ON THIS HAPPY NOTE…

1/6/09

The Wall Street Journal, on today’s (i.e., Tuesday, 1/6/09’s) front page proclaimed that, quoting the headline, “Hard-Hit Families Finally Start Saving, Aggravating Nation’s Economic Woes.” The article went on to report that in the third quarter of 2008, U.S. household debt fell for the first time since the series began being tracked, which was in 1952. During the same quarter, U.S. consumer spending growth declined for the first time in seventeen years.

As loyal readers know (See, inter alia, my 11/26/08 and 12/7/08 posts.), I find the resurgence of saving, even if brought on by economic difficulty, a favorable development, perhaps the only favorable economic statistic I see on the horizon. However, conventional thinkers are sullen and down in the mouth about this development. These brilliant strategists, who dominate New York and Washington (Both of these places, bear in mind, are highly complicit in our current economic malaise.), insist that what the economy needs now is a big shot of spending. As usual, the people directing policy, both public and “private,” are dead wrong here, wallowing in the encrusted and putrid remains of a thoroughly discredited economic philosophy. This economy needs more spending just like a drunk needs a strong shot of JTS Brown (“no glass, no ice”) to cure his hangover.

Yes, the type of spending in which Washington is trying to get us to engage would provide temporary relief, and enough of it might provide momentary exhilaration. But the consequences will be the type of pain that will be relieved only by gargantuan quantities of the financial equivalent of Alka-Seltzer followed by the economic equivalent of an eight hour steam. If we don’t learn to save money again, it’s curtains for the U.S. economy and, more broadly, for our once great nation. This is our chance; this is our moment, as politicians are fond to say as if they had invented that trite piffle of a piety. We should just let these economic problems run their course and let people make the adjustments that must me made. Ours is not so much a problem of public finance as it is of personal finance. We have spent far more than we should for far too long a time. What we are witnessing now is the chickens' of 20+ years of profligacy, borne out of a misguided sense of entitlement, coming home to roost. This has led to our decay not only economically, but morally as well. It might be too much (in most people’s, but not yours truly’s, estimation) to say that our wanton, gormless spending is a soul-sickness, but at the very least it is a reflection of a silly people desperately trying to validate itself by the geegaws it manages to accumulate. For the sake of our economy and of our society, we are going to have to radically change the approach to saving and spending that dawned, at least this time around, with my generation. The adjustment is going to be painful, but it is necessary. Any policy designed to ameliorate the pain will merely postpone, and exacerbate, it.

Conventional thinkers will, of course, heap abuse on such thinking. Ignore what old-fashioned, out of touch moralists like the Pontificator are saying, they will argue, and just get out there and spend. It is their hope that the American people will heed their admonitions and dance to their scratchy tunes, but, again, they are, in some cases, thoroughly depressed at the notion that the populace will not cooperate. “The idea that the American family will quickly spend us out of recession is a fantasy. It won’t happen,” the Journal article quotes Harvard law professor and TARF overseer Elizabeth Warren as saying.

I wish I could share Professor Warren’s optimism. Sure, people are saving now, but only because they have to. This is not the generation that survived the Depression and won World War II. The modern American is a shallow and soft person who tallies his worth by counting the gimcracks with which he surrounds himself. Much like the not yet convinced alcoholic who doesn’t drink when cut off from booze in the rehab center, the American spender will be right back on the hooch when times get “good” again.

It is all quite hopeless.

The only chance I see that our long ago great nation emerges from these troubles is if (Being the parent of adolescents and a pre-adolescent, it is very difficult to say this.) we do go into an economic depression and the next generation is hardened, much like their great grandparents, thereby. That is the only way that I think our society can be expunged of its self-destructive adoration of all things material and aversion to all things by which real character is developed. My generation, and perhaps the subsequent generation, has lost itself to the mental, emotional, and spiritual novocain of spending, debt (the “gotta have it” mentality, as my ever insightful wife would call it), network television, celebrity-centricism, and groundless entitlement.

Needless to say, the faint glimmers of bullishness (on the markets, not the economy) that I have been experiencing over the last few weeks (See my 11/21/08 post.) have rapidly dissipated. Not only are the economic signs bleak, but the cures being proposed by the people in charge on both Wall Street and Washington will serve only to intensify our difficulties. Further, the “experts,” the same people who castigated the Pontificator as a brainless bear when he proposed a few years ago that real estate might actually fall in price and that there would be dire consequences for the stock markets, are starting to get bullish. All this says to me that, despite the market’s being down some 40% from its highs, there is plenty of room on the downside, to paraphrase a man who, at least on film, epitomized the last great American generation, maybe not today, maybe not tomorrow, but soon enough.

Happy new year.