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The Rich vs. the Rest: Devolvement of America - Unless

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opednews.com Headlined to H3 2/11/09

    Having entered the second year of what will be the Great Recession, Franklin Delano Roosevelt (FDR) continues an icon within the Democratic Party.  Many credit his public works New Deal deficit spending with pulling our economy out of the Great Depression.  Nothing could be farther from the truth.  

    Too much money got us into our current mess and more money will not get us out of it.  In FDR’s time it was Japan that was the silver bullet that finally rebuilt our economy.  

    Today, many worry that unemployment may reach ten percent,  perhaps higher, by the end of 2009.  It may be that we have seen nothing yet.  Unemployment stood at twenty-four percent in the 1932  presidential election.  From 1933 through 1939, it ranged from a high of twenty-five percent (1933) to a low of seventeen percent (1939), the year Poland was invaded and Great Britain declared war on Germany.  It fell to fifteen percent in 1940 and ten percent in 1941 as FDR began providing more and more supplies to backup Winston Churchill’s efforts against the Germans.  

    Following Pearl Harbor on December 7, 1941, America was back at work big time.  The buildup of war supplies manufacturing dropped unemployment to five percent in 1942, two percent in 1943, and one percent in 1944.

    Immediately following WWII, America produced more than one-half of the world’s output.  With the rebuilding of Europe and Japan coupled with the armaments race with the Soviet Union and wars in Korea and Viet Nam, America enjoyed a “free near-noncompetitive growth ride” for more than three decades; five percent of the world’s population exploiting more than twenty-five percent of the world’s resources.  At the same time America’s growing wealth was being more equitably distributed than ever before.  

    Beginning in the 1975, however, unemployment began to increase and American wealth began to be increasingly concentrated at the upper end of the income scale.  Today, wealth is more concentrated than any time since 1929; more that seventy percent of American wealth is owned by ten percent of the population.  The bottom eighty percent of American’s own less than sixteen percent of American wealth; the bottom forty percent only two-tenths of one percent.     


    The average unemployment for the 1974-1979 period was 5.4% .  The last time unemployment exceeded 10% was during the Iran/Energy Crisis Recession (July 1981 - November 1982) when the economy declined by 3.6%.   Our $14 trillion economy is tanking but surely has not yet hit bottom.  The 4th quarter 2008 decline was 3.8%.  Even with the $800+ billion economic incentive program currently debated, with spending spread over more than two years, unemployment will continue to grow at least into 2010.    

    Why does our current economic difficulty exist?  Forget the mechanisms of Wall Street greed.  These were but the means to achieve failure.  They could not exist but for monitory policy of the Federal Reserve System creating the existence of too much money.    

    Inflation is caused by too much money, either general or specific inflation.  When specific, bubbles are created.  Bubbles are enhanced by excessive leverage resulting from, again, too much available money.  Bubbles collapse and correction results in specific deflation.

    Going back to the Bush-41 S&L crisis and forward, you have these collapsed bubbles; the high tech dot.com bubble, the housing, derivative-credit swap and stock market bubbles, each at an accelerated pace. With one followed by another, by another, etc. a general economic collapse was inevitable.

    The government wants to get credit flowing once again.  The $700 billion Troubled Asset Relief Program (TARP) has so far failed.  Credit supply is down.  What is not said is that, in reality, so too is credit demand.  

    Who needs as much credit as before the current collapse?  With business contracting, business needs less than before.  Consumers already have difficulties maintaining credit payments. Too much debt was earlier incurred.  Combine that with lowered work time and job losses, consumer credit demand is significantly reduced.      

    Currently, only the  government needs more credit.  More credit is needed to finance the second half of TARP and the economic incentive package.  Continued budget and trade deficits must be financed.  Will  American banks normalize former, but more prudent, lending practices?  This question begs another.  How much longer will foreign nations convert their sovereign funds to American government loans to finance the result of  the total economic recklessness currently observed?  

    There is no silver bullet in sight to resolve our current economic dilemma save one.  War cannot be an answer.  Hopefully Americans are getting out of wars, not fighting new ones.    

    Class warfare is as near a taboo subject as may exist in the American culture.  It has, however, while lacking in public debate, been going on for more than three decades and, without question, the upper class is winning.  Indeed they may have already won.    

    Four events, all within the purview of Congress, would, however, go a long way towards evening the odds in this class warfare and in revitalizing the economy; bank nationalization, a more progressive tax policy, single payer universal health insurance, and the removal of the legal status of personhood for corporations.  

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A retired MBA, I am a former corporate ideologue, former 3rd party advocate and current curmudgeon. While a continued supporter of a 3rd party, I have concluded their efficacy cannot be demonstrated until our form of Government is changed to (more...)
 

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