Critiquing America

Every month I write a lengthy letter that I send to family and friends. After my previous letter a very good (American) friend of mine emailed me, admitting that she took offence to my negative opinions of America and how the current government is addressing the economic problems.

Lest I offend any more people, I would like to say here publically, as I replied to my friend in private, that my comments on America are not critique, as much as it is vocalized observation. In other words, my purpose is not to criticize America in these letters. (For that I have this blog ;-) .) It is primarily to note the symptoms, ponder on the causes, and extrapolate possible future results.

Let me give you an example. When Zimbabwe started to feel an economic hardship they started to print extra money. This money was not based on anything real, like gold. Such printing of unsubstantiated money created inflation (i.e. you needed more money to pay for things), and the government tried to “solve” this problem by printing even more money. Again, since the money was not substantiated by something real its value decreased. A cursory look at Zimbabwe’s complete depreciation in currency is a glimpse into what will happen to the American Dollar if America continues to print more money. I’d like to mention two other observations that are underscoring the issue with this continued printing of unsubstantiated money in America. The first is the Chancellor of Germany’s critique of America’s economic plan. From experience, Germany knows all too well the type of reality where you need a wheelbarrow load of money to buy bread. The second is China, Russia, Brazil and India’s discussion of abandoning the US Dollar as the trade currency of choice. If these countries have lost faith in the American Dollar, it should say something – keeping in mind that these countries are some of the biggest exporters in the world.

My friend asked me a very serious and probably fair question: “What would YOU do instead of what is being done with the banks?” Firstly, let me not pretend to have the solutions to this problem. As I said in a previous letter, this problem is too big for any one person (i.e. Obama or any president and his cabinet) to fix. One thing I would not do is to continue to print valueless money. Printing unsubstantiated money is not solving the problem. It is merely prolonging the inevitable, and by doing so it is increasing the seriousness of the collapse when it occurs. Obama’s recent proposal to give the Federal Reserve Bank more power is another thing I would not do. The US’s Federal Reserve Bank is not “federal”, it is a private company. As I heard one guy say, the Federal Reserve Bank is as “federal” as Federal Express. Part of the mess the US is in, is because companies have gotten too much power over government. Increasing their power will increase the problem.

Also, I don’t think bailing out the these “too big to fail” companies will solve the problem, and here is why: The premise is that by helping these companies the money pumped into them will tinkle down from top-to-bottom until the common man at grassroots level benefits. This is mostly not the case. The money dumped into these companies will mostly be used to pay off the debt (often abroad). In other words, the money will not somehow soak down to the average citizen that needs it the most; instead, the money will go out of America, or save the butts of the rich elite whom have their own savings, yachts, holiday houses in tropical countries and European sports cars.

What would I do instead? Personally I would distrust these major companies, and if need be let them fail.
What I would do with all these billions of dollars in bailout money is invest from the bottom up. I’d invest in emergency projects, encourage entrepreneurial businesses, improved education, build up the infrastructure and not cut infrastructural budgets (like that of the education system, police, etc.). The basic difference between what is being done, and what I think ought to be done can best be described by an analogy of a very sick person. Currently the sick person’s symptoms are being treated. I propose that the person’s immune system be boosted. If one continue to treat the symptoms the person might superficially seem to improve (and that is what the continual printing of money will achieve in the short run), but suddenly the sickness will flare up and the inevitable will happen. (The printing of money will only go so far, until Zimbabwean results occur.) On the other hand, if you focus not on the symptoms, but on boosting the immune system, the patient will be in serious pain and suffering at first, but there is a very good chance that the person will start to heal naturally if you make sure that the causes are not still in place. This healing will not be a superficial covering of the symptoms, but actual recovery. The focus should not be on improved comfort and relief, but on actual healing.

Of course, I do not pretend to know it all – I’m not a politician or economist. I’m merely an observer.

To come back to my criticism of Obama, let me be clear that I’m not criticizing him in particular. (Again, I’m not so much a critic as an observer.) I’ve been equally critical of Bush, even more so, but for different reasons. Bush moved America towards an Orwellian Big Brother state. Obama has done very little to counter that momentum. However, I must admit that I’ve lost my faith in Obama long ago. Any true perusing of the media will reveal that what Obama says often contradicts what his administration says. It would seem that his job is mostly PR.

I do not trust politicians. I didn’t trust Bush. I do not trust Obama.