The False Bush Economy
By Dean Konstantine
The once strong robust US economy has been manipulated by many over the years, to the point now it no longer follows sound economic principles or practices. Many believe the central control and government regulation is to blame, others the deregulation and greed are the culprits.
The fact remains, the bad news isn’t over and can be underscored by the almost daily news of major US business after US business heading for bankruptcy.
Our economy, through decades of mismanagement is now showing the signs of the real possibility of collapsing. This is serious and should not be taken lightly.
The US economy has been turned into a debtor economy which is a false economy. Savings has been replaced by debt, our once majestic manufacturing by a service/information industry, sound investing principles by leveraging inflated dollars in a boom to bust rollercoaster which only benefits a handful of savvy insiders who rake in billions in overnight success.
Even after years of mismanagement we still find Uncle Sam handing out money like a drunk sailor on shore leave after 6 months at sea. Does no one see Uncle Sam is broke, he did not win the lottery, where is the money coming from? More loans or the counterfeit federal printing press?
The fact is, Uncle (can you spare a dime) Sam can not buy his way out of this one, although, he will try. This economy is the product of many years of misguided, ill advised, uninformed and politically motivated boomer politicians. Yet, they continue down this path refusing to admit they don’t know what they are doing or admitting they haven’t a clue how to fix anything.
The old guard the generation of hard workers, who understood the importance of saving, the ones who understood what it meant to have not, to go hungry, to fight a war against leaders bent on world domination are all gone. We are now left with their spooled children, “the philosophy majors”.
Lets look at the facts. For years we have exported our industries, our manufacturing, outsourced our jobs, allowed a lopsided import policy while not taking care of our businesses by negotiating a sound export policy, etc.. There were many reason given by both sides of government but the fact remains our ability as a nation to create real wealth was exported and eroded relentlessly by our own people.
The false economy boomed, and so began the cycle of boom and bust. Inflation was making people rich, paper gains became the order of the day. The old principles of sound economic practices were set aside for the new baby boom economic mantras of leveraging to the hilt and letting inflation reduce the debt over time.
Look at it this way, our housing boom was created by loaning money to unqualified borrowers who could not pay back the loans they borrowed. The boomer politicians insisted on home ownership for renters who could not qualify to buy (mostly because they don’t pay their bills). The greedy bankers saw great opportunities and the ability to exploit this new market of economically unsophisticated borrowers. This introduction of new buyers started the shortage in the housing market, which set in motion the construction boom.
Then comes the speculators, since the market was hot and expanding exponentially, people leveraged and bought 2, 3, 5, 10 homes. This pressure created a storage causing prices to sky rocket. Creating the booming false economy, home values became inflated making people rich, but not through real productivity. Remember our productivity was exported long ago. As people cashed out this false gain they were spending the borrowed money, the equity, that was not earned, but created out of thin air, on everything they could get their hands on.
They bought and bought assuming they would cash out again in six months and pay off that new debt. Until that debt became so great the individuals debt to income ratios or DTI was so high it could no longer be falsified by the banks to qualify the borrower for a new loan.
Yes, many people invested in the stock market with false economic equity gains, the borrowed money, bought products, home improvements, built houses, vacations etc.
The money was following like wine, everyone was drunk with cash. But with money they did not earn, money they could not have earned and living way beyond their means. Its okay, the government lives beyond it means, so why not us was the feeling. All the while telling grandma and grandpa, see your wrong I don’t need to save my house makes me money.
The economy was great! But as with gravity, what goes up without a means of support will come down hard. So, when banks could no longer create or manufacture buyers of homes through the loosening of credit, the housing bubble burst and so begins the false economies drop to the ground.
As the fixed period of the sub-prime mortgages were due to adjust and those renters who were turned into borrowers could no longer afford to make the payments, they did what renters always do when the landlord raises the rent, they move!
This little unanticipated result had the consequence of speeding up the process of deflating the economy to where it should have been all along.
So it begins, we have the economy deflating to meet what people can actually afford through the real means of support, earnings from their jobs or businesses.
The valueless jobs, service jobs, will be eliminated rapidly as businesses downsize to meet the actual economy. Heavily competitive business will soon only see the strong survive, the strong are the ones who have savings to meet the lean times, their competitors fall flat.
One thing you must understand the US economy has become expert at gearing up to meet demand. Shopping malls, restaurants, retailers etc. can crop up over night in a boom economy to take advantage of the boom. But have you noticed, everything is fake, there is no longevity, no stability, no commitment to community. Just high power dollars moving in buying permits, bringing in outside crews to build a façade of a giant store. Under cutting the long term stable businesses of that community, driving them under and out of business becoming the only game in town.
Just as fast as set up they will close their doors, layoff all the local help to off load the debt of their huge temporary business. You only need to look at the stock market to see every major US retailer is going down.
Today, its Circuit City, they sell none essential electronics people can’t never really afford without credit to purchase, there competitors will soon follow.
What about the laid off workers? Unemployment? The tax payers are dwindling how will the government pay for those benefits? Print or borrow more money?
Realize this, being the biggest consumers in the world, is what keeps the world going. We stop buying and the world will feel the slump, as we head into recession so will soon the rest of the world. China, although producing goods, has the largest peasant population of the world, they can not afford to buy what was once meant to be sold in the US market. So, China will downsize it’s manufacturing due to the declining US market and slump into recession as well.
Many people feel they have a job and are still making money. Either working for government or some other secure job they feel will keep them going.
Think about this, if the money stops following because a smaller and smaller fraction of people can pay, if the government runs out of credit and can no longer borrow, if they keep printing money on false pretence, what will money be worth?
Its really not rocket science only common sense. Taxing the rich to feed the poor is not going to work. The rich can only be taxed on new income, they will secure their wealth in places it can not be touched. They will not invest or start new businesses or hire new people, why? Ask yourself this, so they can be taxed? What’s in it for them?
Stay tuned the fun has just begun. I will continue to expose the facts and the forming calamity to come.
