28 February 2009

The Problem is Us

The Planet Money segment on yesterday's Morning Edition (NPR) had one of the most succinct, accurate and chilling descriptions of why we're in our current economic mess, and what we'll have to do to fix it. You can read the transcript at the title link, and listen to it here, but I've pasted in the most salient portion of the discussion below.

"That chart is the most striking piece of evidence that I have that what is happening to us is something that goes way beyond toxic assets in banks. It's something that has little to do with the mechanics of mortgage securitization, or ethics on Wall Street, or anything else," Beim says. "It says: The problem is us. The problem is not the banks, greedy though they may be, overpaid though they may be. The problem is us."

We have overborrowed, Beim says: "We've been living very high on the hog. Our living standard has been rising dramatically in the last 25 years. And we have been borrowing much of the money to make that prosperity happen."

In other words, the problem the banks are facing is the problem we, as a society, are facing: We all have too much debt. And getting rid of it is going to be painful.

If you want a solution in which those who bear the most guilt for the financial crisis pay the most to fix it, while the innocent don't have to pay anything, that's not going to happen.

It seems that the U.S. economy is way past that point. Americans are going to spend a lot of money. The government may bail out some banks that some people wish it wouldn't. There is no magical solution where the U.S. gets out of this mess without any pain.

While they might disagree on who will bear the brunt of that pain, all the experts interviewed for this report say the longer the U.S. waits, the worse it will be for everyone.

If only we'd all be willing to face the fact that this mess isn't just about corporate greed, poor regulation, too much regulation, or failure to help out the 'little guy.' It's about our national addiction to easy credit, an economy based solely on debt, and our love of spending. Until we come to grips with that, we'll never solve our problems.

3 comments:

  1. I disagree with this whole article. I am offended that someone who reads my post and comments on my blog can believe this dribble... Awful...

    The high lifestyle many of us have lived is because many of us have worked very hard. I don't buy this bullshit about us being the problem, especially when the problem is political mismanagement of the financial system, along with over unionization within the auto industry. Research this stuff yourself, don't simply swallow the garbage NPR puts out...

    Why do you think the banking system went bust? Hmmm? It starts with the housing market collapse, slips into the banking system, where their own insurance providers can't afford to pay back the lose, and when these financial institutions can't afford to allow for "business as usual" (the free flowing of money through the financial system), the entire economy slows down. Take an economics class PLEASE!

    NPR is simply spinning the socialist line, discussing how we in North America are bad people for having money and spending it. Such consumption of goods they are attacking is the reason why so many of us are doing well. Money needs to flow through the system for it to survive, something NPR doesn't seem to understand saying that. You cut back on taxes for EVERYONE, you allow businesses to grow without being cut off at the knees, you allow the banks to operate without forcing bad loans down their throats, you keep all this "money is bad, we're all doomed" bullshit away from investors and your everyday consumer, and maybe, just maybe, things will get back on track...

    This is the reason I keep writing articles on Democratic economic incompetence, this is why NPR is a joke, and this is why you shouldn't let talk about "personal greed" cloud your judgment...

    Both the Chinese and the Russians turned away from it with great success, you should too... By first turning off that garbage...

    http://clancop.wordpress.com

    P.S. Sub-prime borrowing is a creation of Jimmy Carter, something Obama supports, giving loans to those who can't pay them back. If the rest of us couldn't take out loans, the banks wouldn't make money, their would be no growth on saving for those who put their money in said banks, and the system would kill over... Think about it...

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  2. Well golly, Clancop. I guess you done told me! I have an economics degree, and did a double-division masters in biology and natural resource econ., and worked as a business manager for nine years before that, but apparently that would make me too stupid to understand economics. The point of the NPR article is not where incompetence does or does not exist - the point was that true repair of the system will mean, in part, that many will have to change their perspectives on credit. For instance, all those many first-time home-owners who should never have been borrowing on to buy a $400K home when they make $30K (a big problem where I live). This goes hand in glove with the insistence of many of the Dems in government that home-ownership is a God-given right and that all borrowers should be financed, regardless of repayment capability.

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  3. As a followup to my previous comment, here's the original article I wrote on this issue last year: http://bullmoosegal.blogspot.com/2008/09/roots.html

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