Why the U.S. Needs an Economic Miracle

Siegfried H. Sutterlin copyright (2008) invited lecture at Truman State University



A realistic assessment of the current state of the U.S. economy is somewhat difficult due to several factors:

l. Major bureaucracies devote a surprising amount of their money for pure public relations, self-legitimizing and happy optimism involving sugar coating and white washing if not bragging about our economic conditions,----corporate, political, military, educational, medical, even religious bureaucracies heavily engage in this. Instead of telling us the truth, we have occasional laws to make them tell the truth entitled "Truth-in-Lending" which was passed decades ago and did not prevent the massive fraud in lending associated with the current subprime mortgage mess.

2. Excessive preoccupation with the current streams of macro-economic statistics, the Gross Domestic Product first developed by Simon Kuznets, has conditioned economists, scholars and the politicians to take their clues from GDP and national income statistics and limit their analysis accordingly. Yet, GDP standards measure only 40 percent of what transpires in the economy. And even then they are misleading measurements for they transmogrify utterly negative socio-economic developments into positive statistics. Thus, spousal abuse, drug addiction, law suits, burning down the neighbor's house, earth quakes, floods, hurricanes, all boost the GDP while their damage is not subtracted. Increases in population will also boost the GDP while not making the masses wealthier.

3. Marketing techniques, political rhetoric and associated manipulations condition the masses to believe that they are living in the wealthiest economy, an economy of unlimited opportunities, capitalistic free enterprise wherein individual initiative, merit and efforts will be rewarded. Essentially, the masses are conditioned to believe in the American dream. Unfortunately, too many are dreaming while actually living through a partial nightmare. They are led to be aspirational, to believe in becoming wealthier, if not millionaires, through speculating on Wall Street, through gambling or through personal efforts. Such are the myths and false notions. If one goes against them, one will be censored too often.

So what is the current state of the U.S. economy and, above all, how are the masses faring economically in America? Time permits only isolating some major features that impact on the masses and that are not ordinarily part of conventional economic analysis or are not sufficiently stressed.

l. The U.S. is suffering, in comparison to other economies, from the expanding burden of spatial-organizational relationships. What does this mean? It relates to how far one has to travel to one's job, to do the shopping, recreating and schooling. Poor zoning laws separate commercial from residential areas instead of integrating harmoniously a neighborhood store and neighborhood restaurant within walking distance. We live in a car-based economy, as we all know quite well. Cities, originally built for citizens, have been taken over by palatial corporate office buildings and have pushed citizens into the suburbs. Rather than decreasing, commuting distances are still increasing. This necessitates lots of driving and wasteful non-sustainable consumption of energy so that, according to some studies, 23 percent of discretionary income is spent on transportation. It should not surprise us that we consume up to twice the energy per capita than other nations that actually have in my view a higher quality of life.

If one surveys the suburbs of the Twin Cities, Denver, Seattle, Houston, St. Louis, Kansas City, Dallas, Atlanta, one sees massive real estate developments miles from downtown where real estate developers---who could be called real estate undevelopers---are buying up thousands of acres of land to build lots of upscale houses with garages for three or four vehicles so that we have mushrooming garage architecture but no store or restaurant within walking distance. The home buyers do not consult an architect but serve primarily the interest of the producer and seller, though they may choose among a few choices of the relentlessly similar homes built in factory assembly style. What was sold after World War II as mass-producing suburban homes according to Levitowns and part of the American dream of home ownership has turned into an American commuting nightmare. Cities originally built for citizens are becoming less habitable for citizens. According to Morris Berman's book "Dark Ages America", they were primarily built as temporary economic projects and not for long term human habitation.

2. Relentless malinvestment has been a major economic characteristic, seemingly forever, of our economy. It ranges from massive military expenditures for what has been termed cynically "theatrical micro-military adventures" to sports stadiums that dot the skylines of Seattle, the Twin Cities, Houston, as the cathedrals did for medieval European cities. Malinvestment also shows up in marketing and advertisement costs for pharmaceuticals which add 25 percent to the final cost as well as in college recruitments which has caused some institutions to spend more on recruitment than on total student financial aid.

