Economics for Dummies

Yesterday afternoon David and I went to see W. It was marvelous, and much more compassionate toward George than you might imagine.  The man means well, he really does. He's just so clearly unequipped to swim in the deep end of the pool. He doesn't even hide it. The real villains are Americans who don't seem to think it's important for the President to be a man with anything resembling an intellect.

I'm thinking of writing Economics for Dummies, a pinko rant on the inanities of capitalism. Yesterday was Chapter 1, here's Chapter 2: The Chinese Conundrum.

Here's how it seems to work.  The American consumer is the engine of the world economy.  When we "prosper," we buy, buy, buy and keep all those factories humming in China, India, Vietnam, etc, but mostly China.  The Chinese consumer doesn't have a credit card, he saves and saves until he can buy that car or TV or bicycle in cash, which means the Chinese have all this money in their banks.  Since the American government is running up as much debt as the American consumer, they have to borrow all that Chinese money. The Chinese put up with this arrangement because they can't afford for the social unrest that would come with even a few point rise in unemployment, they need to guarantee we have the money to keep buying their goods.  So we give them money, and they give it right back, so we can then give it back.  Capisce?

Now the American consumer, worried about losing his job or down to one income,  is discovering he doesn't really need that extra plasma TV, the kids will survive with 20% less toys, and the cook in the house can manage another year or two with the old blender instead of a new cuisinart. Multiply that decision by several million, and you start to have factory closings in China. (Watch for the first big international crisis Obama has to deal with being how to react to the crackdown on riots of the hungry unemployed in Shenzhen or Guangdou.)

So basically, the Chinese lend us money so that we can buy goods from them.  Goods we want, but do not really need. We have a world in which our very survival depends on stopping deforestation and the rape of the world's resources, and yet we have an economic system completely dependent on the perpetual consumption of more things.  We're told we need to save and invest, but we're given stimulus checks and asked to spend and consume. The only thing we're investing in is our own destruction. 

Thank God December 2012 isn't too far off. Clearly we need a huge do-over.

MCO 2008