Setting the Record Straight

September 30, 2008

Have We Reached China Yet?

Down Our Economic Hole
    While all the sturm and drang about the failed Wall Street bailout shuttlecocks back and forth, there are many other factors going on that spell bad economic times ahead for the United States. Here are just a few points to keep in mind, beyond our already-mentioned flood of suits to come.
     –Parts of the United States in less than two weeks after Hurricane Ike hit oil rigs in the gulf and more importantly, caused refineries to be shut down in Texas, were experiencing something not seen since the early 1970s—lines of cars waiting for scarce gas. As we all know, supply short of demand equals higher prices.
     –The price of energy drives the entire American economy. The economy was already being hurt by inflation two and three months before Ike, at a time when people on the lower end of the income ladder were experiencing the germs of a recession. Their employers already were cutting back.
    –Stagflation, the result of inflation coupled with a recession, always hit the lowest on the ladder first because they have less disposable income than those on rungs above them. But they are never part of the government measurements to see how the economy is doing, so the government and those who rely on its measurements are the last to know as they greed along their merry way.
     –Then the bailout calamity. That news drove a lot of people into the hole, their weight alone making the hole deeper.
     –Wall Street’s house of cards was built on over-leveraged bad paper, which, because of the not-quite-yet trillion-dollar debt the Bush administration amassed with mistakes far beyond Iraq, is owned by several foreign countries, particularly China and Japan.
     –Seeing their investments in trouble with the bailout gloom-and-doom, those governments, along with several others, pumped billions of their own money into the American economy to help shore it up. That, too, will come due some day.
     –The same sharp rise in energy prices has had an effect on the whole world similar to the effect felt in the United States. Inflation was rising in tandem with a rising cost of food.
     –Other countries, particularly those in undeveloped South Asia, have long depended on sales in the United States to develop their economies. A middle class has developed in China as a result, but already seeing inflation as they enjoyed that growth, they were hit by America cutback on buying and paying for production.
     –Other countries in Southeast Asia felt the same tremors, many of them facing gargantuan inflation rates.
     –Although Japan is not an outsourcing center, many of its industries have saturated the Japanese market and need to look at markets elsewhere. They already had been acquiring other companies abroad to expand and diversify their markets.
     –The Japanese still has an economy that is richer than that of the United States right now, and before the yen went into the tank 15 years ago, the Japanese owned a lot of property in the United States. Keep an eye on who buys your country club or some other major piece of property in the near future as the fire sales escalate.
     –Even the Democrats will feel it if they win the White House and a greater congressional majority. Gone for at least the first term are all of those programs they wanted to restore like a phoenix from the ashes of the Bush administration. They will promise, but the will not be able to deliver, regardless of any quick solution in Iraq.
     No, we haven’t reached China yet, but the hole is nowhere as deep as it is about to get. Remember who got us there, who was one of them, who sided with them and who used to brag about being an “unregulator.” And we now have had a chance to see some of his judgment abilities.
     Where is your shovel, John McCain?



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