Views on the United States in this Economic Crisis - Assignment Example

 Views on the United States in this Economic Crisis 1) To which direction mega financial institutions and regulations in the world would go from now? Policies on how the financial world is run must be addressed and restructured. Regulations must be put into place that insure a lack of corruption and insure that bad debts are not followed by bad policy. As Morris stated, the regulations exist, it is a matter of a better system of oversight. Without intelligent, driven economists advising dedicated politicians who see the big picture over the immediate pay-off, the world will circle back to the place of current economic despair. The current troubles are based on a system that did not watch itself, and convinced the government that it wasn’t necessary to be watched. An eye toward conservatism and toward basic values as opposed to quick pay-off must be reinstated within these institutions to create a more stable financial world. The concept that the market is a place of respectable gambling must be abandoned and a sense of responsibility must find its way back into the acceptable policies. One example of this type of bad policy is the bailouts of recent history to both the financial institutions and to the car companies. This is not to say that help in those industries was not needed because of the potential catastrophic impact that the collapses would, and still might, make on individuals who are working to make a basic living. However, writing a check to these companies without structures developed to give a greater percentage of success to these 1 Client’s Last Name 2 companies in the future has been a mistake. One has to wonder why the government didn’t use the funds to simply buy the vehicles that would provide work for the workers and then support the needs of the companies. If the bailouts would have gone to the dealers to purchase cars, who would then place orders to the manufacturer, who would then use their workers to make the cars - perhaps it seems naïve, but what incentive do the companies have to pay workers for cars that are not being sold? The answer is that the money will not benefit the people, but the company only. Unless the orders are made, the cars will not be needed. If there are no cars needed, there is no work. When unemployment is rampant there is no money available to buy goods and services which promotes the collapse of the economy. 2) What kind of firms, regardless the size and the country will be winners in a coming decade? Large corporations must start turning away from the investment aspect of their company and start focusing on the production and sale of goods and services. As well, people must start to understand that dependence on a market for financial growth, without the concept of innovation and the creation of a healthy supply of demand for product, nothing can be sustained. This is not a denial in the need for a strong stock market, but the need for a refocus of attention on the creation of product instead of the creation of interest on investment. The interest will follow when the sales are available. As well, corporations must be seeking innovation and invention as an advancement in technologies. In creating new avenues of product development and in creating new technologies that can be exploited within industry, the economy will begin to resurface and balance again between investment, creation, and sales. In order to successfully move past the current economic crisis, the United States will need to refocus its energy toward a more successful proliferation of creating new technologies. It 2 Client’s Last Name 3 will be essential for the government to oversee the way in which debt is incurred, including addressing the current healthcare crisis which has a great impact on debt. It will be vital to the health of the economy for government bailouts to be used prudently and with stringent regulations that are geared toward successful restructuring. Oversight and a more conservative banking attitude will be necessary for a successful future of the national economy. One idea is that the concept that a company is an entity and that the people who work at the company are a disposable resource must be adjusted. The purpose of a company is to make money. However, a company cannot be sustained through the use of government bailouts that are not attached to a plan for restructuring with an eye to long-term survival. In this case, who is actually benefiting from the bailout? Paying off debts and avoiding bankruptcy is a definite problem for a corporation, but it doesn’t truly help to hand them money without strict expectations about the future of that company and how it relates to those who depend on the industry for employment. What Henry Ford understood was that by making affordable cars and by paying his workers enough to afford those cars, he created a market for his product. This symbiotic relationship between earning money and buying goods must be regained within the economy. In the current propaganda, the concept of cutting back has been promoted endlessly. One hears those with wealth talking about how they spent very little for Christmas and they are trying to be conservative. Why? This is the time when they should be spending more money, buoying the economy and supporting those who work for a living so that they can sustain the foundation of the economic stability. It is definitely not wise to go into debt at this time for any reason. However, if the money is available to buy a new roof for the house, then support that roofer by purchasing that new roof. If the house needs painting, paint the house. The first place where the 3 Client’s Last Name 4 economy needs to be supported is by paying workers to work. As always, the state of the agriculture industry will continue to be an important factor in the economy of the world. With the high interest in biofuels, increased agricultural production may be a result, creating greater power in the agricultural financial influence in the markets. Ethanol, the biofuel that is commonly used at this stage, has a great many detractors to its continued use. Two of the problems in producing ethanol is the affect that it has on the food supply and on the grain supply. With ethanol being a corn based product, the corn that is produced for this production is no longer available as feed for animals, thus raising the price of the grain that is available, etc., etc. The affect that ethanol has on its impact in commodities does not justify its use at this time. It has been argued that “devoting 100% of US corn to ethanol, while correcting for fossil fuel inputs, would displace 3.5% of gasoline consumption - only slightly more than the displacement that would follow from properly inflated tires” (Reijnders, 2009). However, despite these negative results, the pursuit of biofuels as an answer to energy issues continues to be strongly supported. The pursuit of ideas that can be proven to have no long term value must be discarded in order to pursue ideas with that can have impact. This enormity of waste is an example of how the world must change in the way it approaches issues. Biofuels can be developed from a great number of biological resources, but the difficulty becomes in creating a sustainable product that does not significantly and negatively impact another commodity, therefore decreasing its value as an alternative. One of the difficulties in abandoning certain ideas is that once governmental support is provided, it is near impossible to easily step