Tomorrow We Dance To Freedom






Credit Decline Exacerbates Deflationary Stage of Income Crisis

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Simplistic solutions to economic problems that attend to immediate symptoms in an attempt to ameliorate a systemic disharmony inherent in a capitalist economic system based upon self-interested greed will only result in abject failure. Pumping more capital into financial institutions so that they may sustain the level of available credit across an income starved global economy will only generate more available credit that businesses and individual citizens will acquire in the form of debt that they'll still be unable to maintain, resulting in another round of defaults. Only a small percentage of businesses and individuals that haven't reached a debt load that is unsustainable will be able to take 'advantage' of this new dump of easy credit. The majority of businesses and individuals are so over leveraged that they wouldn't even consider taking on more debt not unless the term of the loans are extended to infinitum.

Why then did the U.S. government even consider propping up this failed capitalist economic system with all its inherent structural disharmonies? The simple fact is that for anyone to admit that our current contrived, distorted, obtuse 'free' market economic model is flawed in any perceivable way would be to admit that every precept of the gospel of the neoclassical Chicago school of Economic thought is bunk - can't have that, just put wings on the pig.

As I've stated in numerous essays what the economy needs is bona-fide real income ultimately derived from the production of real goods and services not illusory make believe investment instruments or endless loan upon loan extending out across a millennium. We are in the mists of an Income Crisis (so termed in one of my earlier essays) firmly rooted in the deflationary stage where consumption drops precipitously as a result of the continuing drop in real wage income and a decline in available credit.

The decline in available credit is a result of lost investor, business, consumer, and intra-financial confidence in the underpinnings of all the accumulated credit assets that have defaulted as a result of a tipping point being reached in the declining real wage income being unable to support additional debt loads. Let me repeat, absolutely no infusion of credit into financial institutions in the form of buying up distressed credit assets and thus replenishing the 'credit generating machine' of this defunct capitalist system will revive confidence, transform the newly pushed available credit from financial institutions into loans, or jump start the overall real economy from above. Therefore, unrestrained credit coursing across our economy acting as a proxy to income is a completely unsustainable economic formulation; it is poisonous to the entire economy over the long-term.

There is no substitute for real income disbursed in an equitable fashion to all participants engaged within an economy - real income that is generated from real production of tangible goods and services. Nothing is gained by allowing the 5% of upper income thieves within the global population to freely 'suck' every available 'drop' of income from an economy and invest this real income in worthless exotic illusory investment instruments.

Only a reasonable amount of income generated through corporate profits should be invested by the owners of a business (shareholders or sole proprietors) in investment instruments that are fully traceable to bona-fide tangible assets. But ultimately, any real income derived from the hard work of citizens (reflected in productivity gains) would be better utilized in a stream of consumption spending not comprised of a high percentage of infused credit that is transformed into an accumulated debt load that can't be paid under any loan term. This can only be realized under a more equitable economic system based upon fairness not arrogance and power.

Once again I'll state what is obvious; we cannot extricate ourselves from this Income Crisis by feeding the top of the financial pyramid with government funds aimed at purchasing toxic debt assets in order to infuse capital sufficient to allow more unrestrained credit. Every effort must be made to inject government funds down into the real economy by placing wage income (term used loosely to cover all forms of real income) directly into the 'hands' of the 95% of lower to middle income citizens who will spend it freely.

Also important to the sustainability of any economic system is the creation of well-paying jobs that are stable (very few disruptions caused by layoffs or outsourcing) and made available to the largest proportion of our citizens over the long-term. The continuous global labor arbitrage engaged in by multi-national businesses hurts the entire economy by dramatically driving wage income into the 'gutter'. This provides an opening by which excessive amounts of credit are made available due to demand from consumers attempting to maintain their purchasing power (standard of living) and cash-strapped businesses operating at 'the bone' because of fierce global competition and the unrestrained income 'sucking' greed of their executives & board of directors.

This complex system we call our economy must be brought back into balance from its current unsustainable tilt towards complete corporate dominance across all phases of our global societal structure - if it isn't where all doomed.