After reading the latest issue of Business Week I am still amazed by the amount of qualified economists that still have no idea how serious of a situation we are in financially. I don’t know if they are afraid of creating global panic which would result in a more expedient global depression, or if they are just really in the dark. If any economist from the previous eras from 1900-1960 were to look at the situation today in the world market, and then gauge the effects of globalization occurring at uneven paces, they would be truly awed by the way we are reacting to the current crises.
Instead of fixing the basic economic issues, we are instead creating larger deficits and larger debts which are going to end up having to be paid back. How? There is only two ways out, one of course would be to inflate our way out of debt which will be great for the United States but terrible for Americans. If the currency were to inflate on the scope necessary to write off our debts it would make us unable to afford anything except the basic necessities of life, and even that would be difficult. As the United States has become a global superpower we have exported our entire manufacturing sector to foreign nations who can do it for less money. This would mean that we would need to import everything as our manufacturing is so antiquated here in this country that it would take us years to restart this sector.
The other way of course is to simply default on our debt. Which is actually quite common when you think about. The IMF is actually in the business of country mortgages. With the usual situation however, the IMF and some powerful US corporations go into a country and open up everything to foreign ownership from public utilities to the local gas station. In the long run, seemingly this is good for the host nation, though in the short run the pain is not quantifiable as the main ingredient in IMF participation is the elimination of basic social programs. The other drawback to the IMF, is that the invading companies will inevitably pollute and mindlessly ruin the local economy and environment. This is inescapable, and many of the corporations that are guilty of these sins are companies that inspire trust and have our best politicians happily accepting donations.
This is not about Republican or Democrat, there is actually no visible difference as we have seen. Barack Obama is trying to reform health care by adding some pitiful program that will end up hurting the economy more than helping our needy citizens that are dying without health care. Much like Bush Medicare Prescription bill of 2003, which is of course the worst piece of legislation I have ever seen, I am certain that the health care reform bill if it is passed will more than likely, worse. Without a public option what is the point? But even the public option is ridiculous! Unless we get a universal plan there is no relief to be had by adding another excuse to sign up more people with Blue Cross. But really none of this matters. How could it? It is but a drop in our loan-deficit bucket. What’s a trillion dollars, when you are fighting needless wars in two countries and have troops in unnecessary places all over the world.
Really, the end of this scenario will mean rampant inflation and the dollar becoming useless and a return to the gold standard. Lest anyone think the gold standard was not a good way to value currency, lets remember that gold is close to $1000 and many experts are expecting it to reach $2000 as the dollar keeps losing value. The gold standard was discarded in favor of the dollar, which of course is great for the United States but terrible for other countries. It wouldn’t be terrible save for the fact that we are irresponsible and have taken on way too much consumer debt, which of course is not our major problem. It is instead the government debt used to pay for the entitlement programs which are bankrupting the nation. It might be too late to save the dollar and I actually opened up my very own gold account in order to start “investing” in the future global currency. All it takes for us to lose the dollar is China’s current request to open the dollar standard to a basket of currencies including their own yuan which is much better positioned to be the world’s currency. But again this is not fair to other countries as should China start pursuing an economic policy like ours then we would be the ones asking for the gold standard. Thus gold which has been the most stable asset in world history is the only fair denomination for global currencies to be hedged against.
I still believe health reform is a necessity and universal health care is one of the only ways to fix our system, but health care is only one of our problems the other ones will need to be solved by fiscal discipline and better use of our entitlement programs. There is no reason to include private corporations in public utilities. Similarly there is no reason to bother passing health care legislation if the dollar is devalued.
Sure Mr. Bernanke, the Economy is Fine!
