November 21, 2008
The bold new grant of authority over approximately $700B of what appears to be discretionary spending to the Treasury may not ring the death’s knell of the American economy. The shakedown in the housing market might clear the way for more robust development of the new American continent, on the Internet.
America has always been a place of dreams, the vast continent stretching out a promise of opportunity to its restless people far from the cramped provincialism of Europe’s blood-soaked soil. The closing years of the twentieth century unveiled the discovery of a New “New World.” Originally dubbed, “Cyberspace,” a new place emerged on the Internet where business could unfold in creative and extremely powerful new ways.
The economic boom that followed the growth of the Internet may be greater than the scale of the invention of the railroad in improving commerce. The potential of technology however, we recently learned, is also fraught with peril. Increasingly more complicated investment technology allowed a proliferation of speculative products that ultimately floated way too far from the actual value of tangible assets.
The economic shock of the mortgage crisis was sobering. But it was not a mortal blow, far from it. In fact, with the mandate for a new Congress to more actively regulate the financial industries, a new dawn of development of the vast economic potential of the Internet may be on the horizon.
We might look at the vast capital infusions required to steady the market not as a concession of defeat, but rather the house-cleaning required to clear the way for a more efficient, robust and more globally integrated economy. The so-called “TARP” package may represent a post-facto government authorization to finance whatever measures are necessary to follow through with the stabilization and development of the global tech revolution, previously bankrolled by the private sector.
Generally, a nation or state that is planning a massive refurbishing of infrastructure would precede any construction with a significant bond issue. For example, in the private sector, the software industry and the pharmaceutical industry are dependent on massive outlays of capital for research and development up front long before profitability is reached. So too, the investors in government infrastructure understand the nation’s need for capital does not reflect weakness of its underlying economy, but represents an intermediary stage before needed growth can take place. Significant amount of capital is needed up front in order to stabilize other spending projects at the same time that the foundations for the new infrastructure and put in place.
Until recent times, the world’s economies were based primarily on agriculture. The industrial revolution shifted the basis of economies to manufacturing. The tech boom helped shift the economy to a service-based economy. The trend of technological investment gradually lifts nations up from being dependant on the physical world for their livelihood, and overlays greater and greater degrees of sophisticated “emergent” markets and industries atop the established economic bases.
The industrial revolution did not eliminate the need for agriculture, nor did the tech boom do away with industry, but these innovations served to shift the perfected model of these established industries from leading nations, to other, less stable nations to transition themselves into their next state of development.
With the tech boom and Internet revolution, however, a startling change took place. An entirely new industry emerged virtually overnight. Not just in the computer industry, which has been the province of engineers for decades. Rather, the tech boom shifted to all other industries the benefits of an extremely potent force for greater efficiency and innovation. Does it make sense to say that the unprecedented innovations and efficiencies brought about by email, online commerce, access to research and information, and other boons of the tech age, should not be reflected in the value of other U.S. companies together? We may in our lifetime, with the help of Gd, live to see the “information age,” cede to a long-anticipated age where the most sought-after commodity on the planet is not physical capital, or information, but wisdom.
Therefore, the massive advances authorized by the Congress to the Treasury do not reflect a fundamental flaw in the U.S. economy, nor does it damn the nation to being a vassal state to creditors for generations to come. The “bailout” package reflects the premium that private investors and foreign markets have placed on the stability and continuity of the U.S. market. The U.S. market, which encourages innovative thinking, entrepreneurial spirit, and a robust exchange of ideas, was the birthplace of the innovations that fuel these nations, and continues to contribute to their going welfare. Besides, it’s doubtful that any foreign nation wants to see its internet service get unplugged because the United States can’t pay the power bill.
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