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A New Beginning

Barataria stands as a blog with a purpose.  Most of the time, that purpose is to tell the stories lost in the jargon of economics and finance that have come to define our recent lives far more than most people are comfortable with.

If we can’t grab what is happening around us and make it our own, how can we call ourselves a free and democratic society?  Barataria does what it can to offer a different way of looking at what is happening and relate it in story form, free of unexplained jargon.  Hopefully, this will help to make a more real and useful politics.

After a few months of big events and heavy articles, it’s time to summarize the Baratarian view on the big economic picture in one polemic and invite your comments.

The economic situation we are in can best be described as a Depression – one which appears to have started around 2001.  Labeling it a “Managed Depression” explains how the worst effects were not felt until 2008 as those in charge did their best to spend, keep interest rates low, and generally keep things going.  They learned from previous depressions, rare but not unique events in US history.

How did this come about?  In many ways, it was an inevitable part of the business cycles that still define our history as we swim our way through it.  It’s hard to blame any one set of politicians, Democrat or Republican, for what happened – although there were policy decisions made in the 1980s and 1990s that clearly made this Depression more inevitable.

Working our way through this is a matter of time and Restructuring –  building the economy of tomorrow rather than simply reflating the previous one that has already died.   Much of our economic debate focuses on stimulus versus austerity, fairly traditional lines.  But we have an economy that has been stimulated by many years of structural budget deficits and still cannot perform.

Our economy is like a kid fed a steady diet of candy for many years that now careens between hyperactivity and diabetic crashes.  One side says give the kid more candy, the other wants to take it away.  What the kid needs is a balanced, healthy diet and a little bit of exercise.

Getting us through to the other side is not going to be easy, but it starts with the acknowledgement that the tremendous pile of debt run up around the world is going to go away one way or the other.  We can do it in an orderly way or we can wait for a horrific crash that erases it with panic, revolution, or at least incredible inflation.

One thing that marks this Depression is that it has hit the developed world far harder than the developing world.  That means that a re-ordering of global trade and finance is very likely in the near future, again either in an orderly way or in a sharp, nasty transition.  The US Dollar as a global standard is not likely to survive indefinitely, nor should it for the health of our nation.  We have to regain control of our own currency, and that means surrendering our status as the coin of the realm.

Why is this important?  Because manufacturing jobs have been hit hardest in this Depression, crashing from 24M to 16M in the last decade.  These jobs are not only well paying, they represent real opportunity for young people who can start out in an unskilled position and gradually learn as they earn.  That is what created the great Middle Class that once defined the US.

Most importantly, the old quote from Bill Clinton remains true – there is nothing wrong with America that can’t be fixed by what is right with America.  We are not put together as horribly as Europe, where basic financial institutions needed to support the Euro single currency were never assembled properly in the first place.  Attention to global trade and technology that can change how we use limited resources like oil will be critical.

The situation is bad, but it’s not dire.  This election year should be defined not by the tired debates of the previous situation, but by voters demanding that we look ahead to the next world and define it before it defines us.  There is work to be done and, most importantly, a conversation based on truth and dedication that needs to be started.  This is a Depression, but it could be a lot worse.  Starting from there some of the decisions to make and work to be done become pretty obvious.  Let’s do those, first.

This contains many links to past articles.  All the claims and themes are backed up by 800 word essays in these links.  To learn more, just make yourself a pot of coffee click through – and please, leave comments and questions so that we can all work this out together.  That’s what will get us through this more than anything else.

23 thoughts on “A New Beginning

    • Thanks – if we can’t tell this as a story, it’ll never make it into the heads of the people who make the decisions – and that better damned well be the people of this Democratic Republic. Most people “get” this in their guts already, it’s just a matter of bringing it up into their heads.

  1. “Our economy is like a kid fed a steady diet of candy for many years that now careens between hyperactivity and diabetic crashes. One side says give the kid more candy, the other wants to take it away. What the kid needs is a balanced, healthy diet and a little bit of exercise.”
    Absolute gold! :)

  2. It’s good that you summarized because I thought you were drifting. I can see now that you were not so much. It is all tied together and it is a lot to digest but I can see the main point that things are changing rapidly and we have a lot to change along with it. Right now we are just trying to get by day to day and not getting a handle on the changes that redefine the world. I think that if anything else talking about the situation this way makes it sound a bit less scary and more hopeful because it is up to us to make something of it all even if it is different than what we are used to.

