Pessimism regarding our economic future

[Rumely]

We keep talking about economic recovery, and every time the stock market goes up a bit, we hope that it signals bright things to come. But what have we got to sustain an extended recovery? We have exported large segments of our economy to other countries, including huge chunks of manufacturing. As for the service sector, there it nothing preventing other countries from obtaining the expertise we have in our service sector and providing the same services for themselves, and competing in our domestic market for sales of those services.

We are a consumer driven economy, but consumption has to be supported by production. We can't consume without jobs and income. When people don't have jobs, don't know if they'll have a job tomorrow, have to accept reductions in pay and benefits, etc., they scale back on consumption. People who can't be confident of stable income into the forseeable future don't buy houses and other big ticket items and postpone other, smaller purchases. They opt for smaller or cheaper or less deluxe.

The companies that improved their bottom line by layoffs and other cutbacks, may find that demand for their products and services also drop because their customer base with stable incomes with a significant disposable portion has diminished. If they market to other companies, they may find that part of the other companies' cost cutting strategies include reducing or eliminating the products and services of their companies.

Deficit spending and government programs and bailouts are only a short term strategy, borrowing against the hope of future economic robustness. It is another form of economic exportation. China now owns a huge portion of our present and future economic production. As our economic viability shrinks and our debt grows, our creditworthiness declines, which makes borrowing increasingly expensive. The fulcrum or our economic leverage increasingly favors other sectors of the global economy.

The world has changed. We can't just do business as usual and expect the same results as ten, twenty, thirty, or forty years ago. Posturing, chest-thumping, and blind optimism ain't gonna get it done. We have to take a hard look at the path ahead and chart a new course based on long term strategies for sustained economic growth instead of the ponzi schemes and houses of cards that have typified much of our economic activity in the last decade or so.