This graphic is from a must-read paper (via Naked Capitalism) by economists Ken Rogoff and Carmen Reinhart that examines international financial crises through history. The upshot: housing prices will have a long way to fall; stocks still have a long way to fall; the deficit is a big problem; and we are in for a long and deep recession. What is propping us up? Infusions of foreign capital. And underneath it all is a basic problem as Naked Capitalism writes:
The sorry fact is the US has consumed at an unsustainable level. We need to reduce consumption and increase savings (and reducing debt is a form of savings). Reduced consumption means a fall in GDP … Why are we unwilling to accept the inevitable?
September 24th, 2008 at 10:11 am
It may be a “crisis” in terms of carrying on with current levels and modes of consumption, but GDP doesn’t equate directly to happiness and quality of life does it?
This “crisis” may stimulate an interest and development of cash-free exchange such as LETS and time-share, in credit unions, in volunteering, but mostly in not-for-profit or social enterprise. This could be a real boon for the creative class and entrepreneurs to create a leaner, more efficient, more creative, more diverse, more socially responsible and more moral economy (vis a vis the post on the morality of the creative class, also an opportunity to rebuff the accusation).
Hopefully it will lead to people reassing their levels of consumption, reappraising how they value material goods and interpret wealth as an indicator of success.