The US Economic Slowdown – Is This The Beginning of A Quantum Shift?

Global Politics, Current Events |

By MAJOR TOM | February 9, 2008

I have been following this issue for some weeks now---the recent slowdown of the U.S. economy---and wanted to blog about it so eagerly but wasn’t able to due to time constraints; what with the perniciousness of task at work. Presently, I am being the overall coordinator for the conduct of a symposium on International Relations and Foreign Policy slated this coming Friday, and things to be done had become more urgent as the date approaches so nearly.

When the news on the U.S. economic slowdown finally became widespread, after weeks of speculation and foreboding, I got a glimpse of U.S. President George Bush speaking about it in a news conference in the White House, and I could fairly note the grimness of the situation through the heavy face that he had wore that particular moment. Often, action speaks louder than words.

It is simply the worst time for this to happen. Election time is fast approaching in America and the war crises in Iraq are far from over. An economic downturn is the last thing that President Bush would need right now. If he could not resolve this economic woe, President Bush would probably have to contend to a scenario where he have to exit his post with a dark shadow following him---mismanagement of the economy and an unresolved war in Iraq.

Perhaps, he had given so much focused on his war campaign in the Middle East that he had forgotten that his people had also needed much attention from him.

Right now, the U.S. Congress had approved a bill allowing nearly $160 Billion worth of funds to be inputted into the American economy, putting money in the hands of middle income Americans, hoping that they would spend it on consumer products, pump priming the economy with sustained economic activity.

But what if this strategy wouldn’t work at all? Too much or abrupt increased in spending could result to high-inflation, doing more harm than good in the process.

If that happens, a prolonged slowdown would inure to a full recession, where the U.S. economy would shrink by so much that jobs would continue to be lost and productivity could move towards a downward spiral.

And everyone knows what happens when the America catches cold. The rest of the world sneezes. Even as we speak, stock markets across the world have suffered due to this debacle in the American economy. It is then of grave concern for all of us. In our turf, President Gloria Macapagal-Arroyo had just approved a 75 Billion pesos stimulus fund, hoping to shield and immunize our economy from the global effect of the slowdown in America. And it comes now at issue on where does our government get such huge amount of money when in fact we have lingering problems in our balance of payments and our offshore debts remain at a scandalously high level. It had amazed me to no end on how our President could easily announce the release of such huge amount of money, just like eating peanuts in the park---when we all know that money in our treasury is of no significant amount.

Perhaps, it would amaze us more in the coming weeks when we try to find out where this money from the so-called stimulus fund had gone. I hope not. Or we’ll be having yet another useless Senate inquiry on this. (Isn’t it often funny to observe how our Senators are always asking some Malacañang official about some money and where did it go, and in the end, they’d be finding none? Senators ought to be smart and not gullible, aren’t they? But they seem always to end up like Wily Coyote, continuously putting traps here and there, and yet, Mr. Road Runner always come out unscathed and scot-free. I could always see a Wily E. Coyote scenario in our Senate.)

So where were we?

In my analysis---I could see some form of irreversibility in the recent economic woes of America. International political analysts have always put forward the idea about how there would come a time when economic power would shift away from America, transferring wealth and productivity might towards other important players in international economics like China, India or EU and it seems to me that as elementary as these views are, such prognosis seem to become more and more patent and appertaining, not in the near future, but even now as we speak, where the wheels of change has started rolling so furiously. It is in the decline of American economic right happening right before our very eyes.

It is of great note how writers have begun to write about the gap between rich people and poor people in America---on how it continues to widen, causing major and systemic economic problems there---when in fact, just about a decade ago, there is no such term as the “poor people in America”. But now, there are the so-called “poor people” in the land of milk and honey.

Times are but a-changing.

In my readings, this most recent economic turmoil in America had been caused by the increased prevalence of joblessness and high-cost of housing there. Of course, it goes to say that when many Americans are unemployed or underemployed, not many of them could afford to buy houses, driving prices upward in the process as demands decreases. I understand that housing is a very huge and palpable sector in America. House mortgages and loans are main activities in the financial system, becoming therefore a major economic catalyst. If the housing sector is slow there---or at worse stagnant---then the whole U.S. economy suffers.

