1 - Back in the 1930s, tens of millions of Americans lived on farms or knew how to grow their own food. Today the vast majority of Americans are totally dependent on the system for even their most basic needs.
2 - A vast horde of Baby Boomers is expecting to retire, and the "Social Security trust fund" has nothing but 2.5 trillion dollars of government IOUs in it. According to an official U.S. government report, rapidly growing interest costs on the U.S. national debt together with spending on major entitlement programs such as Social Security and Medicare will absorb approximately 92 cents of every dollar of federal revenue by the year 2019. This is a financial tsunami the likes of which Americans back in the 1930s could never have even dreamed of.
3 - American workers never had to compete for jobs with workers on the other side of the world back in the 1930s. But today, millions upon millions of our jobs have been "outsourced" to China, India and a vast array of third world nations where desperate workers are more than happy to slave away for big global corporations for less than a dollar an hour. How in the world are American workers supposed to compete with that?
4 - Back in the 1930s, there was nothing like the gigantic derivatives bubble that hangs over us today. The total value of all derivatives worldwide is estimated to be somewhere between 600 trillion and 1.5 quadrillion dollars. The danger that we face from derivatives is so great that Warren Buffet has called them "financial weapons of mass destruction". When this bubble pops there won't be enough money in the entire world to fix it.
5 - During the Great Depression, the United States economy was relatively self-contained. But today we truly do live in a global economy. Unfortunately that means that a severe economic crisis in one part of the world is going to affect us as well. Right now, the United States is far from alone in dealing with a massive debt crisis. Greece, Spain, Italy, Hungary, Portugal and a number of other European nations are in real danger of actually defaulting on their debts. Japan (the third biggest economy in the world) is on the verge of complete and total economic collapse. So what happens to the U.S. economy when the dominoes start to fall?
The truth is that by almost any measure, we are in worse economic condition than we were right before the beginning of the Great Depression. We have been living way beyond our means and the debts we have been piling up are clearly not anywhere close to sustainable.
...The U.S. economy is being driven off a cliff, but America's "ruling class" has insisted all along that they know better than we do.
But the truth is that in the final analysis it is not us that they care about.
...the U.S. economic system is broken. However, considering the fact that America's ruling class has a stranglehold on both major political parties, we are not likely to see any fundamental changes any time soon. _Benzinga
China is experiencing some economic uncertainties of its own at this time. Consider the housing bubble that is threatening to burst in the middle kingdom. What happens to the US and the world economies should the Chinese bubbles start bursting in succession? Most of China's economic bubbles are closely tied to China's corrupt banks and state owned enterprises -- which cut very close to the leadership of the CCP. Things could become very messy, temporarily.
If China were no longer in a position to buy massive quantities of US Treasury instruments -- in fact was forced to sell a substantial quantity -- the current stresses on the US debtor economy could grow to unsustainable levels. China has already downgraded US debt to AA from AAA. When push comes to shove, things could unravel quickly.
Several other large nations are in danger of falling into financial difficulty, largely due to debt and demography. The collapse of Greece or Spain would not have the impact on the world economy as that of the US or China collapsing, but as stress on the EU builds, financial institutions around the world will be pushed to the breaking point.
Your 5 strikes against the US economy are well & good -- but they miss what may turn out to be the most important of all.
ReplyDelete6. In the 1930s, the US did not tax its productive citizens to pay for an unsustainable overhead of smart people working hard to stop anyone from building anything, thereby reducing tax revenue.
Some undefined portion of outsourcing of US industry is due to excessive regulation and an out-of-control legal shakedown business. I suspect that portion is large. It is simply easier to deal with a long supply chain than to get a building permit from your local bureaucrat.
The good news about this is that -- after the you-know-what hits the fan -- we in the US can reverse decades of obstructionism in an afternoon. We created the job-killing regulatory environment; we can tear it down. And we will tear it down, when push comes to shove.
It would be better to roll back excessive regulation carefully. But the entrenched Political Class will not allow that, so the baby is going to get ejected with the bathwater.
The problem is not the local bureaucrats, for most parts of North America. The problem is the federal bureaucracy, which is working against succeeding in business and providing private sector jobs.
ReplyDeleteOf course public sector unions are creating costs that are growing exponentially. That impossible tax overhead is going to lead to very big (impossibly big) problems unless government executives take some tough and decisive action.