Economic Stability

War destabilizes a nation’s economy. That instability creates jobs in some sectors related to military supplies, weaponry and defense/offense weapon systems. Budget support for military expenses diverts funds from other government programs, mainly health and family services, education and other social services.


Labor is diverted from some industries as the military industrial complex goes into high gear to meet national defense needs. Consumer prices warp to fit circumstances and then eventually settle down.


That’s war time. What we have now is not war, but the threat of war. In times of peace, we have routine military defense preparedness. During times of threat, we have jiggles of demand for tweaked defense systems, and a build up of supplies. Each ‘jiggle’ creates supply and demand distortions to our economy. Some distortions are short-lived; others are longer term. Some distortions are good while others are bad. Like rampant inflation.


That’s the nature of destabilization. It upsets the equilibrium of markets.


Add to that context the national muddle over immigration and Congress’ inability to address that issue. For 40 years they have kicked that can down the road without serious effort to address it fully. I guess this issue is just too good a political campaign matter that can be raised from time to time to help otherwise hapless candidates for public office. Something to blame that is bigger than themselves?


The context also includes economic debris caused by major dislocations of the 2008 recession. That debris includes perhaps as many as 5 million displaced career workers shoved out of jobs that are now obsolete. Employers and governments have done little to nothing in helping them recover and find new employment and careers. No retooling of their skills. Just permanent hiatus in underemployed jobs with no future. Demeaning work, really. Surely, we can find meaningful assignments for these good people?


Another context addition: politically charged attacks on the Federal Reserve. The institution’s job is to monitor and control interest rates and currency values. It is not a political job pool at the direction of any elected office; not the president, the Senate, or House of Representatives. It is independent by virtue of the US Constitution. It does its job based on its own analysis, expertise and professional judgment. No other influence.


A strong economy usually brings higher interest rates. Money is used to invest in successful industries in need of expanded facilities, labor pools and supplies. New technology demands investment funds to create whole new industries. The reason interest rates are low currently is the supply of idle cash is still enormous. Cash not being used for other purposes is stacked in the treasuries of corporations world wide, especially in the USA. Until those cash hoards are drawn down by investment activity, loans will not be needed to spike interest rates.


A friend asked me the other day, what exactly are negative interest rates?  Well, simply put, we the consumer would pay a banking/investment firm money to safeguard our unused cash. In many ways we already do this in fees. But negative interest rates mean we pay the institution based on the amount of money we have on deposit for their services. It is a fee. Some would say a tax. It is negative because we are not earning that fee, the bank is. If anyone thinks this is the way to stimulate investment, I think they have a few screws loose.


So, saying the economy is successful is an oxymoron. The economy is successful in some ways, and weak in others. What is of major concern are the pockets of unused capital in people, talents and cash that lie about waiting for a new tomorrow. The real question is: What will the ‘new tomorrow’ bring?


September 18, 2019