The global economy seems to be on a downturn, and we must all hope we aren't in for a nosedive.
Yesterday, Barack Obama and John McCain gave their views on the present situation. Obama blamed the deregulations of the banking and loan sector carried out by the GOP, and McCain blamed general greed.
A much more pointed analysis comes from Scott Lilly, a left-wing person whose qualifications you can read about
here . According to Lilly, the root cause of the present crisis is that the American economy is primarily consumer-driven and heavily dependent on domestic demand. But during the new millennium, Lilly argues, the middle-income American family has become poorer. The reason for this is that President Bush has been redistributing the flow of money in America, diverting it from the low- and middle-income people and sending it along to the rich.
And since most Americans have become poorer, it follows that most Americans have become less able to buy goods and property. Yet the supply sector needs the American people to buy the goods it produces. The supply-side solution has been to encourage low-income people to take risky loans to be able to keep up their spending.
Here are some of the things that Lilly says:
For eight years we have papered over the fact that American consumers do not have the purchasing power to sustain economic expansion. As a report I authored a little more than a month ago details, the wage and salary increases that have occurred since 2000 have not been sufficient to even maintain the level of income that most families enjoyed at the beginning of this decade. Employment has not kept pace with population growth. And even though worker productivity has increased by nearly 20 percent over this period, weekly wages are barely higher than they were on the day the current president took office.
Under normal circumstances, we would have seen the effects of slow wage and job growth much sooner in the economic cycle. But the Bush administration and their enablers at the Federal Reserve Board found a way to inoculate the economy temporarily from the fact that the paychecks which Americans were taking home were insufficient to buy the goods and services the economy was capable of producing. The prescription was easy credit—car loans, credit cards, and most importantly, mortgages.
Lilly supports his claims in a
report full of facts and graphs that I myself found most impressive.
Ann
