Decoupling Reality from Policy

While mainstream pundits and economists are now realizing the precipitous cliff of sand the United States teeters on, few will mention bad trade policy being one of the causes.

Newsweek's cover story, The Road to Recession we are starting to see mainstream economic pundits realize the U.S. is in much more serious trouble as implied by this foreboding Newsweek article title U.S. Economy at the Guillotine

The Great Global Market Freak-Out of 2008 has everyone asking whether the United States—already on the road to recession—is entering into a protracted period of economic trouble where jobs will be slashed, prices will continue to rise and the dollar will keep falling; and if so, whether the declining U.S. economy will pull the rest of the world down with it

Tell me something anyone with a 2nd grade education does not know, you cannot suck the economic life blood from the middle class and not expect to collapse that economy.

70% of US GDP is now from shopping which in turn is is financed by debt. What happened? After the dot con crash and the great corporate driven rushed mass exodus of offshore outsourcing US manufacturing and service sector jobs, people borrowed against their home equity with cheap credit and never ending rising real estate evaluations to pay their bills.

Now they are calling the sinking U.S. economy a decoupling from the rest of the globe. Sounds like a nice euphemism for policy that has sucked the middle class bone dry.

We're seeing a general decoupling," said James Owens, chairman of U.S. machinery giant Caterpillar. While demand is weak in the U.S., he says, "South America, Asia, Russia, Eastern Europe, all have very strong commodity-based exports. The fundamental economic health in these markets is strong." In addition, companies and consumers in these countries no longer rely mostly on U.S. financing to buy tractors and construction equipment

Translation, we let China and emerging markets have our manufacturing base and now we're hurting. Duh.

According to the article, A new financial order is clearly dawning. Translation, the United States will no longer be a leading economy.

Much of this article examines the denial of globalization. In a global world, one nation-state gets the flu, the entire world will start puking. While other emerging nations try to isolate themselves from the ill-conceived policies of the United States, the idea they will not vomit economic contraction is absurd. India, currently issuing denials, surely must also contract since their offshore outsourcing labor arbitrage business is 7% GDP.

15 mainstream Economists weigh in.