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The Jehoshua Novels


Why Economic Growth in the United States Cannot Happen

So, you cut back on your lifestyle; performed a so un-Greek personal austerity reset but your credit card balance is still creeping up; or perhaps you are slowly burning through your savings; or you are at the end of the line; abandon ship. Whatever, you have a lot of company out there.

Why is it so hard to make ends meet these days? The days of living high on the credit hog are over and we all have to get small but in the end, we still have to make ends meet; we have to pay for food, pay for utilities, buy gas, etc. How to make that work?

We all bought a lot of stuff during those days of easy credit. Debt driven demand drove up the value of lots of things. Homes increased in value so much that they became a kind of income harvested through a home equity line of credit. Autos got big and powerful again making them unaffordable to buy and operate now that we have to live within our means. Cell phones replaced land lines and cost a lot more; especially when everyone in the family has to have one. Maybe you have a home that you cannot sell and you are stuck living 20 miles or more from your workplace and your car is fast reaching the point when you will need a new one just to get to work.

We are all waiting, waiting for the economic reset so that things are valued in a way that makes sense to people’s lives and salaries but it won’t happen because it can’t happen. The assumption made by economists is that we structured our lives around having credit available and we need to restructure; but that is not enough, our society has also structured itself around what freewheeling credit bought us and that we cannot afford anymore. Unsellable homes built far away from work places requiring unaffordable transportation to get to work where a pay cut is more likely than a pay raise. Our society has to restructure itself if we are to make the adjustments needed to live in the reality of today’s economy.

Perhaps you noticed that food is getting more expensive even as everyone worries about deflation. The same economists are trying to drive inflation up because it means no deflation. Mr. Bernanke is fueling up his helicopter just now for a new round of “quantitative easing”; Ben is going to guarantee that there is no reset; that homes remain over priced and that our lives cannot get on to whatever it is they are supposed to be. The powers that govern cannot or do not have the will to restructure the economy and our society but expect us to restructure our lives just the same.

It is time to ask some questions and get some answers. Who was doing the thinking when the government started giving corporate America incentives to offshore our best highest paying jobs to India and China? The deflation of wages due to offshoring is exactly the kind of dynamic that is crushing the American middle class. Who was doing the thinking when American agriculture was outsourced to Mexico with the help of NAFTA? Who sold NAFTA as free trade instead of what it is, a corporate land grab south of the border? What interests of American farmers in such a thing? How is it that higher education is now only affordable for the very rich? How is it that our public education system has sunk to the point where schools are in some cases limited to four days a week? How is it that with one of the worst and most unaffordable healthcare systems that we get health care reform giving us still the worst and most unaffordable healthcare system?

My family Doctor has over a million dollars in student loans to payoff; he currently works as an indentured servant for healthcare insurance companies. It is happening to all of us; our debts are turning us all into indentured servants of the banksters. I went to a public University where Tuition cost $1200 a year. In forty years that cost for the same public University in 2009 was $27,000 a year a 2250% increase! Inflation since then was 417%. Why then doesn’t it cost just $5,000 a year to go to my old school? The answer is student loans; the ability to pay high tuition inflated tuition prices to a ridiculous extent; more than five times than it should be. With freewheeling credit anyone can become an indentured servant; why wouldn’t corporate America want that? Now, what will happen if the Universities have to reduce their tuitions? Do you think my old school; the University of California is going to reduce its tuition in light of the state’s financial condition? Not going to happen.

The United States has closed its manned rocket program. In a few months, after retiring the shuttles, the U.S. will no longer have the capability of taking people to or from the International Space Station. The country that put people on the moon can’t fly anymore. There is only a hope that private industry will somehow find its way into orbit but meanwhile the Russians do it for us. They are laughing, they won the space race after all. The United States is going backwards, a regression that will become permanent if something isn’t done about it.

Without government stimulus money, I happen to know that the county responsible for the rural road that I live on won’t be able to repave it. It will eventually turn to gravel and potholes impassable by anything without four wheel drive, four hooves, or fat bike tires; perhaps an old Model A Ford could do it but not the neighbor’s Prius. This is the fate of America, a regression to a time very much like the late forties if we are lucky.

