The American economy has taken a lot of hits recently from the media, from Republicans in the current presidential campaign, and even from recent government reports about the stalled unemployment rate and rising poverty rate. But we are poised to create a New American Blockbuster Economy. Let’s take a look at how this is happening.
Yes, the recovery is still weak, but America is blessed with an abundance of champions who not only can strengthen the economy, they can remake it into a platform for tremendous prosperity, not just for the favored few, but for the middle class and the poor as well.
A Land of Champions creates an American Blockbuster Economy
Our first champion is the land itself, which abounds in natural resources that can fuel the economy, from the wind and the sun that dominate the Plains States and the Southwest which can be harvested for energy that can transform, not only energy supply and distribution in this country, but the unemployment rate and profits for the private sector, to geothermal energy and our extensive coastlines which can support wave energy development. America is the third-largest oil producer in the world and we are gearing up to significantly expand our exports of natural gas. That’s bad news for the planet global warming, but good news for now for the economy.
Among our many other natural resources, the nation has enough fertile land and fresh water, despite the national drought, to grow enough food to feed every American and a good part of the world, which also generates jobs.
Second, we have each other. America’s diverse people and cultures are a vast resource of knowledge, expertise, innovation, and enterprise that drove the industrialization of the country in the nineteenth century, launched the digital (computer) revolution in the twentieth century, and sparked the information and telecommunications revolution of the late twentieth and early twenty-first centuries.
American innovation and expertise are also coveted—and hired—abroad, bringing cash infusions to U.S. firms. Science, engineering, architectural, financial, and consulting services are just some of the American expertise in high demand around the world. Asia, particularly China, as well as Latin America are strong and growing importers of American expertise and goods.
Our third champion is the strength of the American economy itself. From the Great Depression beginning in 1929, which lasted more than a decade, to the Great Recession beginning in 2008 and still dishing out pain, and all of the other recessions, stock market crashes, and downturns in between, the American economy not only survived, it came back each time bigger and stronger than ever before.
For its Great Recession, Europe chose the path of austerity and is now mired in more than four years of economic crisis that is quickly turning into financial disaster that could impact the rest of the world. America chose stimulus, which has helped revive many different sectors, like the automobile industry, and those sectors are helping to revive the American economy. Employment in the once moribund manufacturing sector has been steadily rising over the last two years. Only when the country heeded Republican demands for austerity did our economic recovery weaken.
Fortunately, long-term bond prices are falling and their interest rates are rising, which should help speed up the U.S. recovery by luring foreign investors. We’re also seeing growing corporate profits and consumer incomes, and more consumer spending. Home prices are rising and the volume of home sales is going up, too.
But wait, it gets better.
Historically, the U.S. dollar and bond markets have operated on a 10-year cycle.
The first two years of a new cycle is a transition period, with up and down movement in both the dollar and bonds before things settle down.
Overall, in the first decade of this cycle, the dollar moves up (strengthens) and the bond market moves down (weakens), which drives interest rates up. When the dollar goes up, the economy expands, and that lures foreign investment in the U.S. dollar and our other assets. This dollar up/bonds down cycle means economic prosperity for the nation.
Then, in the following decade, the cycle reverses. The dollar goes down and the bond market moves up. Interest rates go down. With a weak dollar, Americans invest in foreign currencies. This dollar down/bonds up cycle means that the U.S. economy goes into a downturn.
The 1990s, for example, were a decade when the dollar went up and bonds were down. It was a period of often wild economic prosperity.
The first decade of the twenty-first century reversed the cycle: the dollar went down, bonds moved up, and the country went into an economic downturn, worsened significantly by the banking/real estate crisis of 2007-2008.
Guess what? We’ve entered a new decade and the cycle has reversed again. We’re in the third quarter of the second year of the transition period in this new decade. The dollar is rising, and it’s going to go a lot higher, bonds have peaked and are falling, the long-term interest rate is climbing, the real estate market has bottomed out and is beginning to climb again. We need to prepare for a decade of economic growth and the opportunities it will bring. Savvy investors, for example, can generate massive wealth over the next ten years.
Rebuilding America’s Economy
Clearly, we have the foundation for a blockbuster economy. Now, we must use that foundation to transform the American economy and make it a strong and reliable engine, not just for ten years, but for the rest of the twenty-first century and beyond.
Why do we need to change?
The Great Recession finally taught us that a consumer-based economy is doomed to implode. Hanging a national economy on consumer spending and home sales is tantamount to building a skyscraper on a cardboard foundation—it must and will collapse.
The Great Recession has also taught us that when a government cuts spending severely, it cuts jobs. Rising government worker unemployment feeds a recession, worsening the economic situation.
What do we need to change?
First and foremost, we must become a manufacturing powerhouse once again, whether we’re making phones or cars, wind energy turbines or toys. The economy must build on something solid, something tangible.
Second, the countries to which we’re exporting our services today will acquire the knowledge and skills of those services tomorrow. They won’t need us. So, we have to transform our service companies, be it innovating new skills and services for export or creating new business models.
Third, we must end our national obsession with big business and big banks. Any financial institution that is too big to fail holds the country hostage. It’s time to downsize our financial system.
Similarly, one of the most vital lessons of the last century is that it is small business (less than 500 employees) that drives and strengthens the economy. That’s where our subsidies and research and development dollars need to be directed, not to big business. In 2010, for example, 293,000 companies exported their goods and services. Of those companies, 34 percent were small businesses. We need more programs that support small businesses moving into the global economy.
Fourth, we need to get over the childish belief that government size dictates government goodness or badness. Government may be good or bad, but it is always an employer. Local, state, and Federal agencies have local, state, and Federal workers—from teachers to engineers and office staff—and they are a vital means of strengthening and driving the economy. One of the reasons the unemployment rate has stagnated in the U.S. is the wrong-headed layoffs of more than half a million government employees across the nation. With no jobs, they can no longer afford to buy the goods and services American companies produce. We need to put government employees back to work and keep them working.
Of course, fixing what’s broken isn’t enough. In Part 2 of “The New American Blockbuster Economy,” I’ll explain how to unleash our blockbuster economy.
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