What Economy?

This morning, I was reading about Fond du Lac, Wisconsin praying to hell Mercury Marine keeps going and stays in Fondy.

"Merc," I grew up hearing the term Merc, a life entity as solid and predictable in Fondy as the Packers, beer, deer hunting in November, and Lake Winnebago.

I read about a national panel's mission to determine what caused the financial meltdown, and then I came to the prescient Paul Craig Roberts in CounterPunch.

Roberts, a Secretary of the Treasury in the Reagan administration and prolific writer, has been spot-on for the last decade, seemingly alone in predicting (several years ago) this economic disaster in which now we find ourselves.

His current piece is not reassuring unless you are vested in the Dow reaching 6,500. Here's an excerpt but read the whole thing. From Roberts:

There is no economy left to recover. The US manufacturing economy was lost to offshoring and free trade ideology. It was replaced by a mythical ‘New Economy.’

The ‘New Economy’ was based on services. Its artificial life was fed by the Federal Reserve’s artificially low interest rates, which produced a real estate bubble, and by ‘free market’ financial deregulation, which unleashed financial gangsters to new heights of debt leverage and fraudulent financial products.

The real economy was traded away for a make-believe economy. When the make-believe economy collapsed, Americans’ wealth in their real estate, pensions, and savings collapsed dramatically while their jobs disappeared.

The debt economy caused Americans to leverage their assets. They refinanced their homes and spent the equity. They maxed out numerous credit cards. They worked as many jobs as they could find. Debt expansion and multiple family incomes kept the economy going.

And now suddenly Americans can’t borrow in order to spend. They are over their heads in debt. Jobs are disappearing. America’s consumer economy, approximately 70% of GDP, is dead. Those Americans who still have jobs are saving against the prospect of job loss. Millions are homeless. Some have moved in with family and friends; others are living in tent cities.

Meanwhile the US government’s budget deficit has jumped from $455 billion in 2008 to $2,000 billion this year, with another $2,000 billion on the books for 2010. And President Obama has intensified America’s expensive war of aggression in Afghanistan and initiated a new war in Pakistan.

There is no way for these deficits to be financed except by printing money or by further collapse in stock markets that would drive people out of equity into bonds. ...