34 comments to Why Economic Growth in the United States Cannot Happen

  • Anonymous

    This is very evocative. It’s sort of like the feeling I got when I first read “The Road” by Cormac McCarthy. If we reboot than there’s a chance to get back to reality and some new priorities. But if we create a fake recovery, then we’ll be spinning our wheels until the next crisis. As it is now, I take it, you see us pursuing the latter path. Very well done and, I’m afraid, accurate based on available data and the usual suspects.

  • Numerian

    If incomes have reset to a lower level, then the cost of goods and services will have to reset commensurate to income levels. In a deflationary environment the hair stylist who survives is the one who can reduce prices by 30% or more. Colleges will have to find a way to reduce tuition substantially, because student loans won’t be available. Medical care will return to basics and use MRIs or other expensive diagnostics sparingly. Roads will get repaved when the cost of materials finally ratchets down, along with labor costs.

    This doesn’t mean we will get to a happy world where all the expensive things of the past will cost less so that we can all afford it. Essentials will cost less, but luxury items will likely be more scarce and expensive.

  • Nat Wilson Turner

    can’t disagree with a word of it. This period in the US reminds me of a much less dramatic version of the Russian Empire from 1905-1913. They survived the crisis of 1904 but everyone knew they were done for, and yet they spent a decade in decadent disarray and even then it took losing a World War to get change going and what a shitty change it was.

  • steeleweed

    Any attempt to ‘reset’ the economy is pointless as long as the current political process is in place. The government(i.e. Power) now belongs to corporations and the elite of the financial elite. The tools and power to correct the problem are in the hands of those who created and profit from the problem.

    The political process is broken in the US. On a day-to-day basis, we can live outside the process temporarily and might be able to rebuild our politics (although I’m not optimistic).

    Capitalism is also broken. Whether it can (or should) be repaired, abandoned, modified, etc. is open to question. But one thing’s for sure: it won’t happen under in the current political environment.

  • Michael Collins

    I spent a couple months in Tokyo in 1987. Early on, I asked one of my colleagues, “What’s that doing there?” I was pointing to a rice paddy in downtown Tokyo. I got this mini lecture about farmers being a key source of pre WWII fascism … bla bla bla. I said ‘thanks so much’ but assumed that I was getting the gaijin blow off. I never thought about it until a few years ago when I read about the Tokyo real estate market. I don’t know what role rice paddies played in the bubble but I’ll bet the stupidity behind the policy was a big clue that things would go south with the economy.

    I suspect, but don’t know, that there are economic policies that would mitigate what we’re going through now. But, like Japan before its fall, we have a host of clues that things make no sense and politicians on both sides of the aisle who will do nothing about it. The worse things get, the more distractions we’ll have from the elite and their political minions and the less chance anything will get done. I think I’m beginning to understand the “dismal” is dismal science.

  • fish

    If wages are lowered, people are losing their jobs, and credit is harder to come by, then no one can buy anything. If no one can buy anything, no one can attend colleges, and people are losing their houses because they can’t make payments, how do the corporations and banks come out ahead?

  • dk

    and then sell it back to you on credit when they decide it’s time to expand the economy. Notice the consolidation in financial services?

    Eventually they have to have a war to destroy supply, so that demand is created.

    “The essential act of war is destruction, not necessarily of human lives, but of the products of human labour. War is a way of shattering to pieces, or pouring into the stratosphere, or sinking in the depths of the sea, materials which might otherwise be used to make the masses too comfortable, and hence, in the long run, too intelligent.”
    — George Orwell

  • Antifa

    Yes, it is a planned regression, a necessary full retreat from the burst global bubble economy based on credit, on ‘tomorrow money’ and on hedged speculation.

    Based on gambling that the music won’t stop and if it does that you will not be the one without a chair.

    Well, the music stopped and there are not enough chairs.

    What’s happening now is that people are being told to be orderly, be calm, and do not attempt to sit down before the banksters and wealthy elites have their rumps well settled and their fortunes restored.

    It will take a decade or so for the equity, pensions, social safety net and physical property of the late, great American Middle Class to siphon over to the wealthy, but they will get the goods.

    It’s like watching a fuzzy YouTube video of gangbangers doing a Smash N’ Grab robbery on a supermarket — but in really slow motion. And all the gang guys are wearing thousand dollar suits.

    There is a season when a nation’s wealth is in its ingenuity, enterprise, and daring. There is also a season when the only value in it is what can be salvaged from the fallen bricks and timbers.

  • Synoia

    The corporations profit.

    What long term?

