American Citizen or American Consumer: Who Are We?

The news reports today on "Black Friday" are proclaiming a return of the American consumer. This article featured prominently in the NYTimes paints the picture:

Malls across the country reported overflowing parking lots, and stores reported lines out their doors, as Americans seemed — finally — to be spending again. ...

There seemed to be a resurgence in spending on discretionary items, a bright spot for an economy where nonessential spending has been weak.

I hear a line repeated often since the horrors of 9/11. "They hate us for our way of life". What does that mean?More and more it seems to me that "our way of life" is an endless quest for "things". We define economic progress by measuring nonessential spending.

When I was a kid and a member of the Boy Scouts, there were two merit badges that stood out above all others: Citizenship in the Community and Citizenship of the Nation. What we learned as we studied to fulfill the requirements for these badges were the responsibilities that come with being a member of the local community as well as the responsibilities of being an American. It was a proud day for me when I earned those two badges. Maybe this is a slight exaggeration but it sure seems like the only responsibility for citizens/consumers today is to spend, spend, spend.

If we could only grow our way out of this economic mess

One of the most frustrating sideshows of the economic meltdown is the simplistic, pedestrian coverage and analysis offered by our media leaders. Take for example this article in today's NYTimes. The focus of the piece as stated in the title is that economic growth and an economic environment that cultivates growth can be a big help in our effort to cut our deficits:


If the economy grew one half of a percentage point faster than forecast each year over the next two decades — no easy feat, to be fair — the country would have to do roughly 40 to 50 percent less deficit-cutting than it now appears, based on my reading of budget data from the economists Alan Auerbach and William Gale.

The article goes on to talk about how economic growth was instrumental in the surprising turn in the '90's from deficit to surplus. The article lacks any in-depth analysis of how or why this economic growth in the 90's came about. The boom of the '90's was brought about in large part because of the Internet build out and cheap abundant credit.The Internet boom started out legitimately but degenerated in many ways into a glorified ponzi scheme.

I believe what we saw in those years was a continuation of Alan Greenspan's easy money policies that began after the '87 stock market crash and continued throughout the '90's.It was one crisis after the next: Latin America, Russia, the LTMC fiasco, the Asian tigers. One excuse after the next to simulate. Remember "irrational exhuberance'?

Post 9-11 we went through the same scenario, this time it was housing that was the bubble of choice. All through this cycle we as a society have delayed making responsible financial decisions. Instead we have spent $ we don't have, run up the credit card to a point where we are at our limit and instead of bracing for tough, difficult choices our media elite offer a bromide: we can grow our way out of trouble. Good luck. It's not going to happen.

Karl Denninger does a great job of laying out the math of our current situation in many of his posts. It's time for us as a nation to understand reality, rather than continually wishing upon a star. As Yogi Berra once said, "It's getting late early here".

Election Day 2010--What Does It mean?

Tomorrow, November 2 is Election Day in the USA. Take your pick of bad news: unemployment, mortgage mess, ongoing war , tax increases, it looks like we will see the public embrace the "throw the bums out" approach in the voting booth. That probably isn't all together bad because there sure are a lot bums up on Capitol Hill and we really do need fresh blood and fresh ideas. What bothers me is that I just don't see any fresh ideas on the horizon.

The chart at the top of this post deserves a close look. The pundits have frequently offered the opinion that Obama is anti-business and that his business antipathy is a major factor behind our "jobless recovery". The truth is though private sector job growth has been plunging over the past 10 years to become non-existent. As far as jobs are concerned, the only real growth since 2000 has come through government jobs. Sure, that is no recipe for real sustainable growth, but the point is this economic environment wasn't hatched overnight. In some ways it is amazing that it has taken this long for Joe Q Public to get "mad as hell". I guess that is the magic of stimulus scams, pull-forward demand programs and various bubbles stoked by Greenspan/Bernanke and cronies . Yes, the public is pissed now and there will be a new roster come Wednesday morning.

What does this new crew think they are going to do? Let's see how serious Americans are about adopting an austerity program. My gut tells me, not very.