This is a time for important anniversaries. We’re looking straight into the heart of the 9/11 anniversary this year with terrible rumblings shaking the foundations of our free and open society. The earth itself is about to turn the northern part of our planet away from the sun and into winter. Lost in this reflective time is likely to be an anniversary that we might not want to remember or think comes close in the wash of time and history. This is the second anniversary of the meltdown on Wall Street that has defined our economy ever since.
In 2008 the collapse of Lehman, Merril, AIG, WaMu, and a few others came as such a surprise that very few people thought that it was part of a new Depression. Nearly everyone who had access to a media outlet expressed surprise that it could even happen. The perspective of two years is enough to give us some understanding as to how significant this was, however, and how it might fit into a bigger history.
Consider that two years ago it was popular to talk of a “housing bubble” as an isolated incident that was causing trouble for a few homeowners out on the fringes. We now know that this was part of a larger bubble in technology, finance, housing, and briefly even commodities that washed over our economy. While it has yet to be a completely accepted popular opinion, more people every day are open to the notion that decades of shuffling along through good times created a deeply held belief that we could all have something from nothing without a lot of hard work.
Working through an anniversary like this can help us to understand where we are and where we might be going. History may be a terrible guide to the future, but it is all we have. A bit of perspective can help us to make it through this and achieve Restructuring – a new economy that is stronger than the old one that fell apart two years ago. Recovery is, after all, not an event but a process.
The reason this anniversary is important lies in the one that overshadows it, I believe. History will probably start this Depression in September 2001 for many reasons. The most important single reason is that our nation – and the world – spent a solid week or more not doing anything but huddling together and trying to make sense of what happened.
A lost week may not look like much, but to a fragile economy built on a massive bubble it was a lot. After 2001, the US government ran massive deficits to finance two wars simultaneously and cut taxes at the same time. Alan Greenspan’s Federal Reserve held interest rates low. American cashed out $1.8T in home equity between 2001 and 2008, peaking at $354B in 2006 (or about 3.4% of GDP). Yet for all this tremendous outflow of cash we had almost no inflation and no significant economic growth – we barely held even. Unlike past Depressions, this one was buried under a big pile of paper for a long time.
Two years on, it’s become fairly well accepted that this cannot continue. What exactly we can do is still not obvious and I don’t think that it could possibly be. We still have a poisonous political divide that has prevented us from even discussing our priorities in a realistic and open way, let alone setting and satisfying them. For all the perspective time can give us it’s up to all of us to allow it to settle into our guts as wisdom.
Whatever the next two years or nine years might bring us is, to a large extent, up to all of us. We can look back on these anniversaries and rightly feel sad at the terrible loss we feel just as we can feel the chill of September in the air. But what is most important at this time is moving forward, together, and making an effort to understand what happened and what we can do about it.