Damn the creditors! Full speed ahead! The almighty Barack himself hath pronounced, "Trillion dollar deficits for years ahead!" Obamanomics gone wild!
So how much is a trillion? For starters, lets drop it a notch and imagine what only a billion is like. For example, a BILLION seconds ago, we would be back in Fall of 1977, in the disco Saturday night fever era, when America was getting over its post-partum Vietnam guilt, and people literally wore plastic clothes (spandex), and happy times were at hand.
Now, how much is a trillion? Well, to try and put it into perspective: a TRILLION seconds ago would be 29,000 B.C., when Piltdown man, and Cro-Magnon and Paleolithic guys were stalking the earth, fingerpainting caves, and inventing crude tools; you know the story--all that cool anthropological stuff.
But this illustrates just how large a number a trillion dollars actually is. It's an unimaginably huge sum of money! And Barack Obama is warning us to expect trillion dollar deficits for years to come! And if we're not prudent, maybe we'll end up living in caves and fashioning crude wooden tools ourselves, because this throw-it-to-the-wind, reckless monetary policy could spook our creditors. And in a worst case scenario, they could call in all their treasury notes and demand payment in hard assets; and the cave-dweller era would surely return.
Whenever you talk of trillion dollar deficits for years to come, it rekindles the possibility of hyperinflation, and post World War I Germany. Mr Obama's proposed trillion dollar stimulus program, if it doesn't stimulate, could cause a calamitous spike in inflation, and an upwardly spiraling trade deficit, as we progress along a merry go round economy of borrowing (importing) money from overseas, getting it to Americans through tax cuts and government jobs, and then returning (exporting) this money back to China from purchasing the cheap consumer goods we've come to expect of them-- an uncomfortable place to reside indeed.
China, which has purchased more than1 trillion in U.S. debt, is getting antsy. And at some point, Dr. Obama's magic will wear off, and we'll face down the inevitable necessity of raising our own money--yes were talking tax increases, the economic poison of a downturn. But Obama-mania will go on for a while, and Barack will be throwing money like Santa at government projects, green energy initiatives, and bailing out everyone.
But In order for the people to abandon their hysterical Obama-mania, and get back to reality, requires the rejection of "sloganism" (change-hope, we can, etc.) as a substitute for realistic economic policy, and take grasp of America's true #1 problem-- lack of skilled jobs...and in conjunction-- jobs that pay a realistic wage.
Today Americans are working harder and longer than any other nation on earth. Many families, before the downturn, were maniacally chasing time while in the pursuit of as many as 4-5 jobs per family, just to pay the bills. And most of these multi-jobs were in the low-skills service sector, as families desperately tried to cope with foreclosure, 4-dollar gas, and rocketing grocery prices.
But how did it get this way? Well, a brief economic lesson on our history is in order. Let's do it by the numbers.
1) In defiance of the all the experts, the current recession is NOT cyclical. Why? Because of one basic structural problem-- there's nothing left to RE-cycle back to. Everything in the way of manufacturing infrastructure has been literally dismantled, and shipped lock-stock-barrel, right down to the last lampshade in the CEO's office, to its overseas new location--sort of like greed in reverse.
2) This current recession is structural. During the 1930's, thousands of factories closed; but their buildings and equipment remained in place and intact. When World War II struck, these facilities were easily revitalized and converted into a wartime economy, and helped us out-produce our enemies en route to an unconditional victory over the Axis.
3) The current recession is unprecedented. Most of the factories that closed post-war have been shut down for good ( shutdown for bad would be more precise). This has spun off evil effects from our economy ever since. These post war shutdowns proved calamitous; their equipment was crated and shipped overseas. The buildings were gutted, boarded up, and eventually razed; and the contaminated ground was determined to be environmentally sensitive "brown ground", a sort of never-never no man's land.
Today these refurbished manufacturing properties "flourish" with such community powerhouses as parks, public bicycle paths, and other idio-economic entities. But the point is, when manufacturing capacity is lost, the standard of living decreases.
But the most troubling aspect of all-- these factories didn't close down because of a cyclical short fall in demand, but because they lost their markets to imports. Therefore, no fiscal stimulus can possibly match the benefits of using low wage overseas labor for our lost domestic production. After all, were not about to rebuild some textile factory in South Carolina that once made T-shirts, nor some shoe factory in Massachusettes, when everyone can easily go anywhere to purchase underwear and a new pair of shoes at dirt cheap import prices.
