Whichaway -- Part 2

The most fundamental dilemma, the intractable aporia confronting our political and economic leaders: do we allow the largest banking and investment institutions to fail, precipitating a complete breakdown of the world's financial systems? or do we prop them up with endless trillions in loans and freshly minted electronic (aka "paper") money, leaching all value and meaning from the US dollar, leading inevitably to the complete collapse of the world monetary system? Which way to go, which way to go? Our leaders have chosen the latter path, but what they are not telling us is that whichever path we choose to take will be our road to perdition.

Even before we reach the point of total "disaster," there are other, less fundamental, but more urgent and immediate choices confronting us, impossible choices that nevertheless must be made.

For example, how is it possible to determine what price to ask for any given commodity or service? If we were simply in a deflationary phase, as many economists seem to think, prices would continually be falling, along with wages. This would actually be a good thing for retirees and others on a fixed income, or those who invested wisely enough to still have some real money safely stashed away. Those savings along with the steady Social Security income would definitely go farther if, in fact, we were in a period of true deflation. However, the overhead costs of many companies have not in fact gone down, so for them lowering prices isn't really a viable option. They're convinced that, to survive, they must, on the contrary, raise their prices -- and that's exactly what many are now doing, despite all the hand-wringing over a looming "deflationary spiral." But how can you raise prices in an economy where job losses are steadily mounting, incomes are decreasing, investments have tanked, housing prices are in free fall, and retirement accounts have lost anywhere from 30% to 50% of their value? Which way to go, which way to go? Logically, prices should be steadily going down, but I'm wondering whether anyone has actually noticed that. Aside from gasoline prices, now going up and down unpredictably, and housing prices, which have obviously taken a nosedive, I myself see only prices that either remain steady, or, as in the case of food, are steadily, and alarmingly, rising. If food prices come down, more of us will be eating better, but more supermarket chains will be going out of business. Looks like they'll be going out of business no matter what.

An issue that never ceases to fascinate me is the cost of tuition. For years it's been heading increasingly into the stratosphere, for no good reason that anyone can see -- except for the availability of all that oh so easy credit. But credit is now, supposedly, tight. You'd think in the wake of all those job losses, investment nightmares, and credit crunches, that colleges and universities would be drastically lowering tuition. But I've seen no sign of that either. How can they lower tuition when their endowments have lost so much, due to all that misguided, irresponsible investing? In their eyes, tuition can only continue to go up, up, up and away. But how can they continue to pull off that particular scam when easy credit ain't so easy anymore, and so many families are now faced with unemployment, if not imminent eviction? They "can't possibly" lower tuition, because they need the money. But if they don't lower their tuition, or stubbornly continue to raise it, which many seem bent on doing, new enrollments will wither and already enrolled students will start dropping out in droves.

We have a similar aporia regarding the auto industry. If we bail out General Motors, we'll be saving jobs. But in order for the company to be viable, jobs must be cut. How can we justify forcing such a huge company to cut jobs when so much money is now being spent on a stimulus designed to create jobs? Whichaway, whichaway?

And how about taxes, what's to be done on that front? To preserve some semblance of fiscal responsibility taxes must be raised. But to stimulate the economy taxes must be lowered. We can, of course, raise taxes on the wealthy, something long overdue in my book. But so many millionaires and billionaires have lost so much in the past year, that most will probably wind up paying no taxes at all! And you can't tax anyone on the basis of all those multi-million dollar bonuses, because the taxes on most of that accumulated loot have already been paid. Again, whichever way we choose to go it apparently makes no difference. All paths lead to the same hard, stone wall of utter futility.

Now for the moral of our story. Which I'll save for my next post.
(to be continued . . . )