Monday, March 10, 2008

For 18 years America’s banking system was run like a “new age” hippy commune

2 Responses to “A Full Blown Recession & America In Denial
Bal Says: March 9, 2008 at 3:07 am
The main difficulty for lots of people is that it’s tough to know who to believe anymore. There’s no real transparency in anything that we look at. Indeed, the very standards of evaluation are changing. I remember when the Bush 1 administration changed the definition of unemployment to include military personnel, thereby automatically improving the employment numbers (because military personnel were considered “employed.”) This kind of thing seems to be happening with increasing frequency.
If the standards themselves change without noting it in the vocabulary, what’s a lay person to do?
My criteria is more provincial and personal. We save like the dickens. We don’t skimp, but we “pay ourselves first and second.” Spending comes third. I also still see “help wanted signs” locally, though not quite as much as even a few weeks ago. I don’t know how common what we do is with other people. Having had a big experience with debt years ago cured us of hyper-spending (I hope).
With the dumbing down of Americans and the importation of large numbers of ignorant (not dumb, just ignorant) instead of educated immigrants, this dumbing down is accelerated. And with politicians apparently craving ignorant immigrants instead of educated ones, that won’t change anytime soon.
I guess the s— will really hit the fan when the word “fiduciary” comes to mean “caveat emptor.” Hopefully, that’s still some time away. But it seems likely at some point sooner rather than later.
Recovery? Since it’s not going to be by the people we stupidly hope will represent us, it’s up to each of us. The above may seem very pessimistic. But we’re still far and away better off than we were at the turn of the 20th Century. I believe that there are still enough good, optimistic and truly patriotic people who will - with brains, grit, verve and muscle - pull America out of the nose dive our so-called leaders are moving us. I have to believe it because it’s really all I’ve got. Indeed, it’s really all we ever had.
Bal
Pete Murphy Says: March 9, 2008 at 1:49 pm
Great post, Amar! I came across this post on your blog as the result of a Google Blog Alert for the key-word “economic theory.”
How do we define “recession” and “recovery?” The classic definition of a recession is two consecutive quarters of declining GDP. That’s an almost impossible hurdle and a poor definition because any growth in GDP that falls short of the combined effects of inflation and population growth is going to feel like a recession because the per capita slice of inflation-adjusted GDP is falling. A much better definition would be two consecutive quarters of falling per capita chained (inflation-adjusted) GDP. By that definition, GDP growth that falls below about 4% is a recession. By that definition, recessions are much more frequent and deeper.
An even better measure would be the inflation-adjusted median income of families. By that measure, the U.S. has been in recession for more than 3 decades. Per capita chained GDP has grown, but all of that growth is due to productivity improvement. Economists would have you believe that productivity improvement translates into higher income. It’s simply not true. There’s no relationship whatsoever. But there’s a powerful relationship between income and the demand for labor. As we all know, the demand for labor in the U.S. has failed to keep pace with the growth in the labor force for decades. The Labor Department’s assertion that unemployment is at 4.8% (about the same level that it’s been year-in and year-out) is laughable. When you annualize the weekly first-time claims for unemployment, you find that 13% of the labor force is filing for unemployment every year!
This is a direct result of our enormous trade deficit. At this point, I should stop and introduce myself. I am the author of a self-published book titled Five Short Blasts: A New Economic Theory Exposes The Fatal Flaw in Globalization and Its Consequences for America. To make a long story short, the heart of this theory is: as population density rises beyond some optimum level, per capita consumption of products begins to decline out of the need to conserve space. People who live in crowded conditions simply don’t have enough space to use and store many products. This declining per capita consumption, in the face of rising productivity, inevitably yields rising unemployment and poverty.
This theory has huge implications for U.S. policy regarding population and trade. The population implication is obvious, buy why trade? It’s because when we engage in free trade in manufactured goods with nations that are much more densely populated than our own, we actually import this population density-driven effect on unemployment and poverty. We become one nation economically. The manufacturing work is spread evenly across the new, combined work force. The other nation gets free access to our healthy market but, in return, all we get is access to a market emaciated by crowding and low per capita consumption (if we get access to their market at all). The result is an automatic trade deficit. No amount of productivity improvement, dollar devaluation, etc. can have any impact because none of these alter the fundamental problem - the disparity in population density and the disparity in our markets.
As a result, our enormous trade deficit persists. We have established a host-parasite relationship between the U.S. and these over-populated nations. It’s a virtual global trade welfare state. We finance it through a sell-off of American assets. What will happen when those assets are depleted? The prospects are scary. I believe that the current recession is just a precursor for what’s to come.
As a self-published author, I am waging an on-line guerilla marketing campaign to anyone who seems inclined to be receptive to this new theory. If you’re interested in learning more you can visit my web site at OpenWindowPublishingCo.com. There you can read the preface for free. The book is also available at Amazon.com.
Thanks for attention and forgive me for the “spammish” nature of this reply to your post. You have an outstanding blog going here. Keep up your efforts to raise concern about our nation’s misguided economic policies!
Pete Murphy Author, Five Short Blasts

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