My Thoughts on the Economy and My Kids Thoughts on the Election

I'm sitting here watching Charlie Rose now, and they're talking about oil prices and the economy. As I've been reading and listening to this talk for several months now, there are some things that are becoming quite clear to me regarding the economy. There are probably those who are truly economists who might disagree with me, but I thought I might throw these ideas out there and see what kind of response I might get. So here goes:

Since the massive economic growth that came to the U.S. with the WW2 arms industry, the prevailing wisdom has been that war is good for the economy. The Korean War helped bear out this assumption, although many would argue that Korea was so close to the end of WW2 that the country was still riding the WW2 wave of economic prosperity. Since the Korean War however, we have amassed a considerable amount of evidence that war is not good for the U.S. economy. I am particularly struck by the similarities between economic trends at the end of the Vietnam War and the current war in Iraq.

When was the last major energy crisis in the U.S.? When was the last severe recession in the U.S.? You probably don’t remember because it all began the year I was born: 1973. In 1973 gas prices were skyrocketing because of tensions in the Middle East and there were lines of cars and trucks, often stretching for miles, waiting to get gasoline because of fuel shortages and rationing. At the same time the government started funding research into alternative fuels and energy sources because they recognized that the U.S. couldn’t continue to rely upon foreign energy to sustain its domestic infrastructure. It was out of this era that the first solar cells were developed, electric cars were being tested and were on the verge of being marketed to the public, and then OPEC eased their grip on the market and we left all of this work behind us and returned to our old habits…but the recession continued through 1975.

The recession of 1973-75 was the worst recession since the Great Depression before WW2 and the primary cause of both the Great Depression and the ’73-’75 recession was a major decline in investment purchases. In both cases investors were not putting their money into the market because they didn’t feel safe…so, the economy started to slow down. We are in a similar economic situation today, although unlike the recession of ’73-’75, we know why there isn’t the level of investment and spending that is necessary to keep the market afloat: poor financial practices that are more targeted to huge short-term capital gains rather than long-term market stability.

In his book Moyers on Democracy, Bill Moyers points out that since the late ‘80’s we, as a nation, have developed banking and investment practices that are solely focused on making the most money in the shortest amount of time possible. As a result we have investors pumping money into stocks and futures thereby driving up the value, and then selling it as soon as the price reaches a level of equilibrium. In the ‘50’s and ‘60’s organized crime syndicates (the mafia) used these “pump and dump” schemes to bilk investors out of millions of dollars and to launder money. Many of the accountants for these mob families were convicted of fraud and racketeering for these type of investment schemes in the mid-20^th century…but now these same investment practices that were landing mafia accountants in jail 50 years ago are de rigeur; what was a crime is now commonplace and I’m afraid we are only beginning to pay the price.

During WW1 and WW2 America encouraged savings and investment through war bonds and other long term investment options. The public bought these bonds, which effectively meant that the public was lending money to the government to finance the military operations of the war. These were meant to be long term investments and offered moderate rates of return to encourage saving. At the same time, since the public was lending money to finance the military it helped keep the nation out of less debt than it would have otherwise been in as a result of the cost of war. Another advantage of this system however was the notion of the bond investor being a stockholder in the government…it gave the common citizen more say in how the government and the war was run. If the public didn’t support the war, then they quit investing in war bonds and the government would feel pressured to slow down or stop aggression. Of course, we don’t hear about war bonds anymore. They were sold up through the Korean War, but when the Vietnam War started the bond sales plummeted. Why? Because the public didn’t support the war…but this is where the model of modern war making changed. Instead of curbing aggression, the government chose to run the war on credit. In other words they began the model of borrowing and deficit spending that is the hallmark of the modern U.S. federal government. A good parallel is Frank Murkowski and his jet…the Legislature wouldn’t give him money for it, so he went out and bought it with the State credit card instead. This is essentially how we have funded every war since Vietnam…on credit. As a result we end up digging ourselves into an abyss of debt and when we reach the limit of what we can borrow we are forced to pull out of the conflict. The recession of ’73-’75 was partially the result of running the Vietnam war on credit and the recession played a big role in why we left.

But even at the height of the Vietnam War we were not even close to the amount of debt that the U.S. is currently carrying. Right now, today, the U.S. has the biggest deficit and debt load that it has ever had in it’s almost 300 year history. Even comparatively after the Revolutionary War when we were a dirt poor nation we didn’t have even a tenth of the debt that we are carrying now. Just like most consumers, the country has fallen victim to predatory lending practices and we have more debt than we can possibly pay off. Actually, the estimates I’ve seen have said that even if the U.S. economy thrived and grew exponentially over the next 100 years we would still only have paid off half of the money we owe as a result of the war in Iraq. That means that my grandchildren and even my great-grandchildren will be paying for this ridiculous war…and that’s shameful. Leaving a legacy of debt to children who are unborn is not something to be proud of…in fact it is utterly disgusting that we have politicians who support this kind of poor fiscal management.

