Economic “recovery”

The global economy has permanently changed, and people hoping for a return to “the way things used to be” will be waiting a long time.

The heady days of the early 2000s — an economy powered by an unsustainable housing boom — are over, never to return.

With unemployment at record levels, and after trillions of dollars in stimulus and funding to bloated financial institutions, there are growing doubts as to whether the American economy will be able to fully recover.

What will recovery look like?  We’re probably looking at it — a slow, slogging process muddled down by lack of direction and the failure to create lasting economic growth based on investment instead of speculation.

For the last decade, the American economy was running on lies.   The late housing boom was created and nurtured by financial institutions — including the Federal Reserve — as a means of continuing the momentum of the dot-com bubble, which had popped in late 2000.  By keeping interest rates at record lows, and by abdicating responsibility to monitor and audit mortgage and securities markets and institutions, the government looked the other way while banks and securities dealers sold and packaged bad loans in every global market.

Trillions of dollars were created on paper — but nowhere else.  The wealth was a myth.  Home prices rose, but only because of artificially created demand.

Now that everything has popped, people appear to be clamoring for the good old days.  But those days are gone.  As the bankruptcy of General Motors symbolized, America’s manufacturing base has disappeared, and there is nowhere else for money to go.

To date, government efforts have focused on banks, and not citizens.  And those efforts have certainly paid off:  Goldman Sachs and JPMorgan Chase recently announced record profits from the last quarter.  Meanwhile, average people are struggling to make ends meet.

This is perhaps the most sinister outcome of the current recession:  the growing power of banks and financial institutions in directing government action.

100 years ago, financiers and industrialists such as J. P. Morgan, John D. Rockefeller and Andrew Carnegie largely controlled American economic and financial policy.  We appear to be returning to an era when large financial conglomerates have their hands at the levers of power.

Ironically, the existence of these mega-financial institutions — “too big to fail” — is the greatest obstacle to genuine recovery.   The growing division of wealth between rich and poor and the concentration of resources into a handful of financial institutions is the root of the problem with the modern American economy.  To date, government has only strengthened this concentration.  A vibrant American economy requires the opposite.  Only time will tell if anyone in Washington D.C. — or anyone at all — will have the gumption and ability to address this fundamental issue.

This entry was posted on Sunday, July 19th, 2009 at 2:33 pm and is filed under Content, Imperial Decline, Structure and System and tagged with america, big banks, big industry, consumerism, poverty, the economy. You can follow any responses to this entry through the RSS 2.0 feed.