Deeper trouble
December 24th, 2008 1:40 pm · 16 comments
Tom Friedman builds on the ominous sentiment expressed by Krugman yesterday:
For all these reasons, our present crisis is not just a financial meltdown crying out for a cash injection. We are in much deeper trouble. In fact, we as a country have become General Motors — as a result of our national drift. Look in the mirror: G.M. is us.
That’s why we don’t just need a bailout. We need a reboot.
I’ll sort of lay off the gloom and doom pre-holiday, but for several weeks now I’ve had the nagging feeling that what Friedman is saying here is correct. This isn’t just some funk we’re going to shake ourselves out of and keep on keeping on. The year 2009 is going to be one of fundamental change, fundamental instability, as the last half of 2008 was. This is “deeper trouble,” and I just don’t think we grasp it yet. We will.
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Tags: Economy
There are currently 16 comments on this blog postView Topic | Comment on this blogArtie See
12/24/08
2:30 PM | The year 2009 is going to be one of fundamental change
Fundamental change that is long overdue. No individual, family, group, organization, company, or government can borrow more and more and more and more and more and more and more money indefinitely. It doesn't matter whether it is a home equity loan used to purchase consumer goods, huge Federal deficits used to finance tax cuts that primarily benefit those who are financially well-off, or $140 million for a government-owned "private" hotel and public convention center that our grandchildren will still be paying for well over 38 years from now; they are all one and the same. This indebtedness is what has been sucking the lifeblood out of our economy since the early 1980s.
Compounding the problem is the seemingly insatiable appetite for consumer goods and expendable items which must be imported from overseas, whether they be toys, televisions or other electronics, fixtures furnishings & equipment for the hotel and convention center, or soldiers' U.S. Army boots that are no longer manufactured in the U.S. The resulting international trade deficit is not sustainable, and can only be rectified by the inevitable dramatic decrease in the value of the U.S. dollar.
This is “deeper trouble”
"Deeper" as in our standard of living will fall? You can count on that happening; it is inevitable, after the excesses of the last nearly three decades. But in the long run, this is good: once the imbalances inevitably work their way out of the system, which they will, the U.S. will end up with a sustainable economy.
What is the cost? Smaller houses, fewer electronics and other toys. More one car families, driving a compact instead of an SUV. Less eating out, more home cooked meals. Fewer changes of clothes. Many more staycations instead of vacations. And unfortunately, a shorter life expectancy, as health care becomes increasingly unaffordable. But I'll bet that people overall will be happier than they are right now, as the attention of many people shifts AWAY from material goods. |
gsmart
12/24/08
2:52 PM | What is the cost? Smaller houses, fewer electronics and other toys. More one car families, driving a compact instead of an SUV. Less eating out, more home cooked meals. Fewer changes of clothes. Many more staycations instead of vacations. And unfortunately, a shorter life expectancy, as health care becomes increasingly unaffordable. But I'll bet that people overall will be happier than they are right now, as the attention of many people shifts AWAY from material goods.
I agree with much of this, though I also see the possibility for significalt domestic unrest. Depending on just how unaffordable health care becomes, for instance, or how high unemployment goes.
We in this country have been conditions to expect certain things, a certain standard of living, a certain material affluence (if not actual affluence - we don't have to be rich, so long as we have a big-screen TV, even if we're renting it). If these things go away, I'm just not confident that Americans will react well to it. I don't know that we can handle forced austerity. And that creates a political crisis.
