“I never thought I would live to see a day when the economy was in such danger, that interest rates were near zero, when some $20 trillion in wealth has vaporized, and when no one is sure what to do.” That, in a nutshell, were the sentiments one heard quietly on the sidelines of parties from economic heavy hitters.
Paul Volcker, one of the most respected economic figures in the country, told Congress yesterday that it may take trillions of federal dollars in spending, loans and guarantees to put us aright. That comes at a time when Washington is already deeply in hock.
There is growing talk in both the U.S. and the U.K. that banks are continuing to weaken so much that governments may have to nationalize them – a huge step. And few think that if Washington takes over Bank of America and Citi that it can stop there. “How will J.P. Morgan compete against one percent loans from a nationalized Bank of America? It can’t. If we go down that road, nationalization would have to be widespread.” John Gapper, a noted columnist, says today in the Financial Times that nationalization of the top 10 banks in the U.S. could easily cost a trillion dollars.
Oh, you silly monkeys with car keys. The Baby Boomers were, like Bill Clinton, generators of wealth -- but wealth made by moving around assets on paper and using the opinion industry to convince people to participate in trends. It never was real.
But now, their chits are coming due, mainly because they're all getting ready to retire and take their wealth out of the market. Clinton ran up the value of our money with phantom internet income, and ten years later in 2002, the bomb began to drop. It took awhile for all the dominoes to fall.
Now -- not surprising -- we're in a third world cycle: we have no real way of making income, because we're supporting people who mostly just do very frangible jobs that involve following orders and repetitive work, and our middle classes are drunk with their success in an opinion industry that's gonna be replaced by blogs. We make no real wealth. Yet we have millions of people who want to partake in whatever we do have, and they're too clueless to notice when their $500 check is now worth $250 -- hey, it's still FIVE HUNNERIT dollars.
So what are you going to do?
If Barack Obama were smart, which he is not -- he specializes in convincing people of happy truths, not facing reality -- he would start by cutting out parasitisms. Slash those government programs. Force the military to release more R&D to stimulate the economy. Capitalize on assets we have, and slash all foreign aid and kick out parasites like the UN, HUD, etc. Cut government staffs. You'll send unemployment through the roof, but in doing so, will equalize the dollar by making it scarce again, and tying its value to actual industries that produce things people need.
Further, let's cut away the oil crack habit. We know cars are never going to be the boom industry they once were; let that industry die, because it has lost to the Japanese already. But put all other manufacturing front and center, and find some way to re-attract computer component makers to the USA, and invent a big industry we can all use: green recycling and reuse. Let's start leading in some industries. We've basically pissed away manufacturing and agriculture, but we need them again, instead of paper and entertainment industries.
Finally, give people a reasonable object to expect: it'll be bad for x years and we'll do y to fix it. They can live through it, but they need to know the unraveling will stop somewhere. But unfortunately, in a media-fed democracy of people empowered by an ethic of convenience, truth doesn't sell; entitlement, "free" things, and hidden forgotten socialized costs do. Let's hope the Republicans aren't so stupid this time and give up on elections in 2012 and 2016 so that a Democrat can, for the first time in history, inherit the damage another democrat has done.