Nothing Has Changed

I firmly believe that my evaluation of the American Economy is still correct. Yes the economy is improving, and the stock market is still going gangbusters. But my premise still stands.

The world is a pyramid scheme. Only things that are made and sold to other countries truly lifts the economy. If you import as much as you export then the rest of the money just moves from place to place within the country; there is no growth. If you export more than you import then the economy can grow in a healthy way. If you import more than you export your economy is crashing, it just takes a long time with the largest economy in the world. But our trade imbalance has been negative for decades.

If you have money that just moves around the country, and you have inflation, it costs more for other's to import our products which reduces our exports over time. The only thing that helps is if other countries have an equal amount of inflation.

There are a few things that support my position.

1) Unemployment is way down, to levels most would consider  very good. But many, if not most, of the jobs are much lower paying jobs than before the economic downturn. I believe this is because we have dropped lower into a Service Economy than prior to the downturn. We manufacture less and less each decade.

2) Finally we are exporting oil, and importing less. That has created a world-wide glut in oil which has caused a drop in gas prices at the pump. This is perhaps the best combination of things to happen to our country in a very long time. Consumers benefit, oil companies lose, the economy benefits. This puts more money in consumer's pockets which means they can spend more, which means that they can eat out more, drive more, and all sorts of businesses in America will benefit. Unfortunately there are downsides. If citizens use the extra money to buy "things" and some percentage of those things are manufactured out of the United States it will add to the trade defect. Furthermore income from exported oil, which will help the trade defect, will only benefit a small percentage of people in the USA directly. It's good but it's not as good as it would seem on the surface.

3) The stock market is running at new highs. There have been more days of the stock market being hitting new highs in 2014 than ever before. The stock market generally represents large corporations than small companies. The reason many of those large corporations are more profitable than ever before is because they are manufacturing overseas. It's not the average citizen that is benefiting but rather the corporations. I do not believe this is the plan or some subversive tactic of the large corporations, it is simply the only way they can do business. They can't manufacture in the USA and compete with overseas manufacturers. They either manufacture overseas, or go out of business.

4) The country is shelling out more and more money to support citizens. A lot of people don't like the term "entitlements" applies to Medicare or Social Security. But these same people feel "entitled" to have that money support them exactly because they paid into the system. We all know both Medicare and Social Security are systems doomed to fail unless something is done. Unfortunately the only real fix is to reduce benefits one way or another. The simply isn't enough federal tax money coming in now or anytime in the future to save the system any other way. Now to top those two failing systems we have Obamacare which is another system that simply will not pay for itself. The plan relies once again on the federal and state governments collecting more tax revenue to pay for health care for millions of people who "didn't already have coverage." The projections already suggest this will add another $6T to the federal debt over the next 10 years. Obamacare is a very bad system economically.