Thursday, October 2, 2008

Deficit Spending - The American Way

Deficit Spending - The American Way!

I apologize for the sparse posting lately. I've been obsessing more about the economy and politics than my usual tech/social networking fare.

When we get over this credit freeze, we're still going to see a recession. We should expect it, and in some sense, hope for it.

Few politicians are talking about what got us into this mess.

The desire to put more people into houses, regardless of their ability to afford it, via Fannie and Freddie, caused an unsustainable housing boom. Banks, happy to ride this wave of good fortune with money that wasn't really theirs, were completely complicit with this doctoring of the free market.

Our inability as private citizens to delay gratification until we could actually afford it, has become all too common.

The economy will not right itself until the prices in the housing market come down to their real market value. Real people will lose real money on this. Nothing has been said by our leadership on this simple fact: our economy *is* in trouble because of a credit crisis, but not the one they think. Citizens, local and state governments, and our federal government have all been spending money that wasn't ours. The *real* credit crisis is that, for far too long, there's been too much of it available, and too much of it undeserved.

Even if doctoring the markets with this bailout package works, we're just kicking the can further down the road (like we're doing with Social Security, Medicare, the national debt, etc.)

If America does *not* end up in a recession because of this, then we're doing something wrong as consumers. We're going to have to reel in own own spending to get us back to solvency. This, in turn, will have recessionary effects on the economy. Anything short of this is just an indicator that the housing bubble is just a precursor to the bubble that the entire economy is riding.

Let us hope that we learn our lessons well, and we can softly deflate this bubble before it bursts. Reel in our spending. Pay down our debt. Set some savings aside.

But given our lack of leadership, and the quick-fix policies that will set the precedent and commit the federal government to float the economy at all costs, it's unlikely that these lessons will be learned by those who are truly culpable -- you and I.