Monday, September 13, 2010

Is the present economic crisis being underestimated?

The question is not that the facts are unknown or are being underestimated by the Government; the question is whether the Government knows what the solution is and whether they have the courage to administer the bitter pill or pills that are needed to redress the problem.

Part of the solutions can be,

• Cut entitlements ( Social Security etc)
• Raise Taxes
• Withdraw troops from foreign adventures and cut the Defense budget
• Cut the size of the Government
• Raise Productivity and live with high unemployment for some time.
• Encourage increased savings instead of encouraging spending.
• Stop printing money, that is not backed by productivity
• Stop the waste within the Economy specially relating to energy.
• Increase the Exports of the country and reduce reliance on imports

Out of these, the Government is doing the following,

• Phasing out troops from Iraq and Afghanistan, and avoiding attacking Iran.
• Considering increasing taxes on the rich by allowing Bush tax cuts to expire on the segment.
• Savings is going up.
• Encouraging China to revalue the Yuan.

One of the areas where costs will go up is the Health Care reform which is still a captive of the Insurance Industry and Premiums will go up.
The biggest failures of America are, not owning up to its mistakes. This is typical of declining powers and in fact this is why they decline, because it is not until you own up to your mistakes that you can correct them.

The two biggest mistakes to recognize are,

1. US Foreign policy relating to oil hegemony has been deeply flawed. The Middle East policy relating to Israel/Palestine, Iraq, Iran, Egypt and now Afghanistan/Pakistan has cost trillions and has backfired miserably.

2. The excesses of Capitalism are at the core of the most recent Economic collapse and not only are the guilty going unpunished but they are being given a second chance to try again.

Colonizers and Empires work on the reverse Robin Hood Principle and that is to rob the poor and the weak in order to make the rich, richer. The US has been both an Empire and a colonizer and the absence of revenues or privileges from withdrawing from this role, will add to the Economic burden of trying to make an honest living.
The political gridlock between those who believe that if dishonesty succeeded in the past there is no reason to change course now and those who can see that world dynamics have changed for good will prevent any meaningful solution to come forward. America has no stomach for a national government, even if there is an emergency.

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