Fear Not the R Word

Fear Not the R Word
By David Glenn Cox



The financial pundits debate, could the US economy be headed towards the R word, recession? Then comes the myriad reasons why its not with grandiose examples of rising exports verses falling imports. Ignoring that the falling imports are directly tied to falling purchasing power. In 1934 Ford’s River Rouge plant was the largest manufacturing facility in the world when it was shut down.

Ford’s sales had been falling and 30% of its dealers had already gone out of business. The problem was purchasing power, the cost of the auto had fallen steadily but the consumer had no more money. Land speculation and stock speculation had made millions of Americans appear rich and with pockets full of illusionary profits, so why not buy on credit?

The stock market crash of 1929 rippled through the economy but the American economy in the twenties was primarily agricultural 40% of all Americans lived on farms. The farms had been prosperous and the farmers had been encouraged to expand by high commodity prices and shortages in European markets. Machinery also made it possible for a family farmer to expand his acreage. The banker told a farmer in Kansas that land selling for $300.00 an acre would probably be selling for $400.00 an acre next year so it was best not to wait.

But by next year the land was only worth $100.00 an acre with no buyers even at that price. The rural banks foreclosed on the farmer but recouped land only worth a quarter of the original loan price and unsellable at any price. Welcome to the sub prime Real Estate market, houses sold at inflated values to underqualified buyers. Exactly the same mentality as the 1920’s that economic growth will perpetually feed the machine.

None dare speak the truth; they all knew that when the pendulum returns and return it always does that some are going to be mowed down. The word they like to use euphemistically is transparency, as if all that needs to be done is to just step forward and admit their losses. Then apologize and promise never to let it happen again but this bad debt has been sold and resold it has been used as collateral for other potentially bad debt, so it is not a question of transparency as incalculability.

Just like the rural banks in the 1930’s the only thing they have to foreclose on is property that won’t sell at half the loan price if it would sell at all. The more foreclosures the lower the price drops and why buy a new house when you can buy a foreclosure for 10% less? Pitting mortgage companies against their best customer’s new homebuilders. But the banks have closed the watertight doors to get a mortgage now you must tap dance and prove you don’t need the money in the first place.

So the financial talk turns to the American consumer, the American consumer with record credit card debt. The same American consumer facing record home foreclosures and automobile repossessions. Wal-Mart same stores sales for October were statistically flat, did parents not buy new school clothes for their children? Or did they rob Peter to pay Paul and take it from some where else? The annalists ponder, what will the effect of $100 a barrel of oil be on the average consumer? I have a 1997 Chevy Tahoe for sale, want to buy it? Neither does anyone else, offering it at $1000.00 below book value I get no takers.

But as I drive to work I see lots of cars for sale, in front yards and in parking lots and empty street corners. I see Jet ski’s boats, motorcycles and cars even a limo! But following the same path each day those things are all still there days weeks and months later. The things that don’t show up in the government statistics about the economy, number of persons selling possessions trying to keep their heads above water.

When the stock market tanked in August the Federal Reserve moved to cut 50 basis points and dumped billions of dollars in to aid liquidity and it calmed the market for forty five days. Stocks began to slide again in October, so again the Fed cut the rates 25 basis points but this time it only calmed the waters for one single day. Again the pundits talk about corrections not the R word explaining that strong export sales will keep us away from the R word. As if a single mother in Nashville is some how benefited from grain shipment’s to Asia.

But the globalists dream of benevolent foreigners always seeking to do what’s right belies their total ignorance of the problem. That some how, some way the global economy will save us ignoring that we are no longer a rich nation, that the things of value this nation once created are already owned by foreign interests. The day before Thanksgiving Build a Bear Workshop was listed on the New York stock exchange, what else needs to be said about American economic power?

The Globalism that they preach that has impoverished the American consumer the same American consumer they now count on to save them from the R word. But the answer they cry is more! Ford and GM with massive foreign holdings import cars for the American market as they dispose of domestic production forgetting the American autoworkers don’t just build cars they bought them too. American industrial jobs are in full decline to be replaced by service industry jobs. People with manufacturing jobs drive new cars people in service sector jobs drive busses and cabs.

Disasters almost invariably occur when conjunctions of events strike simultaneously at the same point in time. Were that the problems of the sub prime debacle could be cured with the wave of a magic wand you still have the problem of evaporating currency.

The Bush administration wanted to play war and needed money and what’s a careless mindless war lord to do? You want war money but you want to give tax cuts too? You just have to print more money. The administration has doubled the money supply in six years and if you accept their figures of 3% growth in the economy that means the dollar is over inflated by just 82%.

