But looking at our economic model, I see it being upside down.
The financial innovations that Greenspan was pushing only obfuscated the level of debt that we were taking on. We took on debt but never built the productive capacity needed to repay the debt because we relied on asset appreciation.
The problem is that asset appreciation is like a ponzi scheme. It relies on finding a sucker to buy the assets.
– Companies borrowed from investors and lenders to keep on running and promised future cash flows that didn’t materialize (dot com).
On a small level, I know a restaurant owner who started his business not with the intention to make money on serving meals, but with the intention of selling the business at a profit. Now, he’s stuck. That applies to all sorts of small and large businesses.
– Households borrowed and spent counting on asset appreciation that didn’t materialize. Salaries did not keep pace, so we created asset bubbles to tide us over. Now the bubble is bursting.
– Government did the same thing.
We need to get back to matching revenues to expenses.
– Over reliance on technology and the promises of technology. You bring up Pharma but I believe that it’s a bubble in itself.
We rely too much on drugs to save us from our ills. But the key is to eat well and lead a healthy life. Pills have side effects and cause other ills which then require more pills.
– The technology we developed and counted on such as cell phones, media streaming, mp3 players, etc… are useless. The hype fed onto itself but those are expenses that people will cut first when times are tough. Does a family really need a $200/month cell phone bill? Cable bill?
As a parent you know that good parenting is key to your kids development.
Government is our parents. And government failed to guide us in developing a sound economic policy.
Government policies allowed us to mis-allocate resources. Look at the enormous resources to develop and refine the SUV. The profits are gone and the resulting technology is useless, now the big 3 are about to go belly up.
