It is touching to see Mr. Bernanke and Mr. Paulsen getting credit for their proposed solution to the financial crisis we now face, especially since it was caused by policies which they and previous government officials had purposely followed knowing full-well that this current calamity could be the result

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 It is touching to see Mr. Bernanke and Mr. Paulson getting credit for their proposed solution to the financial crisis we now face, especially since it was caused by policies which they and previous government officials had purposely followed knowing full-well that this current calamity could be the result.

FED chairmen, in particular Alan Greenspan in his erstwhile promotion of the interests of America's rich, have constantly flirted with a depression by employing interest rate and monetary policy practices designed to support an overvalued dollar or to cause a recession in order to reduce purchase of foreign-made goods. The FED, under Mr. Greenspan, has constantly increased interest rates during otherwise normal business cycles, under the pretext of preventing an undesired inflation which he alone supposedly understood (or experienced), when his true interest were in preventing a market-induced devaluation of the dollar. These interest rate increases simply shut down needed business activities and, together with corresponding monetary policies designed to decrease consumption, created systemic weaknesses increasing the possibilities of a depression.

This may seem quite preposterous to you, the reader, so I will briefly explain the reasons for these policies.

When "globalization"-, the scheme of multinational corporations to extend the exploitation of laborer's wage rates to the entire world (beginning 30 years ago), began to produce unsustainable trade deficits in the western world there were, practically speaking, only 3 ways to resolve the resulting trade imbalances. They were protection (tariffs, quotas,etc.), a devaluation of the nation's currency, or a recession, which would cause unemployment and a resulting loss of consumer's purchasing power (hopefully for foreign products).

U.S. legislators, in the interests of U.S. multinationals who were manufacturing goods overseas to sell in the U.S. (the ever-increasing outsourced products and services), were "persuaded"- to discontinue these tariffs, quotas, subsidies, etc. protective of American industries (a process known as "globalization"-). They also were directed by U.S. wealthholders, their sponsors, to resist any devaluation of the dollar, and to cooperate with our trading partners in their efforts to keep their own currency values lower (ignoring the fact that their industries would, as a consequence, gain a major portion of the world's product manufacturing and services.) The sole solution left to resolve the trade deficits , in the opinion of the U.S. policymakers, was to drive the U.S. into what turned out to be a series of low-level recessions. This would not only tend to limit U.S. consumer's purchases of foreign products and services (unfortunately products made in the U.S. as well) and would (presumably) result in a decline in the trade deficits. In this scheme, only the wealthy could afford considerable purchases of foreign-made goods. This would not alone solve the fundamental trade problems, however. The trade imbalances would continue until America's workers could again compete fairly with their foreign counterparts.

Under these policies, U.S. wage rates would be expected to fall. Unfortunately, they would have to fall to around $3/ hour to effect any change in the trade imbalances. It did not happen (and could not happen given living costs in the U.S.). As long as trade protection was not allowed (a cornerstone of globalization), the only solution remaining to correct trade imbalances was for the dollar to depreciate. This solution was resisted by the rich and was not resorted to until recently (and grudgingly). This solution to the trade imbalance was, in effect, done "too little too late"- . By having forced serial recessions for 30 years without trade deficit resolution, the middle class in the U.S. had been essentially pauperized by mounting debt. Instead of decreasing consumption during these "recessions"- the middle class attempted to "keep up with the Jones"- on borrowed money or previous savings. This finally culminated in the sub-prime lending fiasco and current debt crisis. These practices had essentially wiped out any "cushion"- of accumulated financial assets, credit card loan limits, and home equity loans, culminating in a $1 trillion credit card debt and extensive non-performing home loans. There is no longer any way to avoid facing the fact that the middle class is no longer able to sustain an adequate consumer demand for a healthy growing economy.

The only solution possible now, short of trade protection policies, is for the government to provide the consumption dollars necessary to sustain a healthy economy which,current tax policy being what it is, will result in substantial deficit spending. Unfortunately, the rich don't like this solution either, now contesting the "last, best, chance"- for the survival of a high American standard of living, the proposed bailout. As soon as the rich realize that this "consumption-supporting"- deficit will have to be continued indefinitely, now that the middle class's resources have been permanently compromised, they will be even more unwilling to provide this needed financial support. Consequentially, unless a new administration "gets serious"- about serving the interests of the general public rather than the short-sighted and ultimately destructive policies demanded by the rich, the U.S. will be facing a never ending decline in it's standard of living ( a fact well understood by Wall Street.)

I have a solution which would eliminate the sub-prime interest rate problem as well as the "BTC"- (before the crisis) fiscal deficit as a bonus. U.S. citizens now pay about $3,800 per person more than the citizens of their prosperous (western) trading partners for health care services. This amounts to an outlay of about $1.2 trillion more for our insurance-dominated , "pay for as you go"- health services than other western countries citizens pay in their single-pay health systems. The U.S. citizen, as a further insult, experiences a far-lower quality of health care than citizens in these (government administered) "single pay"- systems. The U.S. health care system was rated 26 in the quality of health services among the developed western nations by the World Health Organization in 2008. Of the resulting $1.2 trillion excess payments, the U.S. government pays about 40 percent, and the private citizen 60 percent. This amounts to $480 billion from the government (via taxes) and $720 billion from U.S. families, about $500 per month more per family.

By reverting to a single-pay health care system the projected $480 billion fiscal deficit would disappear. With $720 billion more in the pockets of American consumers (and mortgage holders), the proposed $700 billion federal bailout of our financial sector would be unnecessary.

These problems could be solved in a single day by the U.S. congress. They only need to give up the AMA's, ADA's, hospital's, insurance company's, and pharmaceutical companies' more-than-generous "contributions"- to their political campaigns and vote for a single-payer health system developed in the interest of all the country's citizens.

An even-more important single law would quickly solve the U.S. trade imbalance (at least eliminating the unfair wage advantage of foreign workers over their their counterparts in the U.S.). The U.S. congress simply needs to promote legislation requiring a worldwide (living) minimum wage for workers producing internationally-traded goods, with a proviso that products of non-complying countries be subject to an "equalizing"- tariff based upon wage and benefit differentials. Not only would U.S. and other western countries' trade imbalances disappear, but workers worldwide would benefit. It's time for all good people everywhere to demand a living wage for workers of all countries. Every man working in full faith for 40 hours a week deserves, as a matter of morality and justice, to receive a living wage for himself and his family! Anyone tolerating or condoning less than this should be recognized as an "exploiter"- and suffer the disdain of his fellow citizens.

Authors Bio:
Richard Backus is a journalist specializing in economics and politics.He has degrees in physics and engineering, and considerable experience in computer systems development. He is single, a good bridge player, and an enthusiastic tennis player.