I tend to take the long view on things. Granted, I like to eat every day and I have bad habits that make me act in the shockingly short term. When it comes time to explain things, however, all the pleasure and gratification seeking behaviors of people happen in response to some kind of social construction. We dare not act too far out of line for fear of losing everything we have in money, status, and all the other things that we use to get our kicks. Transformations take place generationally because we grow up with ideas about pleasure and guilt, wrong and right that are comfortable. Things don’t just change overnight because we don’t change that quickly.
Let me explain how I see a few things bluntly.
First of all, I’ve been getting notes from conservatives who think I’m a liberal and liberals that think I’m a conservative. I want it to be known that I think both words have very little meaning anymore, but if you have to call me something I prefer it be liberal. I think that there is a tremendous power in people getting together and building a life together, leaning on each other when things get tough.
At the same time, when that organization becomes a distant “other”, like a government that dispenses values and compassion almost casually, it ceases to be about the people that made it rather quickly. People are people, but systems are systems. They each require their own care and feeding.
I’ve been talking about the potential for an economic Depression because I think the systems that people have gradually come to take for granted are failing all around us. Further, the response I’ve seen so far seems to be the kind of response you would expect with emotional Depression or any other mental illness – denial.
When the IMF head said that the West is already in a Depression, Obama went into action. In tours and at a press conference he stressed the urgency, saying that “if we don’t act now, the consequences will be dire”. “This is not your ordinary, run-of-the-mill recession,” he said, “If we do not act quickly it could turn a crisis into a catastrophe.”
Notice that he didn’t say the “D” word. Just as the “stimulus” bill became the “recovery” bill, every action seems geared towards avoiding panic. But while he didn’t call it a Depression, he came damned close. Obama seems to understand the danger of complacency as well as panic.
If we are to take our new President’s careful path for what it is, we invariably have to look at this from a longer view. We didn’t get into the crisis overnight and we won’t get out of it overnight. If we can see what the real problem is and where we’d like to go, we can avoid taking action in the short term that messes up our chances in the long term. So what caused this?
In the 1990s, people started to make a lot of money with money. It was the Tech Bubble, the daze when amazon.com and yahoo.com and, briefly, even pets.com could generate fabulous new wealth for their investors. We know that this bubble burst around 2000, but by then a lot of smart people moved their money into something safe – real estate. The principle that you make money manipulating money had become cultural, and people lost interest in making stuff – that was farmed off to the Chinese, who appeared far cheaper. The wealth and intellect and energy of our great Empire went towards manipulating money to make more of it. It looked as if we could all retire rich and happy.
Around 2000, however, several things started to happen. The need for new places to put all this money fueled an increase in hedge funds, especially those with a lot of the very safe mortgage backed securities. These had a constant income stream associated with people’s monthly payments and were backed by the collateral of an actual building that was only gaining in value.
What could go wrong? Making money from money became completely institutional in that it was, by all accounts, a “sure thing”. Our government, eager to keep things moving, encouraged this behavior by giving tax cuts to those who were likely to invest the money because investment seemed to be the way everything grows. The debt this generated provided plenty of T-Bills to invest in, too. The Federal Government also did its part to make it easier to borrow money to buy a home.
What was less obvious to most people was that this incessant demand for new investment, especially in real estate, was the first sign of a problem. The beast we created required constant feeding. We had become a giant national Ponzi Scam.
If you look at it this way, the collapse was inevitable. This isn’t a partisan issue – there’s plenty of blame to go around. The long view tells us this is a cultural problem, a problem with what we believe and what we think we can get away with. That won’t change soon. Next time I’ll tackle what I think can be done about it.
If you have questions about what I’ve said here, please follow the links to other essays. I know it’s a slog to get through all this, but easy explanations are usually bullshit. I’m trying to tell the story straight up, and that takes space. If you still think I’m wrong, please tell me so in the comments – I don’t get this perfectly right on my own and I know it. Thanks!