can’t see the forest

A Nail on the Head

Posted in economy, political opinion, U.S. News, USA by Curtis on 3/19/09

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In a CBC News article from this time last year, University of Maryland economist Pete Morici perhaps unwittingly summarized (and prophesied) America’s economic woes with great honesty and simplicity:

Living within your means would seem to be a universal wisdom. Not here.

If we do that,” says Pete Morici, an outspoken professor of economics at the University of Maryland, “if we pay off our bills, we’re going to consume much less than we produce. When that happens, the global economy will go into a severe recession.”

Nobody wants that.

Still, if Americans had more collective fiscal sense, they would look at their aggregate consumer debt — $2.5 trillion, not including mortgages — and they would hold their credit cards over candles. They would get rid of the expensive behemoths parked in the driveway and enter into a long, sober, luxury-free period of financial detox.

They would then tell their government to stop borrowing unimaginable sums from Chinese and Middle East investors. They would try to live in their houses and enjoy them for a few years, instead of treating them like financial milking machines.

But none of this is likely to happen, thank goodness. Because Americans are addicted to the opium of leverage. They love to buy, usually without much down payment or any down payment at all and then, as a market frenzy inflates the value of the thing they have bought to nosebleed levels, siphon off the artificial wealth and spend it anew.

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