Drawing Economic Lines

SEARCH BLOG: ECONOMY

Fed expands lending to tackle liquidity crisis

By Krishna Guha in Washington

Published: March 7 2008 13:36 | Last updated: March 8 2008 00:18

A deepening sense of financial crisis yesterday spurred the US Federal Reserve into new emergency action to try to ease strains in the credit markets – and convinced investors that another major interest rate cut is on its way.

Plan for a Healthy America

“We now face an opportunity — and an obligation — to turn the page on the failed politics of yesterday's health care debates… My plan begins by covering every American. If you already have health insurance, the only thing that will change for you under this plan is the amount of money you will spend on premiums. That will be less. If you are one of the 45 million Americans who don't have health insurance, you will have it after this plan becomes law. No one will be turned away because of a preexisting condition or illness.”

— Barack Obama, Speech in Iowa City, IA, May 29, 2007

Yesterday, I wrote about China as an unethical trading partner. Regardless, the U.S. ignores these "minor problems" because there is so much "benefit" from trade with China... and other "low cost" sources.

• Consumers get less expensive goods... "subsidized" by China
  
• Importers get to purchase components or whole products for sale without using expensive American labor
• The U.S. government has a customer for its debt

Yes, it appears to be a win-win-win. Then why do so many feel so uneasy about the arrangement?

Perhaps this is why.

PFFFT!

Ah, see, if the economy gets bad enough and the dollar gets weak enough, the U.S. manufacturers that have been significantly reduced in size and capacity will be positioned to export goods to foreign countries that still protect their own markets with hefty trade barriers. Huh?

Don't worry. In the end, our government will simply raise taxes on the top 1% of income earners and corporations so that it can provide the benefits you would have if you had a good job in the manufacturing sector that has been going away. And if you can't pay for your home anymore, the Federal Reserve will yo-yo interest rates once again to "fix" your problems.

So, who's to blame: Republicans or Democrats or corporate and finance manipulators or politicians or economic advisors?

Answer: yes.

There is no free lunch [even for Opus] and the Chinese are not "subsidizing" us.

But the one thing the government will not do... because, well, I just don't know.

What I do know is that this particular government inaction imposes a significant trade imbalance on this country, contributes to the decline of the dollar, hurts domestic manufacturers, and hits us all in the pocketbook.

The U.S. is still, by far, the largest economic machine in the world. The machine was built on and grew by being a producer nation. Now we are deluding ourselves into thinking that we can simply be a consumer nation... a service economy... and all will be well. The biggest consumer of all is the Federal government... but politicians of all stripes want us to believe that it is going to be the biggest provider... whatever we need... whatever we want... come one, come all.

It will swallow our problems for us... it will swallow us.

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