away from the program. Waste created by support of programs that are not working helps to perpetuate an unhealthy economy. Charles Morris addresses the issue of waste of this kind in his Recovering Balance 4 Client’s Last Name 5 chapter. He says, “any privileged industry - and public enterprises are prone to become privileged - will eventually fatten to the point where it becomes a drag on, or even a threat to, the health of the economy”(Morris, 2008). Efforts to eliminate this kind of drag on the economy will be essential in setting the stage for a cleaner running system. Pursuing advancements that have no relevant value, or funding institutions that are failing without any real sign that there will be improvement is a continuation of bad policy. One of the topics addressed by Charles Morris, in his book, The Trillion Dollar Meltdown: Easy Money, High Rollers, and the Great Credit Crash. is that of the health care industry. This industry is a place in which, with large revolutions in the way it is conducted, could have a great impact on the United States financial existence within the world. Morris suggests, but does not fully discuss the view that it is time that government takes a role in health care. The initial reason that this is financially a good idea for the average American is that healthcare costs, especially associated with a health care crisis within a family, causes long term impact, on the financial state of the family. This, of course, causes more debt to be incurred as the family works to overcome the debt and continue forward. As well, with many people unable to afford the healthcare that would prevent catastrophic illness, and, with many people unable to fulfill their obligations when debt to medical professionals is incurred, the way in which medical care is financed causes an imbalance of costs. This has a great impact on financial stability. As well, the way in which the costs are inflated as associated to the use of privatized insurance, creates costs that are impossible to navigate without that insurance - which is becoming more States, with reasonably costs that support medical discovery and advancement, a product of superior medical discovery could be supported for private industry in the sales created to the government and to the world. With the availability of education and resources that is within the 5 Client’s Last Name 6 difficult to obtain. This is a failure in good practices, both in health and in finance. On the other hand, to create a system of medical relief for the citizens of the United United States, the world could benefit from the discoveries made, which in turn could provide financial benefit. If the spending on superior facilities and on purposeful discovery was done, the financial benefits in supplying the rest of the world could be tremendous. The other area in which the Unites States can focus its future can be in once again developing innovative technologies that can influence the rest of the world, creating a financial base that is driven by need. One of these technologies would be, of course, in the field of energy. If concerned effort was made in the creation and promotion of energies that have low negative impact on the world, then these discoveries, just as the discover of the car created the need for oil, and the discovery of the computer chip created the increased need for silicon, would change the needs of the world, inviting new industry and creating new markets. In holding back on the creation of these alternative fuel sources, the United States has made itself a slave to the oil industry. 3) What kind of the role international organization should play now and do we need to restructure them? If so, how? The utilization of the rest of the world in repairing the financial health of the United States is going to be crucial. As an example, George Soros suggests that China will lose its communist held government by the capitalist crisis, but most other affects on the world will not have a desired result. Of course, the loss of the government in China is not a desired result economically, but one that would have some benefit in the area of human rights. However, according to Soros, China will probably weather the storm currently, with their bubble bursting down the road. It will be within the best interests of the world to work with the United States to 6 Client’s Last Name 7 correct the overall health of the financial world. “Conventional wisdom”, Soros says, “says that when the United States sneezes, the rest of the world catches cold”. However, he goes on to say that “This used to be true, but no longer”(Soros, 2008). That this isn’t completely true anymore, however, does not mean it isn’t in the best interests of other countries to support the restoration of the world financial economy, which in large part means supporting the economic stability of the United States. Sovereign wealth funds will see an increase in viability as investors as the United States economy continues into a recession. These funds are not considered the ideal in their use, but as the recession continues, those funds might be found a more appealing avenue of revenue. According to Soros, “Their current size is estimated at about $2.5 trillion dollars (this was in 2007), and they are growing rapidly”(Soros, 2008). The west resisted the use of Japanese investment capitol until after the crash of 1987 when those funds were central in the repair of the economy. An example of the initial resistance that has been seen in using these funds is that when China National Offshore Oil Company attempted to acquire Unocal, and when Dubai attempted to acquire DP World, they encountered political opposition. This is unlikely to be the case in the developing crisis. (Soros, 2008). Unfortunately, using these funds does not benefit the autonomy of the United States. Large financial firms will more than likely work towards having the availability of these investors to buoy their capital, but this will be a detriment to the nation in the way in which it is owned. Another unfortunate truth is that the desperation of the people will, to a great extent, win out over ethical considerations and money from foreign entities will further infiltrate the banking system. However, a restructuring of the entire system would be a great benefit to the United 7 Client’s Last Name 8 States. Looking at the way in which the economy is founded and working towards revolutionizing that base so that it is less dependant on speculation and debt, and more dependent on actual trade would go a long way in creating a firmer ground on which to stand. The world did run this way once upon a time. However, the stock market and the economy has become so complex and is so fragile, that the economy has crashed at least three major times in the last century, and it has rotated in ups and downs dependant upon issues that are not in the control of the average person. Navigating in a world where there is more than enough food, gas, and shelter, but without the means to support those things by simply having the willingness to work is not a good system. It’s a grand utopian thought. Works Cited Morris, Charles R. The Trillion Dollar Meltdown: Easy Money, High Rollers, and the Great Credit Crash. New York: Public Affairs, 2008. Reijnders, Lucas, and Mark A. J. Huijbregts. Biofuels for Road Transport: A Seed to Wheel Perspective. Green energy and technology. London: Springer, 2009. Soros, George. The New Paradigm for Financial Markets: The Credit Crisis of 2008 and What It Means. New York: Public Affairs, 2008. Read More