U.S. Loan Effort Is Seen as Adding to Housing Woes and that’s not all!

The NY Times reports that the Obama plan to prop up home prices was a mistake. What it has done is allow pundits to claim that because there are fewer mortgage foreclosures that the Obama plan has improved the economy.

Many experts believe that the only change that will improve the economy is for domestic production increase. If we look at the appliances in our kitchens, and electronic equipment in our homes, and the cars we own, most likely we will find that 90% of them were not manufactured in the US, and most of them were manufactured in China.

What does that tell us about the US economic system upon which the world once relied. True that the dollar being the reserve currency has allowed the US to survive on credit for so many years, but those years are behind us and inflation is increasing threefold. It took 60 years for the price of a movie ticket to rise from .25 cents to $7 dollars, that’s 28% inflation, at this rate it will take 1/3 that time for the price of a movie to raise from $7 dollars to $56 dollars. But it will likely be a lot sooner if inflation accelerates, and it is likely to do so if the national debt is liquidated by printing US dollars. If the US defaults that will weaken the dollar so much that foreign imports will inflate and produce the same effect.

Some say that because Americans will have less to spend that prices will fall. They are demand side economists of the Keynesian school of economics. The supply-siders like the Austrian School of Economics would look at the cost of production to determine retail prices. Looking at the future from that perspective we see the cost of energy skyrocketing, tax increases on production facilities, EPA regulations increasing to protect the air, water and global warming, placing additional cost burdens on production and increasing retail prices. We see mandated wage increases, and protective tariffs. Since most of what we purchase comes from China and Japan,  higher tariffs, and a weak dollar will make foreign imports much more expensive for Americans.

Those who are poor and need jobs in production will likely remain unemployed, because I do not see government policies changing and new production facilities being built.  Those who rely upon the rich for their living will find that many of the rich can’t afford those services, especially those services that involve disposable income, such as horses, boats, planes, and other luxury items.

Many of the people who will suffer economic decline were convinced that Mr. Obama would change the way the government does business.  So far it has been business as usual. So much for rhetoric and mass appeal that got Mr. Obama elected to office.