Many would even include the money spent on sending Neill Armstrong to the moon as a serious malinvestment. Had we spent it on cancer research and maintaining the economic infrastructure, we may have served the masses far better in spite of some notable scientific and technological spin-offs from the moon program. Let NASA have the scientific and technological spin-offs of worthwhile consumer products rather than the reverse. Even the money spent on the current election campaign must be included as an unacceptable malinvestment. It may cost up to 2 billion, money that would be better spent on refurbishing the decayed infrastructure and removing slum houses. Indirect costs of all electioneering, such as focusing on the personal careers of presidential candidates divert media attention from far more important elements. In any case, relentless malinvestments are pulsating throughout the economy and are far too many to be recounted here. They have so deformed the economy over the long term as to produce the world's finest military hardware but it doesn't produce the world's finest homes nor cars nor infrastructure nor even a decent public transportation system. It is a major cause of what could be called slumerica. Beyond that, malinvestment contributes to outsourcing to foreign economies, contributes to loss of high-paying manufacturing jobs and too frequently in having the oldest industrial plants which characterized historically many areas of the manufacturing sector. Malinvestment, we must admit, has been a major cause of failing to solve the monstrous trade deficit in spite of the constantly declining value of the dollar. This complex issue is pregnant with awful implications.

3. Participation in stock ownership and trading on Wall Street has been far more pronounced in the U.S. than in other economies. It is viewed as beneficial for the masses to partake in the so-called democratization of share ownership. Between 1990 and 2000 when the stock market roared, the percentage of people owning shares rose from c. 25 to above 54 percent while in other economies it may have risen from 8 to 12 percent. Ever since Merrill-Lynch, starting after World War II, took Wall Street to Main Street, stock market participation and stock speculation and associated hoopla have swamped the nation.
In fact, though we may not have noticed it, in the last 30 years or so most TV coverage in the form of the Nightly Business Report, Moneyline, Wall Street Week in Review and radio and newspaper coverages of the economy have revamped the focus of economic analysis away from analyzing economic processes and the economy and have instead successfully equated the well-being of Wall Street and its activities with the health of the economy. This is a serious conceptual error. It may even be a monumental sales pitch of Wall Street bosses. It updates the old slogan of the industrial age "what's good for General Motors is good for America" to the post-industrial slogan "what's good for Wall Street and corporate CEOs is good for America" or is the ultimate measure of the health of our economy.

This is simply not true. Stock markets are markets of asymmetric knowledge. They are a form of gambling. The broad masses who partake are always bound to lose to those with inside knowledge, to the CEOs whose backdated stock options have literally stolen many billions from the unsuspecting small investors and from pension funds. Erik Lie, an economist with the University of Iowa, examined 39,000 stock options offered by 7000 corporations between '96 and '05 and discovered that 14 percent involved fraudulent backdating or manipulations. Essentially, America's stock markets have been used far too much as a form of institutionalized theft that generates many billions for the few while not making the masses wealthier. No evidence can be found that massive participation in the stock markets on part of the consumer in the U.S. has increased median family net worth. In fact, the contrary is most likely the case. The stock market may not just be a zero sum game in terms of trading shares but a somewhat negative sum game in spite of the fact that there are some direct and indirect beneficial spin-offs. If we look at the terrific increase in the volumes of shares traded between 1970 to 2008 when daily volume rose from about 15 million or so to several billions, a 200 fold or more increase, then, given the heavy increases in popular participation there should have been a noticeable increase in individual/family net worth. If one looks for it, one cannot find it. Again, the contrary may be the case.

4. Tax policies and crushing real estate taxes. The U.S. tax code, one of the most complex of all advanced economies, is the product of various lobbying efforts which cause it to be highly irrational, inefficient and costly. In contrast, the tax policies and economic policies of some other nations are the product of rational economic policies and programs worked out by the finance ministry bypassing special interests groups or lobbyists and are then submitted for approval to parliament. Our tax code, balancing the special interests groups and lobbyists, tends to be exploitative if not parasitic and highly irrational which does not maximize effective positive economic influences and consequences. It has been known to use the taxpayers money for anti-smoking programs while simultaneously subsidizing the tobacco industry which produces a major cancer-causing drug that kills 400,000 Americans each year. In this context, we must say that our sin taxes are very low compared to other advanced economies.

