Thursday, December 27, 2012

Cliff meet canyon floor

Interesting how the fiscal doctors in a DC would treat our sickly economy. The patient gets an infection in his foot and the doctors want to cut off a leg. Such is the case of our current situation. Only in this case they don't even have to do the dirty work. It will be automatic. Now even the wall street boys are in a bit of a panic. They know that should the inevitable happen their game of monopoly will come to an abrupt end. It wouldn't surprise me if we start seeing runs on banks as the confidence of the American people fades faster than the setting sun. But that wouldn't be the worst of it. Foreign investors would be running to the hills as well as money sought safer ground. And that's what really worries the boys on Wall Street. They could no longer sell their worthless paper to a world market who once had the confidence to use our greenbacks as a world currency. If you've looked lately even Canada has a more stable currency, but it too is only a U.S. recession away from faltering.

Now before you clutch your last shekels and stuff what remaining "bucks" you have in the mattress a little perspective is due here. It's all a matter of percentages. We think way back when a loaf of bread was a quarter but seem to forget that the average weekly wage was less than $80. What's a loaf cost these days and the average wage is no where near what it once was? To give a real perspective check out this chart below:


You will note that we're really no worse off than we were in the 1950s in terms of debt to GDP percentages. And what exactly happened that brought us out of our economic slumps? It wasn't draconian spending cuts but just the opposite. It was a temporary spending increase called "the New Deal" that got us where we are. Even today the effects from that era of spending are still felt in the economy 50 plus years later. Some would credit the turn around of that era to our war spending and to some extent that would be true. We did after all spend the better part of the 1950s rebuilding Europe. But the difference between now and then is that today we have a world market with the lions share of the production going to China. We've lost the bulk of our steel garment and electronics production to foreign countries and are left with low wage service jobs. That is unsustainable in the long term. Look no farther than Greece to see how that'll work out. With no future and carrying a college debt our young people may be stuck caring for their aging parents and living in the house they grew up in if things don't change

But what's truly irritating is to know that corporations are sitting on over $2 trillion and refusing to move the economy because nobody wants to blink first. Those at the top the 1% are satisfied to stand pat and wait but if they wait long enough even what they have will slowly disappear. Money is made only by its' use and not sitting in some vault or savings account.

As I mentioned before the budget isn't cast in stone. Congress could easily pass an extension but I suspect this was the plan all along. Let it go off the cliff because that way you get your spending cuts automatically even if you do have to face your military contractors and wealthy donors. The military budget was due to be cut anyway and the wealthy only get a 2% sting on their tax bill. When you have that much money you could probably make up the difference by what's hiding in the couch. But once again it'll be the rest of us who will suffer. Another recession? I didn't think we got out of the last one yet.   


BBC said...

Well I'm a fucking bum so there isn't a hell of a lot that may happen that can hurt me.

Unemployment has risen again here but that just gives me hope that some of these monkeys will be moving away from here.

BBC said...

When you put a bunch of monkeys in a maze and they start breeding and over populate the maze they start climbing the walls and killing each other.

Many use rats as an example but I think monkeys fits better.

Demeur said...

Funny you should mention that. I did just such an experiment in college with rats. In the end they turned aggressive and homosexual to boot. Go figure.

BBC said...

I don't think of many of them as gays, I think of them as fucked up queers.