Will There be a Recovery? (A must read! )

[raccoon]

By PAUL CRAIG ROBERTS

In the past recoveries were routine, because recessions were temporary restraints resulting from the Federal Reserve putting the brakes on an overheating economy. By restraining the supply of money and credit, the Fed caused inventory buildup, layoffs, and a halt to price rises and union wage demands. With the economy cooled by unemployment, the Fed would take off the brakes. Interest rates would decline, money would flow, consumer demand would rise and workers would be called back to the factories.

In those days when workers borrowed to spend, they were borrowing against rising real wages from rising productivity. In economic downturns, few workers actually lost their jobs. They were laid off from their jobs for temporary periods. Workers seldom lost their homes or cars, thanks to union funds and unemployment benefits.

Today the situation is different. In the 21st century real wages have not risen. Workers have spent more by accepting deteriorating household balance sheets. They have maxed out their credit cards and spent the equity in their homes. Imitators of the US government, American consumers borrow to pay their bills.

The expansion of household debt relative to income created the illusion that the economy was sound. But the consumer economy was as much of a credit-based bubble as the real estate bubble and the financial sector bubble. The economy has lost its real basis.

...

In the second half of the 20th century, American economic supremacy was a gift of World War II, which destroyed the productive capacity of the rest of the developed world. American economic supremacy also owes much to communism in Russia and China and to socialism in India, which rendered these large countries economically impotent. The United States did not have to compete for its economic hegemony. It simply inherited it from the choices made by the rest of the world.

The situation is different today. Unlike the US, other countries are free of the hubris of being the “indispensable nation.” They know how hard it is to be successful and do not treat success as their birthright. They do not give away their economy for nebulous foreign policy goals or for short-term profits. They look ahead 20, 30 years while America’s CEOs look to the next quarter’s profits.
The United States is walking on quicksand. It is dependent on foreigners for the funding to conduct the day-to-day operations of its government. Its economy is a hollow shell reduced to dependence on a financial sector that is discredited worldwide. America’s government believes that its foreign wars of aggression are more important than any domestic needs, including the health care of its population.

....

http://www.counterpunch.org/roberts01052009.html

[Veritas_et_Aequitas]

1. Recovery will happen.

It's just going to take a lot of time and energy since the supply-siders took a bat to the place.

[YOY]

2. We're gonna need some new industries and a better trade set up.

Hopefully a goodbye to the "retail economy": the dumbest circle of self destruction I've ever fucking heard of.

Better education to support them as well.

Trickle down has just led to the assholes trickling out their investments to countries like China.

[4dsc]

3. And when you throw this thought into the mix

America’s economic crisis is beyond the reach of traditional solutions

Khazin points out, as have others, such as University of Maryland economist Herman Daly and myself, that consumer debt expansion is the fuel that kept the U.S. economy alive. The growth of debt has outstripped the growth of income to such an extent that an increase in consumer credit and bank lending is not possible. Consumers are overburdened with debt. This fact takes monetary policy out of the picture. Americans can no longer afford to borrow more in order to consume more.



http://www.prisonplanet.com/america%e2%80%99s-economic-crisis-is-beyond-the-reach-of-traditional-solutions.html