I watched a video yesterday that was asking the question of whether or not the Iraq War was a drag on the economy. 4 "experts" weighed in on the topic and I happen to agree with the host in this matter. The guy to the left of the host points out that if the war is such a drain, why was the economy doing so well for the first 4 years?
Hmmm. Let me think? What was going on during that time that might have artificially stimulated the economy into an unusually hyper state? Anything come to mind?
Maybe all of the indiscriminate lending that was going on for house-flipping and refinancing.
Ya think!
Maybe this will help explain what's going to be happening. This is a super-simplified graph that has no basis in real numbers. I'm just using it as an example. What we feel as consumers and customers (there is a difference) is the difference between the economy growth and the inflation caused by all of the money put into the system by the Federal Reserve (much of which goes to funding America's wars and world empire).
As long as the artificially stimulated economy offsets all the spending the government is doing, everything seems fine. What we feel is the difference between the two. With little difference, everything feels fine and the war appears to have no impact on our economy. We can kill people in order to steal their oil to our heart's content.
When housing prices top out, we start to feel that something isn't right. We start to feel a difference between the money being created and what the economy will be like without all that "free" money being lent out.
As housing prices go down, ARMs reset, foreclosures go up, and the Federal Reserve dumps more money into the system in the form of a Wall Street bailout, the difference becomes extremely obvious (unless you get all your information from the TV). As the economy tries to reset back to where it's supposed to be before all the crazy lending began and the war continues, the gap between the two widens.
The solution then becomes very obvious. We need to quit the bailout and cut government spending in a manner that races the declining the economy. Our best bet for softening the blow of the recession is to cut all borrowing from the Federal Reserve and cut government spending to the point where we can put real money in the hands of the people.
What we have instead is a president who wants to double the size of the war by attacking Iran and the prediction that the Federal Reserve is going to continue the Wall Street bailout at least until June. The War, the bail out, and even Bush's economy stimulus plan (using money borrowed from the Federal Reserve) will cause the blue line to go up more steeply and as inflation hits harder sending prices up and purchasing down, the pink line is going to go down more steeply. The wider the gap, the more financial pain we will feel.
Either the people with the power to fix this mess don't understand or they just plain don't care.