Re: The Fed's Faustian Bargain for the U.S. Economy

Re: The Fed's Faustian Bargain for the U.S. Economy
Posted on August 16, 2013 | Gregory Laxton | Written on August 16, 2013
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Publisher:
Seeking Alpha

Author's Note:

Author's Note:

The following is a post and reply to an article by James A. Kostohryz published online at SeekingAlpha.com.

@Lawrence J. Kramer

The United States will end up going bankrupt 'quantitatively easing'/'being the market' before the American people will trust the improperly regulated financial markets again. Lack of trust is the fundamental problem, and getting it back once you've squandered it with libertarian experiments in deregulation of the financial and housing markets is next to impossible. It's too late for that.

In any case, we don't need freer and easier money with which to risk and speculate on the stock/housing markets. What we really need in the US, Canada and the UK is our manufacturing base back.

Fundamentally, what America/Canada/the UK needs is to bring back the value-added manufacturing they have all exported to Asia, and to re-introduce tariffs and duties if necessary to protect those industries while they're being re-established.

Having a middle class depends on having 35-40% of your GDP derived from manufacturing: taking $1000 of steel and turning it into a $15,000 automobile. You can't have a middle class in an economy the scale of the US or Canada or the UK where there is only services and agriculture. We cannot all be cab drivers and waiters and accountants. Somebody has to actually MAKE things or prosperity vanishes. There was no middle class in England (the first country to obtain a sizeable middle class) before the industrial revolution, and there won't be one in any country that sacrifices its manufacturing for short-term gain. Manufacturing is the only way to find the money to pay large numbers of people without Ph.Ds. $30-$50/hour, and that's where your middle class came from.

Getting rid of your manufacturing by signing asymmetrical free trade agreements which allowed your wealthiest people to move their factories to dictatorships while guaranteeing tariff-free access to domestic markets, all in order to bust unions, is the undoing of the West. Only Germany was smart enough NOT to do this; they vigilantly protect their manufacturing base because, correctly, they see it as a national security/strategic asset, and currently, they are the only country in the world with a positive balance of trade with China. This is the country to emulate.

Just copy Germany and restore America's manufacturing base as fast you possibly can, while there's still time, or you'll have an outright revolution and chaos on your hands within the next few years, as ever-larger numbers of Americans will have nothing left to lose and everything to gain from violent revolt against dubious, selfish individuals who lobbied and manipulated government policies and sold them down the river for their own personal greed.

About The Author

glaxton's picture

Gregory Laxton is an IT professional and a speaker for democratic renewal issues. He served as a policy analyst with the Ontario government's Democratic Renewal Secretariat. He holds a BA in International Studies and... More

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Great comment Greg, I agree with you.

I'm on my home today from a trip to Washington D.C., where I have had a similar conversation with a few Americans this week. What bothers me the most, is the fact that China owns so much of the US debt. Since China is America's greatest rival at this point in time, it really doesn't make sense to give them the type of control they now have over the American economy.

My question is... Who would allow such a thing to happen? I consider it an act of treason against the American people and, something that needs to be reversed ASAP.

Greg Laxton

James, to answer your question as to who would do this, well, those who hate labour unions. Thatcher, Reagan and Mulroney couldn't simply ban the unions or outlaw them, so they had to find another way to make an end run around them. The method they chose was asymmetrical free trade agreements. By signing these agreements without expecting anything in return, they guaranteed that owners of manufacturing would see the obvious window of opportunity to move whole factories oveseas and employ ultra cheap labour to work them. The fact that the union workers back here would all be thrown out of a job was the true objective, and it's one they accomplished very successfully.

To make matters worse, our undemocratic political systems assisted in this scheme. Mulroney famously refused to hold a referendum on free trade with the United States (merely the precursor for later, global free trade documents) because he knew he would need to win a real majority of support, and it just wasn't there. So instead, he held an election over free trade, and 'won' with only 43% of the vote. 43% support is a fail in a referendum, but somehow, it's a 'landslide victory' under our broken, undemocratic voting system.