Another example which burdens terrifically America is the real estate taxes. Our real estates taxes---and I wish everyone were to know this important fact----are up to 25 times---you heard correctly---up to twenty five times higher than real estate taxes in, for example, Germany. This means a 175,000 dollar house may pay 5600 dollars in annual taxes while it would pay only 250 or so in Germany. Beyond this, their real estate taxes are imposed only on the lot and not on the value of the house. This is extremely important since it means that real estate taxes do not rise if one remodels or expands one's home while our real estate taxes in effect penalize maintaining homes. Thus, we have a partial explanation for the slum-like conditions of up to 60 percent of all American homes which stand in sharp contrast to the solid and better maintained homes one can see in most towns and cities in Austria, Switzerland, Germany, etc. In fact, this real estate tax policy may also indirectly or directly contribute to the explosively growing numbers of Americans who are condemned to living in marginal trailer homes. In 1960, according to census figures, out of 180 million Americans, c. 1.4 million were living in trailer homes. By 1990, this figure had risen to above 15 million out of a total population of 240 million. Thus, while the population grew by a third, the number condemned to living in trailer homes rose 10 fold, a truly shocking development that has been totally neglected by economists, the media and the politicians. Roughly projecting this figure into the future means that by about 2045 or so, out of an estimated 465 million Americans, fully 65 percent will be living in trailer homes. It won't happen but so far the trend line hasn't been broken.

A house is the largest ticket item most people buy. Yet, this biggest ticket item, in contrast to brick and durable homes with tiled roofs which one finds in Britain, Germany and the Scandinavian nations, is subject to rapid product deterioration, necessitating constant maintenance such as roof replacement, exterior painting or siding replacement, which boosts the GDP but does not store wealth in the time dimension. Durably built homes which last for generations can be passed on mortgage free to the next generation, thus passing on wealth from one generation to another which reduces debt and enhances the savings rate. It would create old wealth for the masses. We, however, boost the GDP statistics through rapid product depreciation which does not enhance people's wealth but requires mortgages by every generation and adding accumulatively to an already heavily indebted economy.

A house is a low tech item and does not go through rapid change and therefore should be built to last a long time. A product going through rapid technological change has no need to last a long time since it will be replaced by more efficient hi-tech replacements. Unfortunately, the hi-tech revolution of the '90s should have been, but was not, co-joined by a the low tech revolution of building durable houses. Had it been done, Americans would be far better off in the long run.

5. The unadmitted private sector collectivism/socialism. Almost everyone believes the private sector, making up about two-thirds of the U.S. economy, is a model of individual initiative, free enterprise and capitalistic economic processes that must be an example for the rest of the world, at least, according to President Bush.

Yet, this is one of the most misunderstood and most effectively mythologized elements of the U.S. economy. An honest appraisal of America’s economy has to admit that the private sector is in fact heavily collectivistic and socialistic, however much it may surprise most of us. It separates the beneficiary from the cost in many subtle and complex ways. Hundreds of examples could be cited. If an elderly lady buys soap the price of which has risen due to the fact that the soap producer sponsors the TV program the Dukes of Hazzard, a program watched mostly by the young but not by the elderly lady, then we have free socialistic/collectivistic TV programs. Ditto for radio and the broadcasting industry as a whole which separates the beneficiary of the service from the cost and passes on the cost to those not in the markets. Beyond that, the U.S. has a far more extensive insurance industry than most advanced economies---the British weekly, “The Economist” some time ago called Americans insurance mad---and there, too, if mandatory, we practice private sector collectivism/socialism. Even free restrooms are collectivistic/socialistic in contrast to the ones in those socialistic European economies where the beneficiary of the restrooms frequently has to pay just like he/she has to pay for radio and TV far more often than in the U.S.

