Friday, November 16, 2007

It might be time for a reality check

For younger Americans, the Great Depression means little, or nothing to them. Yes, for those who actually read their history books (if in fact history is still taught in our public schools), this was an actual historical event that happened over 75 years ago. The beginning of this economic downturn is associated with the stock market crash of October 29, 1929.

Those of us who are older have never experiencing a catastrophic economic downturn like that one, but we’ve heard the stories from our parents and grandparents about what that period of time was like. When you’ve met people who have been through hard times, particularly the kind of economic straits suffered during the Great Depression, you are haunted by their stories and it leaves an impression.

My father’s philosophy of frugality towards money and finances was no doubt shaped by being born during this economic slump. Born in the early 1930s, most his youth was spent growing up in the shadow of one of the nation’s most difficult economic periods. Ironically, when he reached adulthood after WWII, his generation was part of a long period of economic prosperity and a sense that things would be better, but I’m not sure he ever recovered from that previous sense of deprivation.

Born in the early 60s, I was 11 and regularly reading a daily newspaper and very interested in the news of the day, when the the oil embargo hit, in 1973. OPEC declared that they would no longer ship petroleum to nations sympathetic to and supportive of Israel in their ongoing conflict with Syria and Egypt.

This resulted in immediate affects upon the U.S. economy; gas prices quadrupled, rising from just 25 cents to over a dollar in just a few months. Many filling stations across the country had no fuel for a week..In other places, drivers had to wait in line for two to three hours to get gas. I remember seeing a gas line of a ¼ mile in Lewiston, at the Gibbs Station on Lisbon Street.

U.S. consumption of fuel dropped twenty percent, as Americans began to practice conservation, by carpooling, walking and using public transit, where available. Homes that utilized gas heat began switching to other forms of energy that were more affordable. My father installed a wood stove in our home, for the first time.

The federal government imposed a 55 mph speed limit, which helped to decrease consumption and the number of fatalities dropped. Gas stations imposed fuel limits of ten gallons and many closed voluntarily on Sundays.

The national mood shifted, for a brief period of time. Americans regained a sense of reality, not make believe, recognizing that the prosperity many took for granted, could disappear. The ease of motoring, perpetuated by cheap oil, was no longer viewed as a right and some even predicted that this shortage of oil could continue.

The oil embargo of the mid-70s is now just a memory. Jimmy Carter found himself voted out of office, because he dared to tell Americans that they needed to continue to conserve. Looking back, Carter’s prescience is obvious and even admirable. In 1976, however, Americans, much like we are today, were in denial about a lifestyle that might not be as conspicuously consumptive.

Here in the latter days of 2007, signs are obvious to some that we are headed for another dark period, economically. While we may not plunge to the depths of financial despair that Americans alive in the 1930s did, it seems quite possible that the economic doldrums of the 1970s are quite possible and more likely, probable. Interestingly, if you tell this to your co-worker over lunch, or mention it at the next family get together, see what kind of reaction you receive.

Americans refuse to face the obvious realities that are apparent if one takes a long hard look. On the other hand, however, these realities aren’t necessarily receiving wide dispensation from our mainstream media. Shouldn’t our leaders be helping Americans prepare for some bumps in the road, instead of insisting that we gather up our plastic and head to the shopping malls for Christmas?

Some of the financial spin that I’ve listened to for much of the past two our three weeks is utterly ridiculous and inane. Where is the analysis in various stories about high gas prices, the rollercoaster ups and downs on Wall Street? There is no connecting of the dots and little or no context to any of the news stories I've heard, or read. The shrinking dollar, soaring gas prices, housing slump and stock market fall, though inconvenient, are not the biggest threats to the economy. These are symptoms caused by deeper systemic problems. We need to learn from these events and begin to think about how are we going to build a more sustainable society.

Bad news, however, continues to seep through the denial and subterfuge. Wells Fargo CEO, John Stump, said Thursday that the nation’s housing slump is the worst since the Great Depression and is far from being over.

"We have not seen a nationwide decline in housing like this since the Great Depression," Stumpf said at a Merrill Lynch & Co banking conference in New York.

"I don't think we're in the ninth inning of unwinding this," he continued.

Today, Goldman Sachs announced that the mortgage wipeout could result in a $2 trillion cutback in lending and have dramatic implications for the U.S. economy, according to Wall Street investment bank Goldman Sachs.

The housing slump is expected to end up costing banks, hedge funds and other lenders an estimated $400 billion as defaults on home loans rise, according to Goldman economist Jan Hatzius. Meanwhile, the dollar continues to take a beating on the world currency market.

While this kind of blogging freaks some people out, there are those who believe that economic troubles might be exactly what Americans need. In a land that has become increasingly superficial and overly narcissistic, fueled by steroids, plastic surgery and conspicuous consumption, reconnecting with one another and recognizing what’s really important in life wouldn’t be a bad thing for most of us, in my opinion. It might even reacquaint some of us with the values espoused by our forebears and fixate less on the trials and tribulations of Barry Bonds.

Learning how to make due without a facial, or a visit to the nail salon, requires some depth of personality. Not driving an expensive sports car, or letting that overprice health club membership lapse, in favor of splitting your own wood is probably better for your constitution, if not your washboard abs. Then again, having a ripped body isn’t a prerequisite for survival.

I’m not necessarily hoping for economic hard times, but I’m not thinking about jumping off a cliff, either. Instead, I’m making sure I’ve got some things in order should things take a turn for the worse.

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