Thursday, July 03, 2008
How Low Will it Go?While the mainstream media fixates on the Presidential elections, and all of the trivia that seems to pass as news, the big story of this summer, and quite possibly this past year, is the erosion of our economy. It didn't really happen overnight, not in America. It took a few decades, beginning with Reagan, the deregulating of the economy, the neo-liberal policies of free trade, and the idea that there were unlimited amounts of cash that we could borrow, and pay back at our leisure. For most of our lives, we've had easy credit. There weren't many things that we couldn't afford. We believed in the American way of life, borrow and spend, and pay it back with no money down. Credit was so cheap, and interest rates so low, that it made no sense to save, you couldn't earn enough interest on your savings, unless it was invested in the market, the market was the only thing that kept up with inflation.
That's not true today.
Today, the Dow closed at 11,288 and just to put that number in perspective, on January 2, of this year, a mere 6 months ago, the Dow closed at 13044. Oil on January 2 was trading at $99 a barrel, today it is trading at $145. The Fed can't do anything to stop the bleeding, Bernanke has already played his hand, keeping the markets propped up through the winter and spring with interest rate cuts, hoping to stem the bleeding. There are no more band-aids, and so the markets are left to bleed out, and no one knows just how much blood we will lose, or even if the patient will die on the table, before a transfusion is found. The tax rebates worked for a few months, but they are nearly spent, and so I'm not sure that there is a cure for this ailing economy.
There are some investors predicting that the Dow will fall below 10,000, (a point at which my brother, who teaches economics at the graduate level, says is the point at which you close all banks accounts, remove a loose brick from the fireplace, and insert all of your remaining cash, before cementing the brick back into place) and if you think about, we've lost 1700 in a mere six months, we've only got 1200 hundred to go, before we are living in a very different country than the one we grew up in. There are no more rebates to give, nothing that Congress or the Fed can do to fix this broken economy, and we are really just one natural disaster away from complete economic meltdown. Or one man-made disaster such as a war in Iran.
You might say, and I would completely agree, that we are already living in a country very different from the one we grew up in. We believed in hard work, we believed in education, and we believed in America. Our country has changed dramatically in the last decade, and I don't know what our lives will be like in this new America. I know that it will be hard, the days of easy money are gone, and they're not coming back any time soon. My hope is that we will learn to help each other, that hard times will force us to realize that we were not meant to live alone, that there should be a more equitable distribution of the wealth of this once prosperous nation, and that there should not be such a huge gap between the wealthy, and the destitute.
It will be a hard lesson. But hard lessons are the ones we remember.
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No subject for immortal verse
That we who lived by honest dreams
Defend the bad against the worse."
-- Cecil Day-Lewis from Where Are The War Poets?
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