...but not as well. Preaching to deaf ears, it has been, and for decades, since the '70s.

People don't want to hear it.

The political class's power is based on "Financial Economy" money. Certainly broad based taxes cannot bring in enough money to buy enough votes to get elected. Look at what is happening in California as the cornucopia of "financial economy" money has run dry.

Will the same happen to the Feds? Will Federal spending have to come from taxation instead of out of thin air? Will the Financial Economy come back and rescue Sodom on the Potomac? Will Washington be able to shock back to life the Frankenstein's Monster of the Financial Economy? And so save them both from destruction? And who will end up paying the bills? Are we all to be eaten alive by Zombies?

Ah, exciting times we live in!

It's interesting that Keynes himself said that we don't understand the working of that "delicate machine". The actions of his practitioners today suggest that they think they understand it completely and precisely.

A well written article and great comments from Paul C. "Financial Economy" money is funneled to lobyists who purchase the votes of Congress and perpetuate the monster. Taxes will be raised and Wall Street will engineer more loopholes for themselves. There is no basic morality, honesty or scruples. It's simply, how much money can I make? Voters will become distracted or twittered away into the mindless, sound bite ortiented media. The net result is a slwing of real growth and a lower standard of living.

I have a suggestion to all those members of Congress that rail against "socialized" medicine and one congreesman who recently said that healthcare is not a right (Gingrey-GA). I will swap my individually purchased high deductible healthcare plan for his plan, benefits and premium. No questions asked and I'll call it a day. I am not a fan of government run plans but, again, I'll swap rather than listen to these fools mouth talking points handed to them by the lobbyists for Big Pharma. P.S. Heathcare is "the" ticking financial timebomb!

You have done a fine job of laying out the reality of our present situation. The 64 trillion dollar question still remains. How do you get people to acknowledge this reality without first experiencing severe hardship, if not massive bloodshed?

Its as if we are a society of drug addicts who can't turn our lives around until we hit bottom. In this case it is particularly sad because we are perpetuating this ruse at the expense of future generations.

The next time someone asks if 'its over yet' ask them which of the problems articulated in this article have been addressed.

I have never heard it put better than this:

"Instead of solving the problems to generate a recovery, the political strategies have consisted of waiting for a recovery to solve the problem."

Thanks for this article. If for no other reason than to help me realize I haven't gone completely mad in a world that seemingly has lost its use for sanity.

Eh?

Great article!

Thanks for the succinct and insightful review of the corrosion eating away at the supporting structures.

As for the housing data...

Its terrific that we are doing better than worse. But a couple of things to remember. This is still 45% off the construction from one year ago, which was still during a housing decline. These numbers are actually really atrocious compared to 2 or 3 years ago.

Further, these numbers come at a time when mortgage rates were so low its like they were giving house loans away again. It will be very interesting to see how these numbers reflect as we see interest rates rising this month. My guess is that an increase at a lower level may be in the works.

David Ristau

President, The Oxen Group

http://theoxengroup.com

Any time government gets involved in fixing things it will always fail--no exceptions. The only thing government creates is the need for more government. I am appalled by Wall Street that turns a blind eye as long as they can play their games.

Milton Friedman was right, always has been, always will. The Fed cannot correct the mistakes our Federal government continues to make and only exascerbates them.

If we can roll back the irresponsible (being kind) actions of the last two presidents and then enact a large tax cut, the world economy would improve overnight. And we tried it already and found it to work. We called it Reaganomics, Ronald Reagan a firm believer in Milton Friedman.

It is strange how we are living in a replay of the '70's. Instead of looking back at what got the economy out of the '70's doldrum, Americans have created a demigod that can fix everything by television.

Shame on you, Wall Street. Shame on you, Main Street. We all knew better.

Pedro.

Any time government gets involved in fixing things it will always fail--no exceptions. The only thing government creates is the need for more government. I am appalled by Wall Street that turns a blind eye as long as they can play their games.

Milton Friedman was right, always has been, always will. The Fed cannot correct the mistakes our Federal government continues to make and only exascerbates them.

If we can roll back the irresponsible (being kind) actions of the last two presidents and then enact a large tax cut, the world economy would improve overnight. And we tried it already and found it to work. We called it Reaganomics, Ronald Reagan a firm believer in Milton Friedman.

It is strange how we are living in a replay of the '70's. Instead of looking back at what got the economy out of the '70's doldrum, Americans have created a demigod that can fix everything by television.

Shame on you, Wall Street. Shame on you, Main Street. We all knew better.

Pedro.

