Is Living High Pie in the Sky?
December 13, 2008 Leave a comment
Despite the ouch-factor of the economic downtown, Michael Shaffer’s hand-wringing seems a tad over-wrought. Click here for his article titled “Only Yesterday,” where he invokes the motif of Frederick Lewis Allen’s 1930s bestseller to draw dire parallels between the stark days of October 29, 1929 and our recent decent into economic chaos.
Yes, many 401(k)s have been depleted by 25-50%, and home equity has followed suit. True, the worst may not be over. I’ve joked without feeling humored that I might be working for the rest of my life. Fewer Americans are eating out, having their cars washed, or seeing a movie on a Friday night. Some have all but abandoned aspirations for a leisurely retirement, a college-education for their high school kids, or mortgage-free ownership of their home. Last night on main street in Yorba Linda, California, for the annual holiday festivities, classic cars were lined up along both sides of the street; but this time, an alarming number of the spiffy machines was for sale. We’re being squeezed and we don’t know when it will be safe to loosen the tourniquet.
Still, it’s too early to draw confident conclusions that happy days are gone for good. We need the reminder that wealth is no guarantee of satisfaction. But there also are reasons to expect reversals in the other direction. Home prices will plateau at a level that’s more realistic, and then rise from there. The stock market will bottom out and trend upwards as always. Paying into a 401(k) hasn’t been this cheap in ages. Colleges and universities have to have students, so prices will adjust, as their administrators take stock of their priorities. Heck, they might even devote more effort to delivering an education, something parents will want to be sure their dollars are paying for when money is in short supply.
And, of course, the government will start printing money. How else are they going bail out every ailing mega-company in America? The value of that money should hold up for awhile, since we’re hardly facing inflation at the moment.
I doubt if anybody really understands how the bottom rusted out of our giant economy while nobody was looking. But what happened this fall is different than what happened the fall of 1929. This time around, one man pulled the fire alarm and scared the bajeebers out of everyone. That man was Hank Paulson, Secretary of the Treasury. The most incompetent action of his career was his inexplicable announcement that the sky would be falling effectively immediately. He was right. And with that announcement he helped bring it to pass. Dumb, dumb, and more dumb. Would it have happened anyway? Not the way it did. That much is for sure.
We can’t predict the fallout of this numbscull decision. We should be wary of our elected officials and their appointees. Who doesn’t know that now? But let’s hang in there and keep our prophetic powder dry. I believe Michael Schaffer’s jeremiad is premature . . . even if we’re all unlucky enough for him to be right when the time comes.
Note: Frederick Lewis Allen’s book Only Yesterday is a good read. Schaffer is right about that. You can enjoy it here for free. Or, you can buy it here. There’s a Kindle version, too, for a couple bucks less right here.