From Makers to Takers

Founder Bill Bonner And all the towns and people seem
To fade into a bad dream
And the steel rails still ain't heard the news.
The conductor sings his song again,
The passengers will please refrain
This train's got the disappearing railroad blues.
-- Steve Goodman

The Acela Express train from Penn Station in New York left on schedule. It entered the tunnel to cross the Hudson into New Jersey. But when it came out there was nothing to see. A thick fog lay over the whole area.

Ghost like, we passed abandoned factories, wrecked warehouses, and areas that seemed devoted to collecting and recycling industrial relics -- mountains of bent and rusty steel... Everests of broken concrete... and what looked like whole blocks full of abandoned junk.

We looked out the window, curious about what goes on in this part of the world. Amid the phantoms, do real people still live here? Do they still do real work?

They must. Many of the buildings had broken out windows... but others looked freshly painted with rows of tractor trailers waiting to take something somewhere.

There were also areas of modest worker housing... not abandoned... but actually lived in. Or else, someone went to a lot of trouble to fool us... there were modern automobiles in front of the row houses. And parking lots full next to the old warehouses.

We breathed a sigh of relief. The Northeast Corridor has not been entirely taken over by zombies. There are still people who work in America!

But wait...

The train slid into Trenton... Had the city fathers finally given up the advertising that welcomed visitors since the Great Depression? Or was it still there, announcing a world that died half a century ago?

We held our breath. Then we realized we had missed it. Or it had come down?

Oh, say can you see... does the town motto still proudly and fraudulently proclaim: "TRENTON MAKES THE WORLD TAKES"?

We checked Google. The Warren Street Bridge, built in 1935, still has the motto on it.

Slipping Into Zombiedom

Trenton ain't heard the news...

Fifty years ago, Trenton was a city of middle-class makers. Now, it is a city of takers. Folks here take food stamps, disability payments, poverty grants, subsidies, bailouts. Twenty-one percent of Trenton residents "live in poverty," say the press reports. The rest must live in houses. Or in shame.

Many of the people of Trenton -- like the people of so many of America's cities and suburbs -- have slipped from middle-class makers to zombie-class takers.

What happened?

The feds undermined America's middle-class economy with cheap money. They gave out free money and credit. Consumers used it -- like the Romans during the late imperial period of the second to fifth centuries -- and the Spaniards during the 16th and 17th centuries -- to buy stuff.

When you can get stuff without producing anything, why bother?

The Romans took money from the people they conquered. When the conquests ran out in the first century AD, they began inflating their currency. The Spaniards got their gold from the Aztecs and Incas. Instead of producing things, they used it to buy things from foreigners. Overseas industries prospered. Spanish industries shriveled and rusted.

Trenton stopped making in the 1980s and 1990s. Instead, the people of New Jersey bought what they needed from China. And Saudi Arabia. On credit.

And now... surprise, surprise... Trenton's middle class is struggling.

Good jobs are hard to find. Housing prices are low. And taking inflation into account, a $1,000 investment in the stock market 12 years ago is now worth $884.

But aren't things picking up? Maybe. But in the final quarter of 2012, U.S. GDP fell by an annual rate of -0.1%. Why? Largely because the Pentagon cut its spending $40 billion. From The New York Times:

The United States economy unexpectedly reversed course in the final quarter of 2012 and contracted at a 0.1% rate, the Commerce Department said Wednesday, its worst performance since the aftermath of the financial crisis in 2009.

The drop in gross domestic product was driven by a plunge in military spending, as well as fewer exports and a steep slowdown in the buildup of inventories by businesses. Anxieties about the fiscal impasse in Washington also contributed to the slowdown, one reason stockpiles grew more slowly.

The 22.2% drop in military spending -- the sharpest quarterly drop in more than four decades -- along with the drop in inventories and exports overwhelmed more positive indicators in the private sector, [Michael Feroli, chief U.S. economist at JPMorgan] said.

We have previously reported that the manufacturing comeback in the U.S. is not based on making real things for real buyers. Forty percent of U.S. manufacturing is for the military. Take it away and the economy is in trouble.


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