The state of our economy

Peter Schiff nails it:



I've been wrong a lot, but this is one area where I feel vindicated (unfortunately). I've been saying this for a long time (albeit not nearly as intelligently or specifically).

What we're seeing now is not a real estate problem. It's not a credit problem. It's not a recession that's part of the normal business cycle.

The conventional wisdom about things that the vast majority of people have been spouting over the past year- that we will bounce back from this- is WRONG.

What we're experiencing now is the initial stage of a profound economic reckoning for America and the world.

As the rest of the world caught up with America over the past twenty years, and gained wealth as a result, they turned to America to borrow that money and the American consumer to buy their goods.

So America wracked up a tremendous amount of debt as a result.

Over the past decade, in particular, the world economy was propelled by the strength of American consumption. The American economy was seemingly buoyed by this strength. Inflated housing prices made this strength seem liquid, when it was in fact not.

And now we have the reckoning. America is saddled with so much debt, and- here's the worst part- unlike the past, when we were able to produce our way out of debt and downturns, we now lack an economy built on production and the corresponding competitive edge over the rest of the world that we used to have.

Our economy has changed so much, there's very little we make here anymore. Manufacturing has fled the country. Healthcare costs make it disproportionately expensive to higher American workers. The sorry state of our education system means that we're not setting ourselves up to be able to compete in the service industries of the future. And the deregulated state of Wall Street has made it possible for our largest and most powerful companies to mask their fundamental weakness by playing a shell game so complex- and so fundamentally devoid of value- that no one can figure out how to untangle the mess. And of course, most of the politicians are just stammering and pointing fingers.

There will be no "bounce back". There is no "back", because where we were was an illusion. Where we are now- and where we will continue to fall to- that is the reality.

So where do we go from here?

The first step is to acknowledge the reality of where we are. It is important to stress the significance of this. We need to realize that this is not so much a crisis, or a failure of the status quo. This is an awakening to reality.

Then, we need to cut out the partisan bickering, the reliance on conventional wisdom, and the temptation to fall back on shortcuts.

We need to look at ourselves and reassess what it is that we do and make as a country, given the resources and the workforce that we have. Propping up our failed institutions and models will not help us. Avoiding the immediate pain inherent in being honest about this will not help us.

I'm not 100% sure about this, but my gut tells me that one example of the right way forward would be to let Detroit fail and let our economy deal with the massive consequences. Because those consequences- that real pain- that is a threshold through which we have to pass in order to get to the next step, where we can truly be honest with ourselves.

The unions in Detroit are too powerful.

No one wins when it costs Detroit companies more than $2,000 additional to make a car compared to other companies who don't have to support the same kind of systemic inefficiencies resulting from our broken union and healthcare system.

We need to dramatically overhaul the healthcare system to shift the burden of paying for healthcare off of companies, and to give people better healthcare options at the same time.

We need to be honest with ourselves, and accept the fact that we no longer live in a world in which American workers and American businesses can continue to succeed while they're failing in the marketplace and being propped up by the government.

In short, I think we need to let things really break in order to properly fix them.

I think the attitude that certain things are too big to be allowed to fail, that certain types of pain are not acceptable- that attitude is a key part of the problem. That attitude is what has kept us from facing reality. That attitude is what has created America's Achilles Heel: the notion that we as a nation have become too great to suffer the consequences of our choices.

We are a great nation.

We are uniquely constructed to be in a unique position to reinvent ourselves. We have a tremendous diversity of natural resources. We have a tremendous diversity of ideas and inspiration. We have a tremendous diversity of people, the world's most valuable resource.

And we are a nation built of people who have come here wanting to be here, believing that here, things are possible that are not possible anywhere else.

Opportunity, hope, and dreams are what this country is made of, and the election of our forty-fourth president is proof positive that all of that is still alive and well in America.

So we've got what it takes to get through this, but it's going to take a lot of honesty, humility, hard work, and pain to get there.

If you think there's going to be a correction, or a bounce-back, or that we've hit bottom... If you think any of those things will happen without your life going through some profound and unexpected changes, much bigger than what people even now are talking about, I think you are wrong.