American's Longest Spending Spree is Over
America’s 18 year spending spree is over. Like a teenager coming of age, it’s time to grow up. Today (10/30/08) in the NY Times, it’s noted that “personal consumption fell at an annual rate of 3.1 percent in the third quarter of this year, its biggest drop since 1980, when the economy was in a deep recession.” GDP is down 0.3 percent.
Most of us have been living above our means for way too long, a sort of macro gluttony of materials things. Fueled by credit cards and equity in our homes, we are all to blame for today’s economic mess. As much as we’d like to, we can’t blame it on all on Bush, Clinton or Congress. Yes, the government had been pushing banks to give mortgages to unqualified buyers for decades which in turn increased demand for housing and caused home prices to escalate. This wasn’t natural, it wasn’t market driven. Home prices were artificially inflated because of government intervention and now the market is correcting itself.
We all benefited from this scheme, even those that did not live beyond their means. Jobs were created, especially those related to real estate (construction, architects, kitchen designers, contractors, brokers). Now those are gone. Even those of us not in the real estate business benefited because those employed in the real estate industry were purchasing products (insurance, cars, flowers, legal advice) from the rest of us.
Now comes a time of reckoning. We have been a spoiled people and I for one am glad to go back to the days of saying to friends, “sorry, I can’t join you for lunch today, I don’t have the extra money.” America needs to go on a diet, both from excess eating and spending. It will be a tough couple of years, but I believe by 2010, we will be a stronger, kinder, more fiscally responsible nation with people who might actually appreciate what they do have and stop whining.
Most of us have been living above our means for way too long, a sort of macro gluttony of materials things. Fueled by credit cards and equity in our homes, we are all to blame for today’s economic mess. As much as we’d like to, we can’t blame it on all on Bush, Clinton or Congress. Yes, the government had been pushing banks to give mortgages to unqualified buyers for decades which in turn increased demand for housing and caused home prices to escalate. This wasn’t natural, it wasn’t market driven. Home prices were artificially inflated because of government intervention and now the market is correcting itself.
We all benefited from this scheme, even those that did not live beyond their means. Jobs were created, especially those related to real estate (construction, architects, kitchen designers, contractors, brokers). Now those are gone. Even those of us not in the real estate business benefited because those employed in the real estate industry were purchasing products (insurance, cars, flowers, legal advice) from the rest of us.
Now comes a time of reckoning. We have been a spoiled people and I for one am glad to go back to the days of saying to friends, “sorry, I can’t join you for lunch today, I don’t have the extra money.” America needs to go on a diet, both from excess eating and spending. It will be a tough couple of years, but I believe by 2010, we will be a stronger, kinder, more fiscally responsible nation with people who might actually appreciate what they do have and stop whining.
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