"Almost everyone was scarred and scared by the financial crisis and the
ensuing slump." Most people are still scared for a variety of reasons.
First, the Great Recession was a shock to the system, and we know it can happen
again. Second, there has accumulated a knowledge that the Federal Reserve has
worked frantically to support banks with only moderate positives to the system -
we wonder about the ability of the Fed to really fix anything. Third, people
are afraid for their retirement. We hear that potential retirees need to have
reserves in excess of $1 million when they retire! Get real, who can do that?
Corporations have walked away from pensions and those funds have been looted for
a variety of corporate uses (as in the U S West pension fund financing the Qwest
takeover). People know when their pensions are shot. Fourth, corporations have
reduced investment in the domestic economy, reaping huge rewards using foreign
labor. And fifth, neither major party proposes any kind of fix to the
foregoing.People are shell shocked maybe as much as in 1930 when
household consumption collapsed. It could happen again.
People will spend less when they're barely making enough to survive.Once the richies who have redistributed our wealth in this new Gilded
Age give us our money back, we will go back to spending. Until then,
only 1 percent will spend. The 99 percent of us will live very moderately.
"...The more intriguing question is: What comes next?...".President Bush was unable to stall the bursting bubble prior to his exit.Following President Bush's example President Obama will do every
thing under the sun to keep the next bubble from bursting before he exits.Whomever is elected in 2016 will likely preside over a crash that will
make President Bush's legacy look like a walk in the park.
The one action that contributed most to every market downturn becoming a deep
recession is over borrowing. Without reckless debt, downturns remain small and
blow over. With reckless debt, downturns have a huge domino effect. I suppose you could say that Samuelson is in agreement with me, since
complacency about risk drives people to borrow, but really the biggest issue is
the debt.Blaming the lenders only (the liberal viewpoint) is so
shortsighted. Borrowers and lenders are responsible for the contracts they make,
or in the case of the housing market, congress interfered, making the federal
government partners in lending as well. All parties are responsible.Because we have not dealt with all responsible parties, our government is now
busy making policies that are setting us up for yet another bubble and crash.And liberals are already busy figuring out how they will blame the next
crash on the conservatives.