First I'll just mention that as we anticipated in the last post, Fannie and Freddie have been nationalized. This rated a front page fairly bold headline in the Salem Statesman Journal and an interview with Secretary of Treasury Henry Paulson on NPR this morning. I have the suspicion that I could ask ten people on the street and I'd be lucky if one of them knew about it.
Now back to our topic: what is "the economy". We are told that Fannie and Freddy had to be nationalized to save the economy. For the some workers this means that we can now be assured that if we sit in front of a computer screen for eight hours every day we will be able to make our house payment and car payment and buy food and household items produced in distant countries, and so life will go on as usual. For others the 8 hours in front of the computer may be replaced by eight hours or more driving a UPS truck or maybe wiring an office complex. For almost no one will it mean growing food for local consuption or manufacturing something. Manufacturing has been outsourced to other countries with lower wages, and likewise much of food production.
So what does the US economy actually produce that is of any use? I can't think of much, they say that 70% of our economy is in the service sector and retail. So we buy and sell stuff to each other and maybe provide services (James Kunstler's ubiquitous tanning salons, fitness centers, perhaps auto repair, carpet laying, etc.) Some of these things do seem useful around here, but can't be exported to the other parts of the world that we get our food and goods from.
It seems to me that right now we're pretty much living off the generosity of the rest of the world, which makes the stuff that we actually need. I can't see that we're giving them anything they need in return.