Economic Unsustainability & Credit Deception

[tw]

Originally Posted by Clodfobble

Okay... but if they were being responsible in the first place, wouldn't that mean realizing they couldn't afford some things (like videogames*) to begin with, not buying them, and thus putting the businesses (me) in the same situation anyway?

Economics punishes everyone in tomorrow's economy for 'sins of today'. Return to Vietnam when we were spending $1million every day and yet not even showing those expenditures in budgets. When cars only got 8 and 12 MPG and Americans were, for the first time in history, not just importing oil, but importing more than 50% of its oil.

So what happened? One could have been so fiscally responsible. But massive dollar piles were accumulating overseas - just like today. Eventually the world demanded things for those dollars. The world then buys America. Own the buildings, land, factories, overseas investements, ships, companies ... Suddenly America no longer owns so much. Those vast incomes once associated with ownership - such as the world's third largest industrial base - no longer exist.

Now we must cut salaries, reduce expenditures, buy less things, lower the American standards of living. Well, we did not do that at first. Therefore economics took even further revenge - including something only found in mismanaged S American countries - stagflation. Value of American savings and investments dropped by a factor of five - even though prices were increasing. One foolish president even instituted wage and price controls. No one was allowed to raise their prices. Of course that only made things even worse later. What could once be bought with a penny in 1970 required a nickel in 1980.

No matter how fiscally responsible one 1970 citizen, still, the drunken party that was Vietnam and massive energy consumption hurt everyone. Interest rates for homes went to 20%. Why would that be a problem to a fiscally responsible citizen? Because that money was being loaned by Japanese - who held vast sums of American dollars and now needed higher interest rates to cover their losses and justify investing in a less stable economy. Dollar dropped to 20% of its earlier value - even to a fiscally responsible citizen who saved. Imagine losing 80% of your investments and saving in only ten years. Welcome to the drunken party that started when presidents lied - and we believed them.

Then American jobs dried up. New home construction disappeared. Companies stopped investing in America in the late 1960s to pay for Vietnam, et al. Therefore by 1979, there was always at least one American car in every winter time parking lot that did not start. Gas lines. Everyone suffered. Europe became too expensive even for some of the rich as dollar value diminished. America, a nation so dependent on imports, had to mortgage more of America to pay for those imports. With a dropping dollar, those mortgage rates to buy things were now record high steep.

American exports were reduced mostly to agriculture, lumber, and other raw materials as other countries - including those who then own parts of the world's third largest industrial base - now profited by doing what Americans once owned.

It is easy to be fiscally irresponsible and not see these adverse affects. Those affects occur years or decade later. And then many forget why times got so tough. They blamed only what they see today. Jimmy Carter took much of that blame. People too brainwashed in business school 'short term' thoughts did not blame what was happening on ten years earlier (late 1960s and early 1970s) while two presidents lied even about an Iraq-like war. Everyone then suffers. Even crime soared. Drugs - any teenager that did not try drugs back then is lying. Don't trust anyone over 30 - because lying even from Nixon to justify a bad economy only got worse.

It is how economics works. Economics takes revenge years later for fiscal irresponsibility – especially when all that borrowed and spent money did not create innovative products four and ten years later.

Be cautious. The late 1960s looked so prosperous even as the economy was spiralling into what would eventually become stagflation. It is how economics work when you don't associate today's economic numbers only with fiscal responsibility five, ten, and twenty years earlier. Make a mistake; assume today's economy is from today's fiscal responsibility? Politicians and bean counters will lie to spend us into recession and stagflation again. But you will not see those failures for many years when the bills come due. Then everyone suffers. That is what economics is about. Everyone using the same currency is punished for fiscal irresponsibility of that currency.