Unfortunately for most of us in the world, midsummer 2007 will likely be the turning point from the “good ol days” of yesteryear to the mess we have on our hands now.
Before summer ’07, things were pretty much normal, if not good for the majority of us– we went to our jobs, our kids grew up and went off to college, we paid our bills, and had the general feeling that every day was a step forward as we productively built our futures, one brick at a time.
Then came the winds– the housing bubble “burst” in August of 2007. We notice that the sky was a little less sunny, but I dont think any of us had any idea of the magnitude of the storms to come.
Within one year, Lehman Brothers filed for bankruptcy, which was a first in a chain of events that set the financial world on edge. We learned about the widespread greed on Wall Street with “securitized” mortgages, and the mess of underwater home values. The newspapers of the day’s headlines read: CREDIT MARKETS FROZEN, and we wondered as the rain started and the winds howled at how it would affect us.
People stopped spending and hoarded cash. Businesses sales plummeted, resulting in job cuts and a soaring unemployment rate. This fed the cycle even more as the folks that still had a job worried about whether they would also lose it, and tightened the belt. Those who were already unemployed didnt have the choice, and did what they had to just to survive.
2009 came and went with little change– things were tough. by summer 2010, the Obama administration was trying to tell us all that the recession had “officially ended” in the summer of 2009. By the fall of 2010, the stock markets began responding positively. Then Tunisia. Then Egypt. Now the crisis in Japan, and the “war” in Libya. The markets have been hammered as of late, and new worries abound about soaring food, clothing, and energy costs and the impact on what amounts to an anemic recovery, at best.
Are we headed for the fated “double-dip” recession, and just too myopic to see that we may already be “in” it? I dont have a crystal ball– but I do have my concerns.
Unemployment has come down a bit, but the numbers are skewed. The number of people who are considered gainfully re-employed are re-employed at much less than they used to make. Businesses are still struggling. People are still worried. Tax revenues are down at the Federal and State levels, while the total debtload is up dramatically.
All Americans ended up tightening the proverbial belt when the wheels started coming off the economic wagon, and dealt with debt by either paying off gobs of obligations, filing for bankruptcy, or settling the debt. What did the federal government do? It took on more debt. It’s “income” from tax revenues is down dramatically, which is no different than any of us taking a big pay cut. We paid off debt in our households– Our government borrowed more. Their only solution has been to print more money to pay off the debt– a benefit they have that we as citizens cannot do. Our dollar is therefore losing value, and there is now talk of the dollar losing it’s status as the world’s base currency. The largest bond buyer in the world, PIMCO, has quit buying U.S. Treasuries. China has already slowed it’s pace in buying up US treasuries, and threatens to cut even further.
All of this sure isnt stacking up in favor of a robust recovery, and even hints at possibly plunging us into the double-dip scenario. State governments are functionally bankrupt. The federal government is definitionally bankrupt. Many households have drained their resources just weather the storm since 2007, and dont have the emergency nest eggs they had before the crisis began.
Are we headed for another several years of turmoil? I wish I knew for sure. What I do know is that even if we are in a “recovery”, it looks to be a long and treacherous road to recovery, and by the time it happens, we are unlikely to remember what “normal” felt like in the first place…. it begs the question… is THIS the new normal? Was pre-2007 the world as we “knew” it? are we going to be bouncing our grandkids on our knees some day recollecting the “good ol days” before 2007?