Economics
Global Economics is fun. As an American I have a vested interest in the long term economic viability of American business. Unfortunately, most of the decision makers are making short-sighted decisions.
Economics as the domain of college professors, Bernake and Greenspan, and U.S. Presidential hopefuls is a complicated game of trying to prove bad decisions are actually good decisions. But on main street, economics is very simple, and very basic. Here’s the basis of good economic policy:
Production - Consumption = Wealth or Debt
This is obvious to anyone who takes home a paycheck. If you consume more than you produce, you have debt, which eventually must be paid, and paying is a way of consuming your production. If you produce more than you consume, you will accumulate wealth. It works every time.
As a man who owns multiple small businesses, I learned really quick that income must be greater than outflow to produce profits. Here’s another equation for Economists to learn:
Income - Outflow = Net Profit or Loss
Ok, now that we have that simple lesson out of the way, and if we can agree on the math contained above, let us proceed to evaluate the current state of America.
What is America? In one sense it is a collection of the families who live between the 49th parallel north, and the Rio Grande. Those families comprise a complex economy, but at the end of the day, the basic equations still hold true. I love Wikipedia. It’s been proven to be more accurate than Britannica et. al. For a quick learning curve on the current trade situation, check out this article.
In all but 2 years since 1971 America has consumed more than it has produced. In 2006 America consumed 758 billion dollars more than it produced. That is a lot, and that’s just one year. A quick tabulation shows that America has consumed over 6 1/2 trillion dollars more than produced in the last 37 years. There aren’t a lot of businesses that can run on this kind of track record for that long. Eventually the piper must be paid.
For a better illustration than I can muster, and from someone with the track record to warrant attention, check out this Warren Buffett article from 2003 - America’s Growing Trade Deficit Is Selling The Nation Out From Under Us. Here’s A Way To Fix The Problem–And We Need To Do It Now. - November 10, 2003. Originally found here.