While on the Larry King Show recently, Suze Orman opined that she did not think that we were headed for a depression, in contrast, Larry King noted, to a high percentage of Americans who think otherwise. Although Miss Orman may be knowledgeable about financial matters, I happen to think that she is wrong about her optimistic views, at least in regard to what is most likely to happen to our economy in the near future. As it turns out, I happen to be an optimist and I do agree that large-scale negativism can sometimes adversely affect circumstances-having said that, what will most likely happen to our economy in the foreseeable future is something we can intelligently predict, based on the trends that are going on, what is being done to address our problems, and who is in charge, at present, of the important decisions that need to be made, if we are ever going to restart our economy. Furthermore, this article is not necessarily an attack on Suze Orman, although I must mention that she does have her fair share of critics-most notably, people like James Scurlock. In his article from the The Big Money, for example, entitled “Stop Listening to Suze Orman,” he makes a number of interesting points, including the assertion that she does not follow her own financial advice, that she is a carefree spender (although she preaches that people need to be wise spenders), and that she did not see ahead of time the great economic meltdown that culminated in 2008 (which you would have thought someone with great financial insight might have seen-not that I remember too many other so-called financial gurus seeing the meltdown either). While I do not know if Scurlock is right about Orman’s shortcomings, I do think that she is wrong about her prediction that we are not headed for a depression, or, at the very least, some kind of economic cataclysm of a much worse nature than what we have thus far seen. Here are 10 cogent reasons for thinking so.
1. The government is still not taking drastic steps to avert a worse economic situation than the one we have been experiencing lately. As a matter of fact, the only word that comes to mind when I think of the US government and what it is doing about our present woes is “clueless.” The boys (and girls) in Washington, who are, after all, shielded from most of the problems poor Americans have to face every day, are still not reacting appropriately, still refusing to take drastic action to not just fix the economy, but to avert a worsening of conditions. I would even go so far as to say that our government is, if anything, making things worse. And I want to add that this is not necessarily an attack on President Obama or the Democratic Party-but I do think that the present administration is operating under a business-as-usual attitude, an “attitude” reminiscent of the previous administration. I further venture to say that it feels to me as if Bush is still in office, considering that his policies are very much still in place at a time when we need drastically new, innovatively aggressive thinking. Unless we see some deep-seated changes, furthermore, we will indeed be looking at a much more serious economic meltdown, one that may easily be dubbed a “depression.”
2. What will happen when people start running out of help from family and friends, government benefits and savings? The reality is that many people (actually, millions of us) have had to dip into our savings in order to make ends meet in the last year or two. That “cushion” that we have been able to lean on, though, is not of a limitless nature-the question that needs to be asked, then, is what will happen when these resources start to run out, when unemployment checks are no longer there, when Mom and Pop and grandparents become tapped out (as many of them are becoming, even as we “speak”), when the food stamps and welfare assistance runs out of cash or people go beyond their eligibility “limits” (imposed in the past few years by welfare-hating, rich-folks-favouring politicians), and when there is no money in our IRAs, in our emergency cash funds, and, in some cases, in our mattresses? I, for one, shudder to think what that will do to the economy; I can confidently say that it will, at best, send a frightening jolt through our financial well-being, perhaps triggering a depression.
