Sunday, June 12, 2011

America - Just Do It!

It was almost a depression! It takes longer to recover from pneumonia than it does from a mild cold. It takes longer to recover from a near depression than it does a mild recession. It not only takes more time, it requires stronger medicine and bolder cures. Furthermore, after recovering from a near fatal illness, the memories of the pain and fears linger for a long time and the patient takes a long time before he drifts back to his old habits of slacking off preventive measures to avoid a relapse of pneumonia.

Our politicians tend to hide the bad news from the citizens. They also use the bad news against their political opponent by blaming him for the lack of recovery. They hope the voters will buy into an argument that things will improve much faster and with more vigor if they were in charge. The truth is we all are at fault and things are not going to get better overnight.

We as a nation and individuals overspent. 70% of our economic growth over the last couple decades resulted from consumption. We squandered what was given to us by the greatest generation. Instead of investing in the future we borrowed from the future and now the medicine needed to recover is bitter. We need to pay down debt, consume less and invest for the future. If we don’t; this is the forecasts.

“Just as the cataclysm of the Second World War revealed the fundamental shift ……. In world power from Great Brittan to the USA …. So to has the financial crisis of 2008 exposed another world upheaval….a new transference of economic power from the west to the east…..” Dambisa Moyo, How The West Was Lost
We can stimulate now and invest in the future. The key is how we stimulate. We should be investing in the future by taking advantage of the low interest rates on long-term borrowing. The money borrowed should be spent on such things as education, infrastructure, high speed internet, upgrading our electrical grid, high speed rail where it makes economic sense, upgrading of airports, drilling for domestic oil and alternative sources of energy.

If these expenditures were made by a private company they would be recorded on their books as assets and written off over the life of the asset. Government accounting requires these assets to be totally written off in the year expended. This defies logic. Investing as described above will improve the lives of Americans in the future. It is not throwing money down a rat hole. It is helping the next generation ---- our children.

These investments will also help the present. They will provide a stimulus to get our economy moving again.

It is not time to give up on America. It is time to double down and build our future.

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