But then, it all boils down to joblessness in America. It is of common knowledge that a great bulk of the manufacturing sector there had outsourced their main production activities overseas, towards China primarily and to many other locations in Asia, such as India or Vietnam. Such is the trend happening for more than a decade now and the very low labor cost in Asia had compelled every American business to look eastward, or face obsolescence as they would become so hard-pressed to compete in terms of sales. How would Nike for example level up with Reebok when Nike continues to pay high-wage American workers while Reebok could lower their sales prices benefiting on very cheap labor cost in China.

With technology transfer easily transmuted nowadays, from one continent to another, the level of workmanship in America is easily replicated in areas like Taiwan and China.

This way, American companies have no other recourse but to shift manufacturing overseas in order to remain competitive. As a result, a huge portion of jobs in America would be lost, thereon spurring lower spending among the population and a continued meltdown of the U.S. economy is most likely to happen. Like I said, there is an irreversibility in all of these. The decline of the once so mighty American economy has started and shift in economic power would be given way.

And decades from now, even political and military power would soon follow.

23 Comments »

1. bw says; February 9, 2008 @ 10:53 pm

   Very bad convergence of economic events for America - high oil prices, the Iraq war and the sub prime mortgage crisis - collectively pushed the US economy in to the wall

   It is true that if America catches cold, the rest of the world does too. The high value of the Canadian dollar - higher than US for a while now - is viewed as negative to the Canadian economy because the big market, the US find Canadian goods expensive. So ironic indeed.

   BTW congrats on your increasingly progressive career

2. Major Tom says; February 9, 2008 @ 10:58 pm

   The high currency dilemma is also happening with our country right now---the peso being the best performing currency in Asia had somehow became problematic to our exporters as this would entail lower peso revenues for our exporters.

   In the final analysis, economics or the economy for that matter. is truly a non-simplistic affair.

3. Sidney says; February 10, 2008 @ 12:35 pm

   Most of the problems Americans face now might be the result of two Bush terms.
   War in Iraq, tax policies (widens the gap between poor and rich), oil prices (he was against Kyoto, result of war and instability), etc.
   Bad politics, bad government, bad everything... what can you expect.
   Glad his term is ending!

4. Major Tom says; February 10, 2008 @ 4:14 pm

   To Sidney: And it makes it all the more difficult for him when his Republican Party had to contend in next year's presidential elections there. American voters are known to be so concern with economic issues, "it's all about the economy" many says in the past.

5. snglguy says; February 11, 2008 @ 9:03 am

   Where will Arroyo get the money to fund the stimulus package? Maybe the first gentleman found Yamashita's fabled lost treasure, hehe.

   Anyways, if only Bush and his Republican party stop wasting American taxpayer's money on the futile war his country wouldn't be in this deep financial mess. Just my two cents worth...

6. Schumey says; February 11, 2008 @ 9:57 am

   US economists now predict a shrinking US economy. You can see this here as well. I do not know why this government refuses to change its stand on our dollar reserves. Rather than hold to it, why not pay off some of our debts to unburden the people? At present, we have a reserve of $37 billion. Why don't we use to pay off $20 billion of our debts and spend $10 billion for social services?

   The stimulus Salceda speaks of will not amount to anything. There is also a government program now that gives allowances to the poor. This will only develop mendicancy. What the government should do is to encourage SMEs to expand. But that is easier said than done because of corruption and red tape.

7. ipanema says; February 11, 2008 @ 4:29 pm

   i've always mentioned that perhaps there is no alternative but what the U.S. is experiencing is bound to happen. it is going there and i needs to happen o self correct. now Bush adminisration's $160 billion would cushion its bump.

   hmmmm...where to get the fund for our country?

8. momoftwo says; February 12, 2008 @ 7:21 pm

   I don't know what this could lead to but we are hoping this will do something better instead of making it worse. We are looking forward to that "boost the economy check" btw hehe.

