Most of us know why we’re here — debt, subprime mortgages and George Bush seems to be a popular refrain. Reading economic papers and forecasts from the beginning of 2008 is like reading a review of 2008’s economy from 2009’s perspective — all that’s needed is to change the papers into the past tense. Everything bad that was supposed to happen actually happened. Gas prices surged — a fairly reliable precursor to United States recessions since World War II. The mortgaged-backed derivatives and securities that were making Wall Street firms and banks terribly rich were just as useless as we feared, but far more prevalent. Unemployment has risen steadily, and the whole Bernie Madoff Ponzi scheme was the icing on the “Wall Street’s profits are about as real as the Badger men’s basketball team’s chances at a Final Four berth” cake. Murphy’s Law reigned supreme.
The only one that’s hiring, it seems, is the federal government. So I guess that would imply that for the first time in a generation, a political science degree may be the most valuable degree outside of engineering. Meanwhile, Florida and Texas sported temperatures below freezing over the past week. Hell is rumored to be hovering somewhere around 35 degrees.
There is, however, hope. The House version of the economic stimulus plan promises to plug a $1.2 billion hole in Wisconsin’s state budget. That would get us down to about $4.2 billion. In all, Wisconsin’s cut of the stimulus pie will total $4.3 billion, according to the Wisconsin State Journal. The funds are much needed to help Wisconsin and other states in the midst of a considerable fiscal mess. The infrastructure, health care and education spending garner thumbs up from this aspiring economist.
But make no mistake. This stimulus package is the economic equivalent of changing a flat tire on a run-down 1980 Buick LeSabre. As someone who has driven the aforementioned vehicle extensively, allow me to say from experience that the problem isn’t the flat tire. It’s that you’re driving a 1980 Buick LeSabre.
The problem was and remains that Americans are continuously finding ways to make exorbitant amounts of money without having to produce or sell a tangible product. We lurch from economic bubble to economic bubble, trying to make as much profit before the bubble bursts. The recent crash has revealed that what Wall Street and our economic taskmasters value wasn’t a product, but a stock price.
The tech bubble burst back at the changing of a century. Dotcoms appeared and disappeared. Business plans that quite literally laid out a path to insolvency were rampant. Billions changed hands based off of promises, not products. It allowed people to make millions from selling ideas — not products. Much of the fervor and profit was based off of stock prices and day trading.
The current housing bubble has been bursting over the past year-and-a-half. Numerous firms bought securities and derivatives backed by mortgages that simply would never be paid. To quote a National Governor’s Association paper from January 2008, “Experts are increasingly concerned that significant portions of securitized mortgage debt are worthless and must be written off by financial institutions.” Worthless — how applicable.
Too much of what we make money with is worthless. Our grandparents weren’t nearly as smart as we are, but they were sure a whole lot more productive.
In its prime, our nation was about the only industrial nation with the productive capacity to meet the world’s nascent demand for products. Primarily because much of our competitors were digging themselves out from World War II’s rubble. Much has changed. A good thing can only last for so long. We are trapped in a vicious cycle of trying to find not the next big thing but the next big nothing — trying to make as much money as we can without having a product to sell to make it. That’s the American economy.
Meanwhile, the American people wait with bated breath for a $1 trillion bailout. A silver bullet, if you will, with the consequences of our economic tomfoolery playing the part of the werewolf. The one from the extended Thriller music video. YouTube it.
Only it won’t really fix the problem. The problem is that our economy is like a suicidal prisoner. You can keep a watchful eye on it for only so long. But it’s only a matter of time before it tries to kill itself again.
Greed has been masquerading as a good thing. It kept the profits coming in and the company thriving. Turns out, as then-Arizona Cardinals coach Dennis Green once insisted about my beloved Chicago Bears, greed is exactly what we thought it was. Bad.
Gerald Cox ([email protected]) is a senior majoring in economics and Asian cultures.
