The End of Excess: Is This Crisis Good for America?

The End of Excess: Is This Crisis Good for America?

(Source: Time Magazine Permalink)
In the early 1980s, around the time Ronald Reagan became President and Wall Street's great modern bull market began, we started gambling (and winning!) and thinking magically. From 1980 to 2007, the median price of a new American home quadrupled. The Dow Jones industrial average climbed from 803 in the summer of 1982 to 14,165 in the fall of 2007. From the beginning of the '80s through 2007, the share of disposable income that each household spent servicing its mortgage and consumer debt increased 35%. Back in 1982, the average household saved 11% of its disposable income. By 2007 that number was less than 1%. (See TIME's top 25 people to blame for the financial crisis.)

The same zeitgeist made gambling ubiquitous: until the late '80s, only Nevada and New Jersey had casinos, but now 12 states do, and 48 have some form of legalized betting. It's as if we decided that Mardi Gras and Christmas are so much fun, we ought to make them a year-round way of life. And we started living large literally as well as figuratively. From the beginning to the end of the long boom, the size of the average new house increased by about half. Meanwhile, the average American gained about a pound a year, so that an adult of a given age is now at least 20 lb. heavier than someone the same age back then. In the late '70s, 15% of Americans were obese; now a third are. (Read "What's the Best Diet? Eating Less Food.")
We saw what was happening for years, for decades, but we ignored it or shrugged it off, preferring to imagine that we weren't really headed over the falls. The U.S. auto industry has been in deep trouble for more than a quarter-century. The median household income has been steadily declining this century ... but, but, but our houses and our 401(k)s were ballooning in value, right? Even smart, proudly rational people engaged in magical thinking, acting as if the new power of the Internet and its New Economy would miraculously make everything copacetic again. We all clapped our hands and believed in fairies. Read Article...
http://www.time.com/time/nation/article/0,8599,1887728,00.html?iid=perma_share

The popular culture tried to warn us. For 20 years, we've had Homer Simpson's spot-on caricature of the quintessential American: childish, irresponsible, willfully oblivious, fat and happy. And more recently we winced at the ultra-Homerized former earthlings of WALL•E.

Is the Almighty Dollar Doomed?

Is the Dollar Doomed?

(Permalink Time Magazine)
So it has been throughout the world, from North Korean souvenir shops to Ethiopian bazaars, for the past six decades. Government officials measure the health of national economies by how many dollars are stashed away in their central bank vaults. The international prices of everything from crude oil to cocoa beans are denominated in dollars. The dollar is a universal medium of exchange, because it is liquid, readily available and backed by the largest economy in the world. There has been little reason for global commerce to function any other way.

Arguments against the status quo have their merits. Over the past two years, global dependence on the dollar has been at the heart of the world's nastiest economic problems. Early in 2008, a weakening dollar was a factor in spiking prices of energy, commodities and food, which placed a disproportionate burden on the limited incomes of the poor. The dollar-dominated system has also allowed the U.S. to finance its budget and trade deficits at a low cost, which perpetuated the global imbalances that contributed to the current economic crisis. A system like the one proposed by Beijing, argues Deutsche Bank economist Jun Ma, would make it possible "for China and many other countries to avoid being victims of the systemic risks generated by domestic economic problems and policy mistakes in issuing countries of major reserve currencies."