Saturday, July 23, 2011

The economic cliff: Part III

The stimulus that was passed in 2009 was supposed to stimulate the economy, kind of like what happened in 1977-78. It was supposed to save the United States from ‘falling off an economic cliff’ and fall into deep recession or even depression as prices contracted. (Like what happened in the 1930’s)

It did not do so primarily because our relative financial condition is so much weaker today. Back in the 1930’s, the United States government (As well as the State, city and local levels) did not have the expenses that we have today. (And even in 1977) Most of that excess cash in the stimulus went to pay off those existing commitments. The hyperinflation that was expected has not yet really begun, although disturbing signs are becoming more and more apparent. (Just look at commodity prices, an important leading indicator.)

The main point is that the economic cliff we were saved from in 2009 is back, and the fall is looking to be greater than before. This is because the basic underling issue is that the United States is continuing to spend far more than it takes in. Our national resources have been shrinking for decades. The debt is so large now that the interest coming due is becoming unmanageable. This is like the homeowner who has been borrowing against his/her home for years and the equity is about paid out. Our county is no longer the rich one that was built during the 19th century and the 1st half of the 20th century. As a direct result, we can expect a much lower level of productivity and corresponding lifestyle. And this is IF we take correct action. If not, we can expect unrest and violence internally. (Think Greece and other countries that have had to implement CHANGE) This could easily spread, as economic issues are a very real cause of warfare as nations fight over limited resources. In other words, this economic cliff is much closer and it looks like a longer fall than we have seen in a very long time. Can it be no wonder that the division in our country is so bad? Economics is a basic cause of warfare. This is only one more reason why the war going on is going to become much, much larger before it is over.

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