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Now, in the rear view mirror, many are starting to take up to what a shell game our economy has been for the past 30 years. It was built on credit and expanding consumer spending and debt. The "American Dream" meant everyone had to have not just one family car, but each person had one...and then each person needed a home, or if they had a home, then credit from the equity in that home to spend...and so on and so on. The industrial base was offshored and a "service" base took its place and then even that was outsourced...creating fewer and fewer places for people to earn the money to fuel the consumer and credit economy that had emerged.
Remember, that bubble was also fueled by growing debt...a time bomb that was ticking for years that was totally ignored. Companies could reschedule the debt and consumers could always consolidate or find other creative ways to put off having to balance budgets.
Yep, Insana has a very important point, but only partially. Many who got those "stimulus checks" last year had to turn around and use them to pay for higher oil and food prices or runaway interest rates on their mortgages and credit cards. It went into the big black hole that now no one seems to know where it leads...where our money went. Little of it went into savings...and it had little effect in an economy that was overheated and due for a "massive correction".
I put a lot of blame on Greenspan's laisse-fare policies that ran amok under boooshie. The Fed looked the other way as the economy and the markets became detached from actual earnings and used projections and "estimates" to keep the bubble inflated for as long as possible. Is it any surprise this mess really started to get under way after he left? Bernake didn't have a clue.
Cheers...
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