CLICK HERE LARGE PRINT EDITION:SIMPLIFICATION LEADS TO SUFFOCATION OF US ECONOMY «
Periodically, I go to Seeking Alpha to dispute the editorials there. Here is a typical example of bad thinking from small, simple minds. Across the entire spectrum of writing online about this crisis we are in, I seldom see the word ‘Japan.’ Most articles focus on China. Or OPEC. Or blame Americans for the mess our internationalist ruling elites created.
Rube Golbergism indeed! In fact, if you close your eyes you can easily imagine the gigantically monstrous, creaking, clacking, lurching machine that our economy has become. At its heart is an engine so strong, sleek and pure that it somehow manages to cart around all of the junk that has been bolted onto it over the years, yet as the machine wheezes and stumbles, it seems evident that the engine may be at the point of seizing. And the response in Washington is to bolt on more parts.
Mr. Lindmark is like a lot of starry-eyed thinkers who are very, very naive. First of all, the entire reason the tax code is so complex is very simple: the corporations themselves, the rich themselves, make it complicated so they can evade paying taxes! Period! Every ‘simplification’ of the tax code hurts the lower classes who don’t have a very complicated code and benefits the rich who demand tax cuts in exchange for removing all their complex deductions, etc.
They always pretend that the tax code is hard to figure out. But NOT for THEM! They adore this complexity! They make money off of it! So we cut their taxes more and more and for a few years, the tax code is not so complex. What happens next?
The rich and powerful sneak into DC and insert more and more complex exceptions into the code so they pay less and less taxes! Over the last 35 years, they have done so well at this, their share of the wealth is now double what it was in Nixon’s day. Today, the share of wealth at the bottom is half of what it was back then!
Here is my reply to the rest of this goofy article,Our Rube Goldberg Economy –
Good grief. The housing/buy out/commodity bubbles were GLOBAL. All sorts of economies suffered the same identical bubbles. The engine for all this was an out of control lending cycle. And the place with the cheapest credit rates was the BANK OF JAPAN.
The Japanese carry trade flooded the planet with excess credit. This creation of money was instantly translated into other currencies so the yen could hide behind this screen of other currencies suddenly surging in volume, in particular, the dollar.
This flood of currency then sought somewhere it could go and ‘grow’ in the form of ‘investments’. Many countries had investors using pirate islands in the Caribbean and Iceland and other tiny principalities to ‘grow’ this flood of lending and this is why we had so many bubbles, suddenly.
When the Fed, trying to stem the tide, raised interest rates starting in 2004, this made the carry trade WORSE. And now, it is ending only because all central banks are rushing to make their interest rates the same level as Japan.
So in Japan, the carry trade has reversed. The yen is now getting stronger rather than weaker. And the flood of funny money has ceased. Now, the Fed is trying to be the carry trade! They are trying to flood the world with more debt when the world is drowning in red ink!
No one is drowning worse than the US. Since ALL systems, communist, anarchist, capitalist, democratic, autocratic, large and small are now floundering for the exact same reasons, we CANNOT blame Washington, DC for creating a system that doesn’t work via tax laws, etc.
On the other hand, the true problem lies in the floating currency regime launched by Burns and Nixon in 1971. This started the flood of easy credit. This CAN be fixed. This MUST be fixed.
We live in a complex society. ALL first world industrialist nations are complex! There is no ‘simple’ system except in places like Zimbabwe. They figured out that money can be run up to infinity and now have infinite inflation and total social chaos. Same goes for North Korea: it is a very simple economy. And is killing its own people. And is ugly, to boot.
We can’t be simple any more than Paris Hilton in ‘A Simple Life.’ We can’t go back to a system that ‘worked in the past’ since even in Colonial Times, life was NOT simple at all. The building of our nation’s political base was very difficult and the greatest minds on earth bent themselves to this effort and they thought they did a good job of it.
The reason Washington, DC is corrupt is due to the cost of running for office in the modern age: it requires lots of money for travel expenses and in particular, TV time. Most of the money goes into electronic systems and public airspace as well as billboard ads, etc. The private financing of public office was supposed to be fixed long ago when they passed campaign finance bills in Congress.
But that cut down the ability of lobbyists to lobby Congress. So it was circumvented to the point today that no one uses public financing. They use private bribes! And so the corruption is worse today than any time in our history. Imagine that.
But my main point is, all systems suffered from the serial bubbles. This is why figuring out what was the ultimate source of these bubbles is so important! As I said a number of times, the world’s #1 and #2 economies cannot both be running systems in the red with low interest rates! We have a responsibility to not do this and SO DOES JAPAN. But the real problem is, our financial classes, the investors infesting the system via pirate islands, they wanted this, badly! And they want it back! They want to flood the planet with cheap Japanese loans!
Right now, they will settle for cheap American loans. This will produce another set of inflationary waves in the future, worse than the previous sets of waves that began in 1971. Now, on to an excellent web site that has great commentary:
Craig Harrington: The new administration has promised to create 2.5 million jobs and slow the endemic outsourcing that has been so destructive to our economy. Obama has backed a second, larger, economic stimulus package in hopes of propping up consumers. The proposed stimulus package encourages spending on major infrastructure projects, health-care modernization and green technology to create manufacturing and service jobs.
However, there is a major remaining problem. The United States is unproductive and lacks the capacity to manufacture many of the components necessary for the new wave of building proposed in the stimulus package. According to the Depression-era “Buy American Act,” federally funded projects must contain a certain proportion of American made components (later laws and alterations have changed the exact ratio).
Unfortunately, when it comes to wind and solar power generation, the companies at the forefront of production are largely located overseas (specifically in Germany). Any energy initiatives will require the creation of a brand-new American manufacturing base.
China and Germany have been hard at work, trying to expand German influence into Chinese markets via Germany cooperating with China, building alternative energy systems and super-fast train systems. Among other things. The Japanese use Chinese labor to assemble stuff but they keep all the elaborate technical stuff inside Fortress Japan.
The Chinese are increasingly demanding they get the higher technology. So Japan is moving assembly factories to the weaker communist countries like Vietnam. China was interested in solar energy long ago. My father was one of the early backers of solar power in the early 1970’s and went around the planet, pushing the concept. The communist Chinese were very interested in it. This way, they could bring power to distant villages, for example.
President Jimmy Carter made my father the Alternative Energy Czar. My father wanted solar power factories in the US. He was very excited about all this. Now, way too late, the US rethinks doing this stuff. And we no longer have the manufacturing facilities to do it. We could start a program of building these factories! But to do this, we have to KILL FREE TRADE. For aside from the Japanese carry trade, this is the other devil that bedevils our economy.
While it is crucial to reclaim our manufacturing base if we ever hope to regain our former strength, we are shooting ourselves in the foot by remaining in “free trade” agreements like the North American Free Trade Agreement and the World Trade Organization. Until we get out of these agreements, the stimulus package may only serve as Band-Aid that will be ripped off as soon as the funding dries up and cheaper foreign wages drive our manufacturing back out of the country.
Correct! I love it! Good work here at Economyincrisis.org! Click here to read another Economy in crisis article about the ‘High Cost of Neglecting Manufacturing’, written in 2004.
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