The Chinese Premier, Wen Jiobao is blaming the U.S. excesses for bringing the world economy down. That is part of it, but less than the full story. The irony is; the Chinese, more than anyone, have been the beneficiaries of our largess. Our policies and leadership lured the American consumer with available financing to purchase “stuff ” they did not need or could defer until a time when they could better afford the purchase. Likewise, similar bad policies transferred the production of “stuff ” to the Chinese. The Chinese made good profits and lent the proceeds back to America at good interest rates and terms to keep the cycle going. This U.S.-China relationship of produce,sell, and lend was a win,win,win for China and a lose,lose,lose for America.
When American saving rates eventually went negative did the Chinese seriously believe this would go on and on. Low savings and high consumption comes to a natural and abrupt end.
Incredibly, we are preparing a “stimulus” which I fear much of it would attempt to prolong the consumer economy. All this is madness to me because I think we must steadily move away from a consumer-based economy.
The Chinese caught the Americans at an opportune time. The fancy of globalisation, promoted by Wall Street, was circulating in power centers of government and business. The American consumer, armed with half-dozen credit cards could spend and lift the standard of living for the disadvantaged world. China could produce what we had previously produced at labor rates at a fraction of the dollar per hour or nearby. So Wall St. arranged for production to be transferred to China, and other Asian and Latin American countries. We could now buy these products on the cheap with our credit cards. In the meantime our businesses were consolidating in highly leveraged fashion while the Justice Dept. winked and nodded. Wall St. loved their “M & A’s”(mergers and acquisitions). These could be the sources of obscene profits.
Why did more people not see the down side of all this economic gambling? Does anyone read history anymore?
There is more than a few sovereignty issues with globalisation. It was a mistake to “hand-off” much of our production to other countries. A sovereign nation should always retain select industry that is not necessarily restricted to national security.
There is a lot of working difference between isolationism and globalisation.
Now, serious Americans are left struggling to defend against socialism as a solution to our economic problems. Socialism is no answer! We are living in critical times for our nation and the future of our free institutions.
So, where do we go from here? Well, the government will not have many answers or capacity to change a lot. But, they should be more concerned with genuine relief for the American people than trying to rebuilt a failed consumer economy. Obviously, all economies have a consumer component, but 2/3 of the economy, which we have practiced, is doomed for adjustment. We have too many fast-food joints, too many motels, too many cars, too much pleasure, and on and on. You have heard it said you can’t go back to a by-gone era, i.e. a lower standard of living. Thomas Wolfe even wrote a book about returning to a former time. Well, we can’t go forward. The American people don’t have any money left. Soon, their credit cards will not be dependable. And, much of their “stuff” is near worthless.
An envitible lower standard of living is on the horizon. Because of leverage at all levels; government, corporate, and individual all efforts to medicate our economic dilemma will fail. Should the 2 trillion infusion actually direct the economy forward again it would be temporary at best. The borrowing for the “stimulus” would in time produce an even more serious crisis. Bearing in mind we have multiple approaching problems with money needs such as Medicare and Social Security. That is why the government should concern itself with physical suffering to compliment our vast social welfare net. Of course, this could involve work projects, job training. etc. But, the government needs the insight to know they can make matters worse. Things can correct in a decade or more and move forward again, in a meaningful way.
I think few people realized the depth of incompetence in key areas of the leaving administration.
The entering administration will have the monumental task of freeing itself from the chains of a bankrupt philosophy. A philosophy that reduces the responsibility and thus the potential of the individual. A workable consensus demands this freedom.
This morning the Wall Street Journal told us: “huge crowds gather as first African-American President takes office. The new President’s race, which is mixed, has been the theme. It seems we cannot move beyond race and that just distorts everything.
Fredrick Douglas once visited Lincoln in the White House. Douglas, later spoke on the occasion of meeting with the President. He said, “Lincoln’s the first white man I ever spent an hour with that didn’t remind me I was a black man”. King himself, dreamed of being judged by the content of his character rather than the color of his skin. But, neither the black population nor the white population seem willing to let it happen.
When you hear the word “stimulus” you should consider consumer spending. That 2/3 of the economy has brought us to the crash point of 2008. The consumer economy cannot and should not be sustained. It will dig us a deeper hole. The rest of the world can no longer depend on the over-extended American consumer. There is a new day on the horizon, that Washington policy-makers have not discovered. America must be concerned with producing and not consuming!