Asia Wakes Up and the Party's Over

Bad news from the Asian stock markets this morning (afternoon over there). They apparently are even less impressed with Bush's economic stimulus plan than Americans. It has occurred to them that the years of growing their economies at the expense of American manufacturing (China) or services (India) are coming to an end. All America can think of to do is pump more cash into the pockets of American consumers, so they can buy more things from foreigners with no intention of ever repaying them.

The big economic crashes occur when previous crashes recede far enough into the past that too many people are willing to belief convenient untruths. Such as the notion that it's possible to prosper by pushing pieces of paper around that say that everyone is richer without having produced anything of value.

Or that Keynes only applies during recessions. The other side of Keynes was his assertion that during prosperity, governments should run surpluses to offset their deficits during recessions. That, unfortunately, is politically unpopular, so we get stimulus during recessions and then, under Bush, stimulus during the good times as well. The real deficit, including the off-budget expenses for Iraq and Afghanistan and stealing from Social Security, has been running around half a trillion. During a recession, receipts fall, regular expenses for the economic safety net rise, and to this we are adding $145 billion in stimulus costs. Perhaps a trillion in one year?

Here in Oregon, the checks have been mailed out to refund our "overpayments" during the preceding and unexpectedly prosperous biennium. We dodged one bullet when the PERS recalculation of pension investments was made (I think) on December 31, just before the meltdown got really ugly, but sooner or later we'll be confronted, as we were five or six years ago, with annual state revenue forecasts going south. Our tiny "rainy day fund" is going to last about a year and then we'll be back where we were, cutting class days and getting unwanted attention from Doonesbury. It doesn't say a lot for the collective intelligence of Oregonians.