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Why The American Economy Is Dying (And What Can Be Done About It)

Updated on March 7, 2008

President Bush recently gave an address urging Americans to spend their tax rebates, rather than pay off debt. In a country choking in debt, where many are loosing their homes and livelihoods, and job losses are at an all time high, why would the President of the nation encourage people not to save for their child's education, or pay off credit card debt, but to go and buy more crap that they don't need?

The answer is mired in the flawed economic theory that is killing America, and may very well destroy it entirely. You see, in order for the economy to keep growing, people have to keep consuming.

Americans love consuming. They are the biggest consumer nation on earth, and when they run out of their own money, they turn to credit. The problem is, all the credit that has been loaned doesn't actually exist. A bank can lend several times more than it holds in actual cash, so much of the money that Americans have been spending for the past several years is virtual money. It's virtual money because the money never really existed, but it is real debt. Who 'owns' that debt? Where are Americans in debt to? Other countries.

America, and American citizens owe trillions of dollars to other countries around the world. The US national debt currently stands at around 8.5 trillion dollars. That's right. 8.5 trillion dollars.

So sure, go out and spend your rebate on some rubbish produced in, say, China. America already owes China two and a half trillion dollars. By spending your rebate check, you are temporarily boosting the economy, but you're also boosting China's profit, and you're not doing anything to help the national debt.

Unfortunately, due to the US decision to engage in war in Iraq the economy is rupturing further. Military spending is huge, and yet there are reports that some US soldiers don't even have the necessary armor they need to be protected in battle. Billions upon billions of dollars are being funneled offshore so that American soldiers can put bullets in foreigners whilst back at home, they can't make their mortgage payments.

Breaking it down real simply now, the reason that the American economy is in trouble, and that there are record job losses, and people are loosing their homes, is because there is very little real money left in America. The cycle of debt and consumerism and war has bled the country dry.

The added crisis is that the only way to 'get the economy back on its feet', is to encourage people to spend more. More spending = more money in the economy. Unfortunately, you have to be earning that money to spend it, and America as a whole spends more than it earns. It is only by the grace of these foreign countries (including certain Middle Eastern countries that are known to sponsor terrorism) that America is in debt to that the country isn't full of bread lines.

Spending your rebate check when you get it in order to boost the economy is like trying to combat domestic violence by beating up women. It is rampant, uneccesary spending that has, in part, caused the economic collapse that America is facing.

The reality of this can be seen every day in the exchange rates, (the USD is now worth less than the Canadian dollar) in the layoffs, and in the foreclosed homes. If Americans needed a reason to bring their troops home and focus on re-engineering their economy in a home based, (ie local production of goods rather than cheaply produced foreign goods) and sustainable way, this is it.


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    • profile image

      andrew 7 years ago


      Look back in history say, 1929 and that period was from mass production driving consumption .

      Consumption by nature is a need and nothing else.

      To consume by nature requires an effort that is perfected by trial and error with the loss of life in the process.If consumption was measured it would proably show that more than 90% of the final product was derived by producing exertion from ones self.

      I wonder how many people today actually provide for their own consumption ? INSTEAD WE BORROW TO OVERCONSUME

    • Toronto12 profile image

      Toronto12 9 years ago from Toronto

      The savings rate has been so low for so long, it's just its time to start rising. This is going to be a signifcant headwind for economic growth over the next decade.

    • profile image

      Sealed Shut 9 years ago

      The state of the current US economy, and the future path it takes, is nothing more than the result of consequences from years of misguided and self-centered corporate and political strategy.

      The "disease" infected the US long ago. The minute we adopted the cavalier attitude that permitted imported goods to supercede our own home products is where we gave up the positive direction the US could have maintained.

      Is there a cure? Until people in the US wake up and sacrifice imported products and investments, all hope is lost.


    • fishskinfreak2008 profile image

      fishskinfreak2008 10 years ago from Fremont CA

      In addition, the service industry is shrinking in value as is the US dollar. On top of that, food prices are increasing.