Tuesday, September 14, 2010

The current fiscal crisi9s

I don’t understand how the U.S. will ever get out of this fiscal crisis and back to normal levels of business responding to supply and demand.

Businesses will have to re-employ people to provide the goods or services their businesses produce. But they can’t re-employ people until someone starts buying their goods or services at previous rates. And no one will buy their goods and services until there are jobs.

But there will be no jobs until businesses need more employees to produce those goods and services.

Consumers will start buying again once they have jobs and feel there is a stability in the jobs market.

So, we go round and round – getting a job creates the ability to purchase items. Purchase of goods allows employers to hire people and create jobs. This in turn creates consumers for businesses.

Employers can create jobs after people start buying again but people can’t buy until after they have a job.

No matter how I say it, this is a self canceling process. Something outside the process has to break the cycle.

After the Great Depression, it took WWII to break this cycle. I wouldn’t want to wish anything like that on us to break this cycle. But what is there??

I have no idea.

My nearest thoughts only starts after the cycle is broken. I think we’ll go back to becoming a more thrifty society. People will save more resulting in lower levels of spending.

This, in turn, will result in only moderate business growth, leading to tighter jobs markets and probably lower pay levels.

The long term future as I see it is one of a more moderate quality of life for the middle class and a reduction from tolerable to a desperate quality of life for those in the bottom layers of society.

This confusion I’m feeling may be what the country is feeling. We all know something needs to be done but no one knows what that is.

Think about that.

1 comment:

  1. Hi Jack:

    " After the Great Depression, it took WWII to break this cycle. ..." I believe that there was also an income tax cut in that time frame, proposed for those who worked on lend/lease manufacturing, then extended to all.

    Ed Karns
    A Petaluma Businessman of 30 years.