But, despite my disgust with our country’s addiction to credit, it is not wholly at fault. There are also the capitalist creditors, the literal loan sharks, who will lend any nation or anybody money as long as they are willing to pay a price. In the case of mortgage lenders we have seen that the price that many people had to pay was much higher than they were able to afford and, as a result, we have the housing crisis. The selfishness and greed of lenders to make a buck had put the mark in this situation…they wanted to see how high and hard they could push. They wanted to see how much money they could make, so they started offering mortgages and home equity lines of credit to anyone regardless of income. If you had lower income you just had to pay a higher interest rate…it didn’t disqualify you. But isn’t that paradoxical? If you don’t have enough money to make the payments, then you had to pay a higher interest rate? That’s crazy isn’t it? Although I understand the need to attach a price to the greater risk a lender takes on a person who has poor credit or not enough to pay…but charging outrageous interest was actually defined as a sin in the Bible, in both the Old and New Testament; it was called usury and, in my opinion, it’s still a sin and part of the reason why the U.S. economy is in such dire straits.

There was a time in the this country when credit was only extended to those who had the ability to pay it back…now credit is a commodity that is available to anyone regardless of their financial situation and as a result there is a credit and home mortgage crisis that is part of the reason we are currently facing the worst recession in 20 years of more. Credit has become the new measure of social fitness in the United States. When you apply for a loan, for school, for employment, for the military, or anything else it is quickly becoming de rigeur to do a credit check. Your worth as a citizen and as a person is being measured by a scale that indicates how well you play the capitalist economic game. If you play the game well, and by the myriad rules included in the small print of every mortgage, credit card, and auto loan, then you are deemed to be socially “fit” and a desirable employee or citizen. If you don’t play by the rules, or perhaps more appropriately if you don’t understand the rules, then you are undesirable and are not allowed to participate in modern civil society. Actually, you are allowed to still participate but you have to pay to play…you can still play if you're willing to pay the multiple penalties and fees that make up for your less desirable status as a citizen with bad credit.

Well, so much for my rant on the status of the American economy. I have a lot more to say, but Lianne says that I’ve probably bored you long enough so I’ll try and wrap up with some ideas about what I’m going to do about the economy: Honestly I’m not going to do anything about it…I’m not sure that I myself can do anything to influence the direction that the country is heading, but I can do certain things to make sure that my family and I are relatively insulated from the effects of the recession. In other words, we can think globally and act locally.

One of the things that we are doing is making a serious effort to bike more and not drive our car. We live in the perfect place to do this and the only difficult part is figuring out how to manage the kids. Meridian is old enough to ride her own bike, but Elias and Isabelle still have to be towed, but it’s possible. A couple of weeks ago I hooked up Isabelle’s tagalong bike to my bike and then attached the trailer to the tagalong. As a result we had a very long and cumbersome human powered train…but we had fun and caused quite a stir at the farmer’s market. Which brings me to the next thing I/we can do: like many people we are trying to raise a larger garden this year, build up our food storage, and eat locally…at least during the summer months. We feel that all of these things help to minimize the costs that are incurred to produce and ship food and thereby make a difference by minimizing our carbon footprint. We also know that by having a garden and more usable food storage we are prepared for worse days to come should the economy and impending food crisis become much worse. In fact, we just came back from Portland where we went to Bob's Red Mill and stocked up on a lot of whole grains and other "goodies". I could survive on Bob's 10 Grain Hot Cereal...it's so stinkin' tasty!

Perhaps the most important thing we are doing is talking to our kids about why we make the lifestyle choices we do and about how we can all make a difference by doing small things in our homes, neighborhoods, and communities. We are also talking with the kids about the war and the upcoming presidential election. We want them to know that how we vote can make a difference in the direction of the country and, because they often listen to the news with us, we want them to know that there are other options besides war and that we don’t have to be a war-like country. There are other options to solve our problems…and the girls are becoming quite aware of this. Just the other night as we were driving home we were talking about Muslims, the war and the upcoming election. As we headed toward home Meridian asked: “Does Barack Obama like the war?” I said “No, I don’t think he likes the war and if he was elected President I think he would try to stop the war.” Then Meridian asked: “What about John McCain? Does he like the war?” “I think that he would keep us in the war and that he would make it last a lot longer” I replied. Then Isabelle chimed in: “But God doesn’t like us to fight. I don’t think that God likes war.” I replied to this keenly astute observation with: “I think you’re right Isabelle; God has told us that we shouldn’t fight and I don’t think that he likes war either.” Both girls were silent for a few minutes and then Isabelle piped up from the back seat in a thoughtful voice: “Then I think God would like us to vote for Barack Obama.”

So there you have it…that’s as close to an official endorsement as you’ll get from the "man upstairs" and because it came from the mouth of a sweet, innocent child, I'm even more inclined to believe that it's the truth. I have to admit that I am very proud of them and I think that their words are important for us all to heed in this upcoming election season. We make things so complicated sometimes, and really the things that matter are the simple truths that we all knew as children: don't fight, say "please" and "thank you", treat everyone fairly, and use your manners…and that’s all I have to say about that.