While we sit in a rising pool of unknowns, pundits wondering if we are coming to recession, are in recession, or going into a calamity of proportions yet unknown, we still debate what got us here in the first place. Globalization is blamed for much of our ills and indeed the loss of jobs and industry has brought us to the last stage of an economic empire-that of a service industry. This has been going on for decades as while we sleep soundly, the other side of the world wants what we have already received-a high standard of living. Our parents and grandparents sacrificed for us and did without, so that we could have a better future.
The fear and greed scenario has always been there, it is the prime motivator for the present strategy of the Greenspan era-productivity growth-or less labor and more output in our country’s case as it stands. We have cut labor and boosted productivity to the point of excess in this country and we now pay for that, as there is no free lunch, with less jobs available as the “global” economy heats up and allows us some stability for our exports. This is a temporary situation, one that bodes badly for us in the decades to come. With the lack of industry to “make” things, and the productivity push of the “greed” factor, we become a nation of intellectual providers and no longer a provider of “things.” This is the first sign of an empire’s collapse. We cannot maintain the standard of living for the present, regardless of those who have not reached it yet, and if we do not participate in the foreign markets in the way of stock, ADR’s, or direct investment, we will see our money come back to us in the form of asset sales to those who take our dollars and need to reinvest them, such as Dubai or China-who has a huge investment in our bond market. They also use those funds against us when it is to their advantage with the falling dollar.
The real story of business is cut-throat, inhumane, and cares less about people-it is about banks, money, and the rate of return. Ignore that, and indeed it will be a bumpy ride. Economics in general are not social endeavors and for all the screaming of free trade, there really is no such thing. It is, and always has been a “fixed game” and the little guy gets stuck with all the risk in the end. The banks always cause the problems and the Central Bank, The Federal Reserve usually makes things worse by flooding the market with liquidity and then taking it back after everyone becomes addicted to the availability of those funds.
We are looking down the barrel of a real calamity if we don’t support the rise of the dollar. Suppose your home was worth $400,000 three years ago and now it’s worth $300,000. Well thanks to rising inflation it will be worth $400,000 soon-the catch is that $400,000 will be worth only $300,000 now due to inflation. Banks never lose, they just merge and are refunded by the Central Bank. You get to see your purchasing power shrink like a magician-Presto! It’s now worth what it was three years ago. Don’t you feel better now?