Great Recession of 2008 and Collective National Stupidity

Now that the great recession has officially arrived its easy to look back and blame the all the people that were involved in loans that people couldn't pay, the institutions that bundled these loans into toxic packages of so-called assets, and all the people whot thought that housing prices would rise forever. But it isn't that simple, because the vast majority of the people in this country contributed in one way or another to the economic crisis in which we find ourselves. If you think you weren't involved, think again, because you probably were. Consider the following questions:

Did you buy a house you couldn't really afford, but assumed that future salary increases would eventually make the house of affordable?

Were you spending more money then you earned?

Do you have new, or almost new, clothing in your closet that you never wore?

Do you live in a house that had more than 1000 square-feet per person?

Are you paying more than $100 a month on credit card debt?

Did you do impulse shopping and buy things that you didn't really need?

Do you drive a gas guzzling car?

Did you think that the value of your house was always going to increase?

Did you take out a new mortgage on your house so that you could have extra money to spend on something that wasn't a necessity?

Did you buy a condominium or second house so that you could "flip it" and make money.

If you answered yes to one or more of these questions you were either directly or indirectly involved in the current economic crisis. If you answered yes to three or more of these questions you should be sentenced to three counseling sessions with Susie Orman. All of the above constituted the Collective National Stupidity that led to the current economic recession.

How could buying a few things that we didn't really need to contribute to the recession? Easy. We became a nation of shoppers on an endless buying spree that eventually had to end in a catastrophic bust. Counties, cities, and states became dependent upon sales taxes which would one day drop off a cliff. That day is here now. Companies built more stores so that we didn't have to travel far to buy things we didn't really need. When we stopped buying things in abundance, stores began to close. People lost jobs, and companies went bankrupt, which resulted in defaulted loans at banks. And finally, banks stopped loaning money.

Depressing Recession Is Finally Acknowledged

The people in charge of measuring such things have finally declared that we are in a recession. What was their first clue? The Lehman Brothers bankruptcy? Hundreds of thousands of people losing their jobs? The stock market declining by over 35%? No. The number crunchers and bean counters had to do their thing and tell us that the recession started last December. There is something bizarre about the way the federal government continues to go about its business of handling and describing the economy. It's almost enough to make you lose your faith in government.

Now that the recession is official, the next order of business is comparing it to all the other recessions and estimating how long the current recession will be. A number of official and unofficial sources have already stated that this recession will be worse than probably all the other recessions since the Great Depression. Again, what was their first clue? The bankruptcy of Lehman Brothers and the disappearance of Merrill Lynch, Bear Stearns, and the near disappearance of the rest of the great brokerage houses might have given them an inkling that the economy was in very bad shape. The great brokerage houses didn't go broke during the great depression, probably because they hadn't had the opportunity to create trillions of dollars of “bad assets."

How can an asset to be bad? Easy. That's when an asset is really a liability. It's very similar to giving a mortgage to someone who can't pay it back. Of course the brokerage houses and the giant national banks told us that the assets weren't bad at first. Then they admitted they were slightly bad, but we shouldn't worry. At the same time, chairman of the Federal Reserve Bernanke and Secretary of the treasury Paulson were also telling us that things weren't that bad. When enough people tell you that things aren't that bad it's time to really worry. We all have denial in our personal lives, but when denial takes place on a national level, it's generally a catastrophe.

The official acknowledgment of the recession comes at a time when the people of this country are supposed to be spending themselves into oblivion for the holidays. The spending orgy this year is likely to be much smaller than previous years. The greatest gift that people can give themselves for the holidays is remembering what's truly important in life. Relationships and family are precious and can't be purchased in any store.

Senator McCain Explains Away Phil Gramm

Last Thursday, former Senator Phil Gramm, currently chief economic adviser for the McCain campaign, called America a "nation of whiners" whose economic complaints are mostly "mental." I'm sure most Americans were relieved to know that their economic concerns and hardships could be relieved by a pep talk. Senator McCain had immediate collateral damage to with and said, “Phil Gramm does not speak for me. I strongly disagree." Senator McCain went on to state, "that people who've lost their jobs or are struggling to pay bills aren't suffering from a " 'mental recession.' America is in great difficulty, and we are experiencing economic challenges."

Given that Phil Gramm is a vice president for UBS, and is largely responsible for the so-called "Enron Loophole" along with his wife Wendy Gramm, it is unlikely that he is suffering any economic hardships at this time. It is said that a picture is worth a thousand words. The photo presented with the courtesy of Politgal1 (http://politigal1.blogspot.com/) is probably worth several thousand words.

It's a shame that Senator McCain has a chief adviser who is so out of touch and contemptuous of the vast majority of Americans. If you are not an affluent American and have concerns about: health insurance; your ability to make your mortgage payment; whether you can pay for the gasoline to drive to work and take your children to school; the increasing price of food; and a host of other concerns, can you really afford to vote for a man whose chief economic adviser is so insensitive to your concerns and issues.

Real Recession and Statistical Recession

Recent reports of significant declines in auto sales and home sales gave further evidence of an economy in serious trouble. Major department chains are scaling back plans for new store openings and increasing numbers of vacant stores are appearing in shopping malls and strip malls. But the government keeps issuing its own reports telling us that there is no recession. An article in the Wall Street Journal stated that, "Stronger gains in consumption and exports pushed U.S. gross domestic product higher in the first quarter, revised government figures showed, further evidence that the U.S. avoided recession in the early part of the year albeit with anemic growth."

The economy is headed downward regardless of these statistics. Wealth is disappearing as housing prices decline and stock portfolios values decline. The signs are all around us but apparently these things don't count as long as the government is able to produce statistics that say we aren't in a recession. If your basement is flooding, but the government says there are no flood conditions, what are you to believe?