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Edited on Thu Feb-19-09 12:24 PM by CoffeeCat
I'm not sure how to define what is happening to our economy, because such events have never happened before. I don't have a Ph.D. in economics, but I do know what I see...
It is clear that the entire demand curve for our collective economy was in a big, bloated UNSUSTAINABLE state for a few decades. Our economy swelled--fed a fatty diet of rampant credit-card spending, home-equity cash, and rampant consumerism that was encouraged by our own government.
Now--the financial tributaries that feed into our economy have all but dried. Most people are not wildly spending. They're saving and paying off credit cards. Home-equity loans are practically nonexistent; and rampant McMansion buying is a thing of the past--due to banks putting the kabash on all creative financing.
Our entire economy is 70 percent consumer spending. That works well--when people are spending everything they make and even MORE THAN THEY HAVE--as they use credit cards and home-equity to purchase things with dollars that surpass their annual salary.
We propped up our aggregate economy on wild behavior. Neighborhoods, communities, suburbs and cities were born and thrived due to rampant spending. Now we're seeing--that this spending level is unsustainable in the long term. When that spending dies--so does the economic foundations those neighborhoods, communities, suburbs and cities.
In addition to decreased spending, our economic hardship is compounded by growing unemployment and other challenges. Those who haven't lost their jobs are terrified--and are hoarding their pennies like squirrels gathering nuts for a harsh winter. Most big banks are insolvent and smaller banks fail every week.
This is a complete re-set of our economy. We're just now into the first wave of the collapse. These waves will keep coming--and crashing on our shores.
This is going to be worse than a Depression--because our standard of living is so bloated. We didn't have suburbs during the Depression--where people traveled 40 miles to work. We didn't have so many living in big houses. We didn't have massive credit-card and student-loan debt. We didn't have cable bills, health-club memberships, three car payments on $30,000 cars, cell-phone bills, restaurant-grade grills on the back porch, a broken healthcare system and gas-guzzling cars.
In 1930, people knew how to sew, use a hammer, can food and grow food. Neighbors knew each other and helped each other. Now, we run to the Yellow Pages if we get a hang nail.
What is happening to our economy, is a yet-to-be-named paradigm shift. It's a shift away from our current reality--because we will never return to a time when one city block had three Starbuck's, four nail salons, 2 big-box retailers, several clothing stores, two huge home-improvement stores, three strip malls and two video-rental stores.
Our economy won't be able to sustain this rampant consumerism. More importantly---we won't WANT to support this nonsense again. People will make fun of us, decades from now---and joke about the giant malls and shops that littered our neighborhoods.
Our grandchildren will look at us and ask, "What were you thinking?".
Right now...it's all collapsing. The paradigm shift will arrive--but only after we're standing in the rubble and realizing that we have no choice but to rebuild--because all that we knew is gone and dead.
But, the collapse has just begun.
So, fasten those seat belts and get ready for the ride...because we are in uncharted waters.
This isn't a Depression, as we understand that term. Certainly, this is not a recession!
What is happening now--has yet to be named because it is unlike anything our country has experienced.
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