The Economic Future of the US

Steve Clemons has a really good article on his blog about the vulnerability of the US to international economics. Steve Clemons

In my view, we are about to be taught a lesson by a world that wants America to be tethered down. And the world is going to hit America where it has a serious blindspot at the moment -- on the economic front. We are on our way to becoming a much poorer, on relative terms, superpower with the Chinese, Japanese and Europeans using currency management and debt dependency to constrain our options.

How did we get here?

America cannot afford what it is buying from the rest of the world -- it's as simple as that. That is why the dollar is falling -- but with the Chinese yuan falling at a rate equal to the falling dollar, we can't but help keep buying from them, and the Chinese help financing our ability to buy their products. This can't continue -- and when it ends, the reality will be that Americans broadly will see their living standards fall.

The problem is very clear. Bush has rammed through four tax cuts and an avoidable war that it was said would pay for itself (Iraq got $5 billion a year from oil and could afford to pay for the invasion – we were told this during the arguments before the war, and the Bush administration refused to submit any estimates in advance.)

The result is a sharply increased government deficit, which is being financed by the Chinese who are the only net purchaser of American government bonds for the last couple of years. They can do this because they are selling a lot more to us than we are to them, so they have the dollars to lend.

Of course, that also means that our trade deficit is growing rapidly. Unfortunately, it is growing all over the world. That is why the dollar is dropping against the Euro.

The price of foreign goods is going up because the dollar is dropping. That is the main reason why the price of oil is going up. That increase in prices has a name. "Inflation." Which is why the federal reserve has started to increase the interest rates.

The US is going to crash much as Argentina and Mexico did in the 90's, and the US standard of living will drop - soon. Only the US is a lot larger economically. This is a direct result of the Bush mismanagement of the deficit.

The US standard of living will drop sharply. There is a trade-off between inflation and high interest rates, and the federal reserve will push the interest rates higher to prevent the inflation. Either is really bad for the economy, so jobs will decrease.

The US population will need government intervention to provide additional jobs. The Bush administration and the conservatives in general will not provide that. There is also going to be a need to reduce the deficit. This they will do, on the backs of the working people.

The economic future for America can easily be seen now. It ain't pretty.

November 28, 2004 added:

Steve Clemons yesterday wrote about the future of the US economy as described by Federal Reserve Board Deputy Governor Laurence Meyer

Today, with an unraveling dollar and other nations' central banks flirting with a reshuffle of their dollar-denominated holdings, America may be soon feeling the economic pain resulting from irresponsible economic policy management and the "dependence" part of global financial interdependence.

Bloomberg back on November 19th reported what Alan Greenspan said on the drop in value of the US dollar.

Nov. 19 (Bloomberg) -- The dollar fell to its lowest in more than four years against the yen and dropped versus the euro after Federal Reserve Chairman Alan Greenspan said foreign investors will tire of financing the record current-account deficit.

"A diminished appetite for adding to dollar balances must occur at some point,'' he said at the European Banking Congress in Frankfurt.

Oh, one other thing - It is my opinion that the Bush administration and the conservative Republicans think there is nothing that government can do about the economy and its' effects. It is my opinion that they will do nothing positive and may even take actions that make things worse.

As I wrote earlier someplace - we are in for interesting economic times. Soon. Fasten your seatbelt.

Conscience and Licensed Medical Professionals

Recently some pharmacists and nurses have refused to give birth control or other sexuality-related information to patients because that violates their personal religious beliefs. They are wrong to do so.

Pharmacists and nurses are licensed medical professionals who are expected to carry out the orders of a licensed physician. The physician is the professional we license to make decisions regarding what medications and medical procedures will be given to patients. Pharmacists and nurses are licensed to carry out the instructions of the physician, not to interpose their religion on that decision.

When the pharmacists and nurses refuse to perform their jobs (based on personal belief or any other reason) then the patient, the physician and their employer each have a valid complaint regarding their failure to perform the job.

If their conscience won't let them do some part of the job, then pharmacists and nurses should surrender their licenses or the licenses should be lifted.

Why don't we have Federal Drug Courts?

Today the New York Times published an OpEd from Donald P. Lay about setting up federal Drug Courts. Donald P. Lay is the senior judge for the United States Court of Appeals for the Eighth Circuit. He points out:

Unlike the states, the federal criminal justice system offers no alternatives for nonviolent offenders charged with drug-related crimes. In the federal system, it is almost a certainty that a convicted drug offender will be incarcerated rather than going through a community-based treatment program. It is little wonder then that the federal prison system will continue to be overburdened.

Drug court graduates have substantially lower rates of criminal recidivism than offenders who are imprisoned. In New York, for example, the re-arrest rate among 18,000 drug court graduates was 13 percent, compared with 47 percent for the same type of drug offenders who served prison time without treatment. Drug courts also cost less than incarceration and have high retention and completion rates.

This would seem to be both less expensive than incarcerating every drug offender and at the same time, to be an effective crime reduction strategy.

The only thing that seems to be missing is punishing anyone and everyone found within half a mile of a cache of illegal drugs. We all know how effective that has been up to now, don't we?

From Fallujah thru Elections to ...What?

There seems to be no real question that Fallujah has to be taken to make the next step towards pacification of the Sunni Triangle and Iraq. This is a requirement for valid elections that will establish a government that the Iraqi people themselves will consider legitimate, not just a puppet government that the Americans have imposed on them.

Until that legitimate government is established, one that Iraqi police and soldiers are willing to fight and die for, we cannot pull out of Iraq without leaving a civil war in our wake. The failed state will continue to recruit and train terrorists who are deadly enemies of America, just as occurred in Afghanistan.

Those are the steps that are necessary for us to get out and perhaps bring the status quo back to no worse than it was with Saddam in charge.

So this excerpt from a report in the LA Times does not bode well for the accomplishment of those tasks.

Iraqi insurgents have extended their reach over large swaths of the country, including sections of the capital, making it unlikely that the United States can establish the stability needed for credible elections in January even if its forces succeed in Fallouja, military and political analysts say.

Yet both Ali Sistani and Bush are dead set that elections must not be delayed from the current date in January of 2005. Both parties presumably believe that such a firm deadline is probably necessary for them ever to occur at all.

The LA Times also presents another article that throws real doubt on what the elections are about in the first place.

Stabilizing Iraq in time for parliamentary elections in January may be the driving force behind this week's military offensive in Fallouja, but there could be some confusion at the White House over just what Iraqis will be voting on.

"Well, I'm confident when people realize that there's a chance to vote on a president, they will participate," President Bush said Wednesday when asked whether the participation of Sunni Muslims would be necessary to make the elections free and fair.

My bet is that elections of a sort will take place, but the government that results will not be considered legitimate by much of Iraq or the Muslim world.

Bush will, of course, practice his usual level of bluff and lies and try to paint it as the establishment of democracy in Iraq before he pulls the American troops out as quickly as possible. That will be to his short-term political advantage, but will lead to disaster for Iraq, the US, and the Middle East as a whole. The result will be a failed state breeding more anti-US terrorists, or a Shiite theocracy dominated by Iran. Maybe both.

I'm sure glad Bush is responsible for this upcoming train-wreck and not me.