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Tuesday, August 24th 2010

7:42 AM

Republicans and Democrats Are Both Wrong About Economic Fixes

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While I support Democrats, holding my nose, because they are less warlike, both Republicans and Democrats are not getting it right about the economy. I will try to explain the position of each and give my views which I think could help.

First, Larry Summers and Tim Geithner of the Obama administration are wrong in their thinking. They think that you can just supply loans like in an ordinary recession and people will suddenly go out and apply for those loans. They totally ignore the fact that Americans are still in too much debt, have defaulted and soured on loans, or are becoming frugal as the price of goods and services, including housing, goes down. And these must go down as they have been artificially inflated for years. That will give Americans who have jobs, a raise in buying power. Geithner and Summers cannot fix anything with this supply of loans in a deflating economy. Economics is the "science" of supply and demand. You can't fix the economy by supply if you have no demand for the loans.

Second, the Republicans want to cut, cut, cut. However there is a flaw in drastic cutting because we are in a deflationary economy and massive cuts will put more money into the hands of the wealthy, because of tax cuts, while even more middle class jobs will disappear.

Now, I realize there have to be loans in society, in measure, and there have to be some cuts as revenue is declining. However, we have to be smart about cutting and stimulus. We can cut some, and it is important that we do so. I am against the IMF way, which would result in massive austerity, cuts and a VAT tax, a hidden tax, on goods produced. The IMF way, which apparently the Tea Party is backing without even knowing about the IMF, is doomed to failure and we will have a massive depression. IMF like austerity is occurring in Ireland and they are having their bond ratings cut. Hear this Tea Party? Yes, cut some, but gradually. You don't take an addict off credit cold turkey or you could kill the addict.

While I don't know that a massive depression can be avoided, there are a couple of things we need to do and do now. First, we can cut military spending because our military is a gazillion times larger than any other. We need a defensive military that is superior to all others, but without an aggressor force that has moral and ethical compromises as seen by oil wars being fought in recent US history.

So, we can cut the military as they don't produce more jobs. And we can claw back wealth gleaned by the richest Americans as now 10 percent of the population controls 93 percent of the wealth. This is very unhealthy in our economy going forward. So we need to tax the wealthiest of Americans and if they leave the nation we tax their assets. It has to happen. But in return, we take some money and use it for America. We invest in high tech that will guarantee the creation of jobs. We as Americans, take a partnership stake in projects with major corporations with cutting edge technology.

We have to create jobs, and we have to do it with government's help. But we do it with the understanding that the overall budget must decline. All departments must trim their budgets. And we can do all this if the Republicans and Democrats will work together, but I haven't seen the willingness for them to do this.

So I don't know if America is up to the task of real job growth and economic expansion in a way that protects taxpayers and keeps the deficits down, but not massively cut in this vulnerable time. And I still think that we are in for a long winter without some sort of jubilee forgiveness of debt. What do you guys think?

PS. Don't forget, class warfare came from the top. Class warfare came from Wall Street ponzi loans. And CNBC shills will tell you otherwise. They think class warfare is coming from people who are smart enough to walk away from their crap loans, doomed-to-failure loans. But that isn't how it is. Don't be fooled people, Wall Street attacked you with usury on credit cards and with ponzi loans doomed to failure. And don't think that it is socialism that will do us in. Crony, fascist capitalism that is not really a free market will do us in as the wealthy get wealthier and the rest will die on the vine.

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