Re: Why the US Economy is Tanking (OT)

I am of the school of thought that believes that the Great Depression would have been just another bust of the usual boom and bust cycle if not for FDR's interventions, which extended what might have been a three year bust into over a decade. I see Bush Jr. and Obama repeating the same mistake.

I don't see how. It was under Hoover that the Smoot-Hawley Act was passed, and FDR certainly had no control over the droughts and dust bowl. FDR's negative impact, if any, was minimal in the context of all the other problems that contributed to the Great Depression, and they were outweighed by the positive impact his policies had. The long-term impact of Bush and Obama's stimulus on the current crisis remains to be seen, but almost all economists agree that the short-term impact was positive and necessary to stabilize the economy. I think it's a little shortsighted to call them a mistake just yet.

The war economy worked in World War II because other nations were paying much of the bills - they were buying our production for their armies, and the high expenses were one of the reasons for the end of the British Empire. We are paying for the cost of our current wars - no one else.

You are right, of course, that the lack of competition did much to drive the American economy after the war, and one side effect is that Americans began to believe the hype about the superiority of American industry. When faced with competition which led to reduced wages they could not accept that this is simply how the world works, but instead started looking for people to blame - despite the fact that the American people have benefited greatly from the benefits of trade.

Bottom line: the current wars we're involved in aren't helping us this time around. On that I think we can agree.

While bank regulation has some advantages, the biggest problem is that the government has established a system in which bank executives and investors know that the government will bail them out whatever they do. They only need to follow the letter of the banking laws and they are in the clear, they face no personal risk. Profit has been privatized and risk has been spread to the taxpayers, and it was the government which did this. Furthermore, government regulators required banks to make bad home loans to people who were poor credit risks. The easy home loans also drove up the average price of homes, just as easy college loans have led to increased tuition costs.

See, this is where I start to smack my head on the wall. This seems to me rather dichotomous thinking. Well yes, currently you have a situation where the gov't is in bed with the banks, but you cannot dismiss the fact that we had a largely strong economy while Glass-Steagall was in effect. You don't throw the baby out with the bathwater. Just because certain forms of regulation have been advantageous to the banks, it doesn't mean all regulation ids harmful. I think the evidence demonstrates otherwise.

When wealthy people save money they do not stick it under their mattress: they invest it in businesses which use that capital to buy the means of production and to pay their employees until the business makes a profit. That is the whole essence of capitalism: that one "saves" money by investing it in new and better means of production in ways that benefit all of society by providing products and jobs.

Sigh. If only that were true. Some wealthy people reinvest and others hoard. The hoarding is especially true in bad economies, like the current one, which just perpetuates the problem. Have you not noticed the boom in gold investment? Hell, every other commercial on Fox News is an ad for investing in gold. That's the wealthy man's equivalent of sticking money under your mattress.

Of course, the current lack of understanding of basic business practices by Washington is disturbing to the business community, and the great uncertainty about what the government will do next and whether the dollar will retain its value is what is driving investors and businessmen to take steps to secure their savings rather than invest in a hazardous business environment. The long-term irresponsibility of the U.S. government has led to a lack of confidence in the system.

I don't think it's one-sided. The long-term flaunting and sidestepping of laws by corporations has created a rift between business and gov't. For too long corporations have gotten away with murder, by buying gov't off or by electing their own guys. Do you think these big corporation bosses fully understand their impact on the larger economy, or more importantly, that they care? Did no one learn anything from Darth Cheney? It isn't all gov't's fault that there is no communication there except the exchange of money, is it? Don't the corps hold just as much of that responsibility?

As an aside: please email me at g c b a l d u r (at) f a s t m a i l . f m - I have an idea for a commission.

Already sent. :)