On top of that, the private sector in the U.S. is heavily characterized by chain fast food outlets, chain stores, chain motels and chain hotels and similar collectivizing and uniformizing businesses. Again, it should come as no surprise that Wal-Mart over the last 20 years or so has become the largest store and the largest corporation in the U.S.. It, too, has collectivizing elements. It is also meaningful that its attempts recently to expand into a major EU economy were followed by a total withdrawal from that economy, in part due to the fact that it wasn’t offering what the consumers desired. Similar attempts at collectivizing in foreign economies such as Disney World and football TV coverage were either a failure or met with only modest success in sharp contrast to our collectivizing ways in the economy's private sector. Family owned restaurants and family owned hotels and stores which compete ingeniously and offer attractive varieties and interior individualized decor in sharp contrast to our uniformized chain fast food outlets and chain restaurants are still more prominent in foreign socialistic economies.

It must be understood that the private sectors of many socialistic foreign economies are in fact in many ways far more truly capitalistic than America’s private sector. Consequently, it is no surprise that studies summarized in the British magazine “The Economist” in the last few years indicate that socio-economic upward mobility on part of the poor is better in most European Union economies than in the U.S. economy and, what is revealing, is the fact that this is not due to their welfare system but due to their superior educational system.

Military spending, which is one of the most important features of the U.S. economy since it spends more than half of total global military spending and is being increased substantially by President Bush's proposed budget for fiscal '09, has historically always been one of the most efficient and effective method of introducing and spreading collectivism and socialism in both the public as well as the private sector. When in March of 1783, senior officers of Washington’s Continental Army hadn’t been paid for months and were worried about their pensions, they engaged in the Newburgh Conspiracy planning to overthrow Congress. Washington defused the danger by promising to fulfill all of their wishes which were indeed granted. When in the early 1880s, for several years in row, the graduating classes of the Naval Academy were worried about their careers and interested in maximizing them, they did not have to take over the government to get the goodies as has been the case too often in Latin America, they simply hired some lawyers to lobby Congress and they got everything they desired, namely a larger navy. Ditto for World War II veterans when, according to one historical account, the head of the American Legion, presumably, handwrote the GI bill and its members drove Congressmen in a driving rainstorm toward the Capitol to vote accordingly.
The issue here is not benefits for veterans which too often are not fulfilled in compliance with contractual obligations but unsound politically-derived war policies that have severely strangled the quality and living standard of Americans by foisting trillions of dollars of direct and indirect military costs onto the masses. Simultaneously, it has caused, according to studies published by EPA scientists and others, over a million cancer deaths due to military radiation and other militarily-derived environmental toxins. Beyond this, just to clean up radioactively contaminated areas such as the Hanford site in Washington State, the Rocky Flats site in Colorado, the Fernald site in Ohio, among many others that are part of the EPA superfund will cost many hundreds of billions of dollars. It may even be impossible to do so and may actually become, lo and behold, a socio-economic millstone around the neck of all American taxpayers.

6. Risk transfer and risk dispersion. About the time he left office, the former head of the Federal Reserve Bank, Alan Greenspan stated in public with enthusiastic approval that a favorable evolution in our economy was the expanding use and refined applications of new methods and ways of risk transfer and risk dispersion. One assumes he did not have in mind the unacceptable risk transfer and risk dispersion which were enacted when the catastrophic Savings and Loan crisis of the 1980s imposed vastly higher insurance premiums on the well-managed and responsibly handled savings and loan institutions to bail out the mismanaged and criminally exploited S and Ls. In so doing, the well-managed and ethically handled institutions were penalized which quite obviously imposed a major collectivizing burden in the private sector.

Nor did Greenspan refer to the public burden of having William Seidman, the head of the Resolution Trust Corporation, tap the public sector socialistic bail-out to the tune of about 150 billion dollars. Again, those taxpayers not in the markets were forced to bail out those committing mischief. Thus, we had in the ’80s an expansion of both private sector and public sector socialism/collectivism as a result of irresponsible actions on part of bank managers being rewarded by both fiscal and monetary policies under the control of the politicians. No such economic catastrophe of having 1000 S and L institutions go bankrupt has occurred in recent memories in other economies. (Parenthetically, we could compare this with the fact that in all of the Canada’s banking history, so I have been told, there hasn’t been a single banking failure, not even during the Great Depression.)
Greenspan was of course referring to the expanding use of derivatives, to the methods of the expanding private equity firms as well as to the actions of the hedge funds. Ironically, he could not have referred to the Federal Reserve system under his leadership having just transferred the risks and engaged in massive risk dispersion to bail out the collapsed stock markets of 2000-2001 by having lowered the interest rate to below the rates of inflation for several years so that the ordinary saver suffered considerable losses when his interest rate in his bank account fell below the rate of inflation. Indeed Wall Street was bailed out of its self-caused mess, that actually involved massive institutionalized theft, by transferring the cost onto the ignorant masses which had been quite conditioned by that time to view the well-being of Wall Street as a sign of a healthy economy. It was a surrealistic congame which impacted negatively onto tens of millions who suffered first from their losses in the stock market and then had to pay for the bailout with their tax money for a bailout which in many ways has not yet occurred and may never occur.

