Thoughts on the Economy

A new economic term to be learned: the Liquidity Trap. This is when investors have money to invest, but no where to invest it. We have one today. In order to put money in the Bank of New York Mellon, you have to pay the bank. This is because neither the bank, nor the investors who put their money in this account, have any use whatsoever for cash. No one is buying anything, so it would be foolish to invest in the economy. It is obviously an absurd state of affairs, when the government seems unable to pay its bills and corporations are basically paying no taxes. Wall Sreet Journal blog, August 4, 2011, by Jon Hilsenrath. http://blogs.wsj.com/economics/2011/08/04/bny-mellon-deposit-fee-life-in-the-liquidity-trap/

Interviewed an individual today who wanted a part-time retail job nights and weekends at Gabriel Brothers. She had worked 10 years in a factory and when it closed she was making $17.00 per hour. She spent two years in another factory which also closed. She then got hired at Lake West Hospital, but is paid so little that she now wants to take on an evening and weekend job to make things meet: $7.50 per hour. We talk to these people all the time, but they find it very difficult to actually perform well at two jobs.

Daniel Griswold, Director of Trade Policy Studies at the Cato Institute, founded and funded by the Koch Brothers, gave the following statistics in his talk to the City Club of Cleveland. I didn't right the numbers down, so my memory might be off, but very slightly. In 1990, it took 10 man hours to make a ton of steel. In 2000, it took 5. Today it takes less than 2. There are two obvious conclusions. First, this increased productivity means that all things made of steel are much cheaper than they would otherwise be, and this is a wonderful thing for all Americans, especially the working class. Second, the effect on employment is a catastrophe for the working class.

The international economy has undergone a fundamental shift in the last 30 or 40 years, which requires the American people to engage in thoughtful and open-minded discussion. The problem is that the the economic changes have created immense corporate and personal fortunes which have nothing to gain and everything to lose from thoughtful and open-minded discussion.

In a series of speeches in 1933, 1934, Franklin Roosevelt addressed the nation to state the necessity of government providing work to the people. He said that if industry was unable or unwilling to provide jobs, then the government would have to do it. Over the next 10 years, the US government created 11 million jobs.

Many Americans have been convinced that the government should not be involved in creating jobs, but I believe the alternative is an extended period of high unemployment and low wages and all the negative social consequences which result from that. There seems to be a mood sweeping the country that the time has come to suffer.