What's wrong with the American economy?
As an elderly Asian-American man, I have recently been the target of road rage in California by white Americans. Something is coming undone in the social fabric of the United States and it is pitting different groups of Americans against each other. This rage can be traced to several causes that suggest a new call to action.
The novel coronavirus pandemic-induced shutdown of the US economy mainly affected the middle and working classes. Yet only a small percentage of US President Joe Biden's $6 trillion budget plan is earmarked for individual citizens while the lion's share, under the "bailout package", goes to the pet projects of the Congress members. As a result, the millions of Americans who lost their businesses and jobs due to the shutdown will get far less funding than they need.
In addition to those political payoffs, the Federal Reserve Bank has been giving a large number of banks trillions of dollars in bailout funding in the form of interest-free loans and outright gifts－all via unrestrained money-printing on the pretext of "saving the banking industry". But as French/Irish merchant banker Richard Cantillon said, newly created money always gets distributed first to the upper class and by the time it reaches the average person, it is greatly reduced in value due to inflation. This is exactly what has been happening in the US today.
Since its founding in 1913, the Fed has printed hundreds of trillions of dollars which have always benefited the large banks and their top executives, and rarely the average American citizen. And the trillions of dollars paid to the banks and their executives appear to be a perfect "smokescreen" for the elites to continue to dismantle the middle and working classes.
With fear running high among average Americans, there has been an exponential rise in the purchase of handguns and rifles, most of the buyers being white males. The rising frustration and tension among white Americans have led to an increase in racially charged incidents. With some white Americans taking a cue from previous president Donald Trump, who flippantly blamed China for the COVID-19 pandemic, there has been a rash of unprovoked violence against elderly Asian-American people.
With the effects of three structural developments coming together in "a perfect wave" to further engulf the average American, this violence can no longer be overlooked.
First, "debt" has seen a geometric increase at all levels of US society. With US national debt at $28 trillion, and 36 million Americans living in poverty (US Debt Clock, June 9, 2021)－the US debt doesn't even seem payable.
Second, "derivatives" worth over $2,000 trillion have been sold since the 1990s. They comprise multiple forms of debt instruments and are exempt from normal public accounting. As a result, many foreign countries and banks, including the six largest US banks, are awash with derivatives that are worth far less than their notional or stated price. Warren Buffet refers to derivatives as "weapons of mass financial destruction".
And third, "disintermediation" alone can guarantee the destruction of the US economy. "Disintermediation" is what happens when countries and foreign corporations turn in or discontinue their purchase of US Treasury bonds and bills. Realizing the US economy is in a structural tailspin, more and more countries and banks are unloading their Treasury reserves, as they fear they will be worth far less than their original value on maturity. With this comes a return of inflation associated with the original money printing－and this inflation will hit US consumers very hard.
Given the growing evidence of catastrophic systemic stress, the US should take a cue from China and Japan, and adopt the long view in economic planning. "Five-year plans" are not impossible to work out. In fact, they are often the norm in both China and Japan.
I therefore recommend the US set up a "Blue Ribbon Task Force" to examine the sources of its structural economic crisis and devise a long-term strategy outlining 50 years of structural economic rebirth. To get public support, the task force should consist of a broad cross-section of consumers, retirees, teachers, students, and small business owners－as well as representatives from the banking, government, labor, manufacturing, technology, and farming sectors, and environmentalists. Equally important is gender and age diversity among the task force members.
As Asian planners know, there is in any crisis the co-presence of danger and opportunity. Let us hope American planners will come to see the value of the latter.
The views don't necessarily reflect those of China Daily.
The author lives in San Francisco, California, and is the author of Systemic Collapse and Renewal.