Federal government deficits, which have become unwieldy, financed a part of U.S. growth. Credit did the rest; fueling the seemingly perpetual motion economy of continuous growth. Theory predicted, as for all perpetual motion machines, it would soon grind to a halt. Adhering to the principle that "a rolling loan gathers no loss," and utilizing artificially maintained low interest rates, creative financing, credit card expansion and finally sub-prime mortgages for the last batch of available spenders, system financiers increased the money supply and enabled purchasing power, especially for the home construction industry. Free money, rather than free enterprise, more accurately characterized the U.S. economic system, which has been hit by a four times whammy: (1) Credit markets have reached their limit, (2) foreign investment can no longer finance the trade deficit, (3) the federal debt seems too high to support adequate fiscal stimulus plans, and (4) a sizeable number of debtors cannot repay loans.
Lower the trade deficit by limiting consumption of superfluous imported goods, diminishing energy needs, withdrawing from foreign adventures and decreasing foreign assistance.
Cut the budget for defense spending, earmarks, pork barrel, and non-expedient services, which will lower the deficit, strengthen the dollar and provide funds that more directly attack the financial problems.
Direct tax policies so those with definite needs will receive government benefits and those who have only superfluous needs will supply the funds, Redistribute wealth and soften the calamity on the lower and middle classes.
Plug tax loopholes that will also lower the national deficit and gain resulting benefits.
Revive domestic manufacture of essential industries – steel, metal products, commodities, and autos – which will increase payrolls and make the domestic economy less dependent on credit.
The United States has superior technology, highly productive agriculture, abundant natural resources, escalated productivity, developed transportation, efficient distribution, massive infrastructure, educated population and a blessed variable climate; reasons to be optimistic that an economic powerhouse can find an acceptable solution to a major economic crisis. One reason to be pessimistic is due to the free market purists and flag waving "patriots" who will fight the distressing situation with slogans and empty words. Their deceptive concepts might prevail to the ultimate bust.
Another impediment to solution is the mindset of the American people. The U.S. consumer has become like The Great Gatsby believing in "the green light, the orgiastic future that year by year recedes before us." The Paulson plan, although an important stop gap, is only a "boat against the current, borne back ceaselessly into the past." Negative trade balance leading to using credit to finance domestic production is the major problem. Is it difficult to convince a mindset to place the reverence of survival before the desire for imported IPods?
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