In any case, lower interest rates, a form of risk transfer and risk dispersion, enacted by the Federal Reserve monetary policy massively encouraged the expansion of subprime mortgages since interest rates were so attractively low. On top of this, money was shifting from the stock markets into the housing markets. To make a long story short, the stock market bailout after 2001, essentially a risk transfer and risk dispersion, contributed to the subprime mortgage bubble which, in turn, is now being bailed out by the current so-called stimulus package as well as by the Fed policy of lowering interest rates again and, in so doing, pumping lots of money into the economy. Thus, we have now again risk transfer and risk dispersion from those who caused the subprime mortgage mess onto the masses in a manner not much different than was the case with the stock market bubble of the nineties and the Savings and Loan imbroglio of the eighties. In all instances, the collectivistic/socialistic elements expanded in both the private and public sector. Obviously, those not in the markets, those who were innocent of any wrong-doing, in effect the innocent and naive masses paid the cost and will pay the cost in the form of higher inflation and/or in the form of the denial of lower prices that in a normal economy would result from higher productivity.

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So how else are the consumers, the masses of the U.S. faring economically speaking in 2008? They are living in an economy which has had a long-term declining currency---a genuine negative symptom of what really transpires in an economy---and no one expects the dollar to rise in the long-term. In sharp contrast, almost everyone expects the Chinese currency to rise continuously in the foreseeable future. Even the Euro, which represents mostly resource poor economies while the U.S. is a relatively resource rich economy, has been rising and is not expected to decline secularly. President Bush and too many members of Congress actually have---in my estimation falsely---pursued an intentional policy of devaluing the dollar in order to facilitate export and global competiveness of our products. But it hasn't worked and it won't work if malinvestments continue. If malinvestment had been avoided, improvement in productivity would have made the devaluing of the currency superfluous, at least, to the severe extent to which is has been pursued.

But there are more subtle elements holding sway over the poor masses of the U.S. They are in effect subjected to a form of bureaucratic processing which few would understand. It involves not just being unable to cheer without being led and so we have lots of cheerleaders, if you allow me a humorous example, but beyond this is a far more important element, namely this: the relationship between bureaucracies and the people should always be one of the bureaucracies serving the people. It should not be one of the people disproportionally serving the bureaucracies. Yet, odd as it may sound, this relationship has been reversed in the U.S. to such an extent that the people are serving too much the bureaucracies. To exemplify this pattern we can cite a simple example, namely, "turning out for sports” at all levels of the educational system. By turning out for sports the student transfers the primary benefits of sports from himself to the sports bureaucracies and the coaches. He is subordinated to the sports bureaucracies in a similar fashion in which the consumer is subordinated to the producer. Simultaneously, we reduce sports to the few and manipulate the masses away from worthwhile self-ordering sports activities into spectators and couch potatoes who have become notably obese. Our sports pattern is intensely collectivizing. The beneficiaries of sports marketing to the masses have been President Bush as well as George Steinbrenner, among many, who privatize the profits from sports investments while socializing the losses onto the masses when they acquire taxpayer subsidies for building sports stadiums to maximize their personal profits. David Cay Johnston's newly published book "Free Lunch" will give you lots more information on this and plenty of other examples.

