Monday, July 03, 2006


This was written on the 15 September 2001

How ironic that I had just finished the draft of this article in the early morning of the 11th of September. It is sad what happened on that day in the United States, it not only changed the world politically, but also in important ways, very much economically also. And we will still be calculating the economic impact of the actions of the terrorist years from now. But the truth is that the basic economic picture has not yet changed, and we are still facing a recession of immense proportions, the terrorists, unwittingly, have provided the politicians with a great excuse. Even as they have helped create new jobs of all sorts. Even right now scores of new security officers are being hired, FBI, the CIA, local police and such are working overtime, add to that if you like, all the other support staffs that are working in various fields to help the recovery efforts and that is thousands of people who would have otherwise be unemployed right now, I shall explain.

Well some of you may think that I am just being pessimistic, that the people in Washington know what's wrong with the economy and they while have everything in order shortly. But my fear is that we are facing an unavoidable and prolonged recession for which we are not ready and we don't have a clue how we will ever get out of it. Please remember that the Japanese economy has been in a recession for the past fifteen years, and no experts have been able to help them out of their predicament yet. We do believe that it can't happen here, so let's see where we are and how we can talk our way out of this one.

Do you know anyone that knows really what is wrong with the economy and how to fix the thing, really? No, no, not the morons that predicted a $300 billion surplus for the current year, just 14 months ago, or the ones that were talking about the Dow 30,000 as late as September 1999.

Well those of you who know me, can witness to the fact that I was not the one ever to buy into the hype of the Experts, or even in the miracle of the internet economy. Matter of fact I was talking about the human nature and habit of people buying mostly what they know and have in front, or the catalogs would have put the department store out of business long ago. Did not the catalog companies give better service most of the time.

Really, I have yet to hear one Expert tell me the real reasons for the malaise of the current economy. They all talk the company line, but not one of them has a clue, or at least can talk honestly about the problem we have on hand. The problem here is multi fold, and I will try to speak to as many points as I believe are the most basic. We must remember that we, for better or for worse , do live in a global economy , and suffer the consequences. So the problem is not such that the federal reserve or the CBO can resolve. Sooner rather than later, we will be looking to the World Bank and the IMF for help, whether it was by design, who knows. But her is a list of lies that we are being told

1. Although the stock market has lost trillions in paper value, the economy will rebound in short order. No, it will not, along with the paper value the millions of us have lost hundreds of billions in real money, be it in cash accounts, or IRAs or 401Ks the money is not there to pay for kids college, a second home mortgage, for early retirement, or even retirement for many many thousands of workers. So those who believe consumers will bail out this economy in short order are smoking the same stuff, Clinton would not inhale.

2.The budget surplus is shrinking but it is still there. No, there is no budget surplus left anymore. When the new projections are worked out there will be a real deficit in the current year budget, if you don't take social security and Medicare deposits into account. The current surplus projections were made based on the unlimited capital gains tax income of stock trades as the markets were supposed to keep going up at a clip of 20% per year, facts as we now know are totally the opposite.

3. There is no fear of inflation. Excuse Me!, have you been to the super market or the service station lately? In the pat eighteen months, price of bread is up 30cents per loaf, milk , up 40 cents, cigarettes, up $1.00 per pack, gasoline up 60%. ( we may want to discuss the merits of the $256 Billion tax on the working class in form of the tobacco settlement, and the increase in bank fees, and the use of the debit card for payments and the hidden costs to the consumer also).

4. Economies of scale are still working to the benefit of the consumer. Then why is it that after every bank, oil company, phone company , airline etc. Mega merger we are still paying for their cost of acquisitions instead of reaping the benefits of their cost savings, if not only that these things cost excess amounts of money and more is pocketed by the company boards, CEO's, financing companies and the major investors while the consumers and the lil fry investors are left holding the bag, mean while thousands of loyal workers lose their jobs.

First and foremost is the problem of over capacity, yes, no reason why the global economy can not feed, cloth, provide health care and other basic needs of the 6 billion people of the world. But that would mean that the industrialists and the capitalists forgo the profit motive in the short run and start to pay living wages to the workers where ever on the globe they live. For too long we have exploited the workers in poor countries for cheaper merchandise and it cost American and European jobs in turn. Now that our people are hooked on cheaper goods they are to find out that they don't have a job so they can't even buy the cheaper stuff. We must pay better wages overseas so that those workers can also buy the things that we make.

We must stop keeping the corrupt regimes propped up and supported, so that we can have cheap labor and even cheaper raw materials, with our intelligence and military supports. Corrupt and suppressive regimes fail , sooner or later, and we are left with egg on our faces. Remember, Panama, El-Salvador, the Philippines, Iran, and should I go on. Also can you imagine what would happen to the coca leaf crop in the central American countries if coffee were to go to ten or fifteen dollars a pound. You may think we will be paying too much for coffee, but the savings in life and limb in this country, not to mention cost savings in police protection, courts, and jails and drug rehab and counseling will be immeasurable too.

We must require that over trading partners play fair, provide for human rights, universal education and healthcare so they will also be able to buy the goods that we produce in this country. Remember 99.99999% of the Chinese still can't buy an American vehicle. Our economists have been talking about a potential market of a billion consumers, the question is consumers of what?

Lets get real folks, the party is over ,the computers are replacing humans faster than the humans can create more service jobs , at least at the moment, only way out of the current mess is to have a market to export to, and only way to have that market is to create it anew. No other tricks will work. Eighteen months ago if you were laid off you became an independent consultant. Now there are too many independent consultants out of work. Like I have always said, when everyone is out selling apples , then there is no one buying/ (whatever that means.)

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