Countdown to Global Economic Meltdown Part 4

As we watch the world leaders gather to attempt to stem this pending disaster, we must keep in mind that they are politicians and not economic experts. No doubt they have consulted with the experts, but the remaining question is who will win out.

There are a few groups of people that don’t mix very well. Engineers and politicians are one such marriage on the rocks before they even start. Politicians often want things before they are physically possible. For example cement can only dry at it’s own speed. And no matter how angry and upset the politician gets, the cement does not care. So the politicians put pressure on the engineers to make the cement dry faster.

You can certainly start to imagine how a politician may interact with economic specialists and the I want it now attitude politicians seem to have in a lot of cases. Some things can happen instantly with the stroke of a pen, and other things take time. Much of this particular crisis can now possibly best be dealt with using mental health providers.

People are afraid to spend, and that is what drives or kills the economy at this point. The price of oil has dropped enough that there is some money to spend, but all the warning signs say don’t. Whether this is general lack of trust in the people that say it is OK to spend because they seemed to have cause the problem, or fear that there has been too little time to make underlying changes in the economic structure.

People are keenly aware how much the price of oil has influenced this crisis, and essentially nothing has changed to reduce oil dependency. That simply spells that this is a cat and mouse game and people are the mice and the price of oil is the cat. The time it will take to reduce oil dependency is measured in years and decades, and not days and weeks. So essentially what must be done is somehow turn off the survival instinct so people will spend money, and that is a tall order to say the least.

To do that, working economic models must be created and demonstrated to the public. People must be given the ability to move away from oil dependency on their own. Those two things should be enough to jumpstart the economy. People have seeen what the price of oil has done to them first hand, and one experience is enough.

So pumping raw cash into the economy is a noble gesture, but changes in infrastructure moving away from oil is a sustainable economic growth plan. The oil companies that are favored by politicians are now becoming toxic to the future growth of the economy. The days of oil based infrastructure must be allowed to fade by attrition and replace with new infrastructure that is based on renewable energy and earth friendly technology. There truly is no other answer. All that is being done by these meetings of politicians is looking for a bandage to put on the effect. The true answer is dealing with the cause. That means that the less than wonderful relationship politicians have with engineers is a significant part of the path out of this economic meltdown.

