Paul Krugman: Don’t Cry for Me, America

Mexico. Brazil. Argentina. Mexico, again. Thailand. Indonesia. Argentina, again. And now, the United States.

The story has played itself out time and time again over the past 30 years. Global investors, disappointed with the returns they’re getting, search for alternatives. They think they’ve found what they’re looking for in some country or other, and money rushes in.

But eventually it becomes clear that the investment opportunity wasn’t all it seemed to be, and the money rushes out again, with nasty consequences for the former financial favorite. That’s the story of multiple financial crises in Latin America and Asia. And it’s also the story of the U.S. combined housing and credit bubble. These days, we’re playing the role usually assigned to third-world economies.

For reasons I’ll explain later, it’s unlikely that America will experience a recession as severe as that in, say, Argentina. But the origins of our problem are pretty much the same. And understanding those origins also helps us understand where U.S. economic policy went wrong.

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http://www.nytimes.com/2008/01/18/opinion/18krugman.html?_r=2&hp&oref=slogin&oref=slogin

It started sliding that way in the seventies with a tred to maldistribution of income and accelerated under Reagan and Bush the Preppy when the number of rich and poor combined outnumbered the middle class. Clinton slowed the trend, but failed to reverse it. Bush the Frat Boy put it in high gear once again.

both parties are in on the destruction of the middle class via globalization

for the last five years.

people haven't been abused or exploited too much, is very welcoming to outsiders.

The U.S.A. has lots of underused manufacturing and when put to good use is a major economic powerhouse. Just find or get us some cheaper power resource and the factory could come back to life. (Not making cars, but other things...) But that means reversing the current impetus for globalization and a rush toward the bottom of the barrel Wal-Mart replace as they break non-fixable hardware and cheap knock-offs. The whole Idea of free trade at first glance sounds good, lift up the world thru economic competition. But now that has sapped out strength in the U.S. industrial base.


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What is happening to my business(farming) is the costs are rising and the demand is for cheaper product. I could try to produce more at the same price to fill the demand, but don't have capital to invest for enlargment. Am slowing growing.(Not in position to get loan till lease renews.) Now is the test, I need to raise price to continue to function and pay bills. So I can feel it and have seen it in what I buy. Now I will have to raise price. I think I am behind the curve and that probably other businesses are in the same boat. And so the inflation is not going to get any better as I see it. Will that deflate the the amount of money as workers on a fix rate of pay get squeezed?

....

We came to understand that in the 30s. I guess we forgot. Well, we'll be given the lesson again.