During all the recent economic turmoil in the good ol’ US of A, many people have laid the blame on many things. Personally, I keep coming back to one thought: “Of course our economy is in big trouble. We don’t make shit anymore. We just consume it.” It doesn’t take a genius to figure out that if you are consuming more than you are making, then you’re going to run into trouble at some point down the road and the current economic crisis may well be that point. I think one of the keys to a sustainable economic recovery is a revitalization of the American manufacturing section. If we can begin to produce more goods than we demand then we will have a trade surplus and can start paying back all our debtors (here’s looking at you China). Once some of that debt is paid back, we can be relieved of the interest payments on it, which are substantial. In 2009, interest on the national debt was $180 billion or approximately 5% of government spending (Source: GAO Audit Report-FY2009).
This approach seems like a no-brainer, but there’s a lot of damage to be undone. William Greider of the Nation recently published a nice article dealing with the subject, titled With the World Economy on the Brink, America Must Start Producing for Itself Again. The beginning of the article is excerpted below:
The world economy is on the brink again, facing a crisis of epic dimensions for reasons largely obscured by the inflamed politics of 2010. Against their wishes, the United States and China have been drawn into an increasingly nasty and dangerous fight over currencies and trade. American politicians, especially desperate Democrats, have framed the conflict in familiar moral terms — a melodrama of America wronged — and demand retaliation. Other nations, sensing the risk of a larger breakdown, have begun to take protective measures. Every man for himself. The center is not holding.
The political fray obscures the fact that the basic economic problem is larger than any single nation and stalks the global trading system itself. There is a huge hole in the world — a massive loss of demand. Think of the trade wars as the largest producers fighting over an abrupt shortage of buyers. Financial collapse and recession, with falling income, defaulting debt and rising unemployment, made the hole. In other times, Washington would have stepped in to impose policy solutions and create market demand as the global system’s buyer of last resort. This time, Goliath is gravely weakened, both in economic strength and political authority.