The American Economy Is Not Coming Back

President Barack Obama and his economic team are being careful to couch all their talk about economic stimulus programs and bank bailout programs in warnings that the economic downturn is serious and that it will take considerable time to bounce back.

I’m reminded of an experience I had with Chinese medicine when I was living in Shanghai back in 1992. I had come down with a nasty case of the flu while teaching journalism at Fudan University on a Fulbright Scholar program. A Chinese colleague suggested I go to the university clinic. When I told him there wasn’t much point since doctors couldn’t do much for the flu besides recommend fluids and bed rest, he said, “That’s Western doctors. You could go to the Chinese medicine doctors at the clinic. They can help you.” I figured, what the hell, and we went. The doctor inquired into the lurid details of my illness—how my bowel movements looked, the color of the mucus in my nose, etc. He didn’t really examine me physically. Then he prescribed an incredible number of pills and teas and sent me home with a huge bag of stuff, and instructions on the regimen for taking them through the course of each day. I followed the directions dutifully, and my colleague came by each day to check on my progress. By the fifth day, when I was still running a fever and feeling terrible, I told him I didn’t think the Chinese medicine was working. He replied confidently, “Chinese medicine takes a long time to work.”

I laughed at this. “Sure,” I said. “But the flu only lasts a week or so, and now, when I get better, you’ll say it was the Chinese medicine, right?”

He smiled and agreed. “Yes. You are right.”

Obviously the Obama administration recognizes that it needs to keep the finger of blame for the current economic collapse squarely pointed at the Bush administration, which is certainly fair in large part (though the Clinton deregulation of the banking industry played a major part in the financial crisis and its enthusiastic promotion of globalization began the massive shift of jobs overseas that has left the nation’s productive capacity hollowed out). But it also seems to recognize that it cannot tell the bitter truth, which is that our national economy will never “bounce back” to where it was in 2007.

America, and individual Americans, have been living profligately for years in an unreal economy, propped up by easy credit which inflated the value of real estate to incredible levels, and which led people to spend way beyond their means. Ordinary middle-class working people have been encouraged to buy obscenely oversized homes at 5% down, or even no down payment. They have been lured into buying cars the size of trucks, one for each driving-aged member of the family (in our town, so many high school kids drive to school that the school ran out of parking spaces and the yellow school buses, largely empty on their runs, are referred to by the students as the “shame train,” an embarrassment to be seen riding). They’ve installed individual back-yard swimming pools, unwilling to share the water with their neighbors in community pools. Boring faux ethnic restaurant franchises of all kinds have befouled the landscape, filling up with families too stressed out to cook, and willing to endure over-salted, over-priced and tasteless cuisine and tacky plastic décor night after night.

Now this is all crashing down. Property values are in free-fall. Car sales have fallen off a cliff. Joblessness is soaring (At present, it’s approaching an official rate of 8%, but if the methodology used in 1980, before the Reagan administration changed it to hide the depth of that era’s deep recession, were applied, it would be 17% today, or one in seven workers).

Eventually, the economic slide will hit bottom and begin its slow climb back, as all recessions do, but there will be no return to the days of $500,000 McMansion developments, three-car garages and a new car every two or three years for both parents plus a car for each highschooler. Not only will banks no longer be able to offer such credit to clients. People, having been burned, will not be willing to borrow so much. Company health care benefits, pension programs or 401(k) matching programs that were slashed during this downturn will not be restored when the economy picks up again.

Over the last 20 years, America has degenerated into a nation of consumers, with 72 percent of Gross Domestic Product (sic) now being accounted for by consumer spending—most of it going for things that are produced overseas and shipped here.

That is not an economic model that is sustainable, and it is a model that has just suffered what is certainly a mortal blow.

What we are now seeing is the beginning of an inevitable downward adjustment in American living standards to conform with our actual place in the world. As a nation of consumers, and not producers, with little to offer to the rest of the world except raw materials, food crops, military hardware and bad films (none of which industries employ many people), we are headed to a recovery that will not feel like a recovery at all. Eventually, productive capacity will be restored, as lowered US wages make it again profitable for some things to be made here at home again, but like people in the 1930s looking back at the Roaring 20s of yore, we are going to look back at the last two decades as some kind of dream.

It would be better if the new administration would be honest about this, because with honesty, we could have a recovery program that would actually address the real critical issues facing the country—the decline of our educational system, the irrationality of official promotion of home ownership that has led to the proliferation not just of suburbs but of exurbs, the over-reliance on the automobile for transportation, the unprecedented waste of resources, the pillaging of the environment, not to mention the decimation of the retirement system and the creation of a vast medical-industrial complex that is sucking the life-blood out of families and businesses alike.

With honesty, we could also confront the other big obstacle to national recovery—the nation’s obsession with militarism and foreign wars. The honest truth is that the US is technically bankrupt and in a state of chronic decline, and yet the nation persists in spending a trillion dollars a year on war and preparations for war, as though America were in mortal danger from foreign enemies.

