The Economic Reckoning

It won’t work....it won’t work...it will cause a disaster.

I didn’t do Facebook back in 2005-06 when Bush, flush with actually  winning the Presidency, he lost the election in 2000 but the electoral racist college gave the Presidency to him, along with a right wing Supreme Court;   I wrote the same words in letters to the editor.

I only took a couple economics classes at Stanford and CSU Sacramento, but studied political economy in depth otherwise.  And mega economics (nation state level economic decisions) is rife with examples of the folly of what our good ole Republican Party just did.

First of all, an economic stimulus law in a growth spurt economy is nuts.  It will lead to inflation quickly.  Protectionist laws on top of that is the same recipe for disaster that we endured in 1929.  

The conventional wisdom of the 1920s and before, was that government should not interfere with the economy, with the notable exception of President Theodore Roosevelt’s efforts to break up monopolies (a Republican by the way).

Otherwise Republicans AND Democrats had a hands off policy so income taxes, which were not started until 1916, were not viewed as consequential to the national economy.  

Tariffs were THE major tax source of the government prior to and including the 1920s.

And nobody understood the corrosive effects these protectionist taxes had not only on the global economy (they did not believe such a thing existed) but on the national economy (which nobody understood nor wrote about). It truly was a very different time.

So tariffs were high, since the income tax was so low, it hardly mattered.  Remember too the American Defense industry was virtually non-existent in the 1920s.  

 The world was repulsed by the losses of WWI, so all countries virtually dismantled their militaries.  This meant government spending was practically non-existent.

The air mail wing of the U.S. Postal Office was one of the major spenders of the federal tax dollar...that was it!  

There was no social security, no Medicare, no Air Force, no dam system or TVA.

None of it.  And the accepted notion was high tariffs, since the income tax was seen as a small contributor to government spending, was the main source of the paltry federal government revenue.  Many states spent more than the federal government.    

But, and this a a big exception, there was debt that has accumulated from WWI that had to be paid off.  But America was practically a no federal revenue country, so the debt hung around the neck of the country from 1919, when WWI ended, to 1929.  It was serviced by borrowing from federal banks (there were such things) and by tariffs that began a to irritate and damage recovering economies in Europe and importantly Japan.  Neither source of revenue were even close to paying off what wasn’t even called anything...the concept of a national debt was non-existent.  The federal government actually had balanced the budget every year with the notable exception of WWI.  

That caused tariffs to be radically raised to pay off this debt that many didn’t even understand.  But balancing the debt was something they knew, so they jacked up tariffs to prohibitive levels.  

Because of these tariffs, Japan to feed its economy turned away from the United States and began to attack China.  The real reason for this was to gain access to oil reserves in Northern China to fuel Japan’s growth.  Japan virtually stopped trading with the United States, as did many other nations.  The wheat agricultural industry, that had boomed during WWI because wheat fields in Russia were cut off by the war, was killed by these high tariffs, as countries raised up their taxes on imported wheat to offset the high tariffs the United States was charging.  

This started a precursor of the Great Depression in the farming industry (a big part in those days of America’s economy) and a wheat depression that began in the early 20s.

This warning light in the economy was totally ignored.  Everyone was too busy making fortunes in a Wall Street totally unregulated casino like gambling system, that made millionaires out of middle class fools, who bet on the cum all the time.

And the United States hardly noticed, as it reveled in post war recovery, with absolutely no ability to regulate or even watch the national economy.  It simply was not done.

And then, 1929 happened.  Suddenly the huge economic bubble that had been funded by gambling and wholesale borrowing on collateral that didn’t exist burst.  The high tariffs that had virtually totally funded the government had damaged the recovering economies of Europe and Asia and led to unrest and anger; especially in Germany.  And the debt of WWI still was not paid off. It was an anchor around the neck of the country’s real economic growth.  

So two things happened at once:  1.  Global economic depression 2. The rise of Fascism in Germany, Spain, Japan and Italy.  

And the United States had ten years earlier, in its “Make America Great Again” (they called it America First) retreated into isolationism by not joining the League of Nations and crippled other countries with its high tariffs. 

This was economic isolationism that was a major cause of WWII.  

And the bubble burst.  The deficit spending both private and public that had been driving the false affluence of the 1920s stopped on a dime; plunging the United States and the world into a Great Depression that lasted over 10 years.

Only the spending and mobilization of the most destructive war in human history changed the economic disaster of the 20s.

And we are doing it again...High tariffs and cuts in government spending that has always led to Depression (not Recession) in not only the United States but in the world.

So we are now embarked on the same self destructive path we entered in 1929.

Get your coffee cans out, put your money into it, cause its coming!  

And add to that the inevitable run out of gas and oil, caused by simply using it all up too fast, and you have the perfect storm of an economic/politically and social storm called fascism.  We are living on borrowed time.

Once again that human disaster stalks us all.  The reckoning.....