Personal Observations on the World Scene
Oct 01, 2010
The FFI bulletin will be about a week late this month. I just finished writing it yesterday, proofed it overnight, and brought it to the print shop today. We will be sending it out next week.
The FFI was my top priority when I returned from my trip Wednesday evening. This is why I have not tried to focus on any serious web log yet.
The new fiscal year begins today for America and some other countries as well. It certainly seems like it is starting out with a bang. Ecuador is under martial law after the policemen in Quito tried to overthrow the president. They were apparently unhappy with the budget cuts.
France, Greece, Ireland, and Spain are all being pressured by budget cuts as well. Such things are always dangerous to a government, which is why they don't often try such a thing. That is why it is not always a good idea for governments to tax and spend at a high rate. First, they go into debt and eventually cannot pay when the economy goes sour. Second, the benefits that government gives are immediately thought of as a natural right, and it becomes nearly impossible to remove them once they are set in place.
Congress has now passed a trade bill that shoots a warning in China's direction. The claim is that China manipulates its currency. The implication is that America would never do such a thing. The fact is that we have always manipulated our currency to our own advantage. The real underlying problem is not currency manipulation, but the idea of Free Trade itself. Corporations discovered that they could hire Chinese workers to produce goods at a fraction of the wages that we see in America. Public Radio today commented that those little springs in our flashlights and other gadgets cost 95% less when produced in China--and that includes shipping costs.
There are countless products that Chinese workers are willing to manufacture with cheap labor, and the US corporations are happy to hire them instead of American workers. They know that Americans would rather buy a cheaper product made in China than an American-made product that costs a lot more.
Meanwhile, the corporations have made a lot of money selling those cheap imports to American consumers. Wall Street loved it and shot up to the moon. The richest 1% of Americans now make over 23% of the wealth, something not seen since 1928. When the great Middle Class has no money to spend, the economy slumps, because they are the real consumers that drive an economy. The rich use most of their money to invest in Wall Street, instead of buying consumable goods.
There is enough "stimulus money" being spent on road construction and some other Middle Class projects to help out the economy to some extent. I know that in Minneapolis it has been hard to drive anywhere because of all the road projects. We have learned now that in a recession, road construction workers seem to have better job security.
I don't mind stimulus money being spent on road projects. We need road repairs anyway. But I have a problem with bailing out big banks, after bankers have made lots of money on bad business practices. It seems to me that if a big bank fails, its assets should be distributed to the smaller banks that are not "too big to fail." If anything, we should bail out the small banks instead of shutting them down and giving them to those that are "too big to fail." Why not strengthen all the smaller banks instead of bailing out the big ones?
Any bank that is too big to fail is also too dangerous to exist.