Posted by: Marshall Sponder | March 1, 2008

The Economy

I have been thinking about The Economy lately and meaning to write something specific about it – the markets are continuing to fall (see Markets Fall on Drumbeat of Grim Reports from the New York Times today) – or at very best – remain stagnant.

“…“You can almost draw it out in a diagram,” said Bernard Baumohl, managing director at the Economic Outlook Group in Princeton, N.J. “With home prices going down, consumers cut back on spending. If consumers cut back on spending, the economy weakens further. If the economy weakens further, fewer people are able to afford mortgages so home foreclosures increase.”

“…In January, prices were up 3.7 percent from a year ago, the fastest rate of growth in more than two years.

Much of the increase comes from the cost of food and gasoline, which has risen sharply in recent months. But prices have risen across the board for products ranging from clothes and medicine to computers and washing machines. Excluding energy and food, prices are up 2.2 percent from January 2007.

Rising prices are leaving many Americans financially exposed.”

Ok, we got into this mess for a few reasons (that I know of):

1. As a result of the last recession that really only ended in 2003 (for most people) home ownership and credit were made instantly available to many people who could not afford it.   That might not have been a bad idea had the Federal Government, which had been entirely controlled by Republicans, decided to not exercise any oversight or regulation.  In other words it was the Wild West.

2. Due to a lack of leadership and vision we’ve not really cut back enough on the dependence on Oil and Fossil Fuels.  If you think about it – had we really been focused on alternative energy – which is kinda what Carter tried to do 30 years ago – instead of looking for easy fixes that don’t work long term, we’d not be in this mess with rising inflation due to rising energy prices with lowering income (and lowering net worth).

All the other problems – the one’s I named and the others I didn’t cover – are essentially cased by a lack of leadership or bad leadership.  But now we’re stuck.

So what do we do now?

1. Get serious about developing new energy sources and if possible, start a lot of public works project to employ all the soon to be unemployed (at the rate we’re going – I give that a year – the next President is going to inherit a severe recession, possibly a depression) into massive projects that produce cheap energy and rebuild our infrastructure.

2. As painful as it seems, the Government and Banks need to buy up all the bad debt and/or forgive it.    That may very well lead to the a retooling of the Economic System.

3. For better or worse, we need to embrace Universal Health Care with full coverage for everyone and no compulsory contributions – or voluntary contributions – it’s got to be “granted” unconditionally. You can pay extra and get more services but you must be given a basic set – so everyone can be covered at a decent level, to be begin with.

4. Again, for better or worse, Education needs to be fully subsidized – especially college education; currently it can cost as much as 200,000 dollars for a 4 year degree now – that’s a burden young people should not be asked to assume.   We used to have education priced much more  reasonably – what happened?

5. Finally, we need to make housing more affordable – perhaps it’s going to end up needing to be subsidized.

There’s probably a zillion other things we need to do – but if we did the things I mentioned – I think, in a year or two, we’d emerge out of the mess we’re in.

But….. we’d have to give up the idea of paying as we go and only paying for what we needed – that’s what got us into this mess in the first place – by doing that we ended up with higher living standards than we could afford and no real investment in the future.

Now its time for me to get off my soup crate.

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  1. […] I got home – posted a bit over at The Analytics Guru and […]


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