America, Land of Milk And. . . . . Money?

America's economy, indeed America's entire way of life, depends on a flow of capital. A slower flow (a recession) slows down the economy and tones down the way of life, sometimes called "the living standard."

Speed up the flow, and it results (at least for a time) in an increased standard of living. But too much too quickly can lead to inflation and lower that standard of living.

Where the flow goes depends largely on how the flow is structured. The recent "Occupy Wall Street" participants were by and large expressing concern and dissatisfaction with how the flow of money in America was structured. They felt that too much was going to the top green leaves of the tree, and too little of the vital fluids of the tree were being tapped along the way. In short, the rich were getting richer, and the poor were getting poorer while the middle class was gradually shriveling.

If government, in this case I speak of the Treasury Department and the Federal Reserve Bank, were to put too much cash into the flow, the usual result is inflation in which case essentials cost more because a few, or even many Americans have more available money and can afford to spend more. If those federal entities take too much out of the flow, the result could be deflation, in which case prices might come down, but there is less money around for production and for spending.

Finite commodities can also affect both cash flow and consumer confidence, and that can be influenced by foreign governments, also. A case in point is China's recent role in international gold prices. Lately China has been buying gold at a current low, and buying in such quantities as to cause the price to start climbing, then selling at the increased price in such quantities that the price drops to a level at which China repeats the cycle by buying again.

China uses its state buying power to secure contracts for chemicals and other natural resources in countries in which their economic purchasing power gives them an edge against less favorably positioned buyers, Doing so in turn allows them to use those purchased resources to compete more favorably with finished goods manufacted by their growing economy at times when other economies are under financial stresses.

For many years past, and whenever possible, large economies such as China's and America's have used the same financial tactics to increase their power and their standard of living.

Government to government relations, and buyer to seller relations also play a role in developing favorable trading partnerships. National laws and company policies can greatly affect a nation's competitiveness in world markets. America, for example, has laws against bribery in international transactions, but there are other nations which do not have such laws, and routinely bribe key decision makers to secure favorable purchases and markets.

America's massive military capabilities allow it to project that power to bolster allies, restrain potential adversaries, and maintain its global presence far beyond its own borders. But, that potential dominance can also raise hostile feelings, such that some foreign traders strike trade deals designed to exclude American businessmen for strategic, religious, economic, and political reasons.

At the present time, and for some years now, America suffers from a trade imbalance from purchasing far more from foreign sellers than it sells to foreign markets. The result is a net outflow of capital. That outflow strengthens the foreign entities which are selling to America, while weakening the American economy.

Such a trade imbalance, if out of balance large enough and long enough, cripples an economy by increasing indebtedness and eliminating the flexibility needed in an aggressive international economy, such as the world is experiencing now.

Third World countries, those in which living standards have been traditionally low and where productive capacity has been even lower, are experiencing improvements. These improvements, where they are occurring, are often the result of existing natural resources being tapped by the international powerhouses, such as China and America, and those developing countries which have established wealth.

Today's other major factors which greatly influence American capitalism are the growing inter-connectivity of the global economy due to the increased speed and sophistication of modern communications. Purchases and sales, contracts and treaties, government and personal trading relationships, are now being realized at speeds which have never been possible before.

Indeed, not only does America remain a "land of milk and honey" but our capitalism has made it a "land of milk and money."

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