Friday, June 26, 2009

pick cotton or hoe turnips?

The conventional "wisdom" that is being hawked by Republicans is that the government is driving us toward a hyperinflationary abyss. The problem with this thinking is that the economy along with state and local governments have been so crippled by decades of Republican policy that inflation can’t get started. No inflation might sound good but in an crippled economy no inflation means a free fall into deflation.

The consumer savings rate is up again, it’s now over 7% from a negative number a year ago. This is sucking an awful lot of product out of the GDP and driving spiraling unemployment. The number of new claims is way up again as is the number of people that are continuing to claim despite a record number of people who have had their benefits run out.

The true magnitude of the problem continues to be ignored by those in charge even as the middle class becomes increasingly fearful of becoming homeless. The Obama Adm. continues to operate the Bush policy of giving the large banks free money that they can invest in Treasury Bonds rather than loan to anybody. Does he think people aren’t sufficiently terrified yet to support real reform or does Obama believe we can live on bubble after bubble as we have the past 28 years?

The really big bubble is of course China. This bubble could be burst at anytime, either as a deliberate act on the part of China or simply because of their own instability. Then there are other players or any combination of players that could cause the collapse. Even if nobody acts in a malicious way the bubble continues to grow and a some point can’t be sustained.

We need to move to a sustainable economy and so far Obama hasn’t even suggested anything that would work on a large scale. The Republicans of course would oppose any plan as another New Deal boondoggle and instead hold out for a mixed system of plantations and feudal serfdom. Would you prefer to pick cotton or hoe turnips?

3 comments:

nardo said...

I totally agree with you Prairie2.

Believe me, the rich are quickly transfering their wealth from american cash into other more stable forms of currency thus when the total collapse happens, they will have nothing to fear.

Mark Limacher said...

I do believe you, and I read your posts daily, but I'm perplexed by what I see as a total lack of change in virtually everyone's lifestyle around me. I live in New York's Upper East Side, and I am stunned by the continued volume of spending and the continued lack of financial awareness displayed by my most of those surrounding me. Can this really go on unheeded?

Anonymous said...

No one in charge wants to admit that we need to change the American model of cheap crappy goods to keep Americans consuming. It is a model that at some point has to fail but Wall Street calls the tune and what is good for Wall Street isn't good for Main Street or the middle or lower class family on Mockingbird Lane.

BUT most Americans are whistling past the graveyard. They know it is there but somehow they think they will avoid it or some miracle will happen or maybe it will not happen until they are dead.

I think that Wall Street thinks that somehow they will be immune to the effects of the system falling apart, gated communities, guards and so on but if people have to quit consuming since they can't afford to consume much of anything the system will collapse and take most everything with it. They will not be safe.