3. Another problem which, literally, nothing is being done about, despite it being so pervasively serious, is the continuing exportation of jobs and companies overseas. Just when we have most needed some kind of protectionist action, the government and, surprisingly, Corporate America, have been encouraging (through misguided policies and laws) companies to take our jobs elsewhere, an encouragement which many of America’s most influential and powerful companies have eagerly heeded, to the point that we have very few manufacturers left in the country. Why should these companies keep those jobs here when they can pay much less for labour elsewhere, not worry about any EPA and OSHA restrictions, and generally pay much lower taxes? Even though the government has known about this problem, it has done nothing to address it. Not so surprisingly, this is one of the reasons our economy is in the dumps right now, but, more importantly, it is also a reason why it may not get any better any time soon, especially when one considers that the en masse, national job/company exportation initiative is still briskly moving along, to a large extent with the full blessings of Uncle Sam! And, by the way, other countries have always had protectionist policies which help to protect their major industries from foreign competition-Mexico, for example, makes it very difficult for foreign investors own land there (thus giving local real estate companies a monopoly, forcing foreigners to rent and lease instead, or form partnerships with Mexican investors); China still refuses to seriously crack down on the illegal sale of pirated music CDs and movie DVDs, thus giving its economy billions in revenue, while unfairly taking away billions in lost sales from American entertainment companies; and European countries provide massive subsidy programs for their main staple industries-the US government, on the other hand, more concerned with political correctness than with the welfare of our economy, has shied away from any new protectionist strategies, thus, in essence, abandoning its responsibilities to American companies. If other countries have been fighting hard to protect their industries, why hasn’t the US government been doing the same thing? I only wish the American people would stop listening to the “free market responsibility” lies they have been told by clueless politicians-we have a “free market” global economy only if the playing field is even and fair-there is nothing fair about countries that pay $.50 an hour wages, have no child labour or environmental protection laws on their books, and give unfair advantage to their companies over ours through protectionist agendas our government insists we cannot possibly also enact. Unless we literally force our government to change this childish, disingenuous attitude, we will indeed be facing a massive depression in the near future.
4. Sales of most products in this country, especially higher-priced items made here, have been going lower and lower each year and it does not appear as if this problem will be improving any time soon. As sales figures drop, companies may have to shut down, or lay off employees, and this often produces a domino effect, as we saw in late 2008 and early 2009. As things stand, there is no reason to think that sales will improve significantly in 2010 and beyond-if anything, I think that national sales figures will continue to decline, for a number of reasons, including all the ones I am citing in this article. People will simply not be able to spend money they do not have and, ironically, just when giving people more credit might have enlivened the economy a bit (by at least temporarily increasing their buying power), it is predicted that credit card companies, thanks partly to new legislation recently passed, will actually offer people less credit power in 2010 and 2011. This will only further hurt our economy in terms of sales and, without those “sales,” companies will not be able to start hiring again, or, what is worse, be able to survive as viable, ongoing business entities.
5. Our government is continuing to spend huge amounts of money we simply do not have. This is only further decreasing the wealth we once had, meaning that we will not have money in store for any major future needs, including the bail out of banks, if the need once again arises-although I must add that, as far as bailing out banks, there is a way to do it that avoids many of the problems that came with the last bailout, something which I refuse to believe that the Bush administration was not aware of when they conceived of the idea. While we Americans may disagree about whether the wars in Iraq and Afghanistan were justified, the fact remains that we do not (nor did we back then when Bush was on his “throne”) have the means to fix other countries (when our own has been falling apart at the seams, literally, for the past 10 years) or spend unlimited amounts of funds fighting ludicrous wars (like the travesty in Iraq); nor do we have the funds to build ridiculous walls, like the one between the US and Mexico that Bush, who apparently never read any history books (if he had, he would have known that the Wall of China was, even back then, a waste of resources-why would such outdated technology work now?), started; and we certainly do not have the billions of dollars that are being called for in order to invent a totally new healthcare system, when all we need to do is to fix the present healthcare system, something that should save us money, not cost more. If the present government continues to spend as irresponsibly as the Bush administration did (which spent in 8 years more money than any other administration before it, despite Republican Party rhetoric that they do not believe in unrestrained government spending), we will certainly be adding fuel to a fire which may culminate in what can best be described as a full-blown “Depression”-but, this time, there will be nothing “Great” about it.
