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teaser47401

Interest Rates are a Red Herring

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Changes in interest rates will do nothing for our economy. The causes of our economic woes are systemic. Tinkering with the interest rate dial by the Federal Reserve has not changed the decline in the American standard of living over the past five decades.

Nor can we look to the invisible hand of God, or, Keynesian economics, to change the trend of decline in the American economy. We cannot simply wait for the next business cycle to crest. Business cycles are just that, times of relative good alternating with time relative bad. But, just as the glaciers advanced and retreated over centuries, at the beginning of the Ice Age there was an overall trend. And just as there were scientific causes for the climate change that caused the glaciers to eventually reach the Mason Dixon line, there are real causes for Americaís fifty year decline.

It is not that hard to understand. It is much simpler than climate change. The causes for the current downward trend in Americanís standard of living are plain to see. It is the wholesale export of our manufacturing base and the accompanying export of good jobs for average American taxpayers that are causing the decline by reducing government tax revenues while simultaneously increasing the Americanís need for government assistance. These factors push the national debt ever higher pulling wealth out of the hands of those still working for it and shipping it, in the form of interest payments, to our foreign competitors.

Postindustrial America is an oxymoron. Sales jobs alone cannot create the economic wealth needed to pay down the national debt and keep the American dream afloat. We need manufacturing jobs. Donít get me wrong, there would be no manufacturing jobs without salesmen to sell the product, but selling someone elseís work at margin does not create nearly the wealth that selling oneís own goods does. Competition between sellers creates too much downward pressure on the selling price of an imported product. If the salesman tries to earn a better living by increasing the margin, the customer will buy the import from someone else. For our economic system to create the most wealth, Americans need to sell their own products.

To repair the American economy, we must make it profitable to produce products in America again and that may only be done by changing the laws that prevent the profitability of manufacturing in America. We must exert our political will to make real change. We cannot wait for God or John Maynard Keynes to adjust the American economic engine for our benefit or we will surly share the fate of the mastodon. We were long ago kicked out of the Garden of Eden and we cannot look to an invisible hand for our salvation. It is our responsibility to see to it that American law creates an environment which fosters industry. We must rationally look to the causes for Americaís fifty year decline in its citizenís standard of living and make changes to remove to cause of that decline. We must either repeal the laws for social good we have been imposing on our economy since the industrial revolution, or, we must renegotiate our trade agreements to lessen the competitive advantage of imported products produced without regard to those laws.

Updated 07-04-12 at 03:01 PM by teaser47401

Categories
Economics , Free Trade

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