  • nihil obstet

    I don’t remember all of “us” sitting around deciding to pass NAFTA and ship jobs overseas. Why did “we” decide to “live high on the hog”, buying a lot of stuff on credit and living out in ever-widening suburbs? The people who benefit from road-paving and selling cars and selling gasoline and not so much from public transit were able to get the government to subsidize the suburbs and devalue the closer-in areas. This sense that the invisible hand simply gave people what “we” wanted and therefore it’s “our” fault that we’re now suffering is part of the propaganda. You get to the asking questions part in the second half, but I still think the continued acceptance that each individual in a complex society is responsible for whatever actions are first promoted as personally responsible and then condemned as selfish, stupid, and greedy by those who can actually direct the decisions that move the society is debilitating.

  • Singular

    The Elite. You seldom know who they are and especially you don’t have access to them. 1/1000 – 1/1 000 000 of the population. Typically earn more than $30,000,000 annually, are above the law, have a fake imago for the lower classes etc.

    The Useful Fools. Those who keep the system running. About 10%-15% of population. These are motivated by fear that they drop to The Crap class.

    The Crap. Or what ever. The rest of the people. Many of these want to be part of The Useful Fools.

    it’s “our” fault that we’re now suffering is part of the propaganda

    You are too clever for The Agonist. Much of the propaganda is accept here in The Agonist too, because this is a complex society for ordinary people. They are completely clueless what happens even in an ordinary supermarket.

    Of course the system always says that everything is the fault of the Crap class.


    – 80% of Americans believe they are better-than-average drivers

  • Singular

    Deflation means that you become rich just by sitting on your cash.

    Economic growth means inflation. Inflation means higher interest rates, which means lower bond and stock prices. Thus, economic growth is bad, deflation is good …


    – 80% of Americans believe they are better-than-average drivers

  • Singular

    Plenty of wrong facts here, picked from myths for lower classes. You have neither power nor knowledge. You replace those with entertaining stories.


    – 80% of Americans believe they are better-than-average drivers

  • Singular

    Democracy. Actually people vote like robots.

    Revolution. A war between The Elite groups disguised as something by the lower classes.

    The big difference between Capitalism and Communism. Yet another romantic myth. Soviet communism couldn’t expand beyond trash (services for consumers). Western capitalism can’t expand beyond expert crooks (Enron, AIG, Madoff, Wall Street). Let’s see what Chinese communism can do.

    The Expert Crook problem is what Joaquin should be writing about under the topic. Take a note that I’m not saying here that stupid people are the problem :-) On the contrary.


    – 80% of Americans believe they are better-than-average drivers

  • Joaquin

    I wasn’t using credit was I? I mean I paid it off. It doesn’t count right or does it? No one could help participating in the debt fueled economy. Even those who payed cash for their home participated in the housing boom; a boom powered mostly by debt and if you paid cash at the height of the housing debt boom, you got burned.

  • Joaquin

    The retailer offshoring some jobs, or deflating wages is fueling the momentum that will drive down their own sales later on but retailers do it anyway because they have to survive in the immediate; its just how corporations work.

  • dk

    and a proud member of it.
    A large chunk here are in that 10-15%, but aren’t you also a trader?

  • quax

    Anything wrong with that?

  • quax

    Especially when you don’t bother to support it with anything.

  • Joaquin

    1) Corporations do not always act in their own collective interest. I know from experience that the retail industry is just as likely to offshore good jobs as any other industry even though such a practice makes less disposable income available to consumers.
    2) Suppose you bought a house at the peak of the boom with CASH. You were being very responsible but it is likely that the builder had a construction loan the likes of which are now unavailable and the builder purchased building materials from a distributor that had a bank line of credit so that the builder got nice terms of payment; that line of credit is now hard to get, etc. There was no “not participating” in the debt driven bubble; we were all part of the boom and now WE are all part of the bust.
    3) The central point that there cannot be a reset is I think a very complex proposition because there are so many complicating factors especially energy costs and availability. Even now, oil is around $75 a barrel it is rising but if it dips below $75 dollars a barrel for very long it begins to stress the cash flow needed for oil field development. Those $100 million dollar wells like the infamous Macondo are our future energy supplies and those kinds of projects become endangered without oil above $75 a barrel; there is not someplace else to go and drill cheaper wells or they would have already. This is going to complicate a reset because it means a reset must occur to a different paradigm than that of the past even though the nature of economic forces tend to reset to the past paradigm. How many trillions of dollars worth of homes are built too sparsely and too far from transportation in a future where gas cost 3X what it does now?

