Are you ready for the Great Recession of 2011–2012? You should be, for it is getting under way even as you read this. Just as the 2009 "greatest economic crisis since the Great Depression" actually began back in 2007, so we are in the early days of the next cycle. Only this recession is going to be a doozy. And the aftershocks will be felt long after President Hillary Clinton leaves the White House in 2024.
The coming crisis should be no surprise, for we all have had plenty of advance warning. If it is a surprise, blame those chat-show economists who have become so politicized that they ignore the truths of their own science in order to acquire celebrity. Nor should we forget those politicians who deliberately suborn national interest for the security of zero-sum pork-barrel politicking. Combine it all with a news media largely made up of self-referential ignoramuses and it is small wonder that most of the world has been diverted as Dorothy was in Oz by the lightning bolts, explosions, and billowing smoke screen being generated by the men behind the curtain. The truth is our wizards dare not admit that the levers they pull are not really connected to the true crisis that confronts America or its place in the global market.
Despite the self-congratulatory assurances from the White House, Congress, and part of Wall Street that we have been saved from a slide into a 1930s depression, our most serious trials still lie ahead of us. We are unlikely to be able to get back to those halcyon days of perpetual prosperity and optimism that Americans (and most of the industrial world) enjoyed for the last 50 years. A tectonic shift is occurring beneath our feet and the world's economic climate has shifted. We face not just a few abrasive years of getting back to normal, but a generational hard slog of constricted markets, limited resources, and rolling setbacks. And in each episode of crisis, some will prosper, the weak will suffer most, and radical visions propounded by political snake-oil salesmen of all persuasions will make rational discourse nearly impossible to conduct.
Ignore the reference to Clinton waiting that long to run for Pres again, as well as her actually winning. ;)
CONSIDER JUST A FEW of the economic bellwethers one hears about on the evening news as proof that the crisis has been stabilized and recovery is imminent. Stock prices are up, true. But trading volume is way down and that is because retail investors—citizens making real investment choices— are on the sidelines. The price rises that swell the Dow Jones Industrial and other indices reflect almost pure speculation by Wall Street's investment houses that are soggy with Washington's cash injections. Just as Cash for Clunkers inflated Detroit's hopes last summer, so the share price recovery is more of a sign of a new bubble inflating than it is of real value returning to share market prices.
The same for housing prices, only more so. It was headline news recently that house prices in "some" areas of the country had stopped declining quite as fast, while in some fewer areas there were even tiny increases in prices of houses sold, if not much increase in the volume. Yet there are uncounted hundreds of thousands of vacant houses, condominiums, and commercial office space for which there is no rational prospect of a buyer during 2010 or perhaps ever.
It will get worse. Of the 47.4 million home mortgages in place today, nearly 10.7 million are "underwater," that is, the money owed on the loan is greater than the value of the house. And that's not counting the 2.3 million other mortgages that are "near-negative equity." Most of these latter will face sharply higher upward ratcheting of their interest rates in 2010 and 2011 and that will automatically plunge those debts below the surface.
This article is quite long and full of great details, so I would highly recommend you read the whole thing. He talks about the competition between Reagan's policies and Keynes' theories, the world's energy supply, and decades of chronic Congressional irresponsibility. One of the most poignant rhetorical questions Srodes asks is this:
The policy response of all Western governments is to follow the failed Japanese model of trying to inflate one's way out of a downdraft, pumping up another bubble. The theory is that if interest rates are forced low enough, and the money supply increased enough, and the government ramps up deficit spending to redistribute more wealth from the supposed rich to the supposed poor, a "multiplier effect" of economic growth will be sparked by consumers buying more, businesses investing more, and more jobs being created with prosperity spreading and growing. But if interest rates are already at zero, and the value of the dollar has been halved by doubling the supply of it, and the debt service burden of government spending is already suffocating the capital markets, how can one expect consumers to buy more (to buy more of what?), or businesses to invest more (for a new machine to do what?), much less to hire old workers back when the jobs they used to have are vanished, not to some Third World haven, but just vanished?
And that seems to strike at the heart of the root problem:
...until there is a general acknowledgement of government's blame in compounding this upcoming recession on the back of the earlier slump, how can we expect Washington to seek a new approach to the global marketplace?
This is the problem with career politicians, and the reason we need to change out our elected leaders periodically. Of course, the Democrat party has long been on a crusade to expand government. The Republican party, by contrast, used to be the opposition to that crusade, fighting the expansion as much as possible. Over the past few years, that opposition disappeared, leading to a ramp-up to what Srodes appears to view as a crisis point that we are now approaching. The GOP may be turning back around now, but even if it succeeds will it be enough to derail the train wreck bearing down upon us?
It will get ugly, make no mistake. How ugly? Wait until those things we consider "rights" start to get squeezed in the interest of what our ruling politicians decree as the national interest. The uproar that greeted the mere suggestion that health care resources for the elderly might be circumscribed was genteel debate by contrast with what's ahead. The notion that rights can be rescinded as easily as they have been obtained is not a happy thought. Case in point: my mother recalled that she and my father had to marry in secret and she continued to live with her parents throughout 1936 because the New Dealers who controlled the Pennsylvania state legislature had decreed that no married woman could be a public school teacher or hold another state job when a jobless married man could take her place. Try that out on the next dinner table debate you attend and see how many bread rolls get thrown at you by women who are convinced that it can't happen again; times have changed, they've come a long way, baby. Well, yes. Nowadays most women don't have the option not to work.
HOW LONG WILL THIS DARK AGE LAST? Ask the Japanese, who have been at it for nearly 20 years. Ask the Chinese, who are just making a heroic jump out of a medieval time-warp into a modern industrial urban society only to teeter on the brink for lack of enough food, water, and arable land even as they accumulate piles of American dollars that lose value every day.
It's a real upper to consider, but we don't live in Happyland where everything is ponies and rainbows. We live in the real world. It's time we elected leaders who also live in the real world, and who understand that real solutions are to be had, but not by doing the same things our government has been doing for decades. If we're going to pull out of this dive, we need real change...not just fancy speeches and deceptive pseudo-solutions. It's time we took responsibility for our own governing, spent the time and energy to discover the people and motivations behind the names on the ballot, and demanded real accountability.
I'm not as pessimistic as Srodes seems to be; maybe it's my naivete, my lack of snooty 'advanced' education, or my fundamental belief in the people of this country. But, I'm also not foolish enough to believe that we can keep doing what we've been doing and expect everything to be all right. Every responsible American who has a desire to leave this nation a better place for their children and grandchildren has a duty to examine our situation, our government, and what will really make a difference in our nation's future.
There's my two cents.
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