Friday, March 7, 2008

It's been a long time......

......since I've Rock and Rolled. One of my favorite Led Zeppelin songs.

I've been thinking a lot about the economy, and there doesn't seem to be ANY good news.

Actually, I've been thinking about the economy for quite some time as I've written this blog over the past almost year.

On April 29, 2007, I wrote (in the blog A Superpower?):

"The economy. I think that the economy is a house of cards that could be blown over at any time. The war has been financed not with tax dollars, but with BORROWED money from such countries as China. That we are going to have to pay this back is going to affect our economy for a long time."

On August 14, 2007, I wrote (in the blog Are We Rome?):

"Our economy, while APPEARING strong is a house of cards built on credit and the promise of cheap, plentiful energy, either of which could evaporate at any moment (and as far as credit goes has been heading that way)."

I've also written quite extensively about some of the "hidden costs" of the war, specifically what it's going to cost to properly care for a generation of profoundly broken veterans.

Now it's March 7, 2008 and oil is at around $106 a barrel (so much for cheap energy, although for now, it MIGHT be plentiful - but that could change in a very short period of time), and most Americans are familiar with the credit crunch that is sending not ripples, but shock waves through the economy.

There have been quite a few interesting articles of on the work of the Economist Joseph Stiglitz (many of them predicting the final costs of the wars at somewhere around $5 TRILLION),25197,23286149-2703,00.html

Excerpted from this article is the following:

"The spending on Iraq was a hidden cause of the current credit crunch because the US central bank responded to the massive financial drain of the war by flooding the American economy with cheap credit.
"The regulators were looking the other way and money was being lent to anybody this side of a life-support system," he said.
That led to a housing bubble and a consumption boom, and the fallout was plunging the US economy into recession and saddling the next US president with the biggest budget deficit in history, he said."

I'm sure many economists, and certain apologists for the Bush Administration will find that very controversial.

It makes a lot of sense to me though. In my earlier blogs on the economy mentioned above, I noted the "whats" - this gives a plausible explanation for the "whys"

One of the things I've been talking about over the past several days to my friends is the idea of looking at the economy as a whole. The people in Washington count on the idea that Americans are going to look at the economy in somewhat of a fragmented way - almost as if there are "economy boxes" - there's the energy economy box, the health care box, the housing box, the manufacturing box, the war box. It is ALL ONE BOX.

What happens to one sector of the economy affects ALL sectors of the economy.

The other thing is that they are trying to distract Americans by giving these "rebate checks" to "stimulate" the economy. This is kind of like handing a child having a tantrum in a department store a shiny squeaky toy. This is also geared to American's first instinct of the desire for consumption.

One thing you should remember when you are spending that rebate check on the camcorders, televisions, DVD players and other things is that this is not "free money" for you to spend, if you are a taxpayer, this is YOUR MONEY that the government has already taken from you.

The Government is slow to admit we are in a recession or even in a slowdown (similar to when they were slow to admit that we were in a guerrilla war in Iraq with a growing insurgency - we see where that got us). My guess is that this is to try to keep people from panicking.

One of the scenarios I have looked at in past blogs is a cascading collapse and failure of the economy and infrastructure causing uncertainty and chaos the likes of what we saw during Hurricane Katrina on a national level. I hope that it does not come to that.

I think it will get worse, and maybe a LOT worse before it gets better.

1 comment:

Vince Patton said...

Nicely done as always!