We remain skeptical that doubling the national debt will return the American economy to ‘health’ or ‘normal.’ In a traditional input output table grid economic analysis our fundamentals decayed long before 2007/2009. Our primary output was debt in various guises to buy trinkets from China et al. and liquified fossils from abroad (the Middle East being actually a small percentage of the actual sourcing). None of that structural dissipation will be addressed at all by the Boy King’s binge prescription. It’s not a ‘culture of corruption’ or sloppy lending practices – it is the very core of American self identity.
The Boy King gave a good speech. Yet we are struck by the disconnect between the rhetorical flourishes of a so-called 21st Century Economy and essentially a 1930s action plan. We agree with the Keynesian concept – government stimulus and infrastructure such as bridges, roadwork, ports, even some broadband, etc.
What precisely will be stimulated? As mentioned above, the American structural economy is premised upon consumption via debt. For 2 generations now. Is he contemplating something like WPA? Let’s be honest. Does anyone reading this really believe we could build Hoover Dam today? The Golden Gate Bridge?
Aside from the actual decay of hands on know how, consider this thought experiment. Who exactly is going to do it? Who is willing to suffer that hardship? We don’t even mow our own lawns for Chrissakes. With what regulatory red tape, OSHA requirements, trial lawyers and cable parasites everywhere? Should Rachel Maddow be let go at MSNBC, for example, is she going to climb into the pit and pour cement? How about that smug ass who smirks at people with her at show close?
It’s true that the new Administration is offering to create new jobs in a green economy. It still would be a drop in the bucket. The real question that puzzles is how a trillion dollar stimulus on top of 1- 1.2 trillion deficits (plus Lord knows how many hundreds of billions the Federal Reserve tossed to banks in secret) will re-inflate an economy essentially of middlemen arbitragers (which is what a so-called service economy really is). Middlemen arbitragers’ skills are not export-elastic by any meaningful measure. Nothing the Boy King even hinted at grapples with our crippling current account deficits.
Stimulating consumption is fine if it is a sustainable standard of living based on a balanced economy. But by definition in all recent conversations that means reverting to something pre-bubble — both tech and real estate. As argued above we think it means stepping back even further. The Boy King commendably warns that a family’s net income could fall $12,000. What precisely is a standard of living in keeping with actual productive output without over leverage?
Can Obama say the uncomfortable truth? The America that emerges from this mess will by any measure known today have a lower standard of living. Either by design or forced by circumstances, including exogenous factors such as foreign reluctance to accept essentially meaningless American script.
We’ve said this before and believe it now — printing money today on this scale is begging hyper-inflation in the near future. The Boy King likely will be forced to impose wage and price controls in his first term lest the United States truly become indisputably a Third World nation. And that political measure is a mere palliative.
Overseas, the militarized Empire is no longer affordable today, now, 2009. The Imperial consciousness (which unfortunately contaminates the Boy King’s retinue) must be discarded in favor of a brutal ends means resource analysis and a strategic realignment of core U.S. strategic musts, wait listing other projects, and consigning the rest for woulda coulda shoulda. We can all draw up our lists. If this reassessment (driven by necessity even if we as a people haven’t really absorbed that) is done with care, phased in with commensurate diplomatic and international institutional deployment, a soft landing is eminently feasible.
For all the alleged momentous history of the Boy King’s speech, the essential Keynesian prescription is still very much a boomer thing. If one thinks about it, what precisely is the sacrifice Obama is calling for? Is he really saying (at least for now) anything fundamentally different than the Warlord’s invocation of patriotic shopping?
Got a problem? Write a cheque.
We do support a stimulus plan. Perhaps the more granular details to come will answer some of these questions. We hope the Boy King will be more honest about the future realities and the end game of QVC America.
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(revised AM 09/01/2009)
Brian says
Just wanted to say this is wonderful analysis. Came here via Ioz.
Your Friendly Middleman Arbitrager
Euskal says
I would have to agree with the overall analysis of the American situation.
The Keynesian cure being bantered about was for a America in which 80 percent of the population lived in Rural Farms and the excesses of the 20’s were in over building the most modern factories of their time. The working population was skilled, young and organized.
It would be one thing to spent money on the latest technological fields in hopes that breakthoughs can create the high paying jobs of the future. Maybe spend on Universal healthcare; High speed rail… In other words, our children or grandchildren need to see some benefits for the bucks we are planning to piss away here.
So much for thinking outside the box.