US Government’s Economic Policy ravages US markets – Financial Stocks Tank

The piper has come for payment. In August the Fed bailed out their buddies in the major US financial institutions. After years of speculating in credit derivatives the collapse of the housing bubble threatened the existence of most financial institutions. Instead of requiring the institutions to write down their bad positions the FED pumped in almost $1trillion in liquidity and piloted the purchase of Country Wide Financial, the poster child of bad lending practices, by 4 major banks utilizing funds lent by the Federal Reserve to these institutions. The FED lowered interest rates even though real inflation is through the roof. This was a really bad move but right in line with the disastrous ideology of Reaganomics.

The US dollar has been losing value for the past 5 years. A country’s currency can be seen as shares representing the country’s equity. Just like shares if you spend more money than you earn the currency diminishes in value to represent the new economic reality. If a company creates more shares the value of existing shares is diminished. If the company pays a dividend it receives a higher valuation. The dividend for currency is interest rates. A company may also receive a higher price if the future outlook for earnings (retained equity) is positive. The dollar has devalued because of the current account deficit, budget deficits, artificially low interest rates, and the lack of faith in the United States as a going concern.

The US has eliminated internal production of goods and services. The US only produces 20% of the goods it produces. The US is completely dependent on countries that do not have our values or our product safety laws. The excuse is for cheap labor but the reality is that products may be produced using materials and processes banned in the US. If a worker dies, well, “C’est la vi.” That glue is not available well GHB will do just fine for a child’s toy. The shipping costs are offset by cheap energy produced by high polluting processes. The US cannot complain about quality or the producer will stop shipping goods and stores in the US will have empty shelves. The economic impact of Free Trade at all costs is a reduction of middleclass jobs, lower wages across all segments, and a migration of wealth from the middleclass to the upper class.

The US lives on a smoke and mirrors “Service Economy”. US corporations have become nothing more than marketing companies. Research and Development, Intellectual property, quality workmanship are no longer important. We now make money without working. Wow! Experienced and educated professionals are the latest in the outsourcing scheme. In countries where University is free the PHDs abound and corporate America wants a piece of these low cost professionals. We are now emptying the US production machine, basis of any country, of the last remaining resource, educated scientists, engineers, and top managers.

Corruption is widespread in both Government and Business. Taxes are a cost of doing business. Corruption is a hidden tax on the economy. Corruption is paid for by the collective while the benefits are limited to the parties involved. Corruption is considered a victimless crime. This is like saying that dumping toxic waste into the watershed is a victimless crime. There are victims it is just harder to find the direct correlation. Corruption affects everyone in the country. It reduces GDP just a higher taxes or high interest rates. It causes the loss of jobs. I consider governmental corruption up there with mass murder because the economic effects are felt by rich and poor alike. This in turn results in people not being able to pay their bills, have homes or sometimes even eat. Corruption should carry a mandatory life sentence and lobbying by corporations should be made illegal.

Collusion between politicians and Corporate America has distracted resources from internal infrastructures. Lobbying is legalized bribes. In any other developed country the activities of lobbies would be considered criminal. In the early 90s Italy went through a cleansing process eliminating entire political parties and incarcerating corrupt politicians. The activities were no different than our politicians taking vacations (or the many other perks) on the corporate dime. Italy has since maintained a stable government, reasonable growth, and contained inflation. It would be valuable to discuss the pros and cons of corporate lobbies. It is a good thing that citizens can petition their government for change. It is a bad thing that corporations can petition anyone considering the fact that corporations are not citizens. Corporations have one objective: to make money and the corporation is often misused to further an individual’s greed such as a CEO that makes hundreds of millions of dollars.

Our system is on the verge of collapse. We need to make changes to the underlying system. The problem is grave. The difficulties we are current facing have been brewing for thirty years and cannot be overcome with a change in interest rates or throwing money at the problems. Change will not come without sacrifice but it is time to pay the piper because the piper will always get his due. Our politicians have no vested interest in change. They are more powerful and receive higher compensation than any time in history. To start to fix the problem we need to change the players. We need real working people in Congress. We need a President who represents us and will think about his country before he thinks about his legacy or other personal gain. We need an individual who is not a politician, someone who actually works for a living (or would if he had a job left). Perhaps one of the workers from middle America who has seen his job outsourced or the scientist who cannot pay his university loans because wages for professionals have been trending downward.