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The U.S. Service Economy
During the Clinton presidencies the U.S. economy was converted from one of manufacturing and wealth creation to a service economy.  There are some who say that this is simply a manifestation of our relative personal wealth allowing us to be able to afford the luxury of having things done for us, but I would suggest that it is simply a product of a blizzard of phony money entering our economy via the Federal Reserve.  Additionally I believe that Americans are increasingly deceived into believing in this false sense of prosperity even as more spouses have to join the workforce.  Receiving and spending, not saving, this phony money and being deprived of the business cycle as a result, has created a national false sense of security.

Traditionally starting a restaurant has been a very risky enterprise that often led to failure for various reasons.  At least in South Florida it has been years since I have seen a restaurant become anything but wildly successful from the moment they open their doors.  Eating out, and an interest in food as a pastime are also manifest in TV chefs achieving the fame and celebrity status of Hollywood movie stars.  Heads of households are even supporting families as waters, which was a job traditionally reserved for kids and spouses since this occupation never before achieved the status of having any kind of permanency or stability.  Restaurants have always been in the front line of business failure in an economic slowdown.

When the economy slows and households are forced to cut back on spending, especially today when we have the lowest savings rate in the history of our republic, spending on service is the easiest place to cut a budget down.  When families are insecure as to whether they will see a next paycheck they will readily wash their own car, or cook or pack their own lunch for work, as well as paint their own fingernails.  When budgeting one of the most conspicuous areas to cut back is eating out, since perhaps 50 dollars worth of spending can be reduced to 5 or 10 dollars immediately, and the rest saved.

Thus the waitress winds up pounding the pavement in search of work and has no money to spend on getting her fingernails painted.  Next the fingernail salon goes out of business and this gal now has no money to spend on getting her car washed, and so it goes.  Certainly folks in these positions are no longer dreaming of their new car or refrigerator and so layoffs begin in some of the last few manufacturing jobs we have left.  People out of work are forced to come to terms with their installment payments and find that it was indeed a bad idea to buy more home than they could afford.  They are forced to put their home on a paper thin housing market with thousands of others.  Layoffs and bankruptcies throughout the building sector naturally follow what is now discovered to be one of the largest oversupplies of housing in history as they correctly presume that it will be years before demand for new homes is rekindled.  Laid off construction workers don't need their fast food lunches since they are home making bologna sandwiches to eat in front of the TV instead.  The razor-thin margined fast-food industry shops then drop like flies.

When we were a manufacturing economy with a normal business cycle excesses were wrung out periodically.  Manufacturers could often maintain employees and build inventory for anticipated demand in the next cycle of consumption.  Homebuilders could stand to build a little inventory as well, or contract work reducing or eliminating their profit simply to keep their valued employees working.  Restaurateurs unfortunately cannot inventory prepared meals so they, like all other service jobs will have to let employees go immediately or extend welfare from savings.  Home builders will not be able to inventory homes this time because the fraudulent extension on this business cycle will result in a far too deep of an adjustment on the downslide considering rampant housing speculation.

In the end the Keynesian phony money scheme will result in the greatest and most global economic failure in world history.  Few countries economies are going to be prepared to weather the rout.  The U.S. service economy perhaps least of all.