But the reversal of the relationship of bureaucracies not serving the masses but having the masses serve them assumes at times grotesque consequences which I have never observed in foreign economies. Again to cite an example: newspapers have full-page advertisements for banks in which the sole item states that the banks 88 employees have given last year 5000 hours of community service. In other words, banks advertise themselves on the basis, lo and behold, of what their employees do AFTER they get off of work. The employer impinges upon the private lives of people and converts their private lives into public lives in accordance with bureaucratic dictates. Surely, this is a form of bureaucratic enserfment, although in this particular instance it was based partially upon the Federal Community Reinvestment Act of the ’70s which prompts banks to impose such enserfing demands on their employees' private lives.

Modern economies are largely run by bureaucracies and bureaucracies have to institutionalize excellence and efficiencies to maximize serving the people. In the U.S., however, we do not sufficiently institutionalize excellence based upon merit, education and qualification to the degree to which many of our global competitors do. We are almost the only economy which graduates its high school students without a standardized state administered exit examination and solely on the basis of collecting credits and the same is done for graduating from college. We collect credits and are good at credentialing. As a consequence, we have to import intelligence in spite of the fact that we spend 100 percent more on higher education than some foreign economies. This fact could be considered as another form of malinvestment. It certainly exemplifies bureaucracies divorcing themselves from socio-economic realities, a pattern which too many of our bureaucracies have done such as the military, corporate, political, medical, even religious ones if one looks at the fact that we are the most religious economy yet still have the highest violent crime rates. Something is even amiss in this equation.

But beyond this, debt, it must be said, is more American than apple pie. Over the last 60 years, the savings rate has consistently gone down from double digits figures to 8 percent then to 3 percent and, lo and behold, into dissavings for the last 3 years in a row. This pattern is unprecedented and the present dissavings of the last several years has not happened in our economy since 1932 in the depth of the Great Depression.

Paralleling inversely the downsloping rate of personal savings is the upsloping rate of personal bankruptcies. It has been rising tremendously in the last couple of decades maximizing the careers of lots of self-appointed TV and radio commentators, such as Suze Orman and Dave Ramsey, who are giving advice on money and debt management.

The question arises how and why did this happen to America's savings rates and bankruptcy rates which contrast significantly with the double digits savings rates of other advanced economies and an unbelievable 40 percent savings rate of China.

The answer can be found, in part, in the Keynesian economic theory first published in '36 as a proposal to solve the unemployment problem of the Great Depression. John Maynard Keynes viewed savings as a form of avarice and greed. Among other elements he urged government fiscal policies to stimulate aggregate demand. By 1946, Congress embraced and institutionalized Keynesianism in the Full Employment and Balanced Economic Growth Act which in the '70s was re-affirmed by the Humphrey-Hawkins Act. While both Democrats and Republicans believed and practiced aggregate demand management of the economy, it was even more eagerly and very enthusiastically embraced by businesspeople, the producer and seller who started to utilize government aggregate demand management as an efficient and very effective tool to maximize selling his products. In fact, Keynesian aggregate demand stimulation could be viewed as the ultimate Madison Ave. marketing technique insofar as its evolution in the U.S. economy "outkeynesianized" Keynes when deficit demand stimulation was even practiced during an expanding period, a policy Keynes did not advocate at all.


Overapplication of demand stimulation to serve the interest of the producer and seller has assumed such proportion in the U.S. economy that is has caused the reduction of family net worth and entailed asset destruction. Credit card debts of 950 billion, the spiraling home equity loans and, more recently, the expanding use of reverse home mortgages, particularly for the retirees, are plenty of symptoms of this unadmitted economic disease. While we practice asset destruction, some comparable economies are practicing asset accumulation, i.e. "Vermoegensbildung," in German, as an intentional economic policy.

Thus, we have a giant example of the producer and seller viewing the consumer as someone to be subordinated to the interests of the producer. In time, other developments cemented this process. About a generation ago the University of Michigan abetted this subordination of the consumer to the producer by developing the concept and measurement of the so-called "Consumer Confidence Index" which has been reverberating on a monthly basis throughout the media. It tells us how eager the consumer is willing to spend his/her money to satisfy the producer and retailer. Forgotten, unfortunately, is the interest of the consumer who certainly would benefit from what I would advocate, namely, a Saver's Index to show each month, or at least, each quarter, quite clearly how our personal savings rates are faring and then enact appropriate policies, both fiscal and monetary. It would practice asset accumulation that enhances family/individual net worth rather than practicing asset destruction.

