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Economics and commerce, all built from scratch.

2010? Meh.

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The year 2010 is nearly over.  What happened?  A fair number of celebrities died, a few videos went totally viral, and a few trends were established.  That’s what I get from the nooze, at least.

But what happened economically?  It turns out to be not much.  That is what everyone is complaining about, too.  I’ll do my best to explain just what nothing looks like as colorfully as possible because what we all expect from 2011 is something.  Not that anyone knows what it is, just that it won’t be this blah.

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Overnight Wonder

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The end of the year is as good of a time as any to look back and summarize what happened over the last year.  In the process of doing that I came across a tidbit of information that clearly deserves a post of its own.

From March 2008 through 2009 the Federal Reserve acted quickly.  Most people weren’t even aware of the crisis until October, but the Fed was on it.  Emergency overnight loans at low interest rates were the cornerstone of their effort, quietly fronting interest-free scratch to investment houses that were in deep trouble.

How much did they loan out?  Sen Bernie Sanders sponsored a bill that forced the Fed to tell us.  It turns out it was $9 Trillion – that’s money on top of the $4.7 Trillion that we knew was used to get the economy rolling.  All together the total “stimulus” is about 1 year’s total production in the USofA.

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Stated Risk

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What will it take to get the economy moving again?  Two years after everything simply stopped long enough to watch Lehman fall momentum is still against us.  When credit markets stop they are very hard to start back up again for a large number of reasons – the most important is the one at the heart of any free market, risk.

Interest rates near zero and a Federal Reserve pumping all the cash they can into the economy may seem enticing, but when banks can’t get any kind of interest on the loans they write they become very nervous about the risk inherent in any loan.  Is it really worth loaning out billions of dollars if you’re not sure you’ll be paid back?  So the usual mechanism to crank up the speed of the economy, cheap money, simply doesn’t work.

Perhaps there is a role for government – specifically state government.

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Making Stuff

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If’ you pay any attention to the things you are buying this holiday season, you’ve probably noticed that very little of it is made in the USofA.  That’s been true for an extremely long time – for many of us, our entire lives.  We simply don’t make much stuff in this country anymore.

We don’t have to speculate as to what that means over the long term because we have been living the long term.  We have run a net deficit against the rest of the world almost continuously for 30 years. Some have speculated that this is a good thing, as the rest of the world can make products cheaper than we can – why not run through their resources rather than our own?  The Depression that we are in, this Managed Depression, explains just how wrong that is.

But if you want some data to show the problem there is plenty.

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Buying Season

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Today marks the start of the Christmas buying season.  I wanted to write about how this has changed over the years and how a reliance on consumption is simply not going to boost our economy into a Recovery.  However, someone beat me to the punch more than two years ago in a somewhat obscure blog.  The lesson instead is that the truth is out there in hundreds of blogs contributing to the collective wisdom of our nation and its economic future.

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