so you thought it was over?

It amazes me how easily people give in to wishful thinking or are swayed by a bit of summer optimism. There are those who seriously believed the recession was over. You could add the White House, the Fed and some associated economists, but of course one does not know whether those guys really believed it (I hope not) or whether they were just doing what they are paid to do, i.e. be super-optimistic and give rosy forecasts.

In any case, even my friend Krugman seems convinced we have averted disaster. And that may well be true, we may have averted a sudden collapse of the financial system with all the havoc that would produce. However that does not mean we are out of the woods. Far from it. For several decades now Americans have lived as if there were no tomorrow. They have outspent themselves and accumulated debt. More than half of the households in the country have zero net worth. All of that in an economy that depends on consumer spending for 3/4's of its value. It is not something you can remedy in a few months, or even a few years.

There is a silver lining to all this. I already noted that greenhouse gas production -as well as habitat destruction- is dropping. That is good. People are also consuming less. That is good too, even though it will cause more hardship in the short run. Hopefully it will cause enough hardship so we make some changes to our economic system. And that is what worries me the most. Change is always hard and changing this economic system will be super, super hard to do. To be honest, I hope it will happen, but I am almost certain it won't.

It may be impossible to change the current economic system unless the US collapses or revolution ensues. That is the lesson we learn from history. No matter how much trouble a country is in, and or how many people rebel, the rich tend to get richer and the poor poorer until the latter are so downtrodden and destitute and so numerous that a revolution is inevitable. We are a long way from that scenario.

The other option, a loss of economic driving force, the disappearance of the engine, resulting in a collapse of the empire, seems far off too. Although the latter is the more likely scenario for the US, it is at least fifty to a hundred years out. Waiting for such an event is not a smart thing to do. We should try to remedy our problems before they run out of control.

So what can we do to change?

The solution is quite simple. We need to learn to live within our means. We need to consume less and we need to focus on our local area when it comes to shopping, production and jobs. We need to stop driving, flying and shipping stuff around so much. We need to remove the non-value creating parts of the economy, the ones that depend on cheap oil and environmental destruction.

Unfortunately that is not what we see happening. Instead people are desperate to keep up their life-style and they revert to shopping at Walmart instead. That is the wrong thing to do. These people are behaving like drug addicts who will settle for a cheaper fix, as long as they get some fix.

What we need to do is do away with chain stores like Walmart that destroy local economies and sell goods below cost. We need to replace them with smaller stores that pay fair wages and sell local goods, not trinkets shipped in from China. That would lead to a revival of local job opportunities and jobs that create real value instead of churning through excesses. We need to disable most of our financial institutions. These guys bring no value whatsoever. Apart from causing regular boom and bust cycles they make everyone poorer on a daily basis by charging fees while creating nothing of value.

We need to let of go of this crazy economic system that just shuttles wealth around instead of creating it.