One hopes, as you say, people will rediscover the things that are really important. May need 'em, if the dire predictions are correct. |
lanzate
12/24/08
3:36 PM | There is some truth in this article but it is also typical of an americia who explores china skin deep. He sounds like someone who never got beyond his 5 star Hong Kong hotel, bullet trains, and fancy airports. China has a facade of a middle class as long as you don't look too hard. The bullet train was only built for foreigners who visit the fancy hotels. It doesn't go anywhere useful for the average chinese. |
WinstonTheLastHuman
12/24/08
4:45 PM | Friedman, globalism's number one cheerleader (btw, globalism is just another term for the dreaded new world order), calling for fundamental change.......what's that? brenton woods II? global governance? global currency? probably not the next step (that would be "regional" as in the trilateral commission, as in brezinski, as in obama's advisor) but certainly in the future........but, hey, that is all crazy talk |
lanzate
12/24/08
8:32 PM | quote from Brezinski
“In the economic-technological field, some international cooperation has already been achieved, but further progress will require greater American sacrifices. More intensive efforts to shape a new world monetary structure will have to be undertaken, with some consequent risk to the present relatively favorable American position.”
World currency is not a question of "if" but when. Personally I think it will be rather subtle as people like this guy gain power in the international scene. Obama just better know what's going on. World currency is not what scares me, it is the cloaked centralized power behind it that is down right frightening.
...and on that thought, I think I have some presents left to wrap. |
Artie See
12/24/08
9:18 PM | If these things go away, I'm just not confident that Americans will react well to it. I don't know that we can handle forced austerity. And that creates a political crisis.
I had to think about this for a while before I could reply to it.
In my opinion, the best way to approach this issue is from the perspective of history. We didn't see large amounts of civil unrest in the 1930s, when the U.S. was in the middle of a huge financial crisis. I don't expect that the inevitable reduction in our standard of living will happen overnight; whether you've noticed it or not, these changes have already been underway for the last seven years or so. Issues that creep up on us tend to have less of an impact than sudden changes do.
I know you are far too young to remember this, but I do all too well: there WERE riots in the 1960s, including right here in Lancaster City. Historically, people tend to riot when they feel oppressed. In the 1960s, riots were caused by the dramatic economic disparity between whites and blacks, when black people really were oppressed by the white majority. The other cause of riots was the draft during another unnecessary and unpopular war; when Nixon ended the draft, rioting faded away. Notice how there were no riots against the invasion and occupation of Iraq, even though there was vocal opposition to that war; most likely, this is because there is now no draft.
Another mitigating factor is the ultra-conservative movement which has heavily influenced so much of the U.S. population. Many people really do believe in "personal responsibility", which actually means "survival of the fittest". People who have made a firm stand against providing assistance for those who are in need through no fault of their own will have a VERY hard time justifying asking for that kind of help themselves when they eventually need it.
Another side effect of the ultra-conservative movement is their stand against labor unions, which is especially strong in Lancaster County. As employers no longer provide cost-of-living raises that keep up with inflation (which is already quite common) and require their employees to pay more and more toward their health care coverage, followers of the ultra-conservative philosophy have no recourse to complain about their own predicament. (It will be interesting to see if employers continue to subsidize 401K retirement accounts, now that so many are suspending contributions due to the economy.)
I really don't believe the reduction in our standard of living will be so sudden or dramatic as to cause civil or political unrest. But the lowering of our standard of living is inevitable, as the value of the U.S. dollar must drop to start to correct the horrific financial imbalances which have developed in this country over the last three decades or so.
Gil, I admit to being a pessimist. But there are times that I have more faith that things will work out than you do. |
lanzate
12/24/08
10:00 PM | Another side effect of the ultra-conservative movement is their stand against labor unions, which is especially strong in Lancaster County. As employers no longer provide cost-of-living raises that keep up with inflation (which is already quite common) and require their employees to pay more and more toward their health care coverage, followers of the ultra-conservative philosophy have no recourse to complain about their own predicament. (It will be interesting to see if employers continue to subsidize 401K retirement accounts, now that so many are suspending contributions due to the economy.)
But Artie, why is it that "ultra-conservative" lancaster county is voted as in the top 10 best places to ride out the economic recession by Forbes Magazine? Our houses have not really drop in value, employment is still strong, most lancasterians manage debt extremely well, etc.etc.
