We are living in black swan times. This is an elegant way of describing a deeply frightening phase of economic change as the U.S. begins its economic slide, with power shifting to other blocs and world populations going into convulsions of change.

Swans are white. A black swan is next-to-impossible. Thus we are in the midst of a near-impossibility.

Nevertheless, it is happening. There are five reasons, as the American commentator and historian Kevin Phillips tells us in his latest book, Bad Money: Reckless Finance, Failed Politics, and the Global Crisis of American Capitalism. They are the “financialization” of the U.S. economy, the private debt bubble, peak oil and the domestic and international politics surrounding it, military imperialism and a political failure to plan ahead.

We are familiar with some, less so with others, but no one has summed up this positive flotilla of black swans as well as Phillips has.

He is an interesting man, his intellectual restraint appearing startlingly novel when he was recently interviewed on The Colbert Report, a show designed as a backhanded tribute to stupidity. Phillips, 68, was a devoted Republican who helped devise the polarizing Southern strategy that brought Nixon into office in 1968. The inconvenient barrier between Phillips and the party line has always been his talent for observation and deduction. For him, the facts had to fit. In 1993, he wrote a book, Boiling Point: Democrats, Republicans and the Decline of Middle Class Prosperity, that Bill Clinton used to find a new constituency.

Appalled by what he helped inspire politically, he has since turned on the Republicans and to a lesser extent the Democrats, most recently writing a trilogy of books — American Dynasty on the dangers of inherited power, the second, American Theocracy, on the triple threat of radical religion, oil reliance and debt and this, the third, on how wild finance, a.k.a. bad money, has become the biggest — and least-known — sector of the U.S. economy.

The truism that the West has a post-industrial economy makes me wince. In fact, we do have a manufacturing economy; it just happens to be in China. But yes, the West has a financial economy, so to speak, a huge thing like landfill with a thirst for human flesh. The man in the street doesn’t know it exists.

In 1950, manufacturing made up 29.3 per cent of the U.S. economy, and finance only 10.9 per cent. In 2004-05, manufacturing was at 12 per cent and finance at 20.4 per cent. Since then-president Clinton deregulated much of the financial system in 1999, the sector has ballooned to popping point. It is the biggest part of the economy, the most badly measured and the least understood.

Here’s the short form: As manufacturing died locally, along came the ’80s, with mergers, debt-fuelled corporate buyouts, massive layoffs, greenmailing and asset shuffling. This era was marked by government bailouts of financial institutions coated with criminality (remember the S&L scandal). That was the seed. Without the bailouts, Americans might have been reminded of the healthy fear of debt that had gripped them since the Depression, of Richard Nixon’s loathing of speculators, of Dwight Eisenhower being perfectly happy with a top income tax rate of 91 per cent.

But if Washington bails you out every time you take a crazy gamble . . .? Times have changed. Rich and middle-class Americans became smug and the investment cowboys looked upon them with a wild surmise.

The race began, a private sector frenzy that took practically anything and re-named, reclustered, repackaged and sold it as a new way to invest in a hugely exciting bull market. For all that the U.S. professes to deplore its massive national debt (federal, state and local debt is almost $11 trillion), Phillips notes with surprise that this crisis is all about private debt (household, financial and non-financial corporate) which hit $36 trillion in 2006. It is secretive unregulated hedge funds, it is emperors without borders getting rich via bagging up lousy mortgages, credit card debt and borrowing on home equity. It is alchemy, making money out of “money-like” debt instruments that are quietly known as “candy floss money.” The huge shadow banking sector, which operates like a nation-state but without land, now runs your life.

No one ridicules shadow banking for its intrinsic mendacity. They worship it for its glamorous risks, enabled in many ways by the American government. I’ll give you one glaring example. Washington cooks the books, in this case the Consumer Price Index, to conceal how inflation has ravaged the ones really at risk, the middle class (lest they riot, I assume). Did you know that the U.S. government includes “hedonics” in its Consumer Price Index? Yes, it measures increases in happiness. Bad money, bad stats.

Backstage, as the American show draws to its bloody conclusion, are the lessons of history. Phillips reminds us of what world economic powers share. The Dutch relied on wind and water power, imperial Britain on coal and America on oil. All three ended by financializing a previously sturdy economy that had harvested, manufactured or transported. All three overextended their global reach, turned to extreme religion and massively overspent. Sound familiar?

What appalls Phillips is that the signs of decline, if not collapse, are there for any educated person to understand, but no one dares read them out loud. The eight years Bush has spent denying climate change and rising oil prices, failing to repair infrastructure and preparing for a painful future may well have been fatal. (Note that no Canadian government has spoken up either.) Journalism, sold to huge corporate interests, is too fearful and faded to raise the alarm.

No campaigning American presidential candidate will even now discuss these matters, even if they weren’t being pestered by questions about lapel pins and bowling scores. Phillips calls it the calcification of the political system, and it’s as descriptive of Britain and Canada as it is of the U.S.

One bubble follows another, from dot-com to subprime to credit card debt. The problem is the pileup of crises present and to come: oil at $200 a barrel and rising, the moment when OPEC, fed up with the puny dollar, starts selling all its oil for euros.

Phillips doesn’t even mention water. The U.S. has been using it up as if it were oil. He doesn’t mention food shortages and global warming. The man has too many catastrophes to fill his pages, and I suspect this is why his book stops at an uncharacteristically brief 209 pages. Perhaps he wanted it published before the election, or perhaps he lost the will to live.

On the bright side, Phillips did a sentimental thing and dedicated the book to his new grandson. If little William Russell Phillips has a future, according to his grandfather, then perhaps we do too, even if it takes place in a sod hut in what was once Norway in a hot terrible everlasting darkness in 2092.

This Week

For light relief post-Phillips, I bought Dave Barry’s Money Secrets. Sample quiz: How would you describe your portfolio?

    1. Conservative, mainly bonds and blue-chip equities.
    2. Aggressive, mainly options and speculative stocks.
    3. My what?

What is your annual income?

    1. More than $50,000.
    2. Less than $50,000.
    3. However much I get when I return these empties.

Well, it made me laugh.