First published 7/7/2010
So, what is going on in the economy?
I want to see if I can think through this thing.
First of all there is Adam Smith and his invisible hand. In this model there is a certain demand for products, there are x number of buyers and the number of sellers will increase until it is not profitable for new sellers to come into the market. If more people demand a product there will be an incentive for more sellers or increased production.
What happens if buyers cannot afford a product? If there was no credit they would not buy it. What happens if buyers don't want something anymore? Sellers reduce there price, and some sellers quit the business.
So here is a couple of things that have happened in our economy. The government has had some favorite projects. Since the Great Depression, they have been subsidizing farmers. This is supposedly to help small struggling farmers cope with losses. (There could have been a different solution to this I think. There is an insurance product to help avoid losses, farmers pay there premium every year. Some years are good and some bad. When disasters strike the insurance pays out).
Anyway, here is partially what has happened because of government subsidizing. It's not really, small farmers that are helped (it is usually big agribusinesses). The government comes in and pays people to not farm this or that. You get half a million for not raising x crop, what a deal. The government also suggests crops, like corn, soy, wheat for the farmers to raise. Guess what? We've got a lot of corn, soy and to a lesser degree wheat (there has actually been problems with not having enough wheat this year, corn and soy are more profitable). These crops are highly genetically engineered, highly covered in pesticides and highly profitable. They use them as fillers in almost every food out there (making almost all processed foods contaminated and GMO).
They use corn to make ethinol to "suppliment" our gasoline (incredibly this does not work out as a benefit to the environment). They also use corn to make the lovely detrimental High Fructose Corn Syrup (which leads to people getting fat, sick, and actually easily controlled because they don't have enough energy to question what is going on. Do I sound like a lunatic? Maybe, but I have experienced the energy drain. Then vs. now? Now is much better, never again HFCS or GMO's) They use corn in a lot of other things as well.
Soy, lovely soy. Toted as a health food, incorporated into almost every food out there. Soy is one of China's 5 sacred foods. Guess what? That was because it was used as a nitrogen fix for their fields. They never even ate it for millenia until they figured out how to ferment it, alot. Then they only ate it in very small quantities. Why? Because it is a known toxin, it is highly indegestible, an accumulator plant that takes up all of the nasty chemicals that are sprayed on it. American's get a hold of soy and they run around toting it as a cure for womens menstural problems, heart disease, etc. . . Telling everyone of how healthy the Japanese and Chinese are because they eat it. Well, it's true they eat a little bit, but not nearly the quantity that Americans have been eating. I have also seen reports that Soy is contributing to the feminizing of American men (i.e. they are growing breasts, and there manhood is getting weaker). Look for the Weston A. Price foundation online for more info.
Wheat is also a problemetic crop, it is not that wheat is (or was) not nutritious. It used to be very nutritous. Yet wheat too has undergone many changes in not to short a time. It has been genetically altered (to increase the gluten content), it is highly sprayed (to keep away pests) and it is highly refined (to feed Americans obsession with white bread). As an interesting side note, the ancient egyptians were the only ones that could afford white bread in antiquity, because they had slaves that they forced to go through the tedious process of seperating the wheat germ from the berry. It is also interesting that the egyptian rulers had dental cavities and more problems with illness than there slaves. So Americans come along and figure out how to do the separating with a machine and then they make everything they can out of their "white" flour.
How does this all relate to the economy? Well the subsidized crops are not or were not in great demand until they became subsidized. Then because we had so much of this stuff we creatively put it everywhere. The subsidizing of corn has led partially to the world food shortage (because other crops have not been grown and there have been failures in wheat crops). There are other ways that this relates but I can't think of them off the top of my head.
Well actually, the failure in crops, the massive hunger, has led us to have to pay for food aid. Large scale farms, create a great demand for oil. Oil is a limited resource that is running out, we don't have very much so we help defend oil producing countries and go to war (Iraq and other wars) to defened and aquire oil. (See the movie A Crude Awakening). This leads to massive spending, which leads to massive deficits, which leads to inflation (the government prints money without gold to back it up), which leads to things being unaffordable.