I was under the assumption that Mr. Das was an intelligent person but I stand corrected. Nobody with any intellectual honesty can claim that the US has operated as a free market economy since prior to the 1920's. Economic booms and busts will happen even in the absence of government. Government meddling increases the severity of the booms and busts through the misallocation of resources and productive effort. Therefore, I am disappointed to learn that failed government policies can be fixed by another set of government policies (which in the end are really that same as before). I have found that the only thing that the government has any success at is killing people and reducing that chances that individuals can earn a decent living over the long term and multiple generations.

Spot on, sir, with the basic thrust of the article as in "the current model is built to fail."

Alas, we part company there.

Your estimable reasoning powers should red flag to you your own statements "The US needs to decrease consumption, increase savings, reduce debt, export more and import less" [Yah, yes, so far so good] followed immediately and perplexingly by "The countries with large savings and trade surpluses need to do exactly the opposite..."

WHAAT? They should consume more and save less... why? Isn't that the very path you correctly identify that led us to the GFC?

You succinctly argue that government intervention is the worst way to address the inherent fallacies of the model, and then propose... government intervention. But the model is designed and built by government, with the "free" market its tool, to wit:

In the US, the basics were set up by Truman and his Industrial Council after WWII had put the Depression in abeyance: to avoid the resumption of the Depression, the Housing and Advertising-led Economy was instituted. The GI bill (and a great many others that followed) gave us
1. ever-increasing single-family homes and consumers subsidized by the govt. to buy them
2. ever-increasing roads, subsidized by Washington, to get to them, and
3. ever-increasing consumption of an ever-increasing array of goodies, successfully advertised on the potent medium of television - again, subsidized by the Feds.

We successfully exported this model to war-torn Western Europe beginning with the Marshall Plan and to Japan is similar manner. It took a while, but we eventually got the Russians and Chinese to play ball to some extent.

As pointed out by a prior post, our current model is NOT "free market" and hasn't been for about a century. Beginning with the first meddling Roosevelt and his trust-busting, FDA-founding ways and continuing to Obamao's diktats to GM, government fiddling with, regulating and in many cases "picking winners" has rendered the model far from free.

There are too many points of sophistry in the article to run after every one, but one must object to the silliest: the "Global Environmental Crisis." There is no crisis, there's just Nature, and climate change happens. Get over it. The climate is changing now, or it is not, but stop with the GW religion junk.

"WHAAT? They should consume more and save less... why?"

The reason is that the global economy is out of balance. The alternative solution is for us to simply lower our wages and consumption down to the level of that found in developing countries but doesn't it make more sense for everyone to meet somewhere in the middle?

If we are going to increase our exports someone has to buy them. That means increased consumption somewhere. For us to be able to increase our exports that means they have to be less expensive so the people importing them can afford to buy them. That again means either that wages become lower here or higher in the importing countries...or a combination of the two.


It simply makes no economic sense for the cost of production in a global economy to be different simply because of which country goods are produced in...and regardless if it makes any sense, it is unsustainable.

I guess I'm old-fashioned. Before we tell others they need to act more like us, I'd prefer to see us put our own house in order. Your premise that we must lower our standard of living in order to do that, i.e. balance our budget and manufacture our own basics, is arguable. We would, however, have to forego a lot of fluff - sodas and chips and excercise tapes come to mind - but that might be an improvement in standard of living, not a decrease.

OneWorld thinking that requires everywhere to be the same (same wages, cost of production etc.) also requires leveling of culture and goals. Not preferable to the liberty to be different. Such differences due to location and culture have always existed within this country, and is not only sustainable, it is preferable to enforced conformity to someone's idea of what "should be."

The problem is that economics is a failed discipline that produced no great men. Imagine biology without a Darwin, physics without a Newton or Einstein, psychology without a Freud. All economics has ever produced were glorified money managers and political lap dogs.

Until economics as a discipline embraces the fundamental inseparability of the physical infrastructure of the planet (and its limitations) and the real, full cycle costs of economic activity, economics is merely the science of collective human fantasy and delusion.

We have pushed delusion in the economic arena about as far as it can go in the absence of some deep and clear scientific thinking. There is nowhere the current system of thought can take us unless vast, incomprehensible debt can be eradicated so the borrowing can begin anew. In physics, that would be called perpetual motion. It is impossible.

There is now a vast and irreconcilable discrepancy between the amount of capital in the form of fiat currencies in circulation, and the physical limits of the planet to supply materials for the exercise of such capital. That is all a century of economic thought has given us.

Reality is about to set in, whether we like it or not. The deck is tilted and the smell of smoke is tangible, but no one believes the party can ever end.