An economic prescription

Hello, blogfans!

This is a "hard truth" entry tonight, boys and girls. Many, if not all, will not like what I have to say but, if you have an ounce of honesty in you, you have to admit that what I say is true and, if America will heed what I say, we CAN get back to prosperous ways in this country.

It needs to happen NOW, though.

If you look back at when things were good in this country's economic past, you'll see some things that were true then that are most definitely NOT true now. When things were good, we had a large manufacturing base and the things that were produced were roughly balanced between commodities and consumer items; washing machines, refrigerators, televisions, etc. Now, about the only consumer items that are still produced here are some consumer electronics and there are practically NO commodities produced here at all. What do I mean by "commodity?" Steel, oil, etc. Now, for us to get back to commodity production and to bring consumer item production back, what needs to happen? Low-end wages here need to adjust so that our work force is paid on a level commensurate with what major competitor nations pay their work forces. We've lost enough jobs to Mexico, China, Indonesia, etc. It's time we brought some of them back!

So, that's item #1; Manufacturing has to return as the basis of the US economy and the only way that's ever going to happen is if wages fall to a level commensurate with international competition.

So, with unions controlling wages etc., how are we going to get wages back to where they need to be? Sadly, unions used to be about taking care of members and their wage/benefits issues, but for about fifty years or so, they've been about political power almost exclusively. A lot of union members are losing their jobs as their union contracts price their labor out of the market. Unless unions wake up and make concessions on behalf of their membership, I'm afraid they'll ALL be out of work before it's all over and then the market will have attained a goal that US companies never could; it will have broken the unions and members will be forced to work for less if they're going to work at all.

Sad, but true.

The second thing that must happen is credit MUST become much harder to obtain and savings MUST be encouraged. How is that going to happen? Uh......the government regulates everything else, why can't they make it illegal for banks or other lending institutions to loan money to people who clearly will not be able to pay it back? (college students, people with little or no work history, "pay day loans" etc.) Instead of giving us "earring" (thanks, MO) money in the form of tax rebates, let's do it like this; pay incentives to banks earmarked only for payment in increased interest to savings accounts, AND reduce tax rates so that people have more to save in the first place. Let's face it; a tax rebate is nice, but if the government has money to rebate, that means they charged too much in the first place, right?

Here's the item #2 bottom line - You cannot borrow your way into prosperity, but you CAN save your way there! This country saves far too little and borrows far too much! Let's cut back on the borrowing and increase the amount we save! If we can get that job done, we may actually get a little bit removed from our "get it now, instant gratification" society and get back to the "delayed gratification, save first/buy when you can afford it" situation that we SHOULD have!

Sadly, the other side of that coin is that, if lending institutions or consumers do "high risk" business like ARMs, the old "let the buyer beware" credo's got to play out and people and their banks have to face the consequences of their actions.

I'm afraid that's basically what's going on now in the market, but I don't see any adjustments in regulations for borrowing or lending going on. Regulating commerce IS one of the constitutional mandates of our government so why is it that, when finally faced with something they ARE supposed to be doing something about, they are doing NOTHING?

Too busy trying to do too many extraconstitutional or anti-consitutional things, that's why!

Okay, so let's review. If we want the US economy to recover, we've got to restore an manufacturing base which means that wage structure has got to be adjusted so that it's competitive with the world labor market. Second, saving has got to be encouraged and lending MUST be tightened! That's where we're at so far!

Look in tomorrow for economics 101, ie., "perceived vs intrinsic value." I'll attempt to explain why it's imprtant to value things that have actual material value and devalue those things that do not.