This week, I broadly surveyed aspects of the U.S. economy and the global economic environment in response to a reader who wrote
… almost all the trading sites I visit have confusion written all over them and are giving opposite views. The two most prominent are that the American dollar and economy are at a dangerous point in history.
My first article pointed out the potential near-term danger of a U.S./global financial market not completely healed from its near death in 2008. My second looked at the near-term, catastrophic danger of the U.S. Congress failing to raise the debt ceiling. My third and fourth articles broadly looked at the global economic picture. Some elements within this snapshot provide strong headwinds, but nothing I see is a danger to the U.S. economy or the U.S. dollar. In fact, it is the opposite.
Today I will tell you the U.S. economy and the U.S. dollar are just fine, for now, even though the economy is pushing hard against headwinds toward recovery, and U.S. fiscal and monetary policies push the dollar down. As the U.S. economy continues to recover and the policies end, unwind, or otherwise address our monetary and fiscal issues, both the U.S. economy and the U.S. dollar will again become preeminent and powerful, unless …
I do see that the “American dollar and economy are at a dangerous point in history.” The danger does not come from without, nor is it economic, directly. The historical danger we face is our inability to rise above ideology and actually put in place policies that are in the best interest of America, and we have some serious issues as a nation.
In the last thirty years, real wages have declined. We have decimated our manufacturing base, going from a GDP reliant on manufacturing to one reliant on consumer spending. In the last ten years, this process has sped up, which has created a new class of multi-millionaires and billionaires. This, in turn, has created the widest gap between the wealthy and the middle class since the 1930s. Simply, the American middle-class is dying. Additionally, in the last ten years, America has dropped precipitously in the global rankings for science and math, our high-school graduates are less educated, and for those who do go onto college and graduate, they are facing stiff competition from other graduates for fewer high-skilled jobs, or those “precious” jobs are moving offshore because it is cheaper. Finally, our fundamental infrastructure is 19th century.
The real danger is solving our current budget issues with massive spending cuts alone. It would mean big cuts in education, science and research, infrastructure spending, and the search for alternative energy sources. It would mean a loss of jobs in a time when jobs are exactly what we need. It would mean the issues described above would worsen. What made us a great economic power is government support for education, science and research, and infrastructure.
Yes, we need to change the formula, as it has spread out too wide over time, but we cannot afford to throw it away just to satisfy a disproven economic ideology that has sickened America over the last thirty years, and, in particular, the last ten years. If we follow this path, then, yes, I agree with those “trading websites” that say the “American dollar and economy are at a dangerous point in history.” Yes, in the longer term, if we go down this road, neither will do well against the rest of the world that is building for the future, not trying to go back to a mythological past.
Trade in the day – Invest in your life …
