2008: The Humbling of America

Over the holidays, I asked my 92 year old Grandmother what she thinks about the current economic climate. As someone who lived through the Great Depression, she feels that our society is now technologically advanced enough to avoid another economic crash. "People are more educated and innovative these days," she explains. But can innovation and technological prowess save us before it's too late?

The sub-prime credit crunch is just the beginning of an overall economic unraveling predicted for 2008-2009. Bush recently signed HR3648 which will ultimately mean that more sub-prime homeowners will walk away from their debt since people will no longer be taxed on the amount of forgiven debt. This will further the spiraling credit crunch, write-downs and glut of homes on the market.

In addition, America is now saddled with the largest debt in its history, China has grown into a challenging world power, more jobs have been shipped overseas, Iraq costs us billions (not to mention the emotional costs), economic disparity is accelerating and more fundamental warnings are released weekly. We are teetering on an economic cliff and it won't take much (inflation? increasing unemployment?) to send us down a slippery slope.

In order to turn things around, interest rates need to be lowered even further, but this would accelerate inflation. We need to balance the budget, but the IRAQ war and high oil prices are the albatrosses around our necks. Tax cuts have benefited the wealthy more than the middle class and poor; we need to rebalance. We need to become more energy independent. We need to allow non-residents a path to legal, tax paying residency.

An optimistic view is that we can still rally this divided nation through innovation, resolve and visionary leadership to overcome seemingly insurmountable obstacles. America, albeit sometimes reluctantly, has risen to the occasion to lead the world in the past.

But, in our current political and cultural environment, what would fill an economic vacuum created by another Great Depression? A Bush monarchy? Totalitarianism? A sweep of Christian fundamentalism? Would the United States become one giant New Orleans type catastrophe? Will we be willing to give up even more freedoms and competent leadership in exchange for safety and comfort? And, maybe even more importantly, would Americans elect visionary leaders that can put us back on track?

Many of us have never lived through such an economic calamity and think we are immune during these modern, prosperous times. Can Americans -- saddled with a corrupted political system and autocratic corporations -- rise to the occasion and pull us out of another Great Depression? If we can bring back the "can do," problem solving, innovative, humanistic, hard working values that used to make America strong, than maybe there would be hope. A Buddhist-like simplicity wouldn't hurt either.

After going through this type of economic fire, America could emerge truly changed with a new responsible corporate structure, honest and humanistic leadership and a cooperative world outlook. Maybe we would even change how money and greed corrupt our political, business, environmental and person domains. Instead of life serving money, have money serve life.

My Grandmother -- and many of those who lived through the crushing economic collapse of the 1930's -- say it was actually a time of community building, focus on family & friends and even happy times. There was still a sense of hope and fellowship.

There is a general malaise in America today -- we feel so disconnected. Wealth and materialism separates us and commodifies everything. A second Great Depression could be exactly the kick in the pants America needs. The humbling of America might just have the unexpected side effect of bringing us together again, necessitating a less meddlesome foreign policy and sparking the competitive spirit.

Real change comes out of white hot fire: the phoenix rising. War, genocide, loss of civil rights, etc. don't seem to be motivating factors to the populace these days. They might need to be hit harder to focus their attention: the pocketbook.

Comments

[Henry]

Bernanke is correct when he states that the Fed and the money circulatory system are so vastly improved that nothing like the great depression need occur. There were, for example, 5000 banks per year that failed in the 30s with no deposit insurance.­..so people kept their money out of banks.(see­n a "run" on a bank?) What would cause you not to keep 50000 in an FDIC insured bank deposit today? The answer is the solvency of the USA.
So, while this may be a painful experience, the global pulse of economy is rolling. Yes there is a real estate pop that will happen, and yes the PRC stock market will pop, but the intelligent ones also make money on the way down. And so it goes with the vicissitudes of the capitalist market. Speculation always ends with recession or drawback.

[drkazmd65]

Well Mr. Garibaldi-Frick, I think your Grandmother and my Grandmother (RIP Grandma since last summer at 95) would have had a lot to talk about.

I still wish I had here around to talk to - I'm sure she would have clarified a lot for me.

Also - I just finished reading "The Fourth Turning", a book written by William Strauss & Neil Howe. They posited most of what you write about happening (or it's dark flip-side) happening as well.

One thing for sure - it is going to get bad before it is going to get good again.

[usna73]

I think we'll continue to see a slow motion decline in our standard of living.

China continues to benefit from our deflationary posture, and while they hold the mortgage, they can't afford to have the U.S economy collapse. They have slave-like workers there in abundance, despite inflation in the major cities.

We will see a stagflation like scenario, where we pay more for food and energy while our other consumption shows no growth for several years.

Because this will contribute to a steady decline in the dollar, more foreign corps and sovereign wealth funds will buy up assets here.

America will fit the definition of "colony" over the next decade, with many masters instead of one, as in centuries past.

Buy gold and the yuan. Don't expect to retire comfortably.

[wldnswmmr]

I think the problem with expecting the Utopian changes outlined here starts with the comparison to the Great Depression generation. That was a very different society; not for nothing has this age been called the "Cult of Narcissism," where the focus is on individual wealth and prosperity and never on the commonweal. An economic catastrophe now is not going to initiate a new era of community commitment and mutual support. It will act, instead, on this society in its present shape, and the result will be general chaos and every man and woman for him/herself. The list of improvements here is unrealistic in the extreme to expect from this society, a pipe dream, in fact. The catastrophe probably is coming, so we'll see, but preparation for hard times should probably focus not on social solutions but on how to get oneself and one's family through it.

[LeftRight]

While you may be right, that Americans can, and will, pull themselves together if (hopefully not when) we have another Great Depression, I see a major problem which would likely destroy any chance of that. When we had the Great Depression, we had two factors going in our favor. One was FDR. And the other was the fact that FDR completely changed the nature of the US gov't by making it truly work for the people. He opened the country's coffers, and took out massive debt to pay for projects so that people would have a job, and be able to provide food for their families. Now, we don't have FDR. And we do have an almost $10 Trillion debt. If our economy collapses, who's going to lend the US gov't money? Who's going to be able to pay taxes? What will the gov't be able to do for us???