John Fischer: Are We Scared of the Change(s) We Need?
Jan.23, 2009 in
huffington post, obama news by Obama Chronicles
With the frenzy of inauguration day fulfilled and the twilight-zone foibles of the last eight years in the rearview, it's tempting to forget that one of the central messages coming from the nascent Obama administration is about sacrifice. True, it has been couched in aspirational language: a difficult journey, a long road, a "new spirit of service where" Americans "pitch in and work harder." But the core message--from the train-ride to the inauguration--has been that Americans need to come together, man up, and make tough choices in tough times. Ironically, the sentiment behind the words bear a resemblance almost-president John McCain's almost-financial advisor Phil Gramm's suggestion that this country had become a "nation of whiners." While the sentiments were polar opposites (Gramm with his head in the sand; Obama all tough-love about the future), the consistent theme of Americans scared to face change is striking.
No one would argue that things seem pretty bleak right now. The recession's official. California's in the hole for $40 billion, Detroit's gone begging, the economy shed well in excess of a million jobs this past year, and The New York Times is not quite sure how it's going to pay off its debts. In the same recent poll that indicated Americans' faith in Obama to fix the economy, 92% of the respondents considered the state of the national economy as "fairly or very bad."
But two weeks ago the Minneapolis Fed released a report meant to put things into numerical and historic perspective, with surprising results. In terms of both jobs lost and gross domestic product shrinkage (the former non-farm, the latter pegged to 2000 dollars), where we are today is nowhere near the worst we've seen. Compared to say, 1948 or 1957, our economic slowdown is on par or lighter than the median for such periods, the reports suggest.
So what's really going on here? Is there perhaps an unintentional grain of truth in the blasphemy that Americans are not emotionally equipped to deal with the basic sacrifices of economic contraction and the Obama administration's insinuation that they will soon have to do so? As with all things involving numbers and complex systems, the answer is: well, sort of. People's panic is perhaps justified but misdirected. Like the tip of an iceberg, our current recession is not so much a problem in and of itself, but a hint of much bigger things below the surface.
Last year the VC firm Sequoia Capital distributed a presentation to their clients that began to bring the state of the market into sharper focus. In a nutshell, the low interest and cheap debt of the last three decades spawned a vicious cycle: easy cash enabled the U.S. to buy foreign goods; those dollars sent overseas were in-turn used to buy U.S. Treasuries, keeping Treasury rates low and money cheap. In essence, the more we spent, the more we could spend. At the same time, Sequoia explained, this excess of cash spread to housing. Home ownership and property value skyrocketed. And Americans plowed almost the entirety of this newfound value into their discretionary spending. It would not be an exaggeration to say that Americans were living on credit and saving nothing. Meanwhile derivatives and other financial "implements" turned cheap money into more money, which then got spread all throughout the economy, fueling production and further spending. In effect, the capital underpinning the American economy was stacked on itself like a house of cards. And at some point it started to topple.
The postmortem on the crisis formerly known as subprime lending has been on the table for some time now as has the op-ed stalking horse of the overspent consumer. Yes, bad decisions were made throughout the financial industry and many people lived an irresponsibly borrowed lifestyle. But the true reason for people's fear of economic failure is far more compelling and has gotten far less press.
More now than ever, we are confronted by the very real possibility that the current system we rely on for our style of living has reached its breaking point. Even as forces are aligning to jumpstart the economy, they may treating the symptom of a larger disorder. Obama's current economic plan addresses tactical realities ranging from infrastructure investment to tax cuts to credit liquidity to banking failure. But it has so far offered no answer to the lingering question of whether our contemporary lifestyle has proven to be unsustainable? If our current version of the American dream is an entirely financed one, then how much of it will we have to give up to pay it back?
The way this recession has unfolded calls into question fundamental assumptions about bigger ticket items like home ownership, higher education, transportation, leisure; things we take for granted as integral parts of being American. As Sequoia so understatedly observes in their presentation, this is crisis is "not normal." The mechanics underlying it are too complex; no one really knows its true consequences.
