By Ben Cohen
This week has been a bad one for the United States. The financial meltdown will be absorbed throughout the country (and the world for that matter) leading to job losses, rising prices and huge instability in various economic sectors. We won't feel the impact properly for a few weeks, but when it comes, it will not be pretty.
The economy is now free falling from the top down. The sub prime mortgage industry that delivered huge profits to Wall
Street and ruined the middle class is finally hitting the big boys. The Fat Cats are feeling what regular workers have been dealing with for years, and as the service jobs based around the financial sector start to disappear, the economy could be headed to a dark, dark place.
The situation for most people has been bad for some time - rising gas prices, declining house values, and rising living costs are decimating people's savings, giving them less money to circulate back into the economy and less money to invest in their futures. As middle class money disappeared, so did Wall Street projections for massive profit, leading to the mess we are in now. The cyclical nature of economic down turns can spiral downwards quickly and nastily, and it is difficult to predict what could happen.
The government is scrambling to counter the effects of the disaster, bailing out the biggest firms and providing vast amounts of credit to others. It will dampen the effects, but not stop them, until real and serious reform is implemented. We know how to create sustained economic growth for all areas of the economy - it was done successfully after WW2 when strict regulations and central planning was the order of the day. Post War Europe was built on the principle of strong regulation and a good degree of central planning (via the Bretton Woods system), and the U.S economy, the largest in the world, was created largely through massive protectionism and state planning (contrary to the mythology of the free market). Will the U.S government head in this direction? You can be sure John McCain will not (despite turning into an over night populist).
Barack Obama is making the right noises, stating the financial sector needs serious reform and oversight, but he risks offending many of the people bank rolling his campaign if he goes too far.
The truth is, for serious reform, the situation will have to get much, much worse.
Unfortunately, it just might.