January 16, 2010

Why the US Economy is Insane

by The Punk Patriot

I saw on yahoo's homepage one of those innocuous articles about current news.

Today, it was "4 dangers that could wreck the US Economy" Here's the article.

The basic gist is that there are four things which could send us back into a recession once again, and they are as follows:

1) Housing Tanks All Over Again
2) Stocks Crash
3) There's a US Debt Crisis
and my favourite:
4) Consumers Become Rational

Yup! So here's the situation-- if consumers don't continue to spend beyond their means, and go into debt, (which of course, will inevitably lead to disaster scenario #3, which would lead to crisis #1, which would lead to crisis #2) then the economy will tank.

So here's how the economy currently works:
Since we don't make anything and are a consumer based economy, consumers don't have wages from creating value in the economy, so they go into debt to do things like eat or keep a roof over their head.

Since the reason they took out the loans is that they don't make enough to eat and keep a roof over their head, they default on the loans they took out to eat.

Then the banks all fail because they didn't make enough money on the loans, so they Lobby Congress to get the taxpayers' dollars to bail them out.

Repeat.

What's great is that this article totally ignores the cognitive dissonance present within just a few paragraphs, in one they tell you to save money, in case the market crashes. Then two paragraphs later, they say that consumers saving their money will cause the market to crash. And that is Capitalism in America today.


photo credit: WeAreCitizenRadio.org