Happy 5th of July
Don't get the post-party blues, says Ross:
Since the financial crisis hit, there’s been a lot of talk about the bubble mentality — how a run of growth and good news persuades people that what goes up need never come back down. “This time is different,” the enthusiasts always say, in a refrain that provided the title for Carmen Reinhart’s and Kenneth Rogoff’s recent history of financial panics. But it never, ever is.
A similar mentality, though, can take hold during downturns. The “this time is different” mistake applies to busts as well as booms: when things get dark enough, people start believing that dawn will never come. [...] Maybe this time is different. The recession is deeper. Our debts are piled higher. The gloom is more pervasive. [...] But historical perspective is important. The more we remember the pessimism bubbles of the past, the better our chances of bursting out of this one.
Agreed. But, as Ross hints, there's a difference between feeling grim because there's a big quantitative difference in our dismaying economic indicators and feeling grim on account of a huge qualitative difference. That, I think, is the real difference this time around. What's happening to us can't be captured in statistics or reduced to numbers. There's a qualitative change being wrought in the way our government and our economy interact -- to put the matter gently.
That's what has to change our calculated assumption that, this time, like all the others, we'll just pull out of this thing. At this rate, when we do, will we still recognize ourselves? It's our ability to correct this course -- to take sober stock of the path the administration, but not only the administration, has put us on, and to haul ourselves over onto another path -- that puts the Happy in the 5th of July. But it can't be back to business as usual.
- Comment (3)
- · Quote
- · UnfollowFollow (1)
Comments :
Jun '10
Re: Happy 5th of July
I think it's generally much harder to move down the social ladder now, than it was in the 1930s. In the 1930s, when you lost your job, you weren't falling that far, it wasn't so complicated. You maybe had a furnished two-bedroom apartment, and had to move down-market to an efficiency apartment next to the rail yard. Nowadays, you might have a four-bedroom house (worth less than you owe on it,) two cars, a motorcycle, and a speedboat to get rid of first--none of which are selling. These days, you can't even start your new life of poverty right away. You have all kinds of stuff you have to get rid of first. And those apartments next to the rail yard aren't so cheap anymore.
May '10
Re: Happy 5th of July
The answer is and always was not to acquire those things through debt. Same solution as it was 50 years ago. The problem is that we were less likely to yield to that temptation back then.
I must be terminally conservative.
Re: Happy 5th of July
Duane Oyen: The answer is and always was not to acquire those things through debt. Same solution as it was 50 years ago. The problem is that we were less likely to yield to that temptation back then.
I must be terminally conservative. · Jul 5 at 12:35pm
Has it become impossible to acquire all the STUFF that we've come to associate with the good life -- without borrowed money? Haven't we come to a moment when spending money you don't have has become essential to our understanding of human flourishing?
That's what some of my more paleo or trad friends might argue. It's a powerful argument. Let me add a wrinkle: sometimes taking on big debt is necessary to doing great things. Think of college education at its best.