It is called personal responsibility and integrity that is better than the average. You can mock ultra conservative all you want but they are the ones saving this county. |
PedroHead
12/24/08
10:28 PM | A lot of people will learn that being "cool" does not involve matching your neighbors/friends debt. Being "cool" means being prepared for the future. As someone in financial services I see the silliness every single day. I see the waitress driving the BMW. I see the sales assistant driving the Mercedes. And, I have thought for years, just wait until reality comes home. Your car should not cost more than you make in a given year. Or two.
Just today I was listening to a talk radio call- in show while getting ready for Christmas eve and almost cut off my lip while shaving. The caller was inquiring about FHA home loans and the conversation lead to what debts the caller had. Sooooo, the idiot then mentions that he has a $700/month car payment! All I can picture is that he is living in a trailer but driving a Porsche.
Yeah, idiots like this p!ss me off to no end. We save 30% of what we make and we and our kids will be paying for this fool to get off the hook for the rest of our lives. Where, oh where, is the culpability? If I walked into a store and stole something I go to jail. Alas, many people these days will walk away with a "bailout" that I pay for. In my mind, if you take something you cannot afford (i.e. a loan, a pack of gum, or a pair of jeans) you have a meeting with the courts.
But, we seem to feel the need to tell these people that it is ok so long as it a loan and not a physical object. Yeah, you got a bum deal. Some mortgage guy approved you and you were too much of a moron to figure out you could not afford it. Hmmm, dealt a bad deck, right? How is that any different than the poor dude who steals because he has no money and cannot afford "it".
I am rambling. It is going to be and already is a rude awakening for a lot of people. Keeping up with the Jones's will soon involve talking about how much you save monthly versus how much horsepower your car has or how many bedrooms you have. It is about time. |
Artie See
12/25/08
6:21 AM | It is called personal responsibility and integrity that is better than the average. You can mock ultra conservative all you want but they are the ones saving this county.
I'm not mocking ultra-conservatives. I'm pointing out that people who so strongly believe in personal responsibility - to the exclusion of helping each other out - will have no room to complain when their own standard of living falls. And it will. |
gsmart
12/26/08
9:24 AM | In my opinion, the best way to approach this issue is from the perspective of history.
Artie, I partially agree with you, but want to point out - this isn't the United States of the 1920s, a rising global hegemon despite the hardships of the Great Depression. This is the United States as a mature hegemon - and therein, I think, lies all the difference.
Whatever prosperity Americans enjoyed prior to the 1930s, the U.S. was not yet the world's dominant economy. There was a tremendous disparity between rich and poor; the social safety net we now take for granted had not yet been constructed. The consumer society was in its infancy.
Fast-forward to now. Between then and now we have attained a degree of material prosperity unmatched in history. Even though, as you note, that prospertity has been ebbing for several years - and as I've pointed out here on several occasions, wages have been flat for decades - we now face the prospect of vastly, rapidly diminished economic horizons.
Consider that the concept of the frontier has always been important in American history, in American thinking. Americans believe the frontier is boundless and all we have to do is keep pushing forward and we can continually reinvent ourselves; where the physical frontier closed in the late 1800s the country itself became more and more of a player on the world stage, first with World War I and then definitively with World War II; upon becoming a global hegemon we've bounded off into the frontier in financial terms; the world's most important market, the repository for the world's investment, etc.
And on a personal level - a hallmark of Americanism has been the belief that your children will be better off than you have been.
Can we honestly say that this is the case going forward?
We got a little too creative, didn't we? The frontier doesn't go on forever; sooner or later you reach the far shore; challenges to your global hegemony arise, you stumble financially and where the societal financial infrastructure has been allowed to rot - as has most certainly been the case in this country - then you have reached the end of the frontier. Then you have to think in terms of sustainability; not of unbridled growth but drastically diminished growth.
That goes against our entire American way of thinking. And I just don't think we're ready to change; but change is going to be forced upon us, whether we like it or not.
