Friday, December 5, 2008
This Was Not A Natural Disaster
There are natural disasters and then there are man-made disasters, and then there are natural disasters made worse by an inadequate response to a natural disaster. The latter one is called Katrinia, like in hurricane Katrinia.
The latest chapter of the Economic Crisis of 2008 involves the question of whether the Federal Government should loan the three American Auto makers money so they can stay in business without having to go through bankruptcy. Almost everyone who has commented on this chapter has brought up the fact that much more money was loaned to the banking and investment banking sector commonly known in the jargon as “Wall Street”.
Money and the movement of money has an essential role to play in an economy as complex as ours. Cut off the flow of cash and credit in this economy and it would amount to cutting off the flow of blood to the heart and the brain at the same time. Such an action would produce the death of our economy as we know it. To rebuild would take years and the pain and suffering would be almost unimaginable. But what about cars and trucks?
For a whole lot less money, the Federal Government can keep millions of workers working and all the related industries working as well. But, there is a difference, it is not the brain and the heart, it is only both arms or a leg and an arm of our economy. Either way, in my opinion, not to give the three auto makers the loan is just plain stupid. Actually, it is worse than stupid. If any American thinks that letting the three auto makers go under will not affect their house, they are not thinking clearly, or, more importantly, like a macroeconomist with a world view. Why a world view?
Does anyone on this planet believe if this same thing happened in Japan, that the Japanese Government would hesitate for one second to come to the aid of their auto industry? I rest my case.
It is time to get real in America. The policies that our Federal Government pursued since the end of World War II hold the key to our present economic situation. Not to look at the big picture and just beat on the heads of the auto worker of today is, in my opinion, just plain stupid and mean. How can I expect our Congress to understand what history, our own making of history, has done to the position of the auto industry in American today, when all they know how to read is polls? Foreign competition has pushed Detroit to build a better car, I will agree with that. But, the whole foreign policy, (the Containment Policy), of the United States coming out of W.W.II and the start of the Cold War with the Soviet Union, was predicated on the belief that the way to fight communism was to have strong economic healthy democracies surrounding the Soviet Union. This is where our foreign policy intersects with domestic economic policy and results in the trade agreements with the Germans and the Japanese. These trade agreements helped to make their economies develop and grow strong. In no small part, again in my opinion, was this part of what lead to the fall of the Soviet Union. Germany and Japan, not the United States, had rebuilt themselves from the end of W.W.II, and their defeat, and now had surpassed the Soviet Union’s economy.
A thick book could be written as to why we should not let the three American car makers go into bankruptcy, but that should not be needed. All that is needed is a little understanding of why the present situation was created. We produced first the financial crisis that lead to the present economic crisis by our own hands America, this was not a natural disaster.