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October 31, 2008

Economic Games

The economy is in tail spin. That's what I read every day in the newspapers and when I consider all I've read in a week my head starts hurting.
One day the Dow is down and everyone is fretting - people aren't buying enough!
Then a few days later it makes a giant leap and everyone sighs relief and says - it will be alright! We are recovered now.
Then some time later it dives again.

Can I get some context on this?

Earlier I recall reading how in debt we are - so it seems reasonable that the economy would slow down as we all take a deep breath and try to pay for what we already have.

However, apparently this causes everyone to panic - because then we are making more widgets than people want - so people get fired because they aren't needed to make widgets anymore. And then the people who were making widgets can afford even less and so now not only are widgets sales down but also doo-dad sales as well. And thus begins the deflation spiral that I read about in the New York Times recently and that my friends and I have discussed for years.

But how did we get here?
By making more widgets than anyone could possibly need (or at least afford) in the first place (or more houses if we want to talk closer to home). I guess this is called an economic bubble.

So what is the remedy?

I agree that the government, which is The People collectively (whether we like it our not), should do something. I don't know how this bailout is going to work though. It seems that they keep lowering interest to encourage people to take out more loans to build more widgets so that the widget makers and afford to by widgets, doo-dads (and houses). The flaw I see in inherent in this "free-market system" is that we really don't need widgets or as I call it "plastic crap from China" (though it could just as easily be from Indonesia, Malaysia, or even the good ol' USA).

Working on the disposal end of things I can tell you that we all already have more than we need and it is coming out of people's ears, eyes, trucks, houses, and other less pleasant places.

I have heard this giant bailout be referred to as our generations' "New Deal". This is a load of crap. I am woefully ignorant of history, mostly gleaned through the tales of my grandparents but even I know that the New Deal resulted in the government spending our money creating infrastructure that would actually improve our society - not just give us more plastic crap that we'll throw out in six months but still be paying interest on.

My recommendation to my government is to take that 700 billion back from the banks and invest it in roads, rail, wind energy, solar technology, green houses for gardens in the city, advanced education programs for our youth and adults, and of course, infrastructure to allow every household in municipalities to have curbside recycling and composting collection in order to ensure that precious resources aren't wasted just because local officials are short sighted or ignorant.