In my opinion, one of the key strengths of the United States and our "democracy" is that it's slow moving. However, the federal reserve, you know the arbitrary body that coins our money and sets interest rates, seems to be the most reactionary of any entity related to our goverment.
Granted, cutting the rate puts money in people's hands right now and eases some high-interest debt, but what does it say about the long-term value of the dollar itself? If foreign investors pull money out of our markets because of low-interest and the price of oil, food and other commodities continue to inflate, will the dollar rapidly lose value in the long term while foreign currency continues to grow (i.e the Euro)?
Technically, by definition, a "recession" is two consecutive quarters of a falling gross national product. To date, we have only recorded one. Are you worried? Is it a benefit or a hinderance when foreign investors buy up American companies at a record rate? What is the real issue here? To me it is allowing US manufacturers to set up shop overseas or over the border and not holding the businesses accountable. I want cheap goods as much as you do, but we cannot outsource everything and expect unskilled workers to keep up as the chasm between the rich and the poor grow.
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6 comments:
Great post Gouk...I could not agree more!!
I am not an economist or an economics major but I do remember several business classes stating that the US economy is cyclical which means, at times, the ecnonomy will be in decline. This notion that the US economy can continue to endlessly grow is nonsense. Gold is at an all time high, the dollar is at an all time low and the actions by the federal reserve this morning will do nothing but continue that trend.
When will the policy makers realize:
1. Unemployment is healthy
2. Outsourcing leads to better jobs at home
3. Home sales are an "indicator" of the economy, thats it.
Look,
A percentage of unemployment is healthy, but rising unemployment during rising inflation is very scary and can lead to stagflation.
Home sales is an economic "indicator" but I feel, as a society, we are paying for the bad decisions of banks and lenders who allowed very high risk individuals to buy homes at a stretch, adjustable interest rates. Now we all have to pay for those decisions with devalued property and more homeless people (many of whom are working homeless).
Finally, I disagree and agree with your outsourcing comment...outsourcing is ok when companies who outsource are forced to continue to pay money into our economy...when they outsource and we lose corporate taxes AND jobs, the economy is in trouble and our schools lose money to help educate future innovators.
So, today, are we to pray that companies like Toyota buy American manufacturing plants and provide us with jobs? What about this Wal-Mart economy do you enjoy besides cheap goods at the cost of decent jobs?
Great, I had a nice long post of this topic (something I have been thinking about lately) and somehow it didnt get posted. So I will shorten my thoughts to one line. I am having trouble with the concept of bailing these people out of trouble who got themselves into a mess with adjustable mortgages.
Outsourcing is good because of comparitive advantage. Outsourcing technical jobs to places like India keeps start up costs down and allows compaies to reinvest their profits therefor allowing their companes to grow.
Unfortunately, there is nothing stopping them from pocketing the profits or investing further into overseas markets while ours continues to decline.
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