The Shape Of Things To Come

In the state of Michigan, there already is an extreme recession, and there has been one for at least a year. It has not yet begun the out of control spiral into a depression, but that is because they wait for the rest of the country to catch up to them. In March, auto sales were down 19% from last year; no hope here. In Michigan, you will see the hopeless future of much of the USA, if you care to look. The phenomenon of the loss of manufacturing is quite real and economists talk about it: ... Fed economist Thomas Laubach, a recognized inflation targeting advocate, estimates in a paper that every additional $100 million increase in projected Federal annual fiscal budget deficit adds one quarter percentage point to the yield on 10-year Treasury bonds, albeit that this estimate has been rendered inoperative since the 1990s by dollar hegemony through which the US trade deficit is used to finance the US capital account surplus, reducing the impact of US fiscal deficits on long-term dollar interest rates. Global wage arbitrage also kept US inflation uncharacteristically low, albeit at a price of hollowing out the US manufacturing core. Henry C. Liu, Road to Hyperinflation is paved with Market Accommodating Monetary Policy A "hollowing out" of the US manufacturing core. Let that sink in. The future of the USA shown above is bleak. Inflation was kept in control by the strong US dollar and its preponderance. By this means, there was a minimization of the inflationary effect of the (huge) Federal deficits. The impact of the deficits should have been to emphatically drive up long-term dollar interest rates, but this was reduced substantially by the dollar hegemony. The inflation was also kept low by "global wage arbitration" = "ship jobs overseas", thus "hollowing out" = "destroy" the US manufacturing core. Well, now the dollar is weak. It now longer has the leadership ("hegemony") it once had. What now? Anyone who buys anything knows inflation is much higher than the government says it is, for starts. It is always a bad sign when a government of craven dimwits cooks the books and the statistics. The Dow Jones Industrial went up 400 points yesterday. Wow! Is that a good sign, or what? It is the 3rd time in 2008 that it has moved 400 points or more in a day. Even so, the DWIJ is lower than it was at January 1. I do not believe this type of volatility is a good sign. It means nothing to us. It is traders making money; it does not reflect anything else. During the housing bubble, or before that, during the dot.com bubble, the stock market showed only exuberance, not any reasonable and balanced judgements that such bubbles were unsustainable. The markets are in such volatility that any message they send is one of feverish activity, not rational invetsment decision. Colin Powell's group on education released its findings yesterday. It comes as no surprise that Detroit has a high school graduation rate of 24.9%. I wrote here recently that it was 25%, and when I wrote that, I remember thinking that it could not be true, and I had best check that figure. We are creating the most dismal future imaginable. We are creating a class of citizens who will be cut off from all the fruits of society. And just as the Roman Empire had to provide free corn for food and free circuses for entertainment, so shall we have to provide for this class. Do not kid yourself into thinking this obligation may somehow be ducked. It cannot. We cannot have this disparity! We cannot allow this inequity to persist! Our entire society depends upon a citizenry of educated people able to make decisions regarding their futures. If we do not have a populace sufficiently educated to make their own decisions, we shall have a society where the government will infringe our rights, where the government will employ torture, where the government will tell us to go shopping at the mall while they do important things. We shall have the full blown blossom of a government of Absolutist Capitalism, combining the worst aspects of Socialism with those of Capitalism. The time is short.