So, we have countries in serious trouble now, but this wealth that was lost, was digital, not hard and fast physical product, so I wonder where the wealth really went. Things should have just contracted, and would have if moral hazard was allowed to take place. You see, when people take risk, and fail, the burden of debt is upon their shoulders, not the publics entirely. Yes, they feel the pain of a manufacturer collapsing and no longer being able to produce a product or support it, but you don’t have billions of dollars either in tax raisings, or printing-press production of cash infusions into the economy which devalue the total purchasing power. No, you have thousands of people out of a job. You don’t forstall the economic collapse and make a bigger wall to climb for those who strive hard to overcome it.
This brings us to an article in “Spiegel” called “Can Countries Really Go Bankrupt?” and the answer is Yes. Absolutely. Iceland has, the UK is in trouble, the US is risking its entire history on a Keynesian economic theory that is untested in this forum and is based on Post WWII philosophy that the Keynes multiplier is what saved the US from a never ending Great Depression. The big issue is that with IRAQ coming to a close, the Government will stop producing large scale manufacting orders, and because GDP contains an element of government spending, you’ll see that faulter and cause investor anxiety and more retraction. If the money is not produced from thin air on the historical record of the US economy [devaluing the dollar] you’ll see loans from foreign governments at increasing interest rates as risk increases. If the money does get printed from nowhere, you’ll see inflation. A lose-lose-lose. Bankers who took advantage of bailout money, and lenders who were predatory, should be ashamed of themselves and not allowed to be in the industry ever again.
The only solution to the economic problem for America is to embrace manufacturing again, at a competitive level with foreign countries. The US builds the best of everything, we could even beat Japan in every aspect of automobile manufacturing if it weren’t for the increasing cost of payroll, benefits, and infrastructure. But the retraction of the economy will put an end to that, as people will take a lower paying job over nothing. Manufacturing at a competitive level with China however will not be possible because China does not compete at the same wage level even though they have the same level of infrastructure now. They simply make manufacturing cheaper. Of course, it would be cheaper, as everything is augmented by Government controls towards wiping out competition and generating profits that get directed straight into state bank accounts.
The US oversight of all things, from quality control of the steel we create, to the quality control of the drugs we take, we promise the citizenry a greater wellbeing in return for fiscal increases. And frankly, I’d rather survive my car crash than allow lower quality at a lower cost. We should have had the same protections in our fiscal security, but the SEC was asleep at the wheel.