Letters to the Editor
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A Hard Rain's A-Gonna Fall
Our entire economy is built on unsustainable levels of debt. The national debt under Bush has nearly doubled and the deficit spending continues unabated. Fully 20% of the annual US budget is now dedicated just to servicing the debt. Personal debt has also skyrocketed to record levels. Americans have a negative savings rate. Now, on top of this, the subprime disaster is spreading to the larger economy. The response to this has been a simultaneous collapse in housing prices and a choking off of credit, affecting in particular the ability of homeowners to make MEWs. Without ready access to the housing ATM, which has been the backbone of consumer spending under Bush, we now see the economy grinding to a halt.
The so-called "prosperity" of the Bush years was fueled by illusory paper "wealth" in the form of hyperinflated real estate prices. This giant Ponzi scheme is now unraveling -- and there is absolutely nothing out there that's going to stop it. As a result, the true economic state of the vast majority of Americans is being laid bare: Hopelessly in debt with no savings and no way out.
At the same time, real inflation is eating away at the purchasing power of Americans. Gas, food and healthcare costs are spiraling out of control. Meanwhile, the unregulated credit card companies jack their interest rates up at will -- even for those who pay their bills on time. And while everyone was still basking in the illusion of the "Bush Boom", Congress made it infinitely more difficult for the average American to declare bankruptcy.
We're not just in for a recession. Years of financial mismanagement and policies designed to enrich the already rich and crush the middle class are coming home to roost.
It's going to be very, very bad.
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The Free Gasoline for Everybody Party
Rather than invading Iraq, we should have taken the 1 billion dollars that war will cost, and given it to the American consumer to spend on their energy needs. That subisdy would have rippled through the economy, naturally. It would have also added new tax revenues to government, since most people pay more in sales tax in a year than they pay in income tax.
What are the comparative cost benefits of having Uncle Sam borrow $100 for Joe Consumer, instead of making Joe C go out and borrow the money himself? The first advantage is that payment can be deferred indefinitely, after a time inflation will have reduced that debt to nothing. Secondly rates are much lower, the government need only issue bonds at the prime rate, plus half a percent, and give the proceeds to Main Street.
We all know inflation is a good thing, which is why the Fed has inflation targets. Deflation is the enemy.
While promising to protect the American people, this government went to war in Iraq, creating a trillion dollars of new spending. Check the chart of the DJIA in 2003 when the index bottomed, at exactly the time the war started. Half a million Iraqis died so that the Bush economic team could force feed a trillion dollars into the coffers of the military and defense companies which call Wall Street home. Very little of it trickled down to Main Street.
That's the old Plutocracy at work.
It's not too late for Democrats to advocate deficit spending for goods and services vital to the health and well being of the American people. It would have made a lot more sense to make a meaningful fiscal stimulus package before Bush went off on his crusade, and they drove the price of oil to $100. As a sidelight, Congressional Republicans were considering a $500 energy subsidy as a campaign ploy, in 2004. Why stop there?
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The Perfect Storm ...
Unsustainable consumer and government debt, Peak Oil and gridlock in Washington DC ...
It will take major changes in monetary and energy policy to right the ship.
The current monetary policy of 'debt money' , that is US Bonds placed in the privately owned and operated Fed to expand the money supply is unsustainable. What is needed is a Public Central Bank based on 'greenbacks' or money generated and based on the credit of the government, not its debt.
The current reliance on oil must be replaced with an 'electrified' transportation system using battery electric and hybrid battery electric vehicles. Only in this way will we be self sufficient and trade balance positive.
Without these two steps our economy will only degenerate to a stand still with ever rising foreign debt and an ever smaller money supply to service that debt ending in sovereign insolvency.
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Republicans should eat this up...
According to their Laffer curve, this tax cut should spur enough growth to increase government tax revenues by approximately $500 billion trillion dollars a week.
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commodities
There seems to be a consensus among the various financial gurus I've read lately that the Fed will favor inflation over recession. Thus, they'll print more money, and lend more of it, at lower rates, to stave off a recession.
We've seen this before, of course, in the 1970s. It took Paul Volker to wring inflation out of the economy by raising interest rates up into double digits. It was a painful, but worthwhile move. Had Reagan followed that up with higher taxes, we'd have been in a lot better shape. But Clinton had to spend a lot of political capital getting tax-increases out of congress to reduce the deficit created by Reagan's tax-cuts. They were increases on the affluent, mostly, but the GOP made hay out of it, in any case.
Now, it's stagflation all over again. And that means gold, other commodities, basic resources, oil and gas, are the new nobility. Equities in anything else will be flat, at best, for a long time. Had Bush and his thugs done the right thing, and held taxes where they were in 1999, and if Allen Greenspan had held the line on interest rates after the dot-com bubble and 9/11 (both short-term disjunctions, not deep trends) we'd be in much better shape, even with this irrational, criminal occupation of Iraq.
We would have completely avoided the housing bubble, for one thing, since money would have been too expensive to allow for the rapid rise of housing prices. Oversimplified, I admit (leaves out the incentives to brokers to sell bad loans), but some truth there, I think.
Why did the Bushies and Greenspan go so terribly astray? Beyond ideology? Because their main constituents were the very same rich and powerful people who became even *richer* with the cheap money and lax regulation of the last 7 years. A clearer example of the reign of the new robber-barons would be hard to find in America, than the financial fix we're in now. --excuse the crappy syntax, you get my drift--