  • Joaquin

    Perhaps I should say that there cannot be a reset until some kind of honest campaign finance reform can take place that breaks the bond between politicians and corporate interests. Once politicians start acting in the interests of the American people instead of others then maybe we have a chance.

  • yogi-one

    Only that you’ll never get Americans to try it.

  • yogi-one

    You don’t like my suspenders? ;-)

  • creativelcro

    “If incomes have reset to a lower level, then the cost of goods and services will have to reset commensurate to income levels.”
    True, but not everyone’s incomes have reset. For a number of people, they have not reset at all. These people can keep buying overpriced houses in hot areas. The situation is not uniform.

  • Numerian

    On the contrary, it means a general lowering of living standards. When you take away an enormous chunk of economic growth powered by credit/debt, you necessarily take away McMansions and Hummers and overseas vacations – all the goodies the middle classes were given to acquiesce in a debt-fueled economy. Now prices and incomes may be more in balance, but at a level where previous entitlements are now considered rare luxuries. This, sadly, may also apply to basic government services.

  • Singular

    Expert Crook problem is not as prevalent in health care than in the USA. In banking and finance the problem is almost equal. Almost all Expert Crooks eating the US system alive are domestic in the USA, thus the problem is easier to contain for a short term than in Sweden, where the Expert Crooks are foreign. To name some foreigners: Icelandic banks.

    The Swedish system is more resistant to The Expert Crook problem being faced by the Western Capitalism, but fundamentally the Swedish system provides no more solutions to it than the US system. The US system is just weaker and thus faced the problem earlier.

    The Expert Crooks create an illusion of profitable investments but are just sophisticated mega-scammers.


    – 80% of Americans believe they are better-than-average drivers

  • Singular

    Credit card debt base is shrinking at a fast pace, which is typical before a recession.

    Food price is decreasing here, but if you speak much on the internet in the USA that it is increasing, nobody will be surprised that the food price increases in a supermarket near you.

    The same economists are trying to drive inflation up because it means no deflation. Mr. Bernanke is fueling up his helicopter just now for a new round of “quantitative easing”;

    This is an elite thing and I guess that linking inflation and quantitative easing is a myth. They have been doing this for decades in Japan without inflation. The trick is to inject the money just in the balance sheets of banks and keep it there or in government bonds. There is no inflation when the man of the street receives no money.

    I think that most of the myths originate from The Useful Fools class. The clever myths probably originate from The Elite.


    – 80% of Americans believe they are better-than-average drivers

  • Singular

    Because they admit openly that they live in a class society in Britain, they have an explanation what binds the different classes: Common destiny.

    When The Elites think that they no more need The Useful Fools or The Crap class, there is a problem for the lower classes. Try to find out why this is happening!

    Do they already own everything? Do they need more outsourced foreign workforce than Americans? Have they invented a way to print money to themselves without causing inflation?

    Obviously The Elites think that they need just more control over the lower classes like in The Good Old DDR. In DDR the party elite was more dependent on the Soviet Union than their citizens.


    – 80% of Americans believe they are better-than-average drivers

  • quax

    … Expert Cops? E.g. strong and competent financial oversight on the EU level?

    Of course this won’t happen with the UK in the EU so I’d say let ‘em go … just brainstorming here …

    With regards to Iceland I submit they offer a microcosm experimental set-up of what’s to come for the US (with less violence and racial distraction obviously).

    Sampled this periodical (PDF!) when last flying Iceland air. Have never been as spell bound by a newspaper before. Probably the best alternative leftist paper Iceland has to offer (in the English language anyway).

  • Singular

    How can you forget how corrupt SEC was/is? And suddenly you have no idea how corrupt health care is in the USA?

    The western system seems to be unable to produce expert cops. Maybe they would be a threat to The Elite the same way as spies snooping their bank accounts are nowadays.


    – 80% of Americans believe they are better-than-average drivers

  • Joaquin

    There can’t be real cops in the United States; they would destroy the corrupt system that hired them.

  • Joaquin

    Does the government serve the people or do the people serve the government, in this case, the government as a proxy for the very elite classes? We saw what happened in France two plus centuries ago; it can happen again.

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