Federal Bill Fails to Recognize Roots of Economic Crisis

With the U.S. economy rapidly spiraling downward amidst fears of a recession, U.S. Congress has recently reach a “bipartisan” accord to give 150 billon dollars to 116 prospective consumers, oxymoronically claiming the title of a “growth” package. Normally some witty and convoluted metaphor would pervade the duration of this article, but for the sake of clarity albeit the intellectual arrogance avoided, I will cut directly to the proverbial chase.

This new U.S. fiscal policy fails fundamentally to address the roots of the mortgage crisis and instead stakes a façade of government action for almost the express purpose of the election scene in place of economic sense. To reference a common colloquial phrase, it is “Too little, too late.”

Quite simply, the U.S. consumer is paying the value of under priced risk experienced in the global economy with the rapid economic development of China, South Korea, and India, countries that essentially exploited low-paid masses of workers with the technology of the West to pump out light consumer goods. Not only did this trample underfoot the realistic extrapolation of inflation rates, but led to a vast reservoir of income unmatched by consumers in the West, leading to more subsequent savings than investment, as this drive of innovation reached blood-cult worthy intensity and proportion. The three dollar shirt at Wal-Mart produced in Bangladesh became a staple in the U.S. consumer diet, consequently accelerating the rates of innovation experienced in the global economy in these nations. However, statistical data in global savings shows only a slight increase in net value, which seems to indicates that these savings intention were largely tempered by declining investment intentions in the developed world. A recent Canadian Bank study concluded that this is the primary causal factor in the decline of long-term global interest rates.

Demand within the previous U.S. housing market was fueled by the assumption of rising prices, a complex that facilitates the development of most asset-based price bubbles. If demand had not been met, most homes would have been financed with longer fixed rate mortgages versus the innately popular adjustable low-interest rate ones. This premise essentially created a pre-eminent inflationary dilemma during the past several years when the Federal Reserve preserved low interest rates in the threat of acerbic and potentially devastating depression of home value, subsequently affecting the dollar. Rather than the monetary situation tightening as was expected with a hypothetical increase of long term interest rates, the rates declined and stagnated even with increased intervention from federal entities. Although a potential deflation crisis was avoided, the dollar rate and home values have continued to plunge almost to the point of figurative terminal velocity.

This readily denotes that domestic corporations have effectively lost control of long term interest rates in conjunction with asset prices moving increasingly dissonant from short term values. One particular chilling example is the purchase of foreign currency by Japan and China to stabilize its value to preserve their investments, values that exceed over 500 billion dollars. In a doomsday scenario, when Japan stopped creating an artificial buffer around currency when domestic investment was at viable stake, the dollar value should have crashed. Instead, after economic tremors and gyrations, the U.S. economy remained virtually unchanged, a stunning testament to the depth of these global markets, whose value is closing in on 100 trillion dollars, far outstripping the resources of central banks. Constrained by the potential inflationary impacts of expanding their balance sheets to counteract these forces, central banks are further hindered by lowered international trade barriers. Their ability to augment currency value in conjunction with national governments is almost undisputedly gone on an international scale.

To surmise this situation in several words, national governments have lost major control over their long term economic viability. The new bill is not sufficient enough to spark consumer spending, and fails to recognize the influence of foreign markets. Instead, realistic value in the housing market will have to be ascertained independently for the crisis to subside.

-Jared Andersen (in case the diction didn't give it away)