“What the hell do you know about economics?” questioned my friend. “You can’t even balance a checkbook.”Well, yeah. “Not much, really,” I answered lamely. “You’re right. I’m terrible with money. It has taken all these years, but I’m changing my spending habits.”
“So what you’re saying is that it took a worldwide economic meltdown for you to turn into mister thrifty?”
“That might be over-simplifying,” I suggested. Usually, when I get frustrated or upset, I either go skiing or go shopping. I’ve always thought it a shame that shopping costs so much money; it would be such good therapy otherwise. And I can shop summer or winter.
“So now when the economy needs you out there shopping,” continued my friend, “you’re cutting back. You’re part of the vicious cycle.”
Presumably, to stimulate the national economy, everyone should go out and spend money. The problem is that no one has money to spend right now. So since we’re all trying to hang onto our shekels, fewer of us are buying new cars and yachts and trophy homes. Because no one is spending money, no one is making money, credit sources dry up…a vicious cycle.
And it’s the American way. If something is screwed up, throw money at it to make it better. If we run out of money print more. We can always borrow the big bucks since we are a productive nation, able to drag itself up by its bootstraps to pay back the debt. Oh, we do love our credit.
Continually throwing money at our ever-deepening economic collapse, though, may not be the silver bullet. Tossing good money after bad perhaps only lines the pockets of those who facilitated the collapse in the first place.
I may not know jack about economics, but I watched what happened after congress and the previous administration approved the tax payer-funded $750 billion bailout in September 2008. Eighty-five billion dollars went to American International Group (AIG), which company immediately sent its executives on a $440,000 retreat at a California spa resort. Give me a break!
Taxpayers also ponied up $14 billion for the auto industry, reasoning correctly that car manufacturing is vital to our national interest. Were we outraged when executives of the Big Three automakers flew private, luxury jets to Washington to request an additional $25 billion in bailout money? Hell, yes, we were outraged. What were they thinking? Do they feel so transparently entitled?
Knowing nothing about economics, I can’t help wondering if our premise isn’t skewed. We keep throwing money at the problem and the problem isn’t getting fixed. Albert Einstein said, “The definition of insanity is doing the same thing over and over again and expecting different results.”
We’ve been doing bailouts since the poop first hit the fan in 2008. It took us a few months to realize—admit—that we were in the teeth of an unprecedented economic disaster. By then it was too late. A perfect storm of sub-prime loans, unfathomable derivative financial instruments, over-arching profligacy and outright greed took us to the bottom. Think bottom-feeders; think Bernie Madoff and his $50 billion ponzi scheme.
This line of reasoning leads to the kicker. The kicker is that money we keep throwing at the problem is all on credit. Even recognizing easy credit as the problem that got us into this feedback loop mess in the first place, we continue to spend money as if we had it. We’re borrowing from Peter—future taxpayers, China, whoever—to pay Paul—bottom-feeders. Perhaps I shouldn’t be so harsh.
“Go ahead,” encouraged my friend. “Tell us what you really think. Your credibility is in the toilet anyway. Be harsh.”
Economic malaise is like a force of nature except we, not nature, caused it. There is nothing natural about it except the consequences. We’re in a pickle because our hardwired predilection for immediate gratification and our pervasive predisposition toward greed put us there. Yet although we got our own selves into this mess, we have no idea how to get out of it. Keynesian economics, the old models that pulled our fat from the fire before, aren’t working. We don’t know what to do, so we just keep doing the same old thing.
“You see?” asked my friend when I’d finished my rant. “You really don’t know a thing about economics.”
Hell, yes.
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