George Sarant

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ECONOMY AND SOCIETY IN 2011

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These are the gloomiest times we have seen since the Carter years. This is confirmed by survey after survey showing a lack of faith in institutions, a lack of confidence in the future, and dismal economic statistics. The stock market dropped 450 points last week, or 1300 so far this month and 2000 for the year, wiping out $3 trillion in wealth. The previous week the market finished its wildest week in history, with four 400 point or more daily swings in a row. Though a lot of this was pure silliness, and an overreaction to the slightest scrap of news, mostly from overseas, it is clear the economic fundamentals are not good. Unemployment is over 9% and underemployment is 18% plus. One in five males are out of work, with profound social consequences.

Gold is up 30% for the year. What does it say when gold is a better investment than productive assets that would actually provide growth? There is fear and uncertainty across the land. 47% believe the future is only going to get worse, 73% say the U.S. is on the wrong track, while the number of people satisfied with the way things are going has hit a new low at 11%. Deficits are running at 10% of GDP, with debt over 100%. In short the economic outlook is bleak.

There is an even chance the economy is tanking again as anemic growth sputters towards a double dip recession. We are constantly bombarded with a frenzy of bargains deals to try and increase sales without much effect. Yet despite so much slack in the economy prices are rising and may get worse thanks to all the money the Federal Reserve has pumped into the economy. So far the government response has been, if anything, counterproductive. The last time I used the title Economy and Society was in 2009, ending with the question what if it (the then proposed trillion dollar stimulus) doesn’t work? Clearly it didn’t work and government policies have brought us to our current circumstances.

The news from Europe is even worse, souring markets around the world, as countries struggle with debt problems and their banks appear shaky. But in the big picture what is really going on is a wave across the western world, as the realization begins to set in that unsustainable spending, borrowing, and entitlements cannot continue without sufficient population growth. This is not really news as it has been predicted for years, but unfortunately governments ignored the problem and failed to deal with long-term arrangements, instead reacting to short-term, day to day headlines. Now they are running out of options.

Given chronic government mismanagement there is nothing a change in policies would not correct by, i.e. returning to balanced budgets and sound money. Everything will not go down the tubes unless we let that happen. It is still within our power to correct these conditions, if the vision and will can be found. For the question is whether we still believe in the future, or whether we will bury our heads like the Europeans and slowly fade away. Americans are usually the most optimistic of peoples, and that dormant positive outlook needs to be rekindled. Unless we think the world is going to end, things will turn around sooner or later, depending on when we take the right actions. Economic forecasting is about as reliable weather forecasting so dire predictions need not trouble us. There are always gloom predictors and boom predictors, but most of the time we manage to muddle through somewhere in the middle, as neither the very worst or the very best often happens.

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Written by georgesarant

August 20, 2011 at 9:08 PM

Posted in economy, government, society

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