With continuing news that the US Housing Bubble is slowly collapsing, Fed Chairman Ben Bernanke has come up with a new strategy to minimize the impact....steering the economy into a 'soft landing'...by extending more tax credit to US consumers.
Economists have pointed out that the Housing Bubble is just the surface of a much bigger bubble...commonly called "the US Economy ." At one time, the US was the world's leading manufacturing economy... exporting everything from automobiles to Teflon frying pans. However, in recent decades, other countries in the world, with their low cost of labor, have far surpassed the US in manufacturing and exports. Communist China has become the world's largest manufacturing economy.
At the same time as US exports have receded, the US Balance of Trade has continued to slide, and the US has become the world's largest debtor nation. With plant closings in the US automobile industry continuing, and fierce international competition on the rise, American consumers, and the US government continue to spend money at a record pace.
"The US is the only country in the world that is rich enough to be $8 trillion in debt," George Bush said at a recent press conference. The sale of US Government debt bonds continues to be America's largest export, and the US largely controls the world market for debt. In an era of global competition, while the US economy is losing out in all other areas, economists agree that government debt is our countries greatest resource, because we have been so successful at selling it for a profit.
However, the recession that emerged during the 2000-2001 dot-com bust, was so serious, that the Fed had to concoct a scheme to keep the entire banking system from collapsing. To do this, they began extending easy credit to banks, so that families, that otherwise could not afford to buy a home, would be able to pump money into the economy, by buying the home of their dreams.
What followed was an explosion of home-buying, by people who couldn't otherwise afford a home, and a mania of families buying second homes, the building of new homes, and "flippers" buying homes to sell for a profit.
As American exports continued to decline, an estimated 25% of the economy was based on the sale and construction of homes made possible by this easy credit. The Feds invention of an economy that is based entirely on credit, also includes a portion of the economy that is propped up by the optimism of consumers, who have taken out second and third mortgages on their homes, to pay for everything from vacations to Christmas gifts.
Another sector of the US economy, is based on the continued credit card purchases by Americans, with the average family having $9,000 in credit card debt.
The largest part of the remainder of the economy, continues to be built on massive Federal defict spending....the beauty of this being that, anytime the economy slows down, it can be ramped up by increasing pork-spending spending on projects, thereby boosting consumer spending by pumping more defict dollars into domestic market.
Much of the rest of the economy consists of deficit spending by city, county and state governments.
In order to stimulate our cedit-based economy, a recent government study sought to find out what Americans do best. We no longer build good automobiles, or electronic devices...those industries were long ago taken over by the Asians. The Asians work long hours, produce innovative technology, and save a large percentage of their incomes.
The study found that, although Americans don't save any money, and owe large amounts on credit cards, Americans far surpass anyone else in the world, in watching TV. The average American watches 4 1/2 hours of TV every day.
The Fed's new strategy is to stimulate the economy, by pumping up consumer confidence, and consumer spending, by rewarding American's for what they do best, and extend tax rebates to them in proportion to the number of hours they watch TV each week.
