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A Decade, or so

It’s been a decade since 9/11, with its terrible rumblings shaking the foundations of our free and open society. That is reason enough to pause, but there is another anniversary that is coming up as well. This is the third anniversary of the meltdown on Wall Street that has defined our economy ever since.  As the kids go back to school and the northern hemisphere starts to tilt toward the chill of fall, this is a reflective time.  Knowing how we got where we are may not be a great predictor of where we will be in the future, but the straight line between then and now is all we have as a guide

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 three years is enough to give us some understanding as to how significant this was, however, and how it might fit into a bigger history.

Three 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.

Since the collapse the concept of “Recovery” has been held out as an inevitable event, something right around the corner.   It hasn’t happened for many people, largely because we have yet to achieve Restructuring – a new economy that is stronger than the old one that fell apart three 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 scant inflation and little economic growth – and what little growth was announced has since been revised heavily downward. Unlike past Depressions, this one was buried under a big pile of paper for a long time.

Three years on, it’s become fairly well accepted that this cannot continue. What exactly we can or should do is still not obvious and it’s unlikely 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. That is unlikely to happen until we absorb the best lessons from our history and cross the lines we set up in what seemed like happier times.

Whatever the next three  or ten 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.

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11 thoughts on “A Decade, or so

  1. I agree, we let bin Laden win. He may be gone now but he sure did a lot of damage as we turned in on ourselves.

  2. Jack, Dale: That wasn’t the direction I was going, but it does seem to be true. I’m more interested in people looking back with a clear eye so that we can learn something from it all. I think there are a lot of lessons here. I didn’t say a think about the Iraq War in part because I still have only some speculation as to how/why we were sucked into that in the first place, but there are probably a lot of lessons to be learned from that sorry chapter, too.

  3. My only objection here is using the words poisonous political divide. I think that is a disservice to the low information voter who puts a pox on both parties. Evidence will show that it is the republicans the vast majority of the time who refuse to cooperate, and when democrats do cooperate with the republicans as they are wont to do they are eviscerated by their own party. Sorry Erik that I cannot be any more encouraging now or lately but that too shall pass. Foreign Policy had an interesting article lately on ten things in the last decade that may have been more significant than 9/11. Telecommunications and other various items attached to the global economy among them. Best to you and keep writing and I’ll keep reading.

  4. Dan: Was trying to be neutral, but I do blame the right far more myself. You are right that increased globalization and the rise of the developing world are far more interesting than 9/11 in terms of big changes, but from a purely US economy – centric position I think that the place of 9/11 is underestimated. But yes, I think my piece on containerized cargo will stand up to time much better, for example. 🙂

  5. I don’t know if history will date the Depression to 9/11 but it seems like the only real turning point. That means we have been in this for ten years now and still not pulling out at all which gives added emphasis to Obama’s speech. I can’t wait to hear what he proposes. I have heard a $300 billion stimulus but there has to be a lot more to it than that especially since the republicans would never pass that in the U.S. House.

    I do not think it is fair to say that Bin Laden ‘won’ anything but he did do a lot of damage. If you look at Egypt and Tunisia (sp?) it looks like Bin Laden will have any place in history other than 9/11.

  6. Anna: I’m keeping my expectations low for the speech and, yes, somewhat predictable aftermath of no, no, and no. I also agree that bin Laden will go down as a footnote in history, but he did do a lot of damage – largely because the excuse of chasing him down caused more damage than he did to our civil liberties, political climate, and our economy.

  7. I was going to try to pull a couple of thoughts together when I comment, rather than throw in link, but this article deserves to be shared, The Greater Recession: The Real Reason Americans Feel So Squeezed I won’t try to summarize what it adds to the dots Erik so cleverly connected; just read it if you are interested in economics. It gave me some new insights into the greater recession / lesser depression and how it dates back 30 years.

  8. Laurie: Great article, as usual. Two things stand out to me – how universal it is becoming to use a 30 year cycle, starting with 1980 as the origin of our current economy (and its problems) and the solid discussion of the role of productivity. Both of these were not questioned just a decade ago, but now the 80s and the ensuing increases in productivity are up for scrutiny. Fascinating.

    I think it’s obvious to start with 1980 and look forward, but the fact that this is hitting popular opinion so easily without debate astounds me. If nothing else, I’d expect Republicans to defend Reagen more effectively – and I have a few arguments ready if they do. I can’t wait to see where this debate goes, frankly – it’s very healthy and so far seems to be very factual and matter-of-factual. Thanks again!

  9. Pingback: A Spirit, not an Event | Barataria – The work of Erik Hare

  10. Pingback: Come the Dawn | Barataria – The work of Erik Hare

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