I suggest to you that what we have been seeing represents the end of the United States as we know it - the beginning of a decline that has always been inevitable, the seeds of which were planted years, maybe even decades ago.
It is a decline which will have serious globo-political consequences, as our economic contraction has global economic repercussions, and wars have always been generated from such events. China is the rising hegemon - in many respects, akin to the type of country we were in the 1920s. They are going to seek a growing authority in world events. Will we not try to prevent this challenge to our own authority? Of course we will.
But as in Iraq, our meeting that challenge will hasten our decline. Great Britain "won" World War II, after all - but that war, and the immediate aftermath, marked the end of the U.K. as the predominant global power. |
Artie See
12/26/08
2:40 PM | I suggest to you that what we have been seeing represents the end of the United States as we know it - the beginning of a decline that has always been inevitable, the seeds of which were planted years, maybe even decades ago.
Gil, I'm going to partially disagree with you on that point. Most certainly the United States and its people WILL change, and yes it has always been inevitable. But the U.S. has historically always found a way to adapt to change.
Will life - and politics - in the U.S. be different? Most certainly. Will either become unrecognizable? Not necessarily. Short-sighted and/or narrow-minded leadership could most certainly guide our country down a very dark path. But I believe that the pendulum swings both ways, and U.S. history supports that belief.
It is most highly probable that the United States and its people will indeed recover from its current self-induced woes; definitely with a lower standard of living, most likely less greedy and selfish. And no longer the sole world leader that it once was. But the U.S. has survived far worse crises in the past; I have faith that the U.S. will emerge from this mess wiser than before, just as it has on many different occasions.
I still have trouble accepting that a confirmed pessimist like myself has a more optimistic view of the future than you do. I agree with you that together we face many very serious obstacles and their consequences; you need look no further than out one of the east-facing windows in your office to see one of them. But in spite of grossly misguided leadership, both locally and nationally, I believe the people of the United States will eventually work things out. After all, the pendulum has always swung both ways. |
gsmart
12/26/08
4:54 PM | Gil, I'm going to partially disagree with you on that point. Most certainly the United States and its people WILL change, and yes it has always been inevitable. But the U.S. has historically always found a way to adapt to change.
Here's to hoping your right and I'm wrong. What's on the horizon will require diminished expectations; I hope we can do that without the political upheaval that often accompanies such downsizing. |
Artie See
12/26/08
5:15 PM | What's on the horizon will require diminished expectations
A statement we can all agree with. |
clanker
12/26/08
5:41 PM | Is it possible that the American public, in general, has a short memory and trouble seeing the big picture? Perhaps there are still too many that feel they have a God-given right to consume and consume some more and are in denial about an America that has to adapt.
http://money.cnn.com/2008/12/22/autos/trucks_back/index.htm |
lee41
12/26/08
9:25 PM | Missing in the discussion is that the US economy has transitioned away from a manufacturing driven economy and replaced with a consumer service driven economy. I fail to see how that is sustainable.
This transition was sold as being good for America (cheaper goods), when in fact its goal was short term financial gains (by reducing production costs) that would necessarily result in the lowering of living standards for the vast majority of Americans.
The more 'cheap' stuff from overseas we buy, the lower the living standard goes. "Buy American" has become almost impossible. And with that, the "American Dream" will need to be re-defined.
Anyone remember the Jib Jab 'Big Box Mart'? That's what is coming.
And of course, Republicans demanded that UAW wages be brought in line with those of the foreign brands (which when you exclude legacy costs they were already competitive) but NOTHING about soaring CEO and upper management largess. |
Artie See
12/26/08
10:27 PM | Missing in the discussion is that the US economy has transitioned away from a manufacturing driven economy and replaced with a consumer service driven economy. I fail to see how that is sustainable.
It is not. As the value of the American dollar inevitably slides, combined with ever-increasing transportation costs, within the foreseeable future domestic manufacturing will once again become the cheapest way to make most products. |
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