Re: The Fed's Faustian Bargain for the U.S. Economy | Unpublished
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Ottawa, Ontario
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Gregory Laxton is an IT professional and a speaker for democratic renewal issues. He served as a policy analyst with the Ontario government's Democratic Renewal Secretariat. He holds a BA in International Studies and History from Trent University and an MA in Political Science from York University.

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Re: The Fed's Faustian Bargain for the U.S. Economy

August 16, 2013

The following is a post and reply to an article by James A. Kostohryz published online at SeekingAlpha.com.

@Lawrence J. Kramer

The United States will end up going bankrupt 'quantitatively easing'/'being the market' before the American people will trust the improperly regulated financial markets again. Lack of trust is the fundamental problem, and getting it back once you've squandered it with libertarian experiments in deregulation of the financial and housing markets is next to impossible. It's too late for that.

In any case, we don't need freer and easier money with which to risk and speculate on the stock/housing markets. What we really need in the US, Canada and the UK is our manufacturing base back.

Fundamentally, what America/Canada/the UK needs is to bring back the value-added manufacturing they have all exported to Asia, and to re-introduce tariffs and duties if necessary to protect those industries while they're being re-established.

Having a middle class depends on having 35-40% of your GDP derived from manufacturing: taking $1000 of steel and turning it into a $15,000 automobile. You can't have a middle class in an economy the scale of the US or Canada or the UK where there is only services and agriculture. We cannot all be cab drivers and waiters and accountants. Somebody has to actually MAKE things or prosperity vanishes. There was no middle class in England (the first country to obtain a sizeable middle class) before the industrial revolution, and there won't be one in any country that sacrifices its manufacturing for short-term gain. Manufacturing is the only way to find the money to pay large numbers of people without Ph.Ds. $30-$50/hour, and that's where your middle class came from.

Getting rid of your manufacturing by signing asymmetrical free trade agreements which allowed your wealthiest people to move their factories to dictatorships while guaranteeing tariff-free access to domestic markets, all in order to bust unions, is the undoing of the West. Only Germany was smart enough NOT to do this; they vigilantly protect their manufacturing base because, correctly, they see it as a national security/strategic asset, and currently, they are the only country in the world with a positive balance of trade with China. This is the country to emulate.

Just copy Germany and restore America's manufacturing base as fast you possibly can, while there's still time, or you'll have an outright revolution and chaos on your hands within the next few years, as ever-larger numbers of Americans will have nothing left to lose and everything to gain from violent revolt against dubious, selfish individuals who lobbied and manipulated government policies and sold them down the river for their own personal greed.