The economy is fascinating to me, but I'm not an economist. Some of the economists whose blogs I read have shared some interesting thoughts on what's going on this week. What's especially interesting is they've been sharing these thoughts for months or years, and others are just beginning to be aware of it.

Robert Reich is one. He was Bill Clinton's secretary of labor and is an economic advisor to Barack Obama. He's sympathetic to the middle class and believes some government regulation is necessary. He's been predicting an economic disaster when consumers reach the limits of their credit. Another is Dean Baker, who critiques media coverage of the economy.

A couple of out-of-the-mainstream economists whose blogs I enjoy are George Ure and John Médaille. On the surface, they don't have much in common with each other besides living in Texas. Ure is a consultant, what I would call a cynical capitalist and a borderline survivalist. Medaille is a professor, a staunch Catholic and a distributist. Distributist economists believe the means of production should be distributed as widely as possible rather than concentrated in the hands of a few (or the government).

To my surprise, they both wrote last week that they were reading the same book: Dmitry Orlov's Reinventing Collapse, which compares the situation in America with the Soviet Union at the time of its collapse.

Médaille writes,

[B]y any measure, the economy is bankrupt, and we must, like Blanche DuBois, rely on the kindness of strangers to keep us afloat. Wages by themselves have long since failed to clear the markets, and we are curiously dependent on credit to get us through to the end of the month. We must depend on people who make even less than we do to make our goods. Indeed, the most frightening line about the economy is the one one hears repeated everyday with casual nonchalance: “The consumer is two-thirds of the economy.” Excuse me? Doesn't that mean that production is only one-third? And doesn't that mean, in turn, that we produce only half of what we consume? Surely, this is a recipe for collapse. If we produce less than we consume, we must borrow the difference, and borrow it from governments and nations that may not have our best interests at heart.

He continues,

Government is now concerned with two issues: the bailout du jour and the war of the week. But who will bail out the Fed when it fails (meaning, when foreigners no longer want to support it), and how will we fight our wars when we can no longer support our workers at home, much less our armies abroad?

He thinks "the transition will be brutal" and concludes,

Examining the way the Russians coped and adapted gives some insight to what America can do. This is what makes the book important for distributists, because the answer to collapse is distributism. The development of local manufacturing, local food supplies, local currencies, local defense and policing, etc. will be the best adaptations to the new realities.
...
Everyone should learn to do a few things. One, they should learn to be useful. Skills conferred by the MBA or as marketing managers may not be useful. Learn to make something that would actually be useful to your neighbors in time of need. Two, we should all learn to grow things, and grow them without chemicals and pesticides that may not be available.
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Don't worry about money. Worry about wealth. Wealth is things, not money. In a collapse, food that can be stored will be worth more than greenbacks. Learn to get by without money. Learn to work, learn to walk, learn to ride a bike. And (it may well be) learn to shoot.

Shoot? Our Catholic professor is starting to sound like Ure. After that, though, he concludes that there's hope for us because the collapse in the Soviet Union resulted in the revival of religion there. (And all the comments to the post so far are about pro-life advocacy rather than economic collapse.) Religion aside, his writings on the economy make sense to me.

Ure isn't religious, but he believes in "time monks" who predict the future using linguistics on the Internet. He's hit and miss with that, but I keep reading his blog because he has an uncanny way of calling attention to obscure news items days or weeks before they hit the headlines. He's been writing frequently lately about the Russia-Georgia and Iran situations, and he calls attention to news about bank closings and so on that are buried elsewhere. He's been recommending getting out of the stock market for months. Along the lines of what Médaille is talking about, he advocates buying tools, storing supplies and growing food.

He writes today, in response to a reader who asks what a continuing stock market dive would mean for the man in the street,

No retirement account or prospect of retirement, to begin with.  A semi-nomadic life among the ruins is a kind of worst-case, but a high enough possibility to have good all-weather clothing and broken-in hiking shoes.  But again, I always over prep for things. 

 

You can test your preps easy enough any time by unplugging your phone, turning off your power, not using your checking account or credit cards - and don't forget to turn off the water, too.  If you can get by for 90-days  to a couple of years in this condition, I'd say you're about as well prepared as you can get.

It's scary stuff, especially when you're watching the Dow Jones average plummet. That's why Reich's thoughts are encouraging. He writes,

Bailouts, subsidies, and government insurance won't help Wall Street because the Street's fundamental problem isn't lack of capital. It's lack of trust.

The sub-prime mortgage mess triggered it, but the problem lies much deeper. Financial markets trade in promises — that assets have a certain value, that numbers on a balance sheet are accurate, that a loan carries a limited risk. If investors stop trusting the promises, Wall Street can't function.

What to do? Not to socialize capitalism with bailouts and subsidies that put taxpayers at risk. If what's lacking is trust rather than capital, the most important steps policymakers can take are to rebuild trust. And the best way to rebuild trust is through regulations that require financial players to stand behind their promises and tell the truth, along with strict oversight to make sure they do.

I used to be a Republican, thinking I hated "big government." Well, guess what? We need some government. Right about now I'd like to ask all the free market advocates, "How's that workin' for ya?"

Reich gives me hope that there's a solution, but I don't see how the trust he's talking about can return to our economy before Médaille's and Ure's predictions of catastrophe are fulfilled. Unfortunately, a lot of things can happen before a competent administration  is elected and Congress can be herded into making the right changes.

We've got to do something to restore trust to our economy in the meantime. What was it that Dorothy did to get back to Kansas? "There's no place like home"? Let's see . . . There's no need to worry. There's no need to worry. There's no need to worry.

Keep saying it, dammit! There's no need to worry. There's no need to worry . . .