It Will Take More Than Hope To Have Positive Change

SEARCH BLOG: ECONOMICS

The problem facing the economy is that it's difficult to see where things can or will turn positive over the next six months. Hoping and wishing won't do anything. Planning and scheming are nice, but won't change the facts.

Over the past decade, there have been too many negative changes to be absorbed and for which adjustments must be made.

• The only long-term growth sectors have been the federal government and health care
• Four major economic dislocations have occurred: dot-coms, housing, credit, and energy
• Personal investments have been stagnant or negative since 2000
• The bridge between the unskilled or semi-skilled and the middle class has been deteriorating as well-paid manufacturing jobs have been exported

The wealth of the 21st century's first decade has proven to be largely illusory and home and financial investment values have plunged more than 1/3... perhaps closer to 1/2 in some areas. Any recovery will not be lead by consumers.

Without consumers leading the way back, manufacturers will have to allow inventories to be depleted to conserve resources. This will only extend the recession. Once inventories are exhausted, businesses will begin producing to meet the lower level of demand. For many businesses, the question of survival is greater than the question of return to healthy profits. Any recovery will not be lead by business.

The government has been spending money like a drunken sailor. Over the past decade, the growth of the federal government has been focused on both the war effort and social experiments. Regulation and de-regulation have been implemented without a central strategy and have resulted in ambiguities, inconsistencies, and outright conflicts.

For example, while making domestic manufacturing more difficult in the U.S. due to a variety of regulations with marginal economic value, the same government has opened up pathways for importing products from China that are inferior and unsafe and manufactured in highly-polluting and dangerous processes. While this has temporarily reduced the purchase price of products bought in the U.S., it has undercut manufacturing and associated employment thereby eroding the basis for a sustainable economy.

Any recovery will not be lead by government.

What is more likely is a protracted period of aborted recoveries based on the hope that this or that program... such as bankrupting coal to push inefficient wind and solar energy... will provide the necessary spark.

The U.S. likely will experience a 1990s Japanese recession that results in a smaller, less dynamic economy.

Businesses and individuals will become more dependent on government for direction and credit and security.

Any real recovery will come only after it becomes painfully obvious to all that the double-digit growth of government has been the source of our economic problems. Onerous regulations, excessive spending, mismanagement of resources, political gamesmanship, special interests, and blatant ignoring of the law itself have been the products of our governments. Social and economic deconstruction are now the legacy.

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