Here are the realities as I see it.
The captains of industry are not stupid but they have been affected by the same short term interests that affect all American society. The manufacturers of SUV’s were not stupid; it was mere short term self interest. Profits were fat.
Those fat profits paid heavy union wages and benefits. They could let the Japanese seek short margins. The profits lasted for generations, but the bosses and the workers knew it would end some day. It’s ending now.
And we borrowed a lot to keep the image afloat.
There will be a shrinking of the economy as we retrench to what we can afford. This will be complicated by two factors: 1. paying off debt and 2. Insecurity in the credit market.
I think paying off debt will be easy. We’ll print lots of money but so will other so called advanced societies. It will be a race to the bottom as governments cheapen currency so as to pay back loans with cheap money.
Who is the money owed to? Well not you and I because we never saved and loaned (invested.) In the short haul I think it will be the Chinese and Arabs who get shafted. I think.
But no one in your generation will trust the greenback, perhaps not the Pound and Euro.
And that brings us to the more difficult issue- trust in the markets. That is what upsets me as I glance at the dow.
The markets control huge parts of the economy. I believe layoffs and mortgage defaults will be more affected by Wall Street than Main Street, I’m sorry to say.
So in a nutshell, The best cure is an orderly retreat on Wall Street down to realistic levels. If our economy was measured at the peak at 14 thousand, I expect the dow will continue to settle till 6 or 7 thousand.
Then things should stabilize and life will go on, poorer but O.K.
Forget about national debt. They can always print on toilet paper.