Friday, November 21, 2008

How Not to Be an Alarmist

A few years ago, in an attempt educate myself, I read a book on economics. It explained how various economies in developing nations had been ruined by the flight of capital. This flight occurred just when the countries had taken stern measures demanded by the International Monetary Fund (IMF) to streamline and strengthen their economies. But the result was capital flight that collapsed their recovery instead.

But the US didn’t have to worry about that happening. Our economy was so strong that speculators would never just sell and run as they did from countries in Asia and South America. We were the model of stability for the entire world. Well, guess what? It sure looks like that’s what is happening. Oh, we supposedly are getting support from Europe and Asia, whose stock markets and economies actually depend on ours in this era of globalism. But what we’re seeing now is less money in the market. That’s capital flight. Without capital, a capitalist society can’t operate. Hence our government’s various attempts to shore up the market. Which some people look on with horror as socialism.

I am not sure what’s so wrong about socialism. My whole life, I have seen Americans get rich via their own ingenuity and drive. Should they pay taxes on their profits? Sure, why not? I pay taxes on mine. Is it socialism to take our tax money and help educate and lift people out of poverty? If so, I don’t mind. It has always seemed like a good investment. The more other people have, the less they’ll want to steal what I’ve got. I never liked communism. It never seemed fair to reward the incompetent equally with the competent. But that’s a theory of leveling, and our tax system certainly leaves plenty of juice for those at the top, even if they do complain about their tax burdens bitterly. And of course capitalism has some communistic elements, because it rewards the incompetent, passive owners (stockholders) of companies through the hard work of the employees. But I’m not here to debate systems. What’s the point? Real life economic problems don’t get solved by the application of theoretical social systems unless there is a terrible price paid, usually in lost human freedom or in famine or war. Real problems get solved by attacking what is going wrong and fixing it. Can this be done with the problems facing America’s economy today? Yes. Will it? The jury’s out on that.

What we do know is that our country doesn’t want to fall into a depression, and many people are working very hard to stop that from happening. A continuing problem seems to be intransigence, though. People and organizations that stubbornly refuse to face the reality that the old deal is done, and a new deal has to happen. The numbers of banks interested in working out foreclosures is very small. Still. The numbers of banks holding second mortgages (home equity loans) on properties in danger of foreclosure that simply refuse to make any deals is way too high. I am not sure if it is the sheer complexity of the banking system that is causing this mess, or just stupidity and short-sightedness, but it’s pretty obvious that the foreclosure crisis is getting worse, not better. We have to solve this, because land is real. Money is not. Once we stabilize land values, the rest of our economy will calm down.

All the media people running around and squawking about the economy should chill. Our stock market runs on rumor, on chatter. Right now, faced with the doomsday scenarios about our big automobile companies, the stock market is miserable and many healthy companies have seen their stocks tank. It doesn’t make sense. It’s sheer fear. And possibly some speculators running away. The talking heads on television and their blog-and-website counterparts of the Internet all get a charge out of talking negatively about the economy. But now so many of them are freaked out about the stock market that I am somewhat freaked out myself. Sure, everything can fall apart. But will it? Should I take their doomsday talk seriously? They keep talking and talking. But that’s the problem. They’re observers; they aren’t directly involved in solving our country’s economic problems. Once I turned off the television, I realized that I don’t think everything is going to fall apart. Not with so many people trying to make sure it doesn’t.

But let’s take the worst case scenario for a second. For Brazil in the 1990s, or Japan, things went seriously downhill. There was inflation. And falling values to all sorts of capitalist property. It was a mess. But they’ve climbed up from that point. Maybe not back to where they had been in the money markets. But when I visited Japan a year ago, the place looked solvent. People dressed well. The stores were full of people buying expensive items. There were plenty of fish in the market. So even if the US completely screws up our money economy and our land economy, I have to believe that some day, we will recover. Why? Because we’ve got land, we’ve got resources, we’ve got a healthy, educated work force, and we’ve got drive. We also have the Internet and a lot of bright ideas. I say the future is going to be good. We just have to stop being so scared.

A decade ago, a lot of Americans indulged in millennial fears. But I was too busy to stockpile water and toilet paper for the coming of the apocalypse. Since then, we’ve had 9/11, and more fears, some of them justified but most of them not. And now this, the economic meltdown. Is it finally time to stock up on toilet paper and bottled water? Get more shells for the shotgun so we can live on deer meat? I don’t think so. This country isn’t falling apart any day soon. So let’s not freak out.

No comments: