Monday, August 17, 2009

Great promise or end of an era? You decide.


Which way do we go from here?



America's industry is running at 68% of its potential, yet there is nothing wrong with it. The nation's means of production and the capital that is a part of it have not been ravaged by war or destroyed in some natural disastser. The capital--both physical and human--is available to bring output back up to 70, 80, 90 or even 100 percent if we desire, but the question is, do we desire it? Do we understand this?

There are two ways we can go from here as a nation. We can wake up and realize we have all this great, unused potential and we can decide as a nation that we are not going to sit around and have it remain idle when it could be producing boundless wealth and prosperity.

Or, we can make that excess capacity go away by shrinking this wonderful wealth producing machine called the U.S. economy...make it permanently smaller.

If we opt for the latter, and I am afraid that is the course we are on because of an irrational belief system, then the standard of living of all Americans, whether they are of the current generation or future generations to come, will be far lower than what their promise was.

What a shame.

3 comments:

googleheim said...

the irrational beliefs :
1. balance the budget at all costs - known as deficit terrorism
2. improper knowledge of spending of taxation revenues - "tax payer on the hook"
3. zero knowledge of forex swaps
4. excessive fetish to export at all costs including lowering the value of the dollar ( they must be 1/2 japanese and keeping their export earnings in something other than the usd )
5. no benjamin franklin here with no faith in helping the common person with a full blown medicaid medicare that safety nets our human capital.
6.etc

Brantley said...

America's industry is running at 68% of its potential.......I think we are here because NOBODY is buying. Why, because they all have too much debt that they really have to pay on and can afford no more junk, that a reality. And the banks are not lending to everyone that can fog mirror because they know those borrowing right now are the ones that can't pay.

So, we're here because we are here and the reality is, that is what we've got. Does that make any sense?

Is this a supply & demand lesson?

Brantley said...

I just had to add a little more fuel to the fire. Mike, you make it seem as though we can just decide, wake up tomorrow and decide that we're goin' to change it, only prosperity from here on out...by gosh, let's do it.

Here are some stats that I stole from Richard Russell(& give credit) that he stole from Barron's.
"Russell Comment -- Yes, this is an historic time of change. Debt is piling ever-higher, deflation and world over-production are driving prices down, and many people fear that the "American way of life" is being lost.

Lost? How can it possibly be lost? Here are some figures from Barron's.

$180.7 billion -- Federal deficit for JULY.
$1.27 trillion -- Total deficit SO FAR in 2009, a record.
$332.2 billion -- Government spending in JULY, a record for any month in US history.
$151 .5 billion -- US government receipts for the month of JULY. 5.6% -- decline in monthly receipts from a month ago.

How did it happen? Fiat money, Fed-created inflation, and spending beyond our means (yes, the government can spend far beyond its means too). All this has put us in a precarious position. Can more (enormous) spending get us out of this mess? Ah, that's the question that is currently putting the best minds in the nation at odds.”

He also commented on the debt to create one dollar of GDP.

..."back in those days (~1960) it was taking $3 of debt to produce $1 of GDP."

..."(~2008) it rose to $6.49 of new debt to $1 in GDP."

THIS IS INFLATION AGDJUSTE.

Excessive borrowing, debt, government spending beyond receipts, whatever you want to call it is really putting a drag on the economy. If we borrowed a 100 trillion billion as you might be implying - would these numbers (debt to GDP) reverse????