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.Interesting theory.
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
You mean, living within your means, not buying everything you want when you want it and putting something away for a rainy day was good advice when my parents gave it to me 35 years ago?
ReplyDeleteWho knew?
Yeah, I've been bewildered at how spending irresponsibly is supposed to get us out of a recession caused by...spending irresponsibly.
ReplyDeleteAt some point the bullet will need to be bitten and we'll have to *gasp* sacrifice a little. You know, pay slightly higher taxes for a while. Pay the piper, take our medicine, however you want to phrase it.
So I assume you want us out of Iraq and Afghanistan immediately? I certainly do, but there's no way you can spend $2 billion dollars a month (easily what those conflicts cost us--easily!) without a growing/expanding economy. I certainly have no problem with the idea of not spending what you don't have--but you cant have your cake and eat it too. New security systems at airports? Needed or not? I say no. Expanded border patrols--needed or not? I say no. Economic support to stabilize the Yemen government? That wont be cheap. The Chinese have a saying that "When your empire's so big the sun never descends on it, then the sun never descends on your problems." America is the land between the Atlantic and Pacific oceans. Its the land between Canada and Mexico along with Alaska and Hawaii. So why are we off halfway 'round the world mucking everything up? Our military should be at home, protecting America. Real America. Not protecting oil wells in Iraq and pipelines in Afghanistan. But you cant say you support the war effort without also saying you support economic growth and (sadly) Wall Street. Can't have (1) without the other.
ReplyDeleteLodo,
ReplyDeleteIt's difficult to see what we are gaining from being in Iraq and Afghanistan. Security? Nope. Access to oil? Perhaps, but at what cost? We may be better served investing that into new low-oil/no-oil technologies.
I agree that a growing/expanding economy is desirable. It's what we all want. What I don't agree on is that overspending by the federal government is the same thing as a growing/expanding economy. Going into ludicrous debt doesn't make our economy healthy and more than me maxing out my credit cards makes me rich.
To make matters worse, the administration (as the past administration) are giving billions to companies that don't produce anything of value to the economy. They're merely moving money around and taking a commission from it.
I think you and I are pretty much agree on this one.