Wednesday, July 07, 2010

What's ahead?

If this guy and economists like Paul Krugman are right, then it's soon not going to be such good times. Krugman has claimed it can be averted by the government going deeper into debt and then when the economy improves, it can pay back its debt. He wants to see unemployment checks continued indefinitely. He also believes in Santa Claus.

The question I have is if we did what Krugman suggests (something that is very debatable given the political climate in the United States), would we still face this in a couple of years but deeper in debt as a nation? I have a lot of questions right about now.

When people talk like this man or Krugman, do they create an environment of fear that guarantees the crash?

Are we actually in a historic time of realignment and the jobs that were here before will never return no matter how many people the government employs temporarily?

Can a government assure an economy or does it require the people?

Sometimes, do we just have to accept change is coming and nobody can hold it where it is for long?

A lot of people are holding onto their money right now possibly out of fear or possibly like the economist above suggests, waiting for the bottom to enable them to scoop up the profits. They will be taking those profits from pension funds, from small investors, from the same type of people who suffered the worst during the Great Depression (which might be no longer known as the Great if this prophecy of what is coming turns out to be true). In a culture that values greed as a virtue, does that even matter?

The biggest question I have now is what can we, as individuals, do about it? If we pull our money from the market, we guarantee a monumental crash. If we let it ride there, we might find it happens anyway. If we are facing a time of transition, which history has seen many times before, what is our best approach to prepare our families and ourselves for a new era? History tells us that nothing stays the same forever. Any culture or person who thinks they are guaranteed anything has not been paying attention!

Is part of the problem our accepting that our tax system has become unbalanced with favoring the richest, incidentally, who will not be hurt by a crash. We could rebalance our tax system and recognize that the strength of this country has been the engine of the middle class.

We could, but will we? Not likely when so many in that middle class are not only clueless what is happening but actually are working to benefit the richest because they have been duped into thinking having nearly half our wealth in the hands of 1% of the people is good.

In a changing economy, jobs may never come back where they were. We could help re-educate people for new jobs except do we know where those will be? Possibly the salaries will never match what they once were. So much has gone overseas and only tariffs might reverse that. Where do you see the stomach for that? Jobs that used to seem very secure, like teaching, are now anything but guaranteed to be there.

The writer below agrees with Krugman and makes some interesting points. I am not sure any of this can be done given the atmosphere today. When fear overcomes reason, there isn't much you can personally do but ride out the wave-- hopefully ducking to avoid the worst of it. It is worth reading his viewpoint though.

It is guaranteed that if we roll over and play dead or put our heads in the sand, we won't be part of the solution at the least. On the other hand, is there a solution? Joe Bageant has a lengthy piece with his take on it. It is long but worth your time.


Kay Dennison said...

I found the Bageant article excellent and I think he's onto something important. I also think that we ordinary mortals need re-think our relationship with the bankers and hide our money.

Harold said...

I may need to write about this on my blog because this could run long. Maybe not; I hated economics.
I think Joe Bageant is pretty much right on the money. Regardless of the New Deal legend, Keynesian economics didn't end the Great Depression; WW II and the restructuring of the world's markets did that.
The fatal flaw in the post-war economy was the tertiary economy especially in an international market. Financial markets have been swapping theoretical value back and forth like there was something behind it, and there's nobody at the top to call "bullshit" on it.
Any economy that isn't based on production isn't based on anything at all.

Robert the Skeptic said...
This comment has been removed by the author.
Robert the Skeptic said...

I deleted my previous comment after thinking about it some more and doing a bit of research.

I frequently state that I feel that our generation has lived in the best times man ever has, and ever will, on this planet... In that I am in agreement that we are in very dire times, the case for doom may be overstated, however. A TV news reporter once quipped: "If you were to take all the economists in the world and lay them end-to-end, they would all point in different directions."

After reading the articles linked in this post I visited the non-partisan Economic Policy Institute which I feel has an extremely astute group of academics and scholars within their ranks.

In just browsing some of the articles at the EPI some calmer heads appear to prevail - for example, Social Security is currently funded due to prudent actions of Congress back in the 1980's. ...most of the [future] gap can be closed without raising taxes on ordinary workers—just those with earnings above the taxable earnings cap of $106,800."

The EPI also has information about how continuing to fund unemployment insurance (UI) stimulates the economy as a majority of those funds are spent immediately upon receipt by the unemployed. Additionally it discusses myths about the federal budget deficit and deficit reduction versus job creation.

I am not minimizing the desperate plight we are all facing. However I believe the EPI has credibility in that they are objective, they have no political agenda, no vested interests nor conflicts of interest to sustain.

Rain said...

Thanks for your research, Robert. I had seen a good link with another intellectual think tank meeting who had a different view on unemployment being extended but overall it's definitely a debate for what is best. Our financial planner figures it'll go down farther but nothing catastrophic as he thought our overall economy is strong. It's good to stay alert these days ;)