Thinkin' Outloud

Our economy may be very much worse off than most economists can fathom. Most, including myself, were not born since the end of the Great Depression of the 1930s to have much of a memory of truly hard economic times. I think we are getting ready to see even worse--much worse.

Our current paid economic “thinkers” and “experts” were schooled in how well our policy makers like the Federal Reserve and Congress can act to avert such “major economic cycles” as depressions are called in the business. One can only expect “minor business cycles” (recessions) and the only real question that seems to come to mind is whether it will be short term or somewhat longer before the turn around and the next boom times, they say.

For a simple economy such as we have had up until the recent globalization over the last couple of decades, this historical philosophy might be true. However, our world has changed and our leadership (the movers and shakers on Wall Street) have us jetting at hyper speed like the USS Enterprise on Star trek into an abyss that absolutely no one on this earth can foresee or predict.

We can imagine some possibilities though. That is what scares me. No one can argue that we have become one with the world in economic matters. Therefore, to survive, we must meet the new competitive challenges being placed before us. We have to use whatever competitive edge we have to secure a niche in supplying valuable goods to the world or become obsolete as a nation.

So’

Our natural resources are not abundant or cheap to get to, like in our industrial age, whereas China, Mexico, and other petrol nations are in their infancy. Our labor pool is spoiled with high wages and certainly cannot be competitive with China or India’s few dollar a day salaries to produce the same goods. Our baby boomer retirees are coming to bloom along with their expected retirement pensions which add impossible costs to current autos and items that we produce and most of which are greatly under funded. Our health care costs are skyrocketing as the boomers age, which is a great drain on any economy. With NAFTA and our business leaders on Wall Street chasing profits, any meaningful industry has been outsourced to cheaper nations leaving our workers sitting with their proverbial thumbs in their you-know-wheres. We have taken on the police duties of the world with very little financial support for a mega-expensive task . We allow anchor babies and illegal immigration to tax our system uncontrollably.

All that has had us going this last decade is what I call our “Romanesque self indulgent, self consuming economy”. We have eaten ourselves from within and dismantled our skeleton and vital organs---much like the Romans did prior to their fall. For instance, you build my house, I sell you property, you fix my teeth, I make your burger, I take out your appendix, you make my latte at the corner hangout. I cut the timber and you build my apartments. You drill for gas and heat my home. Where in this equation do you see any value being created by our country to our global customers. You don’t. This is why our trade deficit is out of this world and very likely unfixable.

Unfixable. In a sense maybe from our perspective but albeit not from our global trading partners’ views. The Saudis see one answer by not lending so much to us in bonds but actually buying hard assets such as our stock market, part of CNN, and what is left of our last profitable businesses and industries. They tried to buy our very ports and make moves daily on firms related to our defense industry.

We can secretly print money, which many think we are now doing. This may be why gold has tripled in the last few years and the dollar is plummeting world wide.

What I see is an absolute requirement that our country put its “factors of production” (labor, pensions, health care, and government expenses) in line with the world economy or we die on the vine. This housing boom is over and the chickens are coming home to roost. Think what I am saying here. The “sucking sound” is not just jobs being sucked overseas any longer, it is the sound of our country being sucked into third world status to survive. Its time for ideas and real change.

Our only hope is to dump our current politicians and find real leadership, get our kids off the couch and get them educated so they can innovate, nationalize philosophically to protect our freedom and be prepared to bite the bullet over the long term until the new Bill Gates’ and Henry Fords can innovate us out of this mess. And don't even begin to think there is someone running for office right now that can fill the bill, I am talking a major overhaul here.

This “Economic Stimulus Package” being porkbarelled around by congress now is a joke and should embarrass any thinking economist. Its like dumping a teaspoon of water on the Great San Francisco Fire and expecting to put it out.

I have some more thoughts on this stuff folks so stay tuned!