While the producer's interests were facilitated and cultivated and the consumer's interests were neglected in the post-World War II period, there was another burdensome long term economic problem arising more and more with dramatic economic consequences. This is the institutionalization of inflation as a long term economic phenomenon.

Keynes himself was an inflationist and Nobel Laureate Paul Samuelson, whose textbook first published in '48, advocated a l to 2 percent monetarily induced annual inflation rate to stimulate the economy, raised this rate in subsequent editions of his best-selling textbook until the inflationary '70s when during the two oil crises inflation pushed into the 12 percent annual range for '74 and again for '79. At that time nearly everyone believed the widespread myth that inflation was caused by oil prices quadrupling in '74 and doubling in '79. But oil prices do not cause inflation, they cause oil and associated prices to rise and make us poorer, to be sure, but if the money supply is kept constant with population growth, inflation cannot materialize over the long term as it has for more than 60 years.

Inflation, we must understand, is a general rise of all prices preceded by an increase in the money supply beyond the rate of increase in the growth of population. In a normal economy, which was the case for many generations before our inflationary era, increases in productivity, if all other things remain unchanged, should result over the long term in a generally declining price pattern---an economic phenomenon which we haven't seen for a long time and which few would expect in the foreseeable future.

Inflation also serves the interests of the producer and seller at the expense of the consumer. It also benefits the debtor at the expense of the saver and traditionally governments are the largest debtors in any economy. In fact, it not only subordinates the consumer, it enserfs him. Thus, it is no surprise that inflation acts as a work coercer, forcing more family members to become breadwinners, more wives to work and more work hours for the husband who used to be the sole breadwinner.

And so, we have another phenomenon which characterizes the U.S. economy disproportionally relative to others. Namely, the constant call for more jobs, more jobs, the economy is generating more jobs, vote for me I will promise you more jobs. And more jobs, for the last 50 years or so, has been interpreted as a sign of the strength of the U.S. economy. All politicians called for more jobs and indeed, the percentage of adults participating in the labor force rose dramatically over the last two generations or so. In the fifties, approximately 54 percent of all adults participated in the labor force. This figure rose almost constantly to 58, then 62 and now it is about 70 percent. I suppose, I might add cynically, once the politicians have exploited this slogan to such an extent that all adults are working full-time and we will reintroduce child labor which the politicians outlawed long ago, then we have to admit that more jobs isn't necessarily a sign of a healthy economy. Economic progress resides in getting wealthier while working less and not in working more while not getting particularly wealthier.

Currently, the U.S. economy has the highest adult labor force participation. It is also surpassing in the last few years the number of hours worked per year per worker of the traditionally hard-working and diligent Japanese workers.

Just recently, Ford Motor corp. announced that it will reduce its hourly wages from 28 to 14 dollars, a shocking wage reduction of 50 percent and we can be assured its workers are working not just 40 hours per week but often overtime, too. In sharp contrast, VW workers in Germany between '94 to '06, for twelve years, had a contractual full-time workweek of only 28.8 hours, a policy which obviously could not be sustained and was somewhat increased just recently. On top of this, our workers are having far fewer vacations, sometimes only 1 week per year in contrast to a legally required minimum of 4 to 6 weeks in foreign economies. The U.S. worker also has far fewer holidays.

Ironically, GM and Ford have severe problems because of mismanaged private sector socialism associated with health costs and retirement benefits. Contractual obligations which they incurred must be maintained but were neglected as a result of the preoccupations with short-term benefits on part of their CEOs and union officials.

In spite of working more and more, statistics of the last three decades show no perceptible or very little increase in family/individual net worth adjusted for inflation. Even during the booming '90s, judged by economists such as Nobel Laureate Joseph Stiglitz to be the best decade in U.S. economic history, in its first five years, family net worth did not rise relative to inflation and during the second five years it rose only marginally so that in 2000 it was actually still below the 1990 level. So much for benefiting the masses during the roaring '90s.

