Not so quick, Wall Street

Things seem to be looking up in the financial markets. optimism has returned, it seems.

This is a little premature. Remember that although 1929 had the Great Crash in October, November was a pretty good month. Overall, 1929 wasn't a bad year. 1930 was a bad year. As was 1931, 1932, ...

The usual cycle involves things getting good, people getting too optimistic and overexpanding, then pulling back at the same time. Eventually, demand is unmet and expansion begins again.

This cycle was different. We drove consumption upwards while manufacturing migrated overseas. The engine was, as economists and journalists kept telling us, the housing market, which remained robust even as the trade deficit rose.

The housing market is bust and it isn't going to be fixed. We'll of course need some housing, but not on the same scale. Manufacturing will also not rebound. We haven't had plants cutting overtime, they've just been closing down. They aren't there anymore. And because we aren't really into engineering in this country, the likelihood that the next generation of world class manufacturing will take place in America is slight.

Jobs growth in April came in unsustainable areas -- education, health, government. These are things we do for ourselves. If we want to continue to import what we need and/or want, we need to have something to barter with.

What we produce that the world wants, in exchange for the oil to which we are addicted, isn't a lot. Food, certainly. Some raw materials. A handful of manufactured goods where we're still near the top, like commercial aircraft and software. We also have tourism and higher education, but they aren't significant in the big trade picture. The dollar will fall further and we'll be required to consume less, as foreigners lose interest in funding our consumption. This recession is going to continue for a long time.