Sunday, October 12, 2008

Recession 1973 vs. 2008

There is a difference.
The recession of 1973 was the direct result of OPEC raising their price for a barrel of oil from $4 to $40. This threw all of the developed nations into turmoil. This was due to the fact that America and other countries made the decision to preserve our own natural resources in favor of using cheap Arabian oil. You would think that leaders of these countries might anticipate that something like this could occur and develop backup plans to counter but alas that did not happen. I said at the time that by simply reversing the previous decision and instead of taxing local production to immediately heavily tax foreign crude. This would have added to the misery but within a short period of time positive results would have occurred. In the meantime short term relief could have been given to drivers, airlines, etc to ease the pain. Had we done this by now all nations would be free of dependency on OPEC. Their price would have dropped and all would be well. The difference I am trying to make is that a physical event triggered the recession.
The recession of 2008 is altogether different. This is the direct result of our government removing all controls from the financial markets and letting them go wild. Is there a week that goes by without you receiving another application for a credit card with spending limits in the thousands? After 9/11 we were urged to do our patriotic duty and rush to the mall to keep the Chinese factories in full gear. Where in my day a 20% down payment and a good paying job were required, now houses were given away assuming that ever increasing value would keep the ship afloat. Again, prudent government leaders should have anticipated that a downturn was possible and put stronger provisions into the buying process as a safeguard.
During this deregulation process multi millionaires were created. Good for them but not the rest of us since their gains were at the expense of common sense. They didn’t care. Why should they, after all we are all one world aren’t we? All our illustrious leaders need to do is restore sanity back into the system. Return to the rules that kept commercial separate from investment and insurance. The companies would need a grace period so they could divest without penalty and they should not be allowed to be swallowed up by foreign entities including countries like China who hold trillions of US dollars. Reverse the trend of huge companies buying up competitors and getting bigger, too big to fail as the current trillion dollar bailout attests to. Reform the tax system so that these huge corporations return to paying their fair share of taxes like we little people do. These are just random thoughts. The list is endless. The solutions are well known to economists. Bring them into the process. In order to remove temptation to fool with it create a commission to pull ideas together and present to the Congress with their only choice to vote yes or no like they do now when reviewing closing military bases.
Wouldn’t it be great if one or both of the presidential candidates proposed solutions such as the above instead of stressing great and wonderful new programs as if the current crisis had never happened?

Jack B. Walters
3961 N. Hillwood Circle
Tucson, AZ 85750
(520) 722-2958
October 12, 2008

1 comment:

arizonahiker said...

Makes sense to me Jack, I totally agree.