Bring It On!

What does America manufacture? Debt…

April 25th, 2008 | by Dusty |

Kevin Phillips was a conservative superstar back in ‘the day’. He helped to create and bring into power the extreme right wing of the Republican party.

He is now one of their biggest foes. His newest book entitled: Bad Money: Reckless Finance, Failed Politics, and the Global Crisis of American Capitalism, lays out how America’s manufacturing plants have died off and been replaced by….wait for it…

The Mall. Yes, the Shopping Mall where we the people spend our money, and if we don’t have any..we use our credit cards to buy things we don’t need but we covet. Mr. Phillips isn’t the only human being to see the writing on the wall. Danny Schecter has made a movie about it which he calls; In Debt We Trust. Mr. Schecter’s take on our society’s credit addiction:

Over the past 25 years, America has moved from a society based on production to a nation driven by consumption; from a country that once shared its resources with the world to one deeply in debt to foreign banks and countries-to the tune of trillions of dollars. As the growing number of bankruptcies and foreclosures testifies, our national debt is mirrored by a skyrocketing consumer debt, with an increasing number of individuals and families unable to cope.

Back to Kevin Phillips’ book. The Financial Industry now makes up roughly 21% of the U.S. GDP(Gross Domestic Product) — the largest sector of the private economy. Does this bother you? It should. Manufacturing has shrunk to only 12% of the GDP. Read that again, only twelve percent of our GDP is now Manufacturing. To put it very succinctly..that is a massive timebomb that is waiting to blow. Individuals that adore the American capitalist system will undoubtedly say Phillips is full of bat guano, but I am not one of those. From the book, via a NYT review:

By 2007 total indebtedness was three times the size of the gross domestic product, a ratio that surpassed the record set in the years of the Great Depression. From 2001 to 2007 alone, domestic financial debt grew to $14.5 trillion from $8.5 trillion, and home mortgage debt ballooned to almost $10 trillion from $4.9 trillion, an increase of 102 percent. A crisis in the mortgage market in August 2007 brought the party to an end. Since then we have been living in a twilight zone of what a security analyst quoted in the book calls “one of the slowest-moving train wrecks we’ve seen.”

Our financial meltdown is now affecting other countries. What if they ‘cash in’ their dollars for Euro’s or the Yen? According to Paul Craig Roberts, former economist during the Reagan administration, “China alone has over one trillion U.S. dollars, and Japan holds slightly under one trillion”. If the US dollar suddenly lost it’s luster, as the worlds currency, we could become a third-world country almost overnight.

It only took 25 years for America to move from a society based on production to a nation driven by consumption. It is unsustainable and when it falls like the proverbial house of cards, it will hurt every last American below the top one percent of the population. The Stock Market Crash of 1929 will look like child’s play.

I might not have a clue about the world of high finance or the GDP, but I know that the price of everything we need to live in this world is rising while the income of American’s has stagnated for years, if not a decade. It’s not rocket science to be able to see that we pay more but are making less. The jobs leaving our nation are being replaced with jobs not even remotely comparable in earnings potential. If interest rates continue to fall, Senior Citizens will not be able to survive on the interest from their savings and investments as they have for the last seventy or so years. Our federal government continues to prop up banks and investment companies that played fast and loose, yet refuse to extend unemployment insurance for those hardest hit. People are now buying consumables such as groceries with their credit cards. From the website American Progress: Data released last week by the Federal Reserve shows that Americans’ total credit card debt has reached $951.7 billion-up 8.2 percent from a year ago and the highest amount ever recorded.

Wait until the credit card industry takes it in the shorts like the mortgage industry, it will be a sight to behold. I wouldn’t want to be an insider when that bat guano hits the fan.