6. Our ballooning deficit is becoming a heavy chain around our neck-a metal monstrosity, metaphorically speaking, so big that it may drag us into an economic cataclysm of huge proportions. This deficit may very well be the needle that will break the camel’s back, so to speak, in the long run. And the problem is not that we have a deficit at all (which has been the case at other times in our history) but that our government seems to be unaware of its importance and uncaring about its potential ramifications. Unless the government takes drastic measures to, if not reduce, then stop, any unnecessary further increases, our national deficit may become the run-away economic “locomotive” that no rhetoric or superficial solution will be able to fix.
7. The money we are now borrowing from other countries also poses a significant threat to our economy. In theory, those countries (mainly, China, at this point, but others, like Japan, may follow) to which we owe money could call in their loans at any time and, if we cannot make the payments arranged, the penalties that will be imposed may also push our economy into a downward spiral out of which it may take years to recover, assuming we can recover at all. Rather than borrowing money, how about just reducing expenses, especially ludicrously unnecessary expenses (about $12 billion a month, by some estimates) like the war in Iraq?-but, “no,” some among us keep saying, “it is our duty to fix Iraq”–which was not “broken,” if I remember correctly, until we invaded it. I posit that this misguided attitude has done more harm to this country economically than al Qaeda, 911 or the threat of terrorism! How about fixing our own country before we presume to have the right (or, more importantly, the resources) to fix other nations?
8. There is still a tendency, even with a supposedly totally new administration, to follow the same failed-policies mentality of the last 10 years-and that is not likely to change any time soon. Clearly, the old economic rules and standards will simply not work in this more-complicated global economy, and, yet, President Obama has surrounded himself with old-guard, Democratic machine pundits-people whose ideas and methods may have been perfect for the 80’s and 90’s but who are mostly ill-equipped to deal with the sophisticated problems we face today. If anything, we need new ideas and fresh thinking, people with backbone, integrity and the creativity to find solutions that may not have been needed at previous times in our history-but, instead, what seems to be coming out of Washington is routine, run-of-the-mill ideology. Why is it unreasonable to think that this kind of ill-prepared, business-as-usual mentality can only get us deeper into economic trouble?
9. Erratic weather patterns, partly caused by global warming, are likely to bring about more natural disasters like Katrina. There is no question that another disaster of that magnitude will eventually seriously test the resilience of our economy. Unfortunately, hurricanes are not the only potential danger. There are tsunamis-just a single one of which could potentially destroy the East Coast of the United States-earthquakes, tornadoes, and man-made disasters. The truth is that we, as a nation, do not have a great deal of resources left in the till to deal with any major disasters. While we can probably deal with one major disaster, what if multiple disasters strike, and what possible limits can we possibly put on man-made disasters? As horrific as 911 proved to be, it is, by far, not the worst possible disaster, as far as potential terrorist attacks go. Going with the assumption that it is a matter of when (not if), for either natural or man-made disasters to strike, it is reasonable to assert that any such major event will most probably contribute to a potential national economic depression, which is yet another reason for our conserving (rather than spending without restraint) our valuable resources.
10. The stark reality is that our physical national infrastructure (i.e., our roads, bridges, public buildings, etc.) is in bad shape and it is expected to get worse in the next 10 to 20 years. Where will we get the funds to reconstruct much of this infrastructure? This challenge alone, some of us can argue, is enough to plunge this country into a major economic disaster. In regards to our national highways, for example, which have been getting busier and busier, despite repairs and upgrades not keeping up, can we compete in a global economy or jumpstart our own economy when we may not even be able to safely and quickly transport goods to local markets? The expense involved in dealing with this problem may contribute to a possible future depression, unless we, as a nation, take some drastic action to change policies which have proven to be mostly ineffective or downright harmful. Since I do not see such changes being made, though, at least not in the foreseeable future, I have to conclude that things will probably get worse before they get better. Contrary to what Suze Orman believes and has predicted, we are by all appearances (including the non-traditional economic indicators I have alluded to in this article) heading for conditions somewhat worse than what we have thus far seen, possibly culminating in a depression.