Search This Blog

Tuesday, April 19, 2011

Why An Economic Collapse is Inevitable

    With Oil price going thru the roof again.  It might make some wonder if we are headed  for another crash.  Especially with the stock market surging up and down like it is on a roller coaster.  Prior to the Subprime meltdown unemployment in America was at an annual average of 4.6 for 2006 and 2007.  In 2003 oil was about 27.69 a barrel and it moved up $37.66 in 03.  The rise kept on and in 05 and 06 the price went to over $50 a barrel.  This price rise put the people who were living at the edge of their income over an invisible ledge.  Suddenly they were faced with making decisions.  Would they eat, buy gas to go to work or pay for the house.  Their income would not do all three.  They did what most people would do.  They chose to eat and work. Speculators who had pushed the market to its limits suddenly had loans that were no longer performing as they had forecast. Panic started and banks and finance companies started trying to rein in the losses which simply caused more and more of the failures.
       As they say,  "The rest is history." The question is, "Is history about to repeat itself."  My view is yes.  With almost fourteen million people on unemployment and living on the edge, the job market growing very sluggishly and the Federal Government on the edge of Bankruptcy it is hard to have a positive attitude.
      The Politicians are dithering at best.  They want to make cuts, but are in total disagreement over what should be cut.  The Republicans want to cut off unemployment and are to stupid to realize it will just push many people over the edge.  Their argument that the government can not afford it is sound.  However the government can not afford not to either.  Republicans are also obsessed with not raising taxes.  Well the only way to get out of debt is to either pay it off, which requires money, which the government gets from taxes.  Or to cut spending, which is good as long as it does not increase the shortage of government funds.  People not working do not pay taxes.
       What is needed is a way to create jobs that does not increase the national debt.  As oil is over $100 a barrel and prices are surging the last thing anyone wants to hear is that we need a major tax increase on gas.  However if that increase goes directly to the states. The key is keeping the Feds hands off the money. It creates an instant fund to create jobs and start rebuilding infrastructure. It could be called an "Energy Independence Tax."  This is something that can be done immediately, if something is not done immediately we will be in a depression that is going to make the one in the 30's look like a cakewalk.  Yes it would be painful, but not half as painful as a depression.  It would buy time for the politicians to fix the broken system.  They keep talking about long term solutions and do not realize the problem is in the here and now.   If they try to wait for the long term solution the government will be totally bankrupt.   
      The first thing that needs to be done is freeze spending at present levels and then look for serious cuts.  How about bringing troops home from Germany, Korea and other overseas sites and bringing the expenditures to maintain those troops into the American economy.  Leaving troops in Iraq should not even be an option.  It is time for Iraq to stand up and take charge of themselves. We removed their WMD and he is dead. Their other problems they need to deal with.
      In Afghanistan we need to let the Afghans know we are the ones who helped them beat the Russians and that we left once and we are ready to do so again.  If the Afghans are half as honorable as the writer of the book "Charlie Wilson's War" implies they are.  They simply need to be told that they are being use by al Qaeda and that they have been played as pawns.  They will take care of the al Qaeda problem themselves. The Taliban are nothing but thugs and thieves and they are the Afghan peoples problem to deal with.  The Taliban are simply idiots who allowed themselves to be used. They are not a threat to America. Once they find they have been used they will turn on al Qaeda like a pack of wolves.  Then we can bring those troops home also.  That will save billions and let the world take care of its own problems for awhile.
     There are many solutions that could help, like going to a four day week.  It would save tons of energy and create jobs.  Some of my other blogs cover these ideas and believe me, while they are radical, they can be implemented and the technology is already here.
    If something is not done and the fourteen million who are getting unemployment start to loose their homes.  The housing market will go for another big slide and as people tighten their belts the markets will freeze up again and we will be headed for the bottom. In the Great Depression the market lost 89% of its value.  From its all time high the bottom today would be around 1490 points. It took three and a half years from top to bottom back then.  We are not quite that far into this one yet.  That is scary, but the sad truth is it could happen.  Back then the government pulled America through, but this time it is the government that is bankrupt.  As millions more loose their jobs the governments income will continue to slip.  They will not be able to pay their bills and if they do it will be with printed money that has no value.  Lets hope they get it together, but you better be preparing for the alternative.  The Politicians just do not get it.

No comments:

Post a Comment