The Real Crisis of Our Nation

There is a lot of clamor about dire economic conditions these days and now it's even spreading beyond the White House. Peoples' ability to pay for things has been seriously curtailed and in a consumer economy that is a painful situation.

I do not want to deny the danger of a falling economy or belittle the struggles of many people who will be hurt by it, but I do want us to give this situation some perspective on the true crisis we face. If we will just look up from our navel-gazing for a moment to look forward and backward, we may realize a few things:

1. Our situation is not that bad. Consider our situation in comparison with that large trial that the President loves to liken ours' to - the Great Depression. First of all, we have way more stuff than they did back then. Life is dramatically easier and more comfortable while at a relatively low price. We have TVs, microwaves, highly advanced vehicles, computers, too much food, the internet. Heck, even electricity is really quite cheap, for now.

No, technology cannot save us and continues to threaten us in some ways, but the fact is that we are very well off. You ask someone who lived through the Great Depression what it was like and then count your many comfortable blessings.

2. Our economy will recover if given a chance; it always does. I refer you here to Kondratieff's Long Wave Theory about economic cycles, not surfing. Go ahead and look it up or check out this very helpful link: http://www.kwaves.com/kond_overview.htm

The gist of it is that our economy moves in waves over many years based not on complicated mechanisms or calculations, but essentially on human behavior. Things begin going well as we find a winning solution to grow the economy. Out of these roots we grow robustly and reap the rich fruits of our growth. Then we become greedy and shift our focus from growth to consumption. Once production is overrun by consumption, we fall until we begin to learn how to grow again.

The problem right now is that our mechanisms for saving for the fall and winter times are unsteady. In the Great Depression they completely failed. Ours are not beyond saving. This more than anything right now is the problem we must be addressing, but still are not getting our Geithner in gear.

3. Once we recognize the core of the issue, we also realize that we as well as our government are all complicit in this affair. Our economy's contraction is a natural response to careless consumption on every level of society. We did it, our neighbors did it, the investors ("fat cats" to you populists) did it, the government did it. I am sick and tired of all the finger-pointing going on over this "economic crisis." Wall Street/Main Street, fat cats, golden parachutes. It's like children calling each other names on a playground.

Once all of us pots and kettles realize they we all have a bit of a charcoal tint, we can get on with the task ahead of us - planting seeds and growing. Anyone who assigns the blame for our situation to any person, group, or class has an agenda to sell.

4. Considering how we got here also illuminates that this is not really an economic crisis so much as it is a return to economic reality. We have been living in a bubble for many years now. In fact, you could almost say that we have been in something like a giant Ponzi scheme where as long as we kept buying into it, we got payoffs. Now we're out of cash and we need to go back to work.

Reality came calling and caught us with our pants down. The temptation now is to say that our pants are not down and we are actually dressed in the finest new clothes, because we are the emperor of the world, right?

Recently on Glenn Beck's TV show, he showed a graph charting average home prices over the years. Home prices had fluctuated based on various economic times, but the average and most stable home price over the decades was around $100,000 (inflation adjusted). The graph showed average home prices rising rapidly over the 90s and into the 2000s to almost $200,000, and we have only just begun the drop down to normal prices.

The graph was skewed to emphasize the bubble, but the fact is that the housing industry was at an unrealistic and unsustainable level. This led to unrealistic and unsustainable equity which led to unrealistic and unsustainable consumption. Policy-makers helped create the boom by setting interest rates extra low at the Fed to make borrowing easy and by creating programs and "government sponsored enterprises" to make borrowing even easier for people who could not afford to pay.

This is why I say this is not really an economic crisis. This is just reality. So don't let anyone tell you that times are really unfairly bad for us, that we deserve better, or that we can return to the same levels of ease and consumption we enjoyed for many years. We have to return to real life, which is not very comfortable. As the Dread Pirate Roberts said, "Life is pain, highness. Anyone who says differently is selling something." Like a stimulus bill.

5. Once we realize all this, we can address our problems with clearer vision. Unfortunately, our government has not made the step past the bubble. The whole "stimulus" plan was built on bubble ideas. "If we spend, no, reinvest more, then we'll keep prospering like we did before." That is just part of the Ponzi scheme lie that got us here. That's like trying to make a mound bigger by scooping dirt from the bottom of the mound to put on the top. It doesn't make the mound bigger, only less stable.

This is the real crisis. G. K. Chesterton said, "When men have come to the edge of a precipice, it is the lover of life who has the spirit to leap backwards, and only the pessimist who continues to believe in progress." We have brought ourselves to the edge economically by our accumulated mistakes and blindness. Our economy is responding by shedding the unnecessary fat and making the painful return to realism. It is our government now which may push us over the edge.

Our President and Congress' quixotic charge to "stimulate" our economy and maintain failing institutions could push us toward national bankruptcy. My last post outlined how this exact situation occurred in India and could happen to any country that spends more than the economy can sustain. Every dollar of deficit spending is another dollar of new growth that must be used to pay off the government's debts rather than build a new future.

The deficit "stimulus" spending is a lie. The money would have been spent, invested, or saved all on its own by the people who earned it. That "stimulus" was not the government's money. But now that the government committed to spend it, the government committed us (people) to give that money to it.

At our point of greatest exhaustion, the government may suck away the life on which we need to recover. This is why I am scared. This is why I am angry. This is why I criticize and dislike our new administration and Congress. They are painting a smile on a dead horse and beating it some more. They are using Depression-era ideas while pronouncing the death of the Reagan era.

Their actions do not encourage new growth of the people, by the people, and for the people in the economy, but only grow their own power, the burden of which must be carried by the people. This is why they will fail, politically, economically, and eventually electorally if they do not try some change. Let us hope they don't drag us with them.