Troubled U.S. economy out of ideas, out of mojo, out of gas
By Gary Lamphier, Edmonton Journal December 31, 2009
The decade with no name finally has one: The Big Zero.
That's what New York Times columnist Paul Krugman dubs the past 10 years, and in my books, his label is an apt one. For Americans, at least, the decade was a giant doughnut. As in: zero job growth, zero stock market gains, zero income growth, and zero upside for homeowners. Here in Canada, we fared much better. Average house prices doubled over the past decade, and the Toronto Stock Exchange's lead index is about 40 per cent higher than it was on Jan. 1, 2000, thanks to our abundance of resource stocks.
In Alberta, the oilsands exploded, driving economic growth, income growth, and net wealth.
Globally, there was also good news. Countries like China, India, Brazil and Russia boomed, lifting millions out of poverty, and creating a new class of wealthy citizens. That's worth applauding. South of the border, however, it's hard to find much to cheer about. Oh, there were some ups as well as downs. Before the housing market tanked, U.S. stock market indexes hit record highs in 2007.
But on a point-to-point basis, the U.S. economy has gone nowhere since Y2K dawned. The tech boom cratered, the housing bubble was built on fake money, and the grossly overhyped dot.comera largely lost its fizz (OK, so now we Tweet and spill our lives on Facebook -- how revolutionary). Corporate heavies like Enron and WorldCom went kablooey, two of Detroit's Big Three carmakers got flattened, and big banks like Lehman Brothers collapsed under the weight of their own crappy assets.
A decade ago, America's federal debt was less than $5.8 trillion US. Today it's $12.1 trillion, and rising so fast Congress was just forced to hike the debt ceiling for the umpteenth time. It won't be the last.
Total U.S. government debt is sure to reach 100 per cent of GDP in the next 18 months. After that, who knows. No one really wants to think about it, especially the talking heads on financial TV shows. Besides, it's already worse than the official numbers show. For starters, the U.S. refuses to consolidate the debt of 100-per-cent owned mega-disasters like Fannie Mae and Freddie Mac on its national accounts. Oh well. Never mind.
Perhaps we'll have a U.S. dollar crisis, as many fear. With two wars to fight, millions out of work, a quarter of all home mortgages under water, and no clear plan to get out of this mess -- other than a geyser of public cash or debt guarantees, now at $11 trillion and counting -- it's hard to see a happy ending. Quite simply, the U.S. has lost its mojo. It's not just broke. It's bankrupt of ideas.
The nation that gave us inventive geniuses like Henry Ford and Thomas Edison is now in the casino biz. With Wall Street's help, the Fed inflates speculative bubbles to buy time and paper over its messes. The huge stock market rally that began last March is built on one thing: cheap money. I'm sorry I missed it, of course. I could have used the dough. But when it ends, as it inevitably will, it won't be pretty. Meanwhile, America's once-vaunted innovation machine has gone missing in action. R&D budgets have shrunk, vencap funds have gotten gun shy, and U.S. factories stopped making stuff the world wanted (and could afford) long ago, ceding their turf to China.
The eggheads said don't worry, the value-added product-design jobs will remain in America. Which is a nice concept, but lousy math. Most of the 15 million Americans who are jobless or underemployed don't have PhDs in chemical engineering. They're worker bees, ill-equipped to design new computer chips or wonder drugs. Throughout the recession, offshoring by U.S. companies to places like India and the Philippines actually increased, not decreased. And the big brains still wonder why job losses were so deep over the last year. Perhaps they should visit Detroit. The city that once symbolized U.S. industrial might is now talking about turning its thousands of vacant lots or derelict homes into a giant urban farm. That's a good start, I figure. Carrots and tomatoes have more intrinsic value than much of the garbage Wall Street's "innovators" produced in recent years. In retrospect, most economists mistook Wall Street's dubious -- even fraudulent -- paper shuffling for economic growth. In fact, it was all a giant con. Even the major U.S. business publications -- hardly a hotbed of left-wing radicalism -- agree that Wall Street is largely to blame for the economic implosion.
The kicker? It doesn't matter who sits in the White House, it seems. Like the Republicans, the Obama crew hasn't done a thing to address Wall Street's excesses, beyond mouthing a few a few vacuous sound bites about "fat cat" bankers. There's no serious talk about breaking up "too big to fail" banks like Goldman Sachs, and all the yapping about executive bonuses is mostly for show. In the wake of the economic collapse, Wall Street parties on, while millions of working stiffs now rely on food stamps to buy groceries. Bank profits and bonuses are soaring, thanks to taxpayer-funded bailouts, access to zero-interest funds from the Fed, and such wonders as high-frequency computer trading, which enables banks like Goldman to shove retail investors to the back of the queue. That's not capitalism, or the free market. That's a market that's rigged, for the benefit of the few, at the expense of the many.
In moral terms, or democratic terms, it's easy to see what all this amounts to: a big fat zero.
glamphier@thejournal.canwest.com
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