An Open Economy Has Change And Debt

Change is inevitable – except from a vending machine.

Robert C. Gallagher quotes

Allan Greenspan was grilled yesterday about the sub-prime debacle….yes there is plenty of blame to go around. But when a recession hits the blame game begins. But as Mr Greenspan said ” Not all the Subprime mortgages, or any  category of loan should be banned as unfair or abusive. ”

The Recession and the high unemployment numbers have caused great pain and suffering….but there are additional economic issues that we should keep in mind when we analyze economic changes and discuss the recession and its ramifications.

Technology is a major agent of displacement, but also we have major  changes in consumer tastes and domestic competition.
Think of all the people who have lost their jobs at bookstores because of and now e-readers, or at record stores because of iTunes.
Also, one-quarter of newspaper jobs have disappeared, not because of unfair foreign trade, but because of Craigslist and free online news.  That’s life in a free and open economy.”
Keep in mind the following:
Since the beginning of the 1990s, the U.S. labor market has shed 4 million manufacturing jobs. But during the same time, that loss was overwhelmed by the creation of 18 million net new jobs in mostly service sectors where the average wage is higher than in manufacturing. Job gains have come in education and health services, professional and business services, and, before the recession anyway, construction and financial activities.
Before I conclude here is some food for thought about debt…which in extreme is quite damaging but take look at Debt from another point of view:
For years, debt has fueled the growth of any capitalistic economy. Most people reading this have a high percentage of Debt / Assets since we were all able to buy our houses with debt. When interest rates are low and inflation is low (as it is now) it’s good to borrow and put the money in real assets. Eventually inflation roars back and those assets have gained considerably in value. The thing that kills capitalism is persistent deflation, as happened in the Depression. Fortunately we have a Fed that learned from the mistakes in that period.
Enjoy Your Day!

Leave a comment

Filed under Uncategorized

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s