Economy: short term view is mandated by politics

Regardless of which political party occupies the White House and/or controls Congress, everyone runs up huge deficits by both drastically devaluing the real value of currency and failing to collect sufficient tax revenues.

Politics has a lot to do with it: better to fake-it and make the economy appear to be OK right now, and screw the future.

Real, physical value of U.S. assets has declined sharply in the last few decades, and the downward trend is accelerating. Couple this with a huge increase in the money supply that is starting to look too much like Germany in the 1930s - printing money like crazy is the Federal Reserves short term fix for keeping the foreign debt imbalance and consumer credit bubbles from popping (for now, at least).

A few weeks ago, my friend Tom criticized me for referring to "bubbles" because simply using that term is negative thinking - I have to agree with him that negative thinking collectively has a bad effect. (I am spiritually oriented, if not religious, and I believe in the positive global effect of meditation and prayer.) I have to agree that very-short-term, consumer credit madness does prop up the U.S. economy, and another friend James has correctly criticized me for advising people to not spend much money on consumer goods. James' observation would be even more accurate if many people read my opinions, but, I am happy when a few hundred people a day read my blog - so, I don't have to worry personally about crashing our economy by recommending frugality - not a large number of people listen to me! (Regardless, it feels great to express myself.)

Setting aside criticisms for negative thinking, I think that a very real problem is that too many people refuse to acknowledge reality: the harsh reality that even a quick look at a plot versus time of: consumer credit, balance of trade figures, percentage of U.S. debt that now has to be serviced by foreign central banks because individual foreign investors are getting wary of our economic problems, decreasing amount of savings, decreasing amount of real factory equipment, decreasing amount of real productivity, etc.

This is just my opinion: I believe that one of the primary reasons why we invaded Iraq was to simply take America's attention away from the economy.

OK, here is something positive: I believe that as individuals we have a lot of control over our own economic destiny. I would advise my friends and family to avoid new debt, try hard to reduce current debt, invest in education, keep driving your old car, consider paying down your home mortgage instead of buying a larger house on more credit, learn more useful skills, etc. Do what you can to protect your family financially, then sit back and watch the show... It is likely to be a wild ride for a while...

Something else positive: as people, we should enjoy our individuality and uniqueness. Sure, it is fun to follow the crowd when the stock market is on an upwards cycle, but my gut instinct is that people are almost always better off simply following their own intuitions.


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