Understanding Pukebonds and Layoffs

At last I learned the identity of the model for Forrest Gump. He has betrayed himself by coming up with a simple explanation for the economic crisis--and he made the mistake of attaching his name to it.

http://groups.google.com/group/alt.fan.cecil-adams/browse_thread/thread/349f8228950744f8

As for the layoffs and rising unemployment, we have seen a great increase in the number of store closings and the desolation of factories.

As this continues over the next few months, the result will be a lot of empty commercial buildings that will be for sale in a market where there are no buyers. This is the next domino of the economy to fall. . . . Commercial Real Estate.

At any given point in time, you can always find a lot of economists telling us that the end is in sight--just "six months down the road," or "by the end of the year." They said that all through 2008 and they are saying it again in 2009--but this time they are usually telling us that this will not turn around until 2010. So the six-month forecast has turned into a twelve-month forecast.

At the end of each failed prediction, they hope you won't remember what they had said ealier. There is enough egg on their faces now to feed all the starving children in Darfur. Of course, they can always justify their optimistic statements on the grounds that negative economic prophecies tend to be self-fulfilling. That is because it is all a CONFIDENCE GAME. In other words, if people have confidence, they will spend more money, and this will solve the economic problem. That is largely true, at least temporarily, but the real problem is that we have reached the limits of our credit line, and not enough people have enough money to spend on things they don't really need.

The American consumer has driven the economy of Babylon for many decades. We bought what others manufactured, thanks to "free trade." This could continue as long as Americans built up their wealth, primarily through the rise in real estate prices. Why save money, as long as our houses had value? Real estate became a subsitute for savings accounts. It worked until it didn't.

America, the world's golden goose, was put into the oven until roasted brown. We could have handled a little bit of free trade, but when one company outsourced its jobs to a cheap labor market, it forced all competitors to do the same, because Americans love bargains and will cross the city to save a few pennies on a cheaper product made in Cheapomakistan.

When American workers were forced to compete with dirt-poor laborers who were willing to work hard for a few dollars a day, Americans would have to be willing to work for a few dollars a day . . . or the foreign workers would have to go on strike to get paid the same wages as Americans. Well, the verdict is in.

This "free trade" idea is great for corporations, but bad for high-wage workers. but corporate profits still depend on the American consumer. In bleeding them dry, they have undercut their own consumers. So now they are paying the piper for cooking the golden goose that has been living in the gingerbread house fantasy world.

If I look beyond the coming collapse of Commercial Real Estate, I see the collapse of Free Trade and with it the total collapse of virtually all current trade treaties. We will have to start over and renegotiate all of these on different foundations. It is really only feasible to have free trade agreements with countries that are on comparable living standard with similar wage structures. I am not against helping other countries, but we must recognize that we cannot help them by destroying our own work force.

The recent "Stimulus Package" ($787 billion spending bill) caused an international outcry with "Buy American" provisions, most of which were quickly removed. This shows how sensitive this issue is right now. Right now about 30 small countries have enacted protectionist trade policies. Other countries have been grumbling, but the countries are small enough to ignore--so far.

Yet as the global economy steadily shrinks in the coming year, there is little doubt that at some point protection policies will be enacted by larger, more important countries. Retaliation will occur, and this will soon snowball into full-blown trade wars. Trade wars can easily be the foundation of shooting wars.

So these are the trends to follow in the coming year. It continues to look like the year 2010 is going to be a critical year in the history of the world.