Wednesday, August 23, 2006

The Smoke And Mirrors Economy

You know things are bad when even Walmart can’t make money. While the Bush administration (and their allies in the media) continue to talk up the economy, Walmart experiences a decline in profits for the first time in ten years and poll after poll shows that the American people aren’t buying the hard sell of a strong economy. Now that the facts are starting to come out that refute the rosy outlook, the reality of just how bad things are will likely further damage the GOP as people come to recognize Republicans as the architects of our new failing economy.

Foreclosures are up, bankruptcies are up (despite the horrific new bankruptcy law) and housing sales are down, not exactly signs of a strong and vibrant economy. There is no way to have a successful economy based on consumption and debt, yet that is exactly the economy the GOP and the Bush administration have built. It has enriched a few, but the rest of us may drop through the floor at any moment, either individually or as a result of a steep economic decline or even hyperinflation leading to a depression. Those at the top don’t have to worry about their own welfare and they certainly aren’t concerned with ours, but the government is supposed to and it hasn’t since Bush took office.

What good is a government that doesn’t look after the interests of the people? That is the question more and more people seem to be asking themselves and that should scare the hell out of the GOP. It’s still the economy stupid, and they have failed.


Anonymous S.W. Anderson said...

Your analysis and conclusions are dead on, except that runaway inflation isn't the biggest danger we face. It doesn't even come in second.

The greatest deep recession or all-out depression danger now and for the foreseeable future is our dependence on foreign energy sources, primarily oil. A big, long-running disruption in supply could trash the U.S. economy very quickly. It could even trigger a big economic setback around the world.

But no less a threat is posed by our huge and ever growing foreign debt. Our 2006 trade deficit is on track to be $1 trillion. We've been breaking trade deficit records for going on 30 years. The ill effects are cumulative.

At some point, especially if we run into trouble with energy supplies or get bogged down in multiple wars, creditor nations could decide to quit giving us more rope with which to hang ourselves.

That's all it would take to dump this country into a situation so bad it would make the Great Depression look like a minor speed bump.

Our current setup is unprecedented in history, for good reason. We're basically playing with matches in a dynamite factory.

Most people don't realize that because: (A) they trust our leaders to know what they're doing; and (B) they themselves never studied economics and really know little about it, beyond managing their own finances.

3:06 PM  
Anonymous david said...

Inflation is the trigger to the next Great Depression. Why? Because the folly of the American economy is that the people have been encouraged to behave as the government does.

The so-called Recovery of the past few years has been based on the housing market. As house prices climbed, homeowners refinanced and took on a higher debt load. It's similar to those who bought stocks on margin during the 1920s. The banks don't really want to foreclose on big homes --certainly not if the housing boom busts.

Foreign energy dependency is a red herring. America abuses energy and the current administration encourages waste and abuse. Europe sets its energy prices much higher than America and so has always been more efficient and more capable of adapting to energy disruptions. But Republicans preach the Evils of the Nanny State and so you won't see any intervention until it's too late.

Foreign debt is a problem. However, living beyond one's means by maxxing out one's credit cards is the American Way. Yes, the Right can boo & hiss at those "Tax & Spend" liberal Democrats, but at least that's a responible business approach to government finance. The Republican philosophy of "Cut Taxes & Spend More" is the Michael Jackson school of accounting. I expect to see all the White House neo-cons moving to Dubai in 2009.

I'm afraid America didn't learn the lesson of its greatest political economist, Dr Seuss. Send Dubya "The Lorax" and not "My Pet Goat". The Republican leadership wants to steal the wealth of our children's children and blow it all in Sin City. Strangely, disgraced media baron Conrad Black, soon to go on trial for economic crimes, wrote a glowing biography of FDR claiming that the New Deal saved Capitalism from itself. Can it be saved a second time? Even the Lorax doesn't know for sure.

5:34 PM  
Blogger The Local Crank said...

On the bankruptcies, sadly, many people are convinced now that they can't possibly qualify under the new rules and so are just allowing themselves to sink further and further into despair. I have had families who make virtually nothing and owe hundreds of thousands of dollars tell me they thought the law prevented them from filing. It's truly depressing to see.

9:12 PM  
Anonymous S.W. Anderson said...

David, you apparently believe that because a fair amount of belt tightening can be done to reduce U.S. energy demand, our economy isn't that vulnerable.

That can be done over time, no doubt about it.

But what I'm talking about isn't just a case of Americans suddenly facing the uncomfortable prospect of $7- or $8-per gallon gasoline. I'm talking about a situation so severe that businesses dump millions of employees within a few months. Many of the suddenly unemployed are in debt up to their eyeballs, so they start losing their homes and vehicles.

Next thing, financial institutions start going belly up. More businesses fail, dumping more people out of work. The ripple effect soon causes the whole economy to collapse.

And of course, at some point before the collapse, our foreign creditors administer the coup de gras by cutting us off at the worst possible time.

11:25 PM  
Blogger Silent Spring said...

Good points by all. To add -- almost every American I know is maxed out. Oppressive mortgages, car payments, credit card debt. Living pay check to pay check. The petrol issues are going to be the straw that breaks Americans backs.

And while I'm speaking of backs, as a middle class American, I'm getting dang tired of carrying this nation on my back.

7:25 AM  
Anonymous xenophon said...

In my opinion we, as a nation, can overcome any challenge.

We can overcome prohibitively expensive oil prices and transition to widespread alternative energies successfully if we have the right leadership to organize the political and economic will. We can do this without harming the economy or causing too much suffering.

But our bad luck is we have precisely the wrong leadership at precisely the worst time.

The Bush administration is treating the American people not as useful and productive assets to a healthy economy, but as cash cows to be exploited.

11:52 AM  
Blogger jae said...

I know enough about the issue of the Economy and Oil to have asked for and gotten a job with a local Solar Electric Company after we signed a contract with them for installation.

On a monthly basis, I try to shrink our debt (particularly the unsecured) but then I get disgusted and think it doesn't matter anyway and book a vacation or send a carton of gifts to a friend. It's self defeating, I know, but the sweetness of a taste of paradise is, ironically, what gets me thru.

My husband and I both drive cars that are 20 and 15 years old respectively because we have a)bonded with the performance of our vehichles and b) don't want a freaking car payment! (to say nothing of insurance costs!)

xenophon says we need the right leadership. I agree. Now, the question is....who is that and even if we try, can we get diebold to elect them?

10:03 PM  

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