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Joe's Blog

May 21,2009

What happened to our economy in my humble opinion

It wasn’t the housing bubble that caused our economic problems. It was the loss of good paying manufacturing jobs. 

Here’s why:

All the problems we are experiencing with this economy can be traced back to the loss of manufacturing jobs over the years.

As the good paying manufacturing jobs moved to foreign countries, our population’s earning power diminished. It got so bad that the economy slowed down. Rather than fixing the real problem, the Fed’s lowered interest rates to increase the buying power of those earning less than they should have been able to earn if there were enough good manufacturing jobs here.

With interest rates so low, people who couldn’t afford cars and homes financed under normal interest rates, found they could now afford them.  So they bought them and bought them in many cases for more than they would normally have been worth during a period of normal interest rates,  (because low interest rates provided low payments).

Well, this process continued until the Feds saw that inflation was rising.  Since inflations in any economist’s mind is the worse thing that can happen, they put the brakes on the economy by raising interest rates. (I believe the economists are completely wrong about inflation, but that’s another discussion.) However, they didn’t realize that raising interest rates would instantly make all those loans too expensive for people who couldn’t increase their income and it made buying anything on credit too expensive again for those earning low incomes (because so many good paying jobs have disappeared).

Let’s take a look at how and why all the good high paying jobs are being lost. First, we allow foreign companies to “ASSEMBLE” their products here and sell them as Made in the USA. When companies like Toyota or Honda assemble their vehicles here, most of the actual manufacturing is done back in Japan. This is true with most all the foreign companies with factories here. Second, we allow foreign countries to ship their products here at ridiculously low import tariffs. (In most cases less than 10% of what they charge us.)  Congress allows this under the STUPID assumption that cheaper products are good for our populations as cheap products allow us to live better on our income.  (Which wouldn’t be so low if we had the manufacturing jobs we used to have.) What they don’t understand is this stupidity is a downward spiral for our country.  As cheaper products from foreign countries suck up our good paying jobs, cheaper and cheaper products will be required in order to maintain our lifestyle as the upcoming population’s earning power spirals downward with the loss of more and more good paying manufacturing jobs. 

This problem isn’t going away. All the stimulus and all the help we’re giving people to bail them out of the economic problems won’t fix the basic problem.  When interest rates are raised again we’ll be right back to square one. The fact is: we’ve lost so many of our good jobs that there is no way to support a normal economy in this country.  Most of the population because of the low paying jobs, can only afford loans at ridiculously low interest rates.  Until we realize that it’s an industrial manufacturing base that is required to bring our economy back, we will continue to vacillate back and forth in and out of recession based on the cost of credit.

Think about it: if we lose 10 good paying jobs – that’s ten people who can’t afford to buy the product.  If we lose all 10 million manufacturing jobs – that 10 million people who can’t afford the product. etc.  What companies like Wal-mart, Target, Home Depot, Sears, Lowes, Harley-Davidson and just about every shoe and clothing outfit, etc., don’t seem to understand is they’re putting their own customers out of work. How the hell do they expect to sell products if their customers don’t have jobs to afford them? We can’t all live off the government hand-outs.

We keep losing jobs and the economists believe the cause is the recession.  I say the recession is the result of losing good jobs not the cause.

China put forth an economic stimulus and it’s working. One that I know of was a special deal to get people to buy new appliances BUT THEY HAD TO BE Made in China.  We’re helping GM and Chrysler and the economists are all over TV stating that GM and Chrysler would be doing the right thing having cars built in China and selling them here because it would be less costly to make them there.  Nothing in our stimulus program requires that the money be spent on domestic products to generate domestic jobs. Congress is promoting a new-car-buying stimulus, but nothing in it states that the vehicle must be a manufactured in the USA. (ASSEMBLED in the USA is NOT the same as MANUFACTURED in the USA.)  They must be idiots!  All they’re doing is stimulating other economies with our tax dollars. Simply take a look at India and China's economy - see how they grow manufacturing the products we consume!

Our stimulus-program checks end up stimulating foreign economies as most of what they are spent on is made outside this country.

Yes, we are freaking stupid!  Well anyway, our government policy-makers are!

No economy can survive if they don’t manufacture at least as much as is consumed in that economy. If we want to buy foreign products we must be exporting as much as we import. Otherwise, eventually there won’t be jobs to support buying anything.   We cannot import more than we manufacture and continue to prosper. Unless we change our attitude about importing so much of what we consume, this country and its citizens will never regain long-term prosperity.

Getting out of our recession requires getting people back to working at good paying jobs. Unless we do that we will circle right back to recession when interest rates are brought back to normal levels.  Banks are not going back to the loose lending policies NOT because money is tight, but because people don’t earn enough to repay the loans they want. There is only one simple answer to this problem: fix the unbalanced import export situation.  Doing so will create the jobs necessary for prosperity and the rest will take care of itself. Any other fix is only temporary and a waste of money.


Our government stimulus programs amount to little more than subsidizing the populous for the loss of good paying jobs. Which really is nothing more than providing customers with cash for all the companies who stock their shelves with foreign made products and companies who assemble products here with foreign made components. Meanwhile, our politicians are spending this country into debt so deep it will never get out without defaulting.  At the same time the fat cats get fatter and fatter selling foreign made junk at huge profits while the working class goes further and further down the ladder of prosperity.


One doesn't have to be an economist or have a high I.Q. to see that the countries in a recession are the ones buying cheap foreign-made goods, and the countries that are doing well are the ones supplying those goods.  They export more than they import, while their customers do the opposite and are therefore in economic distress.


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