9. Wil says; February 12, 2008 @ 11:45 pm

   I think the two main factors that have contributed to the potential US recession are the escalating cost of Iraq war and the mortgage crisis. With the former, the responsibility can be placed on the gov't while with the mortgage crisis, a lot of players have contributed to this problem (banks or lenders, borrowers, realtors and mortgage brokers).

   The US has always had poor people for as long as I've been here. That's why there's still homeless shelters that have to turn people away b/c they're oftentimes full.

10. barrycade says; February 14, 2008 @ 9:28 am

    The problem with the US recession is that people become more fearful and thus, would rather save up their money than spend it on the economy. And the $160B, financial experts say, wouldn't really help, it's band-aid solution; maybe good enough for now.

    I'm not sure though how long the paranoia will continue. What bothers me more is the effect on RP economy, no matter how government says we are less dependent on US because we've increased trade with China.

    With regard the power shift, I've always believed now is the time of Asia, with China leading the way. Asia is fast-becoming the powerhouse for just about anything -- from manufacturing to manpower. Indeed, Asia is the way to go.

11. beatburn says; February 15, 2008 @ 5:04 am

    America should change its paradigm for the changing global times and stick to focusing on its domestic problems rather than the problems of others. It should learn how to compete with China (although I don't know how China's labor force can be beat).

    Look at its recent history, America has a way of bouncing back from its recession. Although its technique is through waging wars or at least dabbling into it. Decades of the 20th century can be categorized as to which war America was into at the time.

    The sad reality is the little brown Americans here will definitely feel the economic slowdown.

12. verns says; February 15, 2008 @ 9:47 am

    malaki ang mamanahing problema ng susunod na American President....

13. catatau says; February 17, 2008 @ 2:17 am

    Hi!

    I´m testing your converted Pressrow theme on catatau, but there is some problems: on internet explorer the layout is very diferent of firefox, specially the side bar. Do you know what is going wrong?

    best regards,

14. Major Tom says; February 17, 2008 @ 4:54 am

    To sngl: It might probably be so true and make sense at all. The Iraq War is causing so much utilization of wealth. To be sure, it had contributed majorly into this recent economic debacle there.

15. Major Tom says; February 17, 2008 @ 12:01 pm

    To schumey: At $37 Billion, we surely could use some of it to pay our debts. That way, we'd be unburdened by too much interest paid on the huge debt.

16. Major Tom says; February 17, 2008 @ 12:04 pm

    To ipanema: That's the billion dollar question and I can't believe our president had announced upon it so ceremonoiusly, like such money is to be had easily.

17. Major Tom says; February 17, 2008 @ 12:07 pm

    To momoftwo: I hope so too madame; and as of now, the worse seem to have been over---but it's good to be so cautious always.

18. Major Tom says; February 17, 2008 @ 12:09 pm

    To Wil: Sngl had the same idea as you have here and I am much inclined to go for that. Iraq is such an expensive sham for Pres. Bush.

19. Major Tom says; February 17, 2008 @ 12:12 pm

    To barrycade: Now that's the problem if the fear of further recession would lead the American people to hold on to their money---it would be like a Catch-22 situation--helpless and futile.

20. Major Tom says; February 17, 2008 @ 12:15 pm

    To beatburn: That should the wise thing to do and if the Democrats would win next year, that would be a most possible scenario, since they are known to hold more importance on domestic affairs, rather than external affairs.

21. Major Tom says; February 17, 2008 @ 12:18 pm

    To verns: Sinabi mo pa sis, President Bush really made such huge issues outside, like the Iraq War...

22. catatau says; February 17, 2008 @ 9:39 pm

    Hi Tom!

    Thank´s for atention, and for the alterations on theme. But there is one problem remaining: the alignment of sidebar, on ie and on firefox the sidebar are under the content box (using ff and ie on windows vista, on 1280 x 800). Do you know what is going wrong? And about the side bar, which tags had you edited?

    []´s, and thank´s!

23. tutubi philippines travel says; February 23, 2008 @ 8:29 pm

    let's just see how the stimulus package jumpstart economy. hope pinas doesn't get too affected

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