Thursday, June 11, 2009

forum posting: Depression & The White House

In the first place I don't think what is deemed as another economic depression at the time being is exactly the same as the one just before the second world war. There are similarities in between them but the significant meaning in history will not be the same. Thee past depression would not be as serious as this one.

The fundamental reasons that they are NOT the same:

  • The world population level at 1930 depression is only at about 30% of today's world population level. We have 3 times more people to feed today.
  • The economic scenario in 1930 was much more rural agricultural, and today much more urban metropolis & industrialized. Cities where most people live today are much more vulnerable then countryside. There were only few stock markets in 1930s, people lived in very independent basics & produced their own needs. Today's people are critically interdependent on each other (& resources of each other) globally.
  • In today's globalized scenario, economic crisis can not be contained to particular countries; regions; or continents, unlike the much more isolated scenario of the previous century's depression.
Take oil / fuel prices for example, in 1930 different people in different parts of the world depends on different sources and different types of fuels, and pay different prices to satisfy their own needs. Today we see only one single oil price datum for entire global economy, only few people can escape from this.

In the 1930s the world was still abundant with many kinds of resources with much less people to sharing them. Today's global resources had been seriously depleted & exhausted with 3 times as much people to compete for and more critically depending on these vital resources for survival. The level of desperation and distress is very severe and tense, there are much more crisis than solutions comparing now & then back in 1930s.

People today are much less willing to do hard works & make scarifies as well as face difficulties comparing to our grand simpler parents in 1930s. The people today expects more but really contribute much lesser as well as being more unwilling to suffer and do hard works than the people 2 generations ago. As a result people in today's urban world are indeed heavy burdens to one other, while in the old days of 1930s, people were much more inclined to be resources & assets or potentials to one another.

In 1930s era, fewer people had financial credits, fewer governments had deficits, or issues bonds, most businesses began with their own capitals and resources. Today, most people need to live on financial credits, it is common for governments to issue bonds to raise debts and operate on deficits, businesses widely depend on bank loans and or selling shares or bonds to raise operating capital, a single business failure can easily trigger chain-reaction in many others, which was uncommon in the old days.

The British Empire collapsed after World War II, but even the big number of colonies received mostly positive impacts the rather than negatives. The USSR collapsed in 1991, and together it took down all of the republics within it's federation as well as those within the Warsaw Pack or Eastern Block Nations into a serious negativities. The USA had yet collapsed, but it's negative impact already went globally.

This clearly showed more than just the closely interconnected vulnerabilities of this modern Globalized world.

The Empire Status & Superpower Status of USA will collapse starting from it's economy & finance. This is the rise and fall feature common to all empires similar with the Roman; the Persian; the Tang; the Han; Genghis Khan; the British Empire; the Japs; the Nazi; the Soviet etc.

This is not something for any president in the White House to alter or eliminate. Weather be it Obama or Lincoln or John McCain or Hillery Clinton, it will not make any difference. It is deep rooted, it is in grain, it is natural, it is regular and disciplinarian, and it is confirmed by history.

The British Empire rosed on it's territory colonialism & fell on the lost of it's colonies after depleting in World War II.

The Soviet Empire rosed on it's domino spreading of Communism Ideology, and fell after it failed to annex Afghanistan into Communism.

The US Superpower rosed by it's Economic Dominance & Free Market Influence, it will fall as soon as it's economic rivals gained stronger influence and global market dominance.

Part of the many symptoms of this ending cycle of US hegemony is being seen as the current Depression. It is only half-truth if you only see this economic side of the picture, neglecting the political aspects and developments in the stage of global strategic balance. The effects and phenomenons are all closely inter-linked and interactive between economic; political & military / security domains. The wars started by Bush in Afghanistan & Iraq are significant factors.

Franklin Delano Roosevelt implemented many programs and measures during the Great Depression. But most of that did not had chance to see any result before the USA sank into World War II. Ironically, the Declaration Of War against Japan signed by Roosevelt on the 8th December 1941 was his MOST EFFECTIVE solution to the Great Depression. After WW2 it was followed by an Economic Boom. :-)

It wasn't the intended solution, it was anything that Roosevelt had a choice about, since the Japanese Raided the Pearl Harbor on 7th December 1941, just the day before he had to declare war. It was not seen to have any positive factor to the Great Depression to be a part of the World War, not at all.

