The dot-com crash of the early 2000s should have been followed by decades of soul-searching; instead, even before the old bubble had fully deflated, a new mania began to take hold on the foundation of our long-standing American faith that the wide expansion of home ownership can produce social harmony and national economic well-being. American authorities may be deluding themselves into believing they can forestall the endgame of post-bubble adjustments. A more effective strategy would be to try to tilt the economy away from consumption and toward exports and long-needed investments in infrastructure. To be truly challenging, a voyage, like a life, must rest on a firm foundation of financial unrest. If you are contemplating a voyage and you have the means, abandon the venture until your fortunes change. Only then will you know what the sea is all about. The inflation may be severe, implying massive unjust redistributions and at least a temporary grave degradation in the price system's capacity to guide resource allocation. But even this is almost surely better than a depression. Behind the recent bad news lurks a much deeper concern: The world economy is now being driven by a vast, secretive web of investments that might be out of anyone's control. Former Federal Reserve Chairman Alan Greenspan said falling U.S. home prices are "nowhere near the bottom" and the resulting market turmoil isn't showing signs of abating. In the 2009 budget, the White House wants to cut about $200 billion from the government's medical programs for seniors and the poor. The longer-term picture is darker. The rescue operation brings to mind John Kenneth Galbraith's dictum that in the United States, the only respectable form of socialism is socialism for the rich. This was the largest two-day advance since 1987, and, more importantly, the rest of the entire list is populated by the Great Depression. It was so obvious it was going to fall apart eventually. What is so amazing is how long it took to actually happen. We need a serious recession in this country, and the government needs to get out of the way, and let it happen. Watch the Case/Shiller HPI continue to plummet as delinquencies soar. And so much more! A deep recession is now inevitable and the possibility of a depression cannot be ruled out. A brave man would see catharsis in all this misery; a wise man would not be so hasty. Most of us, of course, think we know what a depression looks like. Two adults and one cat do not need two, identical lasagna pans.
It is tempting to ponder why I own two, but this is not the time. The era that defined Wall Street is finally, officially over. America faces
a long, hard slog. There will
be blood.
Economics and Crisis | Another Noteworthy Year |