So lets see, I lent you 100 dollars five years ago to buy a house, I sold the mortgage and made 1% you defaulted this year and left Citi bank in the lurch. Since you only paid interest on the loan you have paid 0 on the principle. The house is now valued at 70 dollars but because those are inflated dollars the actual worth is 35 dollars which would be one hell of a deal but no one has any money. Besides with the currency in free fall next year it might be only be worth 5 dollars. Still Citicorp says its losses don’t equal two quarters of it earnings, whistling passed the grave yard pretending that this is the exit music and not the overture.

Fed Chairman and excuse maker in Chief Ben Bernacke tried to make the point before Congress that the weak dollar was good for the economy. If you ignore that the United States has out sourced 50% of it’s manufacturing capacity his argument might have held water. But if you import more than you export which the United States does then what you have is inflation of prices and a devaluing of currency and a recipe for the perfect storm.

Every economic issue today is rooted in globalism and free trade. The twenty million illegal aliens in the country are refugees being used as pawns by both political parties. The Republicans seek downward pressure on wages and a wedge issue the democrats seek voters. Ignoring that these are economic refugees escaping from the same policies they are attempting to follow in this country. There are only two word to describe it, stupidity or treason. It is borders designate a nation’s sovereignty. This is not and issue of race nor sovereignty but of economic survival.

The idea that the consumer will bail out the economy while their wages decline and their employment is outsourced is lunacy. Take a look around at the healthiest economies in the world, all with huge trade surpluses. All with heavily regulated imports and highly regulated immigration. While our economy does exactly the opposite and then says, “Don’t worry the consumer will bail us out.”

Not this time fellas, you’ve cooked the goose that laid the golden eggs and sold him at half weight. The stock market is not in a correction but free fall as the value of gold the safe harbor currency skyrockets as the dollars value melts like snow in the springtime. OPEC talks about switching from the dollar to a basket of currencies are held in private worried that even a public discussion might bring about a collapse. As the Chinese economic minister says, China will favor strong currencies over weak ones.

But their maybe is some good news, maybe. Maybe like 1929 there will be a new economic realignment. A new deal, and understanding that we must work together to build a nation, that a fraction who are successful does not make us successful as a nation. The alternative is dark indeed as the purpose for all those repressive measures Congress and the Bush administration have passed become clear.

Fear not the R word; pray for the R word what we are facing the D word and only the candidates the corporate media call marginal will even mention it. But to those of us outside in the rain we don’t need a weatherman to know which way the wind blows.

Did a computer translate it from another language?

Was that really printed in a newspaper?

Jeez.

current economic situation and the idiotic theories of the current crop of economists.

Only one little quibble. "strike simultaneously at the same point in time" is a really bad phrase. Some editor should have caught that.

Otherwise, bravo!

Did this get published somewhere?

There is a yearning for the next big thing. This belief in a technological magic bullet is dangerous lunacy.

In a world with decreasing resources and increasing demand, the new economic gain is in resource efficiency, more than worker productivity. The 3000 SqFt prairie mansions 45 miles out in West Soyfield are an evolutionary dead end. Next wave is earth contact/embedded construction and Urbanities clustered around transportation/resource/production nexii, not fungal shaped ponzi development fed by concrete bands of wasteful polluting SUVs.

User owned single occupant vehicles will be taxed and expensed to near non existance. Time share vehicle pools will replace them, as an adjunct to mass transit. Rome built roads in a non-trivial way, becuase they knew that the transportation system was the garden plot for a diverse economic life. Levittown turned that on its head. Highways to bedroom communities. The death of civic life occurs in suburbs and exurbs.

With a new economy based on creating, supporting and using a sustainable planet, a new community life, with less social isolation, new possibilities exist.

We need to start building that America now. We need to remember that defending America is not the same as using our military as a blunt instrument of global economic hegemony. If we returned to a national defense force/ WPA model for pre college or pre technical training youth, and stop boming the crap out of people we have disagreements with, we might return to a competitive excellence. But while we fight the war on terror with borrowed money, there is little incentive for that.

We could within a decade, cut our petroleum usage to a level where OPEC had no ongoing control of our economy, if it was our national priority.

The next big thing is really a big thing. It is a complete makeover of our system to maximize resource efficiency with minimal environmental impact. Getting king coal and emir oil under control is the first requirement for future survival. Doing this will change everything from housing, transportation, agriculture... the whole shebang.

Note to the globalist, free market, voodoo accounting boyz. Step aside, and watch what real economies look like.

US economy would be in trouble when the jobs are outsourced. The GNP is usually described as dependent upon the consumer. What kind of shortsighted idiots think US consumers can keep the economy afloat when they have no job and no security and no insurance? This is the American way...next quarters profits, but no long range planning.

When the term gross national product was replaced by gross domestic product productivity was also revamped. In days of old if General Motors produced more cars in a month it was considered improved productivity.

Now however, and employee working at Wal-Mart scanning purchases at the check out is considered productivity, a gross bastardization of the term since they produce nothing. A manipulation of the system that figures the cost of the employee in the basic formula of productivity.