American Economy

One thing that those of us who live in the United States should never forget is how wonderful a country this really is. Now, if you consider arable land, natural resources, educational levels, level of technological development, population density, and standard of living, there really is no comparable country in the world.

There are those who point to the current economic problems and predict Armageddon. Yes, people are suffering in some cases, unemployment is higher than we would like, but generally the country is carrying on quite nicely. Americans are making tough choices about whether to buy a new car or save more. Home prices are down and unfortunately many people have lost their homes (many of these were in homes they really couldn't afford in the first place). But the great majority of Americans are doing better than almost any citizens of any other country in the world.

Now, we are running a deficit that is higher than we would like, we are spending too much on health care, we face serious shortfalls in social security and medicare funding but does anyone really want to equate this to the horrors Europe, China and Japan faced after World War 2? In fact, if you consider the great depression, the turmoil in this country, which after all was intensified by the dust bowl drought, did not lead to fascism, or communism. In fact, while Americans became thrifty and cut back from the excesses of the 20s, the standard of living for most Americans in those years was still generally better than anywhere else in the world.

As we move into the future, we face some challenges, but really, even if China decides it won't but more Bonds from us, does anyone really think the country is going to collapse? We have contracted from what were the excesses of the early 21st century and in a few years we will have regained economic stability.

A lot is being made about bank failures. In the depression when a bank failed, the depositors lost their money. Now, the bank is renamed, depositors are safe and business continues as usual, with the losses from bad loans absorbed into our bank insurance system.

A lot of people in this country are having to make do with less right now. Lobster prices are very depressed as are many other commodity prices. In fact, while we continue to hear people worry about inflation, some sectors in this economy would love a little inflation right now. Yes, common sense tells us that prices will go up again in the future but it isn't likely to happen in the short term.

We are beginning to see renewable and national energy resources replace oil, slowly, but if you think about it, every barrel of oil replaced helps keep energy prices down, reduces carbon emissions and helps the trade deficit. You don't have to stop all oil use all at once, you simply have to work at the margins.

This country is going to have problems and issues, but we are the greatest economic power in the world. China, to use a Mao quotation, is really a paper tiger. With a population that exceed the U.S. by a multiple of 4 and a GDP that is about half. The economy is extremely dependant on exports and if they were to stop buying US bonds, Americans wouldn't be able to buy their exports. Realistically, until we start to equalize the trade deficit, bonds are the only way to equalize the currency equations.

Suppose the worst case was to happen and the United States couldn't sell treasuries any more, or the interest rates became inflationary. Well, imports and exports, while important, are still a very small part of the US economy as a whole. If foreign goods became unaffordable, especially energy, it would become disruptive, but we would adjust and really do much better than just about all our trading partners. Imagine the impact of American exports getting cheaper and cheaper? OK, we would have to replace oil with natural gas or coal or renewable, we would drink California wine instead of French, but we wouldn't collapse. In fact, we might have a boom!

There is a big difference between stock prices going down and Armageddon. Those who like to predict the worst ofter either want to sell bonds or want to make money shorting stocks. Meanwhile the average American, while a little worried about the future, is actually doing quite well.