War, debt and a changing economy

By Michael Randle, EDITOR

Sure, the U.S. created more than 6 million jobs in 2021, the most in any year in history. Of course, the year before, it lost more jobs than any year in history.

Once full employment is reached — and that will happen soon if the economy continues its current growth — get ready for job growth to drop from an average of over 500,000 jobs a month to less than 100,000 a month. Why? Population growth is near zero in the U.S. (0.1 percent in 2021) and those of retirement age are leaving the workforce at a rate of 5.5 times those entering the workforce.

So, soon, job growth won't be making the headlines like it once did in 2021. What will replace job growth as the primary subject in the media concerning the U.S. and the South's economy? Well, probably one of two things.

The war in Ukraine could turn into a much larger conflict, involving NATO countries such as Poland, Romania and even Hungary, which are located near the current Russian front. If that occurs, other NATO countries, such as the U.K., France, Germany and the United States, would definitely get involved to fight the Russians. That would be a huge blow to the economies of all nations that choose to go to war.

Heaven help us if that occurs, because Ukraine is not dealing with a rational war enemy. It is dealing with a nutty-nut dictator in Vladimir Putin who, as one person, could start WWIII. However, I don’t believe the Russian people would let that happen.

The second headliner

The other main issue is the fact that the national debt in the winter quarter reached $30 trillion for the first time ever. That figure is well above Real Gross Domestic Product (GDP) totals from last year. Just COVID-related aid since 2020 has risen above $5 trillion so far. That massive amount went to households, businesses (both large and small) and schools, just to keep them open while the pandemic raged.

However, without the $5 trillion economic infusions, the economy would probably still be in recession. The pandemic recession was the shortest in U.S. history as a result of the federal government's record, fast-strike stimulus. By comparison, total aid during the Great Recession was about $1 trillion.

Now the U.S. is faced with a debt hangover. So, will this be the new subject for economists to chew on? Will the largest economy in the world, owning and controlling its own currency (the one used almost exclusively in major economic transactions throughout the world), be faced with insolvent social safety-net programs, inflation, higher interest rates, less domestic investment, and lower income growth? Some of that has already happened, including the highest inflation in 40 years.

With this debt, the U.S. economy will be tested. Currently, the debt compared to GDP is about the same as it was during World War II, at around 118 percent. Difference is, we are not at war, not yet, anyway. The current U.S. debt is not sustainable. If we go to war with the Russians, the Chinese (our largest borrower) may really test the U.S. economy. After all, Russia’s economy supports a debt-to-GDP ratio of only 19 percent; China’s ratio is 68 percent.