The End of the "Service Economy" Experiment

Today the Government pressed hard for a $700 Billion bailout of Wall Street, that’s about $2300 for each man, woman and child in the USA. The Democrats, not to be outdone, pressed for their own bailouts for “Mainstreet”.

Meanwhile, it was reported in the WSJ on Thursday, September 23 that "Thousands of community banks, worried about the mounting volume of bad construction and land loans, are clamoring for a piece of the government's proposed $700 billion bailout plan."

http://online.wsj.com/article/SB122212518500765089.html

I don't think “Mainstreet” wants or needs a bailout. The politicians intend the “Mainstreet” bail out for those wall street wannabes who thought they would make a fast buck buying real estate and flipping it and then got caught with a ratcheting mortgage when the bottom dropped out. Or it’s for those other mini-wall streeters who thought they were entitled to a home at someone else’s expense.

Frankly, I would think that the average American would be insulted to be put into the pile with the likes of these people. So here’s a message to those in Congress: don’t insult me by telling me you are fighting to get me a piece of the bailout pie.

However, this is all quibbling, as I believe what we are seeing here is not the end of Capitalism, per se, but the end of that great political experiment called “the service economy”. That economy, as you will recall, was to be based on financial services, etc. and, for a short time, people did move from manufacturing to that industry. Manufacturing declined from 25 to 13% of gross domestic product and financial services increased from 11 to 21%. While this was going on, the politicians “sympathized” with the people in the rust belt, like Ohio, while at the same time taking $millions in donations from the financial services industry.

Note: For a list of donors for the Obama or McCain campaigns, or your Congressmen and Senators, go to this website: http://www.opensecrets.org/

So when I listen to the “crocodile tears” about the demise of “Main Street” I also check the list of donors. How disingenuous our politicians are!

So where do we go from here? Well, first, don’t vote for McCain or Obama. If you think they are going to be able or willing to correct this problem, you are wrong. McCain is a product of the system that created it, and Obama is the hand picked Democratic candidate with Senator Joe Biden, Jr. as his running mate. Senator Biden is also a product of the system that created this mess.

Neither of the Democrats is a reformer and probably cannot be counted on to address the myriad problems facing the United States as a result of this long term problem. Senator McCain is running as a reformer, but is really a question mark and probably cannot be counted on to address the problems.

If you think I am incorrect in this, then ask yourself this question: Where is our National Energy Policy? If your response to that question is the thought “What energy policy?” then you have realized the truth. These people are clueless.

Kevin Phillips, in his book “Bad Money: Reckless Finance, Failed Politics, and the Global Crisis of American Capitalism” sums up the problem we are facing this way:

"My summation is that American financial capitalism, at a pivotal period in the nation's history, cavalierly ventured a multiple gamble: first, financializing a hitherto more diversified U.S. economy; second, using massive quantities of debt and leverage to do so; third, following up a stock market bubble with an even larger housing and mortgage credit bubble; fourth, roughly quadrupling U.S. credit-market debt between 1987 and 2007, a scale of excess that historically unwinds; and fifth, consummating these events with a mixed fireworks of dishonesty, incompetence and quantitative negligence."

Read that again a few times and let it sink in. In particular, the end of the last sentence. If you think this is about the Bush administration, you are only partially correct. Mr. Phillips has few kind words for the Democrats. I suggest you buy the book and read it. And vote for someone else besides a Democrat or a Republican. If you can spare a few of your precious minutes, write a letter to your congressmen and Senators and give them an ear full.

So here we are, with a failed political experiment, no energy policy, deficits and future deficits so great as to boggle the imagination, and 78 million baby boomers standing there with their hands out expecting a social security check. Can you spell “bankrupt”?