Hope is not a strategy. ~Michael Bloomberg
One of the hardest hit industries over the past several years of this current economic crisis is defence spending. While nations need to protect themselves from groups who wish them harm, the level of spending enjoyed prior to 2009 is currently unsustainable. As a result, troop strength is being reduced, major defence programs cut or greatly curtailed, and spending on supplies and equipment for current forces slashed. That sector of the economy is certainly in a major slowdown, as are other sectors. A global economic recession has hit us all.
Okay, I understand that we all have to do with less in these tough times, but where is that money actually going? There is actually more money in circulation, not less. So, I am afraid it is not going into programs to stimulate the economy or encourage innovation and job creation. I am afraid it is going into the pockets of bankers.
Why do I say this? Here is a sobering bit of reality.
The current US administration has made available more than $12 trillion in cash infusions, loans and guarantees to the financial industry, what has been termed “bailouts” of a sector critical to economic stability and “too big to fail”. But for state governments that are facing massive budget deficits, it has thus far provided only one quarter of 1 percent of that amount in federal stimulus funds—about $30 billion. The White House is feeding the banks with cash while states across the country lay off workers and slash spending on education, health care and other social programs.
And many of us believed the bailout money used to keep the banks afloat would then allow the banks to renew lending at favorable rates, thus stimulating the economy. Wrong! Didn’t happen that way! In fact, banks have been more restrictive on lending than at nearly any other time in history. They are using the bailouts to pay off their debts and continue their casino betting practices, while the US and UK continue to pile up unsustainable levels of national debt.
This is not just another recession and, if we just sit tight, things will pick up again. I believe there is a fundamental shift occurring in where money is being concentrated and how it is being used. Here’s a statistic that tells me this is not just another recession.
Over the past three recessions in 1981, 1991 and 2001, the car rental company Hertz never experienced its annual sales contract more than 3.5 percent in any given recession. In November and December of 2008, it saw a 20 percent fall. In January of 2009, Hertz announced a reduction in its global workforce by 4000 employees in a bid to decrease costs due to reduced demand. Hertz had already reduced its workforce by 22 percent in the last two years. Today, however, Hertz is doing just fine, having improved efficiency in the car rental and return process through the use of hand-held technology and Internet reservations, thus reducing the need for more jobs and more hiring.
Fundamentally, we are entering a different type of economy where jobs are being replaced by technology at a rapid rate and economic stimulus means bailing out the banks, not creating new jobs or revitalising state and local economies. Bright and eager graduates from Oxford and Cambridge are seduced into jobs in the banking sector rather than business, social or educational opportunities. And all the while, the national debt is mounting. Without a robust economy spinning out jobs, innovation and growth, how will the debt be paid down to a level where the world once again has confidence in the dollar and the pound?
Just another recession? Don’t think so.
Tight Lines . . .
John R Childress