The truth is that we are not threatened by Communism, by drug lords, or by Muslim Jihadists in any serious way. Rather, we have become our own worst enemy.

The administration could start by telling us all this straight up, but the problem is, most of us probably don’t want to hear it, which explains why we’re not hearing it. It also explains why we’re about to blow another trillion or so dollars on propping up failing banks, funding pointless highway and bridge construction, and blowing up illiterate peasants in remote places like Afghanistan and Pakistan.

http://www.countercurrents.org/lindorff310109.htm

As with all empires, the Abyssinians, Alexander the Great, Egyptians, Romans and later; they all eventually decline and fall.

This is because they have never learned the lessons of history, letting their pride and avarice be their undoing.

The United States is in decline and money is becoming worthless.

The best we can do is try to prepare for the worst, because it may be coming.

I doubt even Obama can get us out of this mess we're in.

Well, not exactly same..past empires fallen for different reasons, mainly for expanding in territory farther than they could handle, but eventually - for example- the Roman Empire fell was because they have lost control of the border regions and eventually people got polarized, based on religion and leadership, so there went to the East and West.

This could only happen if people become so much polarized in USA, that it would break up the United States into 2 pieces or more.

But the current crisis isn't like that, although the Middle-East wars and having military all over the place (Germany, come on, WWII ended 60yrs ago, still large amounts of US troops) does strain some money, the real problem is the uncontrolled spending of none-existing money, or basically money that doesn't have anything to back up with. Printing more money would lead to inflation, which would signal the end of the dollar, not printing money leads to further deterioration and losses, since as I said, the money borrowed and lent does not exist, only on the computer screen.

Let me show you a bill, this is from the Astro-Hungarian Monarchy, shortly before the entire empire collapsed, the hyper inflation forced the Korona to go this far. I think for this amount, you were lucky if you could buy enough groceries for a few days:

We've not had an "American" economy since 1913.

Nope, sure haven't. Obama hasn't tried to solve this problem, either because he is bought, or being manipulated, or not smart enough to know how our economy works.

Federal Reserve Bank must be abolished entirely in order to maintain a stable economy.

Our Fractional Reserve system must be abolished entirely in order to maintain a stable economy.

Our money must be backed by gold, or silver, or infastructre, etc. before we can keep a working system in check.

Everything is supposed to crash. Since 1913 every dollar put into circulation has had a interest rate charged on it. You can't maintain that standard for long.

Right now, we have to let a depression, worse than any the U.S. has ever had, in order to recover. Good news is if everyone does the right thing, politicians and citizens alike, we should be out of it in a year or two. If we wait, and try to pass bills like this stimulus, or create jobs for the sake of having jobs available, we will be hurt much, much worse. Look at Iceland. (Or what used to be.)

To expect our economy to recover, while doing what we are doing now (bailouts, socialization), is the same as to expect a bad tooth getting better by taking a pain medication.

precisely. If the economy gets worse, without the stimulus, it "would have been much worse." if it gets better, "it was all because of the stimulus."

Economics cycles. we're in a downturn that will ween us off our credit-driven ways. it will either end up for the bettor or worse in a few years and either way, I doubt we will learn from it.

I have to admit that this is not my favorite subject. When I google for information about should the Federal Reserve Bank be abolished to get the other side of the story, all I get is this side of the argument. What's up with Google anymore, they used to be a good search engine.

So where is the other side to this story, is there an opinion other than abolishing it, or an opinion for it?

I keep hearing over and over and every where that the stimulus is dangerous. I can't believe that everyone in Washington is completely stupid if this is the case, so where are the arguments for it so I can read what they have to say about it.

I explained this earlier my friend. No,these congressmen aren't stupid, they are merely divided. Some politicians don't want to look bad. Many people will become angry because in order to fix our problem, we will need to fall into the worst depression we've ever had. This is not something politicians want as many are out to win popularity contests. The other two groups of congress are the ones that want to look good by investing the stimulus in the "right thing". This is an illusion. It doesn't matter where you invest it, it's the increasing debt that will save us for a few more months, maybe even a year or two.

Most importantly boo, i challenge you to find information on where else the U.S. gets there money. As far as i understand every single dollar we circulate, to include money we borrow from China, we pay interest on. This cannot work out mathmatically. This not statistics, but hard math. Unless math cannot be applied to money. That would be the only argument.

There is no other side of the story about the Federal Reserve. Only people that believe that crashing economies is a necessary evil. If you want the argument for pro-central bank look up history. I believe Thomas Jefferson and Alexander Hamilton kept arguing. The federalists were the ones that supposedly kept pushing it through.

Thomas Jefferson abolished the first national bank. Andrew Jackson abolished the second. Andrew Jackson was the only president in the history of the United States that completely paid off our deficit.

Although i'm pretty sure that's what JFK had in mind. But it is physically impossible to pay off our debt, when the only place to get money is from more debt. See where this is going?