We have been for the better part of two years. Now, we could spend a lot of time talking about who did what to whom to cause the economic meltdown in the first place (it was politicians and investment bankers, btw). The truth is, pretty much everyone played some part in what I call Economageddon (but mostly it was politicians and investment bankers).
But who likes to focus on blame and bad news. Not me. Rather, let's consider what we need to do to dig ourselves out of this hole. Now some people -- namely everyone in any governmental position of power -- think the best way to dig ourselves out is to keep digging deeper. They theorize that spending more money that we don't have will miraculously translate into everyone having more money in the end.
But there are also a lot of people -- namely millions of ordinary, hard working Americans -- who realize that spending what you don't have is kind of what got is into this mess in the first place.
This is the good news. This is the silver lining. Because even though it’s a bitter pill and it means we'll have to live with spending less and having less "stuff", it is the path back to economic solvency.
I recently discovered Mike Mandel's blog (great analysis on economic/financial data) and found the chart illustrating household borrowing over the last 20 years.
The keen observer will note that household borrowing has fallen so much that it is now negative. That's right, for the first time in the Age of Information, American households are saving money. We're slowly digging ourselves out of the debt hole we've dug over the previous decades.
Of course, this isn't the whole solution. Our government leaders are still spending way more money than we have, which is actually reducing our national net savings despite what individual households are doing.
But my hope is that we're seeing a shift in attitude. That people are accepting the fact that we can't continue to spend what we don't have. And with time and enough ridiculous bailouts (yes, that's California looking for a handout), this attitude will trickle up to the boneheads who hold the power of our national purse.
It's not going to be easy. A cool 70 percent of our economy comes from consumer spending, and with consumers saving more and spending less there will have to be some major adjustments. But that's the pill we have to swallow.
And it won't be quick. Hell, I don't even know if it will happen in time to avert the global social breakdown (currently scheduled for the third quarter of 2013, fyi).
But it's a good start.
tagged: economy, household savings, debt, spending, Mark Mangino