The Washington Post is already deconstructing the financial crisis, and looking for the upside. That being, we will learn our lesson and be better for it in the long run. It’s a pretty good forensic analysis but Fareed Zakaria got a couple things wrong…really wrong.
Since the 1980s, Americans have consumed more than they produced and have made up the difference by borrowing. Two decades of easy money and innovative financial products meant that virtually anyone could borrow any amount for any purpose. Household debt ballooned from $680 billion in 1974 to $14 trillion today. The average household has 13 credit cards, and 40 percent of these carry a balance, up from 6 percent in 1970.
This is all true, but I don’t know one person that has thirteen credit cards.
But the average American’s behavior was virtuous compared with government behavior. Every city, county and state has wanted to preserve its proliferating operations yet not raise taxes. How to square this circle? By borrowing, using ever more elaborate financial instruments.
True also. When do we get to the part however, where the two combined forces. Where government decided that home ownership, and getting a loan to make it so, was no longer the American dream? That in the interest of “fairness” it was a right; no matter what your income or credit history was.
If there is a lesson to be taken from this crisis, it’s an old rule:There is no free lunch. Now, debt is not a bad thing. Used responsibly, it is at the heart of modern capitalism. But hiding mountains of debt in complex instruments is an invitation to irresponsible behavior.
Okay, I’m still with you.
In the short term, governments must take on more debts and obligations to resolve the crisis. But that doesn’t mean we should stimulate the economy with more tax cuts, as some economists advocate. That would only keep the party going artificially. A far better stimulus would be to expedite major infrastructure and energy projects, which are investments, not consumption,and have a different effect on fiscal fortunes.
…as some economists advocate? Silly economists. Don’t listen to them. Keep the party going artificially? Like the longest and most robust period of economic prosperity ever in the history of America? That was a party? No. It was real and it was brought on by Ronald Reagan’s disdain for ever-larger government and economic growth spurred by tax relief.
…and let’s not forget…one benefit of Ronald Regan’s leadership: revenues to the federal government increased dramatically. Revenues that could be used to pay for those goverment functions that are necessary and practical; revenues that could be used to pay down our debt. Back then we had true fiscal leadership in the White House. It’s been a while.
A far better stimulus would be to expedite major infrastructure and energy projects, which are investments, not consumption, and have a different effect on fiscal fortunes.
Them’s some big words. I love it when a liberal calls government spending an “investment” and hides it among the big words – prose not unlike the financial derivative instruments he (rightfully) lambastes a few sentences ago.
The U.S. economy remains extremely dynamic. Even now, the most surprising data continue to be how resilient the economy has been through the recent shocks. That will not last if the panic persists, but the economy’s underlying virtues would help it recover quickly from a recession.
Underlying virtues..extremely dynamic..resilient? Sounds like our economy is fundamentally sound. You best be careful there…that sounds like you agree with John McCain. That could cost you your paycheck where you work.
The Fed, White House and congress are almost out of options. Pelosi’s proposed stimulus is more of the same and will only contribute to the length and depth of whatever course this crisis is bound to take. The only option – the only proven option – is to cut taxes and allow the free enterprise system – led by small business – to grow us out of this predicament.
13 credit cards? No kidding. I have one. And 13 is the average? So there’s someone out there with 25 cards, to balance me out?
They might be getting their data from credit reports (https://www.annualcreditreport.com/). I have seen lots of old credit lines on mine that appear open, but I am certain I requested that they be closed. I would like to know how to tell these particular lenders “where to go”, if you know what I mean.
The Washington Post is already deconstructing the financial crisis, and looking for the upside.
Of course there is an upside! Nobody can afford to retire! Productivity will skyrocket!
Wow, you guys have a real reading comprehension problem. The quote says the average “household” has 13 cards. Sounds like a lot to Angryclown too. But it’s not the same as the average “person” holding 13 cards.
JRoosh, the poor man’s Mitch Berg, had a blackout: “Back then we had a true fiscal leadership in the White House. It’s been a while.”
Eight years, to be precise. I’m sure you haven’t forgotten that Clinton left office with a budget surplus.
I’m with Troy on this. My household with two adults probably has that many credit cards, and I’d bet that a lot of people bite when Target/whoever tells them they can get 10% off if they get the credit card–so yes, Jeff, there ARE people out there with a LOT of credit cards.
And for reference, the average household probably has only about 1.5 people eligible to hold credit cards, as a large portion of households are single people. So yes, we’re talking about a LOT of credit out there.
Clinton only got a surplus because he spent the social security surplus as fast as it came in. Like every president before & since.
If he really balanced the budget he could have used that money to finance a bridge to private retirement accounts. And before you go on about how private accounts would have been wiped out by last week’s bust, SS has already upped my retirement age since I got my card. It’s cost me about $40k in benefits.
JRoosh-
Haven’t you heard? We’are all Keynesians now.
There is also the occasional household that carries a department store credit card and a gas station credit card. That’s probably bringing the average up quite a bit.
“Wow, you guys have a real reading comprehension problem.”
That’s like a clown telling a guy on the street that he has big shoes.
That said, In my household, we usually sign up for accounts jointly. We typically get 2 cards with two separate card numbers, tied to one account. We have MC, Visa, AMEX, Discover. We also have a couple store cards like Ultimate electronics & Guitar Center. Multiply that by 2 cards each & we have 12 unique credit card numbers. If they include our “cash & credit” ATM cards which can be used as a Visa card, but is not truly a credit card then we are now up to 14 unique card numbers.
People can make statistics say whatever they want.
It can add up in a way….when I bought my house and had a credit check, it turns out both Wells-Fargo and Discover had given me cards I didn’t ask for, nor never used. I also had a dept store card that I had not used in 10 years.
I’m sure you haven’t forgotten that Clinton left office with a budget surplus.
Only because of the momentum of the Reagan years. Reagan took his case directly to the American people and forced change. Everyone knows this. Even a clown.
PS thanks for the compliment
I’m sure you haven’t forgotten that Clinton left office with a budget surplus.
Only because he could cash the “peace dividend” (Thanks, President Reagan!) and because while he spent his first two years in office planning to spend like a crack whore with a stolen Gold Card, the ’94 Revolution forced him to triangulate to the right like a madman.
He was more fiscally conservative than Bush (I or II); he was forced to be.
So – as usual, the boom DID trace back to conservative principles.
Three wingnuts, three different incorrect reasons why Clinton delivered a federal budget in the black. So I guess Bush doesn’t get all that “Reagan momentum” eh? You’d have thought he could have kept the Clinton momentum going at least. So will you kooks attribute anything bad that happens in the Obama administration to “Bush momentum”?
Actually, if you use GAAP accounting methods, Clinton never did have a surplus. You know, the accounting methods the rest of us have to use if you don’t want to go to jail? Government ignores these laws on its own books.
Real Clinton record; trillion dollar deficits.
Clown’s right… G.W. spoiled the Reagan momentum when he engaged the presidential policy to fly two planes into two buildings.
So will you kooks attribute anything bad that happens in the Obama administration to “Bush momentum”?
Nah, we’ll just mock you. Enjoy snark-catching, AC!
Bike Bubba is right. The Clinton surpluses were only projected surpluses.
They projected in 1998 that in 10 years, there would be surpluses. Unfortunately, those projections have to assume quite a bit about the future. The forecasters assumed that the state of the economy in 1998 would continue & grow at the same rate for 10 years.
The economy that those projections failed when Clinton was still in office, handing a recession & true deficits to Bush. Bush’s hands are indeed dirty in terms of the deficit, but Clinton in no way left him with a surplus.