So maybe we are a nation afraid of the change we need. But with compelling justification. Change in the White House is different from change at home. Our crisis of so-called consumer confidence is not merely in our ability to keep buying, but to keep living the way we believe we're supposed to. And that's a scary thought.
No one would argue that things seem pretty bleak right now. The recession's official. California's in the hole for $40 billion, Detroit's gone begging, the economy shed well in excess of a million jobs this past year, and The New York Times is not quite sure how it's going to pay off its debts. In the same recent poll that indicated Americans' faith in Obama to fix the economy, 92% of the respondents considered the state of the national economy as "fairly or very bad."
But two weeks ago the Minneapolis Fed released a report meant to put things into numerical and historic perspective, with surprising results. In terms of both jobs lost and gross domestic product shrinkage (the former non-farm, the latter pegged to 2000 dollars), where we are today is nowhere near the worst we've seen. Compared to say, 1948 or 1957, our economic slowdown is on par or lighter than the median for such periods, the reports suggest.
So what's really going on here? Is there perhaps an unintentional grain of truth in the blasphemy that Americans are not emotionally equipped to deal with the basic sacrifices of economic contraction and the Obama administration's insinuation that they will soon have to do so? As with all things involving numbers and complex systems, the answer is: well, sort of. People's panic is perhaps justified but misdirected. Like the tip of an iceberg, our current recession is not so much a problem in and of itself, but a hint of much bigger things below the surface.
Last year the VC firm Sequoia Capital distributed a presentation to their clients that began to bring the state of the market into sharper focus. In a nutshell, the low interest and cheap debt of the last three decades spawned a vicious cycle: easy cash enabled the U.S. to buy foreign goods; those dollars sent overseas were in-turn used to buy U.S. Treasuries, keeping Treasury rates low and money cheap. In essence, the more we spent, the more we could spend. At the same time, Sequoia explained, this excess of cash spread to housing. Home ownership and property value skyrocketed. And Americans plowed almost the entirety of this newfound value into their discretionary spending. It would not be an exaggeration to say that Americans were living on credit and saving nothing. Meanwhile derivatives and other financial "implements" turned cheap money into more money, which then got spread all throughout the economy, fueling production and further spending. In effect, the capital underpinning the American economy was stacked on itself like a house of cards. And at some point it started to topple.
The postmortem on the crisis formerly known as subprime lending has been on the table for some time now as has the op-ed stalking horse of the overspent consumer. Yes, bad decisions were made throughout the financial industry and many people lived an irresponsibly borrowed lifestyle. But the true reason for people's fear of economic failure is far more compelling and has gotten far less press.
More now than ever, we are confronted by the very real possibility that the current system we rely on for our style of living has reached its breaking point. Even as forces are aligning to jumpstart the economy, they may treating the symptom of a larger disorder. Obama's current economic plan addresses tactical realities ranging from infrastructure investment to tax cuts to credit liquidity to banking failure. But it has so far offered no answer to the lingering question of whether our contemporary lifestyle has proven to be unsustainable? If our current version of the American dream is an entirely financed one, then how much of it will we have to give up to pay it back?
The way this recession has unfolded calls into question fundamental assumptions about bigger ticket items like home ownership, higher education, transportation, leisure; things we take for granted as integral parts of being American. As Sequoia so understatedly observes in their presentation, this is crisis is "not normal." The mechanics underlying it are too complex; no one really knows its true consequences.
So maybe we are a nation afraid of the change we need. But with compelling justification. Change in the White House is different from change at home. Our crisis of so-called consumer confidence is not merely in our ability to keep buying, but to keep living the way we believe we're supposed to. And that's a scary thought.
Read more: Detroit Automakers, Debt, Job Losses, John McCain, Phil Gramm, Subprime Mortgages, Minneapolis Fed, American Dream, Economic Crisis, Recession, New York Times, Credit Crisis, Obama, Living News
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