    • I have been drifting, but it’s been with a purpose. :-) I don’t like just complaining, I like finding solutions that are worth discussing – ones that come from a different way to look at the problem and could lead to a way out. That’s how I came to the conclusion that the end of the Dollar Standard is actually in our best interests at this point, so I had to imagine what that might look like.
      Also, the piece on Velocity is important, because I’m focusing on what that really means and how to repair it. But it does stand as a bit of a tangent on its own, yes.

  3. Keep going, this is a great blog. When are you going to write a book on this?
    When are you going to run for office?

  4. It should be obvious we have to look at this different because nothing is working. Trickle down does not happen. I would like to know what you mean by a balanced diet for the economy, do you support a balanced budget or at least approach to one?
    The politicians are all about themselves, they have very little to offer. I guess they are as confused as everyone but they need to give much more before I will vote for someone not against the other guy.
    Also who is the guy in the pic?

    • Your feeling is pretty typical among people I talk to, which is why I say that most people seem to “get” this in their guts. It’s a matter of articulating it so that people have something to actually think about and discuss that’s important. I do try to do that as much as I can.
      The guy is Sancho Panza, from his statue in Madrid. I want to remind people that I’m not Don Quixote, I’m Sancho – doing my duty to keep things from getting too crazy after the whole world lost its mind watching too much … well, whatever this is that the Big Media throws at us. :-)

  5. I must agree with “SWatson,” that paragraph is “Absolute gold.” You know I simply can’t slog through 800 word posts on economics–my brain refuses to assimilate the information. But this sentence resonated:

    “We have to regain control of our own currency, and that means surrendering our status as the coin of the realm.”

    :-D

    • Thank you. That line seems really obvious to me, but I really can’t explain it in less than about 800 words. I am really trying because I think it’s important. I’m very glad that you agree because I’m starting to think it’s the most important thing we have to do right now – and given all the stuff that needs attention, that says a lot.

  6. My Olympic horse asked me: how does the US pay what it owes to foreign holders of US assets? How have we been maintaining this trickThe trick according to Paul Krugman is that the US earnings from abroad have been greater than the amounts in interest and principal we owe to other countries.

    http://krugman.blogs.nytimes.com/2011/12/31/us-net-investment-income/

    US capitalists working abroad are sending home money! They are clever, yes indeed!

    Why does the world like to purchase US treasuries and hold dollar reserves. I don’t know or maybe I do and won’t tell Barataria.

    We do have a problem and I’ll let Erik comment on what he sees in this article’s graph. He is going to blame it on Reagan.

    http://krugman.blogs.nytimes.com/2011/12/29/the-burden-of-debt-again-again/

    Back to the Olympics and sipping my india pale ale.

    • Aw, I sometimes blame it on Reagan, but there was a shortage of investment capital at that time and the policies adopted then made sense, to be honest. But that doesn’t mean they kept making sense throughout the last 30 years!
      We had a choice to make long ago about how to run our “Empire” based on a US Dollar Standard and the biggest, baddest military the world has ever seen. We haven’t done a horrible job, and as Empires go we’re definitely not the worst there ever was – and we did leave behind a lot of benefit to many places.
      But those days are over, and history will ultimately judge that Empire of ours by how we leave it behind. The UK did a great job on that, folding into the Commonwealth and re-evaluating what it means to be British over and over in their popular culture (if you look at it a bit sideways, that is). So we remember them pretty well now.
      I think we’ll do the same, especially since we were never a traditional “Empire” in the first place. But I would like to hurry the process along. $700B a year in Defense Department alone (doesn’t count Homeland Security, etc) and a total balance of payments over 30 years of $8.2T leaving our shore is a total drag – it won’t keep up forever.
      Thanks for the good links from Krugman, and good to know that the investment money isn’t draining us like the consumer expenditures – but to everything there is a season. I really do believe in K-Waves / Business Cycles / Jubilee (in the biblical sense of it, too!). “To everything there is a season, and a time for every purpose under Heaven”. You know, that was the #1 song the day I was born … :-)

  7. Here’s a fascinating for you Erik –a graph on oil, gold and the dollar.

    http://www.macrotrends.org/1334/the-dollar-gold-and-oil-since-1974

    From May 1998 to December 2006 the dollar was above the average (I think that is an average line). This meant that we were consuming too much and probably too much oil. And of course we built too many houses or renovated too much. We need to start more businesses relative to housing starts.

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