A recent USA Today article, “U.S. debt shrinking at a glacial pace” said that eighteen months into a deep recession, consumers have made little progress shrinking a mountain of debt.
In contrast, the Des Moines Business Record suggested in the same week that we are on the cusp of stabilization in its article, “Economists say consumer spending will spur growth.”
It’s tough to determine which article has the more accurate outlook. But I believe “Glacial Pace” paints a better picture of what we’re in store for. There is just too much debt out there.
If we “fix” this in short order, everyone would be happy, but that just is not reality. The price of band-aid fixes is significantly higher down the road.
In step with the credit union way of responsible money management, the U.S. needs to pay down their debt yesterday. The longer we wait, the more painful it will be.
5 comments so far
1 Jeffry Pilcher // Sep 4, 2009 at 7:20 pm
Let’s recap.
Back in the late 90s, the market exploded.
It was irrational exuberance known as “the dotcom boom.”
But jinkies… No business model, no revenues.
So then there was the dotcom bust.
Recession… Boooo!!!
Cut the Fed rate for 42 straight months and…
Whammy! Recession fixed!
Money’s cheap, times are good.
V-shaped rebound! Yipee!
But everyone’s buying more than they should.
And it’s all on credit.
People buy houses.
Companies bet on each other’s debts.
Then they insure the bets.
But jinkies… It takes more than debt and bets to make an economy work.
(Clue: This country doesn’t make anything.)
So then there was the financial meltdown.
Hmmm, how do we solve this nasty credit crisis?
Holy bailout Batman, I’ve got it! More debt!
How about piling on a few trillion more in IOUs?
Bingo! That worked better than an infomercial!
V-shaped recovery! Hurrah!
Green shoots.
All is well.
You know what all these V-shaped rebounds look like?
VVVVVVVVVVV
We haven’t solved an economic problem in 50 years.
We’ve just substituted one problem for the next.
Does the government really believe that everyone from Joe Average all the way up to Uncle Sam can pile up a mountain of debt without any consequences?
Who knows what the next problem will be… Maybe we should give inflation a try.
We are trapped in an economic cycle of violence.
One thing is for sure. The blame for the next financial crisis is already fixed.
2 Denny DeGroote // Sep 9, 2009 at 11:41 am
Jeffrey,
Excellent assessment!
And now the government has the gall to blame us for being un-American because we question their antics -excuse me, tactics.
3 Jeffry Pilcher // Sep 10, 2009 at 11:52 am
To this American, the government should stay out of our lives and out of our business(es). We don’t need their “help” (or at least their version of it). We don’t need to be encouraged to buy more stuff — more cars, more houses — with government incentives to artificially prop-up industries. We don’t need to be manipulated like dumb pawns in an “economic stimulus plan.” If your industry isn’t sustainable, too bad. You need to learn to sink or swim without this taxpayer’s assistance, thank you very much.
If you think back about how this republic was created, the federal government was established to fulfill specific needs — a military, interstate facilitation and regulation, etc. States were largely supposed to be free to determine their own policies. Simply put, this country was founded on the principal that a large, centrally controlled, national government was NOT the right way — e.g., monarchies, dictatorships, fascists. So how did we end up here, with this bloated bastard of democracy (for which blame is equally distributed between both parties). States are not free to control their own destinies. People are not free to make their own decisions. Uncle Sam runs the country now, and with a heavy, omni-present fist.
Any short-sighted moron with a pen can pass legislation that leverages our future for a short-term gain today. Sure, that may get you re-elected, but it doesn’t solve our problems. Real leadership means treating the root causes, not applying ointments to alleviate topical symptoms. Real leadership means making decisions that might not be popular, that don’t please everyone, and might not get you re-elected. Real leadership means returning to the fundamentals of this democracy, this republic and our economy.
If I was elected to Congress, my primary mission would be to see how little legislation I could pass. How many more laws, new laws do we need? We don’t need thousand-page bills. Alas, our so-called leaders are too afraid of “doing nothing”; they assume “leadership” = “more legislation.” But if we pass mountains of reactionary legislation every time there’s a “crisis,” we’ll eventually legislate every last one of our “freedoms” away.
One of the core problems facing this country is excessive consumerism. We buy too much stuff we don’t need with money we don’t have (and much of it just ends up in landfills). We act like spoiled brats who think they deserve everything — two houses, four cars, a boat, an RV, a riding mower, an ATV, Xbox, Playstation, Wii, etc., etc., etc., etc. We act like we’re entitled to all these things, when really these things are privileges to be earned through hard work and savings.
Do we need new laws, more laws to fix this kind of problem? No. Do we need trillion-dollar budgets? No. We need leadership. We need to fundamentally reset this country’s relationship to money. We need to pay down our debts (both personally and nationally). We need to learn to want less and live within our means. We need to relearn the value of thrift and the responsibility of savings.
Would the shift from an economy driven by wants+credit to one driven by needs+savings be easy? No. It would be extremely painful. And it could take a long time. But we would have a much healthier economy on the backside.
Unfortunately, we lack the leadership, the courage, the desire, the discipline and the patience to really address the core issues this country faces. That’s why it’s easier for our legislators to distract themselves — and us — with other things like abortion, drugs and gay marriage.
4 Jeffry Pilcher // Sep 14, 2009 at 12:56 pm
http://pragcap.com/after-the-boom-there-will-be-a-bust
5 Denny DeGroote // Sep 14, 2009 at 4:25 pm
Thrift and savings!! Ah yes, something I learned about over 45 years ago when I got my first job - a paper route. And then there was mowing lawns. The sky was the limit - the limit to the extent I was willing to work.
And so, not being one to sit around when there was money to be made, there was the bean walking, and the corn shelling, and the hay baling, and working at my uncle’s gas station
It was all hard-earned money. And lessons on how to manage it came from the understanding that it was my doing that produced it. It wasn’t going to be there from any handout.
And so, thrift and saving came about naturally.
Well, it maybe doesn’t come about so easily today, but there is help for those who never learned these important lessons (or maybe did and need a refresher).
Credit unions - who’d have ever thought that something as elementary as a cooperative could be such likely solution.
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