Prediction: Next Experiential Step in the Economy

01Mar09

We have reached the point of recognizing that our economic wizards made some serious mistakes in handling subprime mortgages, banking regulations, and so forth. In this sense, we have laid the groundwork for a recovery like the one that followed the dot-com bust circa 2000.

This time around, however, we are seeing a real Dolly Parton bust. It’s much bigger and much more artificially created than the dot-com bust. If anything, the dot-com crash was our warning sign, indicating that we had now created an economy that was capable of such foolishness. We didn’t unmake the artificial contrivances of that economy. To the contrary, we treated them as though they were normal — were, indeed, just the start of something truly grand.

On this reading, it will not be enough, this time around, to recognize that we once again did something like the dot-com bust. This time, we have to go further and recognize that some substantial segment of our economic assumptions and behaviors are untenable. We are already progressing toward that, in pulling back from unsustainable spending and beginning, instead, to count our pennies.

If we had pulled back, like this, before the thing started to spring leaks, we might have managed a graceful retreat. Unfortunately, we didn’t have leaders, institutions, common sense, or divine intervention to give us a serious heads-up. So now we are going to have to do it the hard way. This will be a panicked retreat, a volatile, disruptive, destructive affair.

Usually, when you have panicked and destructive actions, things go a little overboard before reverting to a relatively moderate state of readjustment. We’re not likely to just wind our way down to a lower level of economic activity, and then calmly and gradually start to put things back together again. What’s more likely is that there will be some experiences of financial devastation, a widespread sense of economic despair, people in the streets, wrecked and sometimes terminated lives — in short, a fairly extreme unmaking of things we have taken for granted for decades.

Where we will wind up, I think, is a mindset that goes much further than before. We won’t say that the subprime mortgage meltdown was a sort of repetition of the dot-com bust. We will say that both were symptomatic of an entirely confused sense of how a healthy economy works. My guess is that large numbers of people in coming years will reach a point where they decisively reject major parts of the contemporary economic landscape. They may feel that debt and/or high interest are absolutely impermissible; they may finally get serious about rejecting the nonsense of trickle-down Reaganomics; they may adopt a relatively permanent less-is-more mentality that rejects the accumulation of large, expensive, or unnecessary possessions.

The next experiential step encountered by participants in our economy, I am speculating, is to go through hard times that will shock people into revising some fairly basic assumptions. This is likely to take years. The teenagers of 2015, I am speculating, will be stunningly different from the teenagers of 1995.

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