In comes the white knight, the credit industry. If we can get a loan then we can "afford" a car, a house, in some cases food and clothing. How dare we save our money, it's UnAmerican. We need to buy more, that's what good ol' Pesident Bush told us to do after 9-11. BTW we were in big trouble, even then and they all knew it. So the subsidizing of our lifestyles has made the cost of everything to go up (partially, remember inflation from printing too much money?).
More demand for a product, clothes, cars, houses, makes people want to get in to sell the product. So more clothes are made (as cheaply as possible, since they are meant to be used a short time and then thrown away), more cars are made (as cheaply as possible as well), more houses are made (also a lot of times poor quality).
How is this bad? Well think of it, everyone is not satisfied with what they have, they need new clothes, new cars, a new house. They don't want to save there money, so they are given loans. As long as they are working this is alright, right? Not really. They are now beholden to others, they are virtually slaves. But they are willing to do this, they get to drive their nice car, live in their nice house, wear their nice clothes. (Unfortunantly a lot of these people will be driving no car, have no house or clothes, sad).
Then what happens? It all starts to fall, the price of gas increases, the price of food the price of clothes. The demand for houses keeps going up, so people keep building. There are so many people building, the price of materials increases. The price of existing homes increases. What about those people who want to save their money 20% down and then an affordable mortgage? They want a home they can expand and put their own labor into for extra equity. Well too bad, the competition has forced contractors to build homes with all the extras, with finished basements, and a spa out back (please come buy my home). Guess what, the price of everything has increased (incredible how can this be happening). Very few people can afford to save 20% down and they can't even find a home with an affordable mortgage (houses cost to darn much). So "hero" loan officers come in and offer you a chance to get into your home, take out a loan for the principle and a loan for the down payment. Now you know and I know that something feels quite wrong here, but everyone is doing it, it seems to be working for them.
Now BOOM, it all explodes. We have too many homes, that cost too much (builders are dying here they put so much money into the homes they built, should have built smaller and more affordable). They file bankruptcy, they cant build anymore, they are out of work. Everyone out there who decided to buy their dream home they can't afford has been working two or three jobs. Maybe both mommy and daddy both, but guess what they can't do it anymore and they lose their home. This adds to the amount of homes for sale on the market. People cant afford their new clothes so retailers can't sell their clothes. People are putting money on credit cards to buy food, guess what they are still going to have to pay the piper. Banks are in trouble, because they have lent money to people who have overextended themselves and are going bankrupt. So guess what? We have banks going bankrupt. Where does it end?
Here comes the government, they are going to "Bail" out the banks. In all seriousness, and I am scratching my head here, do they really think that this is going to be a long term solution? Bail out the banks, what a joke. Everyone in America is suffering. Even those that lived on a budget, saved their money and didn't buy a home they couldn't afford. Some of them are reaping the benefits of their thrift and are now getting affordable homes. Some of them, still are not able to buy a home. Why? Because they have lost their jobs, they have used their savings and feel like they are getting no where (That's us). So what would bailing out the banks do? Perhaps temporarily this would calm the stock markets. It would also, reward people, executives, for there poor behavior. It would create 700 billion dollars more of inflation, this is an indirect tax on all of us. As if the war and spending on all of the natural disastors of the last couple of years has not hurt us already. Inflation, means the cost of living (everything) will continue to rise. Is this bailout a solution, NOT AT ALL. I don't know what the solution is, but I know that the underlying instability of the economy right now is scary and it leads me to my solution.
To be happy with what I have and grateful, to make a garden, to walk if I can to buy my food. To take care of the environment (I haven't even gone into how all of this is indirectly related to how poorly we have been treating the environment). I also haven't gone into a diatribe about how the GMO's and poor eating habits of Americans are increasing the cost of health care creating the big demand for the health care industry (health care, I think it should be sick care). Which also strains our economy and makes the big guy's rich and the rest of us poor and sick. That triad can wait for another day, there is a lot to say about that.
Anyway, I am sure I have left out a lot, and that there are other perspectives out there (one which my neighbor holds is that this crises is from the cost of foreign oil, give me a break). If anyone can expound on this futher please comment, it would be interesting to see other perspectives.
~Strawberry Girl
