>How we got into this financial mess is a relevant question
The question of the hour is what can we learn from our experience so that when our economic system — remember, I didn’t say government — works itself out of whatever we’re in we will never want to go there again.
But unless we quickly diognose the problem, we are doomed to repeat our past failures.
It was Albert Einstein who said We can’t solve problems by using the same kind of thinking we used when we created them.
So away with all of the living — and dead — economists. There are no smart economists and never have been. If you want a debate, just get two economists together. No two economists agree on anything.
America was a creditor nation until 1988 under Ronald Reagan. It wasn’t necessarily his fault. We just stopped making things that other countries bought. In other words, countries like China started producing all our furniture because their labor rates were lower than ours. That was the beginning of the job drain from America — when our own wages got to be too expensive relative to Mexico and other developing nations. Unions helped propel wages upward in America. In that way, yes, you could say unions participated in our demise as a creditor nation. True capitalism requires that a nation be a creditor nation, not a debtor like America.
Capitalism requires cash, but we squandered ours. The American credit-card system of spending is not only a trap to our people, our politicians don’t know how to tighten their belts, either. America’s spending mentality has taken a real tailspin lately, and we’re left to debate how to get out of this funk. If the definition of a capitalistic nation is one that has the cash to lend to others, then China, Japan and Saudi Arabia are the world’s finest examples of capitalism. Forget the Chinese repression; forget the Saudi’s terrorist activities. They’re capitalists, we’re merely beggars at the door.
And now, due to Obama-mania and all his spending, there is word in the credit markets that the U.S. is soon going to find it’s credit rating reduced to that of Great Britain and Kenja, Africa — barely acceptable to do business with.
That’s what happens to nations whose president keeps saying this is a much worse problem than I thought. If Obama is so smart, why is he advertising through his loquous mouth that America can’t get back on top again, or that we don’t know when this monstrous problem will be defeated? Or hurry up and throw some money around or we’re all doomed?
Obama should be saying things like Roosevelt said during World War II: “We have nothing to fear but fear itself.” That the eternal optimist Ronald Reagan said in the 1980s about the Iron Curtain and the wall separating East and West Germany: “Mr. Gorbachev, tear down that wall.”
Leaders find ways to be positive, even in the midst of calamity. So far Obama has not found out how to lead positively. He’s still in the campaign mode and until he changes gears, he will be a failed president and will take America down with him.
He should be whistling positive vibes, not spewing all the negativity that other nations hear and upon which they make decesions not to lend to that nation because they may be done as a nation.
A poor credit rating means we soon will be paying some of the highest interest rates in the world and when Obama spends another $800 trillion you can count on something like $800 trillion in interest payments — if, indeed, China, Japan, and several middle eastern nations will continue to loan us money because now they are angry at us for pulling them down with us.
Our entire productivity and economy has been based on spending more than we take in. Government teaches it to our kids by example every time Congress passes a bill. They have to go to China or Saudi Arabia for the money to pay for their excesses. If they won’t lend to us, the Treasury will resort to printing money, an act that will severly deflate the dollar.
How about this? From now on we run our businesses on a cash basis. We no longer use banks. Put all the banks out of business and see what we would have. This may take a while, because businesses don’t have operating funds. Part of Obama’s bailout should be to give each American some money. Let businesses borrow from private individuals and circumvent the banks. We would experience a period of stagnant growth for once. The growth of a nation depends on its ability to borrow funds for growth. If we deprived ourselves of that luxury for a while until we got back on our feet, we could solve this riddle. But be prepared to carve out some exceptions.
This is where this kind of solution gets real dicy and political.
What I just suggested won’t work in housing. The entire housing industry is based on the credit-worthiness of home buyers — solid, bill paying people with credibility and the ability to pay back over 20 or 30 years the borrowing they engage in.
We pride ourselves for being the epitome of capitalism. Well, if not us, who is? It’s the nations to whom we look for loans when we run out of money. Like I said, China, Japan and the Saudis. It’s a nation with a cumulative balance of payment surplus. A creditor nation has positive net investment after recording all of the financial transactions completed between it and the rest of the world. Oh, if we were only that . . .
Investopedia explains Creditor NationCreditor
nations have invested more resources in other countries than the rest of the world has invested in them. To determine if a country is a creditor nation, one must account for the the nation’s overall debt balance when calculating the balance of payments.
Creditor nations can sometimes lose their status and become debtor nations. This happened to the United States in 1988 when its balance of payments turned negative.