Are Our Economies Going to Return?

By Markus Taylor

An estimated 30 trillion plus dollars was wiped out in one of the greatest economic crashes since 1929. This in reality created the complete collapse of our banking system, and many industries which depended on the previous fast moving bubble economy.

Given these simple facts, our economies cannot return to the same state before 2008, but they can evolve and become viable again, if we can sort out the banking crisis, and create new industries that can compete in a Global Marketplace.

The days of an unsustainable credit economy may be gone, but household credit could still remain available in a New Economy that should evolve as our old economy changes, and develops into a more sustainable post-crash economy.

There are four vital lessons learnt from the death of our old unsustainable Economy:

1. Too much Credit is bad for an economy, because it is based on an assumption that a natural economy always develops and is not subject to the natural laws of the business cycle. In fact too much easy credit, could be a sign that an economy is in deep trouble, simply because people are encouraged to prolong an economy that is over-saturated with consumer goods, and are enticed into buying only because of easy credit.

2. Globalization did work but only because Industries were producing for consumers who were borrowing on easy credit. Many of the countries that were producing
these products were based in low wage, emerging countries, and were too dependent on supplying the credit economies of Europe and the USA.

3. Sustainable employment was not being created in the USA or Europe, as these producer Countries were developing their own economies as our Corporations outsourced or permanently re-located jobs to these Countries. And Consumers purchased products made from these Countries, rather than
in their own Countries.

4. We failed to diversify our Economies, because we could not compete with the low wage emerging producer countries. And depended on credit on over valued
salaries, that are uncompetitive in the global marketplace.

These are four reasons our old economy cannot return, but it does not mean there is no economic return for our Countries. A new Economy is going to naturally emerge, that could be competitive in the global marketplace, but depends on our economies producing products that can compete in the global marketplace.

We may also need to re-evaluate our financial system because values were based on speculation rather than reality. Speculative values created over-valued housing, not based on the real value of housing but on the amount of credit consumers were allowed.

True home values really could be based on the amount an average family earn, and can afford to pay over a period of time. Therefore a couple earning a net annual income of 30.000 dollars, could in reality afford a house at 200.000 dollars not 400.000 plus. This only creates an unsustainable speculative housing bubble.
Bailouts and Stimulus packages may help save parts of the old unsustainable economy, but they are primarily based on borrowed public money, and the sale of interest bearing government bonds. This money has to be returned probably as taxable income from the very same consumers that are struggling with over-extended credit.

One message we are slowly learning from the current economic crisis, is that it is nice to go shopping, but only if we can afford it!. And we should learn to save part of our income, and in part borrow within our means. Consumers in Europe, and the USA fuelled the previous economy through easy credit, unsustainable credit. Our Governments failed in part to support new competitive industries that could compete in the global marketplace.

Many people did not foresee that emerging Countries not only produce cheaper consumer goods, primarily because of low wages, and access to cheaper resources. But they learnt from us, how to produce these goods, and how to do things better than us.

Few people realized that China has thousands of years of experience in International Trade, and commerce. It has only been 500 years since Europe could emulate this success, and 200 since the USA started emulating this. Considering there has been growing evidence that 'Native" American Indians traded with Chinese Traders, before America was "discovered," by Europeans, this is one lesson we need to realize.

Taking a hard reality check, may help us start creating a new economy that will bring us back our economy. Not bring the Chinese economy to us, as we borrow and speculators earn quick profits on inflated values of property and stocks.

One way forward is the new Green economy, and a silent revolution in manufacturing using Nano Technology. Both could create a new but sustainable economy, that we all could share the benefits instead of speculators leaving us with the bill, as they did with the old economy.

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