Well, who benefited during that marvelous decade? The top ten percent did, in particular the top 1 percent if one looks closely at income statistic. They produced products that did not benefit that much the masses in spite of lots of the hi-tech revolutions that did increase productivity substantially but was not co-joined by the absolutely necessary low-tech revolution of better houses and an improved spatial-organizational relationship to benefit the masses and remove junk yards, offensive billboards, the large number of slum houses and trailer homes. It was to some extent an echo of the computer revolution of the fifties and early sixties. That hi-tech revolution was also made in the U.S. but it did not primarily benefit the living standard of the masses insofar as it was far too much misapplied and misdirected into the moon program, into electronic sports score boards, into the military and even computer driven stock market trading and computer driven silly advertisement and marketing techniques.

But what happened to the Wall Street financiers, the corporate CEOs, the overpaid athletes, movie stars and entertainers, the top one percent of the income scale? They retreated to gated securitized communities whose numbers increased from 2000 in the 1950 census to about 20,000 in the 2000 census. By retreating to such gated, securitized communities, they are indeed exercising a vote of no-confidence in the overall cultural, civic and economic development of our economy. No equivalent pattern to any degree has emerged in other advanced economies. Co-joined by other patterns, an "oasis economy" has evolved in the U.S.

Meanwhile over the last three decades the annual income of the CEOs of the Fortune 500 rose from about 45 times the annual average worker's income in 1980 to about about 90 times by 1990 and, by the end of the stock market boom in 2000, it reached an astonishing 520 times the annual worker's income. Again, other advanced economies have no such disturbing inequality of income and the relationship between the annual worker's income and the income of the CEOs of their corporations remained relatively stable at about 25 times, exactly the figure which it had been in the U.S. in 1965.

What surfaces here is not an economically determined income but a politically manipulated and politically determined income which has strong unethical elements.
This leads us to a major worrying element in our economy, namely the economic consequences of overpoliticizing a population from early childhood on. It conditions the masses to expect their rewards through politics rather than through economic productivity. Instead of calling for ethical behavior---and ethics is universally in short supply given our corruptionism and the worse corruptionism in Latin America and the hopeless corruptionism in Africa---we constantly urge everyone to become more engaged in politics, especially during an election year. We forget to call for ethical behavior. Again, it is no surprise that the economist Hans-Herman Hoppe of the University of Nevada in Las Vegas raised the issue of democracy and its economic consequences in his complex book "Democracy the God That Failed." It makes the case that economic productivity declines in every society which embraces democracy. Overpoliticization, we must conclude, reduces economic productivity and tends to be corrosive to ethics.

To resolve these issues, the U.S. needs an economic miracle and not just for a few years nor of the type of the roaring nineties but of the type that benefits the masses, removes slumerica, increases the family/individual net worth, provides more leisure time instead of less and extends hope rather than despair.

To do so, we must end war costs as soon as possible and redirect the resources toward domestic improvement. Each year since the wars in Afghanistan and Iraq started, we have spend roughly the annual equivalent of the Gross Domestic Product of Afghanistan and Iraq. Moreover, these wars have resulted in a massive shift of wealth away from the U.S. to foreign nations while, in the meantime, the U.S. has evermore become dependent upon foreign money to finance its debts, to bail out the mortgage mess and aid corporation such as Merrill Lynch, Citigroup and others. The U.S. economy is the world's foremost debtor economy and is paying hundreds of billions each year in interest and dividend payments to foreigners. They have the money and we have the debt.

An economic miracle would also compensate for unsuccessful military policies abroad. It would also prevent the increasing temptation on part of the U.S. to use political, diplomatic if not military power to correct for economic shortcomings.

1. Politically v. economically caused economic problems.

2. Bush's nationalistic military policies v. internationalist and globalizing economic policies.

3. Incorrect info from leaders: Bush's tax reduction and foreign aid and Seigniorage. Bloomberg and immigration. Greenspan and salaries of professionals v. workers.

4. Wealth shifting from family/individuals to bureaucracies.

5. Pessimistic prediction: no retreat until an overwhelming event such as ecological degradation and/or external pressures.

6. An asset destroying economy is inhumane, an asset accumulating economy is humane. Therefore, fiscal and monetary policies should serve the masses and the growth of the net worth of families and individuals should be the base and reference for monetary and fiscal policies.