The recent trouble with the subprime mortage lending business showed a problem with the foundations of the US economy. I like it when I find blogs or articles by people able to explain the issues without a lot of jargon.
acerimusdux in a post on Daily Kos explains why 30 years of libertarian influenced laissez-faire fiscal policy has led to a failure to invest in America, and THAT is the most dangerous threat to our way of life.
What [Alan] Greenspan glosses over here, is that for nearly 30 years now, our economic policymakers, of both parties, have operated under the misguided theory that savings would somehow automagically equal investment, by some mysterious operation of the “invisible hand” of the free market. As a result, we now have nearly 30 years of economic data which proves that this just ain’t so. Perhaps Greenspan, having held his influential position throughout parts of all 4 administrations which pursued these policies, and having used his position to aggressively promote these same policies, is incapable of giving a more honest assessment of their failure.
So when you hear or read economists and financial writers today talking about a global “savings glut”, consider that the only difference between a “savings glut” and an “investment deficit” seems to be one of interpretation. And ask, what evidence is there that the private markets have invested at an optimal level?
And likewise for those who say the government only needs to get out of the way for the private sector to invest. I would ask, as we have tried this now for nearly 30 years, where are our modern factories? Where is our modern production equipment? Where is our domestic industry? Why are we falling behind the rest of the developed world even in our transportation, communication, and health care systems?
Failure to invest in America is about as bad as ignoring external threats. Reaganomics was a failure.