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