America's Economic Suicide
We stopped making things. Out dot.com craze bloomed and passed. We were stuck. How to keep the engine running when there is no fuel? Just loan money. If you loan enough people money, they will spend enough to make everything boom. And boy did we loan and so so many borrowed.
In 2005, almost $1 trillion dollars was extracted from Home Equity loans. Practically 10% of our GDP in 2005 was borrowed funds from the equity of our houses. Then add in another trillion in mortgages for residential and commercial real estate and now things were really cooking. Building we didn't need going up everywhere. Taxes were exploding to our governments. Who needed to produce anything when you could borrow as much as you needed and just build and import.
Until we were not allowed to borrow anymore. Then people started to slow their spending and ran out of money. Business slowed and tax revenues slowed. Now we are laying people off by the thousands everyday. Deficits are at record levels. Foreclosures are at record levels. Bankruptcies are growing rapidly. http://www.bloomberg.com/apps/news?pid=20601109&sid=aaTdhmzxnz1k&refer=home
Bankruptcies just don't affect those companies that go bankrupt, but the entire chain of suppliers that feed into that company. For example, for every job that is lost on Wall Street, they say two additional jobs are lost. When an airline shuts down, hudreds of suppliers are affected. When a retailer closes, trucking companies and vendors are impacted. Just as growth begets growth, contraction begets contraction. Without credit in America, there is no growth.
The jobs being lost are not being replaced. Current jobs are being outsourced. Our government tells us there is no inflation when the prices of many things we buy has doubled in the last few years. We are told everthing is fine and a couple months later we are facing the worst crisis since the Great Depression. The ratings agencies and analysts lie and there is little if any accountability.
Thousands and thousands of retailers are shutting down(see today's NYTimes). Large municpalities on the verge of bankruptcy(see Jefferson County, AL or Vallejo, CA). House prices crashing and billions of debt on our bank's books are defaulting.
We are now reaching the point where we will have to socialize or monetize. With approaching 50 million people uninsured, the health care system cannot afford to maintain the status quo and still make health care affordable for those who carry health insurance.
We carried too many too long with too much debt. Builders overbuilt. Consumers over spent. Municipalities over serviced. Now we are broke and no one wants to lend us any money. Our vacant homes are sitting there rotting with insect infested swimming pools. Vacant offices and retail space grows everyday as business and retailers shut down. Many downtowns around Amercia are becoming more and more distressed with rising vacancies.
And what are we doing about it? Giving $600 to encourage spending? What a joke....let's encourage more of the behavior that got us here in the first place.
Pilots are taking paycuts. Mortage Brokers are taking paycuts. Lawyers are taking paycuts. Doctors are taking paycuts. Teachers are taking paycuts. Firemen are taking paycuts. Police Officers are taking paycuts. Reporters are taking paycuts. Mortgage brokers are taking paycuts. Real Estate Sales people are taking paycuts. IT workers, if their job is not being outsourced, are taking paycuts. You get the picture.
And people dismiss when one is concerned with the lying that is being showered upon us. Wait as we start feeling the effects of the truth.