The fact that Americans have, for so long, chosen to thumb their noses at domestic goods (and unfortunately, cars) for so-called cheaper better foreign products, is a structural change in the economy that may never revert. And as the 21st century progresses, it portends a further decline in the standard of living as America remains the country that IMPORTS everything and make nothing; and no amount of stumuli can budge that economic elephant out of the picture.
Real wages now are 2/3 of what they were in1965. That's why Americans remain so lovingly nostalgic back to the 1950-60s, when American families lived a good middle class lifestyle. We were a full wage economy: one spouse as the breadwinner, and a stay at home mom to rear the children. It was the "leave it to Beaver" era of American prosperity, which continues to remain only a cherished time of wonderful memories.
What the country truly needs is a return to a full wage economy. Then dads can stop competing with the kids for jobs at Wendy's; and unemployed Ph D's can cease competing with moms for retail jobs at Walmart.
But meanwhile, how did we arrive at such an economic dead end, where America produces nothing?
30 years ago saw the transition to the information economy that brought on the yuppie prosperity of the 80's. In the 90's, it was the internet bubble that brought on the Clinton era of good feeling. And after that popped, it was the housing credit bubble based on Alan Greenspan's too-low interest rates. This prompted Americans to use their houses as giant credit cards.
From 2001 to 2007, America's economy (and low unemployment) basically prospered by building and selling houses. It was all driven by rock-bottom interest rates. People took out mortgages on second homes. House-flipping speculative Americans prospered by selling homes back and forth between themselves. Some had more than 1 going at the same time.
People purchased second homes on the lark of watching them go up 10% or more in value each year. But this only served to expand the trade deficit, since, during all this time, no new money from foreign dollars was coming in; and oil imports were causing a $700 billion/year capital outflow to leave offshore-- an unsustainable pace.
And since 2007, America's bubble-bust economy has declined more rapidly than in almost any other brief period since 1929-1932.
Today -in the parlance of the most-reverend Jeremiah Wright--the chickens have come to roost. After thirty years of transforming ourselves to a complete service economy, we must pay for our "capital" sins-- corporate greed , credit obsession, savings rejection, and importing everything.
And before we are able to return to a full wage economy, a starry-eyed America must somehow force the the air out of the big government balloon Obama is attempting to float ---and his trillion dollar boondoggle defined under the banner, "only government can get us out of this". But can it?
Every job "created" by the government takes away the capital that could have gone to the private sector in tax cuts, small business loans, and outright grants. The idea here is creating REAL jobs. These are the only ones that evoke true economic stimuli, and generate additional wealth. And the greatest wealth expansion America has ever seen was in the post war economy, when the manufacturing sector exploded to meet the consumer demands of a MARKET economy.
Remember--countries that manufacture never go bankrupt, because they are capital- based, and not credit-based. And every manufacturing job created has a multiplier effect, because the wages paid to that newly hired worker now creates jobs at the local bank where he deposits a weekly paycheck, and then creates retail jobs at the local shoestore, drugstore, theater and restaurant. This is the essence of a full-wage private sector economy; every job created has a wealth-generating effect...which means, ahem-ahem, prosperity!
But in America, as the world's numero-uno debtor nation, we are in danger of going bankrupt, not because of the lack of jobs, but because of the lack of capital! We are a capital starved nation, and thus are doomed to remain hooked on borrowing to possible insolvency, unless we can shake lose from this disease of government dependency.
Over the last three generations, with the onset of the entitlement economy, the disease of governmentism has grown to the point where people now acquiesce to the idea that instead of the private sector, they now rely on the government to set their financial course.
Now were almost a half century removed from the peak of our full wage economy, and things couldn't be headed in a more ominous direction. Instead of a firmly-defined economic policy, (a sort of well-written national business plan) we have the directionless, anything-goes, spaghetti-on-the-wall ideas of Barack Obama. And the result? We've morphed into some strange hybrid form of a political economy, confusing to our overseas creditors and Wall Street alike.
And with General Obama at the helm, a commander with no battlefield (economic) experience, we are about to place our entire future destiny in the hands of someone who's never ever managed anything in the private sector--not even so much as a paper route. Good luck.
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