This is part of a periodic series. Click here for part 3


2 Responses to Countdown to Global Economic Meltdown Part 4

  1. Avatar Robert Simpson
    Robert Simpson says:

    I have been reading your blog for a while and I have to say that I agree with just about all your conclusions. I would like to ad a few comments based on my long experience in international business with China and the USA. After all, the mortgage debacle was started because wall street had no place to invest money as few companies are left that actually produce anything and mortgages funds investment were one of the few promising areas left. But where did all the western investment opportunities go. China of course but who dares play that market?
    China has become rich on the backs of western countries that believe in fair trading and basic capitalist principles. However, China does not believe in fair and free trade and its one track mind towards exports with unfair government backing using protectionist methods, currency manipulation, enforced technology transfer and more has resulted in a gutting of the industrial infrastructure of formerly rich countries. Twenty years ago, Made in USA or made in England was the rule. Now it is almost totally absent. The transfer of wealth to China is complete and if it wanted, China could start buying up America starting with its banks. Citygroup or General Electric or GM with their share price slide could easily become Chinese tomorrow, imagine that. Economic imperialism in reverse. (Remember the ‘Running dog capitalists’ slogans. A bit ironical to say the least). China will now use it’s vast reserves to buy commercial, military and political influence around the world. It should be building hospitals and providing health care insurance, clean water, air and proper schools but that is all secondary to the Chinese drive to reclaim its rightful place as the world’s dominant culture. You need only talk to a person of Chinese descent for a few minutes to realize how they are proud to be Chinese and even in the depths of China’s poverty a few years back, they would assert that it was all temporary and part of the ups and downs of all great civilizations. China would soon be on top again. How true. Its all part of this global game of Monopoly and it is not so hard to predict the future. The first question is, will the world be a better place under Chinese hegemony than the US? This being a strong negative,it begs a second question? Can the decent of the western world be reversed? I believe so. Western countries can take the lead in new environmental technologies that would on a large scale bring back industry, stimulate job growth and slow global warming. Corporate tax incentives can be used to reorient companies to bring the work back home from China. Why oh why is Nesley and other large food manufactures producing food in China when western farmers dump extra milk in the sewers because of artificial quota limitations. Was it hard to predict that China would cut corners to raise the profit margin even if it endangered lives. They don’t care about Chinese lives so why would they care about non-Chinese. The traditional reasons of lower labor costs don’t even apply because food plants are almost totally automated. It is all part of this capitalist hysteria that puts even a 1% difference in cost as reason enough to move everything to China. The Western companies and importers involved in these scandals should be fined massive amounts or in exchange for a lower fine, move their operations back to western countries.
    When Walmart closes a plant in the USA because it has moved all its buying to China, it means that those Americans who have lost their jobs will no longer have any money to shop at Walmart. In effect Walmart is putting its customer base out of business. A bit of a short view I would say and it was not hard to connect the dots that eventually a countries wealth is based on exporting and it cannot servive on the myth that we have become a service economy. What balderdash, as if selling hamburgers to each other and suing each other were going to replace making televisions, computers, cars and clothing ourselves. If every retailer does this, as they have now done, there is no one left to shop and they have moved the wealth to China. It also says that these corporations don’t care about their home countries and take a very short view of business. If at least the workers in China were getting wealthier it would not be so bad but it is only the factory owners and the Chinese government that is getting wealthy. And now they are ready to use that wealth against the western world. If one has known the Chinese and lived in China it is not hard to figure out the future. They only care about the Chinese and getting on top(only slightly different that western culture except that our former wealth allowed us to play more fair with naive idea that a richer China would benefit the world). The western world just has to stop giving China any advantage because they are supposedly a poor country. China is a special case in the world and should be treated as so. Put them on an equal footing to western producers and all of a sudden producing in China is not so cheap.
    – Require that Chinese environmental laws be respected or brought up to minimum western standards and black list any company not respecting this.
    – Chinese companies must respect minimum salaries and have employee benefits. Forty hour work weeks, overtime pay, safe working conditions and most companies would be eliminated. Now we have a level playing field.
    – In western countries, complete corporate, municipal tax holidays and five year payroll tax holidays for companies bringing back jobs to western countries. The government gains by taking the workers off the dole and consumer money now flows back into the economy.

    -The second prong of getting the west back on its feet is creating an alternative energy industry manufactured in western countries that would take them off oil dependency. By instituting a massive alternative energy program that would encompass research to produce the best batteries to make electric cars, solar panels, low consumption LED lighting and so on. The US could become the leading designer, manufacturer and exporter of electric cars and more in the world in a very short time because we already have the technology. (see http://www.teslamotors.com) We just need the will and the government backing.
    The first step has already been accomplished. Obama is not in the pocket of the oil companies and he is pro environment.
    Lets see what happens!

    Bob Simpson

  2. Avatar John Williams
    John Williams says:

    I have to agree with both of you guys. Robert your more in depth focus on China certainly points out a few key things that many people overlook, don’t know or don’t care about. It truly is a very complex issue.

    Richard I must say you do have an uncanny ability to predict what will happen. Just last night NBC news talked about president elect Obama moving in the direction you call out with moving away from oil dependency and more earth friendly infrastructure to support growth.

    I have noted that you have tooted your own horn from time to time about your predictions being accurate more often than not, and my first thought this guy is full of himself. But after spending a good part of a Sunday afternoon going over your older entries and seeing they have come to be after you talked about them, I have a lot more respect for your ability. I often wonder who you are and what your education and background is. I most certainly will be paying closer attention to what you say as you have earned my respect.