The New Normal in America: It's Not a Pretty Picture
Get used to it folks. We are not returning to the good old days of 5-8 percent GDP increases every year or unemployment at below five percent or pre-2007 housing price levels or anything else that used to make America a place where the next generation could almost be guaranteed a better (more lucrative) lifestyle than their parents. It seems the only two people who believe we will soon sing, "Happy Days Are Here Again," is President Obama and Fed chairman Ben Bernanke. They suffer from delusional economic disorder or DED.
We can't undo what has been in the works for more than twenty years in just one year or two or three, or maybe never. I'm talking about episode after episode of "Greed Gone Wild" starting with the meltdown of thousands of savings and loan institutions in the late 1980s and early 1990s. You think we had some bad loans in the pre-2007 financial meltdown era? Well, try checking out the "thrift" institutions that accepted savings deposits and made mortgage, car and other personal loans to individual members. The related slowdown in the finance industry and the real estate market was a contributing cause of the 1990-1991 economic recession. Between 1986 and 1991, the number of new homes constructed per year dropped from 1.8 million to 1 million, which was at the time the lowest rate since World War II.
Fast forward to the late 1990s and early 2000s when companies like Enron and WorldCom made the greed of the savings and loan era look like child's play. At WorldCom, former CEO Bernie Ebbers was convicted of fraud and conspiracy in 2005 as a result of WorldCom's false financial reporting, and subsequent loss of $100-billion to investors. The WorldCom scandal was, until the Madoff schemes came to light in 2008, the largest accounting scandal in U.S. history.
Then along came the subprime mortgage loans and attitude of all too many banks that we need to bring Americans from all walks of life into the American dream of having their own home regardless of whether they were financially qualified for the loan and could make the monthly mortgage payments. Then, the banks sold off a basket of loans as a collateralized debt obligations to investment banks like our friends at Goldman Sachs who then passed along the junk to unsuspecting investors. Just to be on the safe side, these investors took out credit default swaps with AIG so that if the loan payments were not made by the original borrowers, then AIG would have to cover that amount. No wonder AIG suffered a liquidity crisis when its credit ratings were downgraded below "AA" levels in September 2008. The U.S. government spent $182.5 BILLION to bail out that company.
So, what does this all mean wise and all-knowing Ethics Sage? First, get used to America being the second largest economy in the world after China. Second, save as much money as you can. Don't be a profligate person. We have enough of those in the government. Third, vote out of office any politician that has been part of the system that created the mess during the past 20-30 years unless there is a very, very good reason to do otherwise. They have forfeited their right to your support. One final word, do what you can to better your personal circumstances and contribute to the betterment of society. We need more truly altruistic people. We have enough of those with narcissistic personality disorder.
Blog by Steven Mintz, aka Ethics Sage, June 13, 2011
Cartoon reproduced with permission