A perspective on the decline of manufacturing in the U.S.

You don't have to be an economist to understand that something is seriously, systemically wrong with the manufacturing industry in the United States. Consider the demise of the Great Lakes region in terms of employment and manufacturing.

First, you have to understand that the cheapest, most reliable way to transport tonnage over large distances is over water, if possible. If you have access to the Great Lakes, you have a direct water route to both international and domestic markets through the Atlantic and the Mississippi. This is a huge competitive advantage. How much extra costs do you have to pile on before that advantage evaporates? I don't have an exact number, but I know we've surpassed it. I know because people and companies are leaving the area and are not being replaced.

You can argue about the causes, but an exodus from an area that should be a geographic no-brainer from a manufacturer's point of view is an undeniable symptom that something is very wrong. The status quo is a loser.

I think we're finally getting to a point in our national conversation where things are becoming evident in terms everyone can clearly understand; dollars and cents. Good ideas attract cash. Bad ideas repel it.

Could a balanced budget send the U.S. economy to new highs?

You may find all the talk about Federal deficits and National debt boring or tedious, but something of pretty heavy global historic significance is taking place before our eyes. I find it fascinating.

The country is in the midst of deciding whether to limit the size and cost of Federal government or to continue to leave the upper limits an open question. Regardless of what you believe the government should or should not provide, a growing number of people are making those provisions contingent on operating within a budget. Even tithing is set, in most cases, at 10%. If religions can set a limit on how much they ask from their members, why can’t the government? The other option is to implement the programs and address the priorities you’ve decided to advance and worry about the fiscal consequences later.

If the United States actually implements a credible, feasible plan to get to and stay at a balanced budget, we will have achieved a level of fiscal strength unmatched around the globe. Europe’s string of bail out packages is just stall tactics. They have not addressed the underlying problems. Much of China’s growth has come from construction of cities that nobody lives in, highways nobody drives and mass transit systems they can’t maintain. This makes their numbers look good today, but they will be liabilities in the future.

A Constitutional amendment requiring a balanced budget is a must. Congress cannot write a law that binds a future Congress. Membership in Congress rolls over every two years. A plan that spans decades doesn’t stand a chance if it relies on the support of new members through several election cycles. They have to be bound by the Constitution. They could still over-ride spending limits with a ⅔ majority in case of emergency.

The underlying issue is that America may put fiscal and economic strength ahead of social and political agendas in the priority list. This would be a break from global consensus and a giant leap ahead of the pack for the United States.

Here we go again - European 3 card Monty

When is a default not a default? When it's a buyback!

The new, old strategy for dealing with Greece's debt problem is for the European Financial Stability Facility (aka taxpayer funded pile of money) to buy Greek bonds on the secondary market, then allow Greece to pay back less than the face amount of the bonds or "retire them at a discount".

This is really a variation on the "Special Purpose Facility" scheme in which a quasi-private entity is formed, which owns Greek bonds. The former bondholders are now shareholders in this entity and the entity is backed up by guarantees from the European Central Bank. In both scenarios, the end game is to relieve the bondholders (the folks who actually made the investments) from risk and instead, place the risk on European taxpayers (who had nothing to do with the bond purchase decisions).

To put the buyback program in perspective, let's say Bob and John are coworkers of yours. Bob owes John $100. It's beginning to look like Bob wont be able to pay it all back. Your boss steps in and buys the debt from John (so now Bob owes your boss $100). Then your boss tells Bob he only has to pay back $45 and takes the difference ($55) out of your paycheck.

Sound ridiculous? That's essentially what's being proposed. And if it works over there, they'll do it over here.