Monday, February 09, 2009

Nobody gets it: We don't NEED the economy to grow!

Since as long as I can remember, I've heard it repeated to me again and again that the health of America's economy depends on the rate of its growth. That's crazy!

When a baby grows, we always get really excited. "Look! She just took her first steps!" we exclaim, followed closely by "OMG! It's her first day of kindergarten!" But we do not expect this baby to keep on growing FOREVER. That would be gross. And yet we expect America's economy to keep on growing -- long into adulthood, far into middle age and even into death.

Like the hair and fingernails of a dead person, we still expect America's economy to keep on growing -- even in its coffin.

You see photos of those rare individuals who never stop growing -- six feet, seven feet, eight feet tall. But at some point in time their image changes from "tall, dark and handsome" to "side-show freak".

That is what is happening to the American economy now. And guess what? Selling more cars, filling more Wal-Mart shelves, opening more dollar stores and stockpiling more nuclear weapons just isn't gonna save us from the circus -- or from the graveyard either.

PS: And while we're at it, let's also take a look at America's banking system -- composed mainly of a small handful of monster-sized mega-banks. Are they never supposed to stop growing either?

If I understand what economist Mike Whitney is trying to tell us on this subject, big banks like Citigroup, Bank of America, JP Morgan-Chase and Wells Fargo are becoming even more obscenely gigantic. Even in these days of financial hard times, these mega-banks continue to grow taller and taller and put on more and more weight -- as they continue to swallow up small bank after small bank and then wash down their meals with bailout "food stamps" from the feds. But as these mega-giant banks keep getting larger and larger, are they also getting healthier and healthier as well? Don't you wish. No, they too have turned into freaks -- whose weight has billowed out beyond the strength of their legs to support them.

To paraphrase Whitney, our current federal banking policy seems to be working on the principle that when small banks start to get too big for their britches and find themselves in financial trouble, the FDIC then takes them over and puts them in check. However, apparently no one seems to be applying these simple-but-effective FDIC principles to America's top big-box banks -- even though the big guys are the ones who need to be put in check the most.

According to economist James Galbraith, "I think it’s fair to conclude that the large banks, which the Treasury is trying very hard to protect, cannot in fact be protected, that they are in fact insolvent, and that the proper approach for dealing with them is for the Federal Deposit Insurance Corporation to move in and take the steps that the FDIC normally takes when dealing with insolvent banks."

No, we don't need our economy to keep on growing and growing just for the sake of growth itself -- and we surely don't need our banks to be growing out of control either. What we do need, however, is to develop an economy and banking system that will not be measured by size alone -- but rather by whether or not the systems work well on our behalf.
PPS: Speaking of babies, here's a video of my one-year-old granddaughter Mena dancing to Ravi Shankar. Total cuteness!!!!!