However, inevitably the wars brought great changes to the world and put Americans and many other people into extreme conditions that finally produced unexpected result of Economic Boom after the war had ended.

The noticed effects after war:
  • The massive destructions from war demanded reconstruction and restorations, it was huge market vacuum for the economy to fill
  • The massive lost of lives eliminated burdens on resources and changed level of dependency, great abundance of vacancies in human resources to fill jobs in post war restoration
  • Massive redistribution of resources after collapse of Japs+ Nazi + British powers which dominated these vital resources, US & Russians took control of global resources after war
  • People forced by war to get used to scarifies and suffering and hard works instead of indulged in luxury rotten lifestyles, they became efficient productive man power after wars, ex-soldiers and farmer became workers
  • New World Order, new chapter for the world, reshuffled commercial financial industrial and agricultural scenarios after the wars
There are 2 well-known post-war economic booms, one also known as the Long Boom:

Post WW2 Boom(click here)

Many Americans feared that the end of World War II and the subsequent drop in military spending might bring back the hard times of the Great Depression. But instead, pent-up consumer demand fueled exceptionally strong economic growth in the postwar period. The automobile industry successfully converted back to producing cars, and new industries such as aviation and electronics grew by leaps and bounds. A housing boom, stimulated in part by easily affordable mortgages for returning members of the military, added to the expansion. The nation's gross national product rose from about $200,000 million in 1940 to $300,000 million in 1950 and to more than $500,000 million in 1960. At the same time, the jump in postwar births, known as the "baby boom," increased the number of consumers. More and more Americans joined the middle class. (more)

Long Economic Boom:(click here)

Postwar Boom: 1947-1973

The term the long boom is used by some historians to describe the period from approximately 1947 to the oil crisis of 1973 in which nearly all OECD economies experienced strong year-on-year growth. This was in part achieved through a complex number of factors mostly planned at the end of World War II. After the war, the major powers were determined not to repeat the mistakes of the Great Depression. They established the Bretton Woods system, setting up international institutions designed to ensure stability in the world economy. This was achieved through a number of factors, including promoting free trade, instituting the Marshall Plan, and the use of Keynesian economics. An alternative explanation for this period is the theory of the Permanent arms economy which suggests that the large spending on the military helped stabilise the global economy. (more)

Barack Obama promised to steer US out of Iraq War, but war is still on today both in Iraq & Afganishtan and had further spread into Pakistan. Security Crisis in North Korea & Iran as well as other hotspots such as Somalia are still ticking like bombs.

USA under Roosevelt entered a great war in the middle of Great Depression and led to not only an economic boom but the rather replacing the falling British Empire to be the new global predominance superpower, after the wars.

Bush started his War Of Terror & Gulf War II, triggering the US economy into this current depression, which Obama had to inherit from his moronic predecessor in White House. Obama promise to steer out of these wars, but he can NOT prevent the global hegemony from changing hands.

The smaller countries and economies tagged behind US had been receiving very negative impacts and will continue to suffer deeper as well as longer, as this global transition takes place. When the world economy stabilized in the next stage it will be a rather different world. Any idea hoping a quick return to good old days or swift recovery sweeping the enomous in grain dysfunctionalities are naive dreams.

It is an irrevesible bilateral transformation that is taking place, without the enormous mass resting properly in their respective new places, no one could expect any stability. Short term fluctuations and jerks are expected and we should not be misled by those.

No one should expect Barack Obama to have capability nor resources to undo the accumulated demerits from so many other presidents who had past the problems down one after another probrably from Lyndon Johnson till Bush (junior). Ironically instead of hoping economic magics from White House, one should just hope that nothing for the worse would be initiated from the White House.

I observed that Obama's present economic programs and policies are the reverse of Free Market Economy and Capitalism. That was published previously in the following blog post:

Related Blog Post - Economic Crossroad

This is written as a part of my forum discussion, regarding Obama's building of a Temasek GIC like state equity business out of US automobile industry.

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