Over at Fortune, Geoff Colvin, senior editor at large, weighs in with the next big financial crisis: "We made it through the bursting of the Internet bubble and now the bursting of the real estate bubble. Next we may be approaching the end of the most worrisome bubble of all: the standard-of-living bubble."
And:
"Since credit card debt has been growing much faster than the economy -- more than 8% in last year's third and fourth quarters and over 7% in May (the most recent month reported) -- people are apparently using it as a substitute for income. Thus, for the past year or so we have still maintained the standard-of-living illusion."
Bottom line?
"Sustainable increases in living standards have to be earned, not borrowed, and that means performing ever higher value work that can't be outsourced. We haven't been meeting that challenge very well; doing so will probably require much more and better education for millions of Americans, which takes time and money. The result may feel like deprivation, but I don't see it that way. Who knows -- we might even find that living within our means and saving a little money actually isn't so bad."
4 comments:
here, here.
i agree in theory, but not in practice...
since americans' real incomes haven't actually risen substantially since the 1970's, and have actually fallen in the last couple years...
and because the article comes from Fortune magazine, one of the mouthpieces of the capitalist class that has executed this neat bit of economic trickery....
in short: i'll start saving when you pay me more....
The author may not realize it but he's talking about a word that starts with a capital D and rimes with Recession. Very few people today remember what it means.
The last time debt was this out-of-control in the US was in the late 1920s. The US consumer spent the 1930s paying down that debt to manageable levels.
That's what a depression is: people stop spending and start paying down debt and saving.
But don't forget the other issue here: we gave millions of jobs to folks overseas, and kept the standard of living as if those jobs were still here via a massive credit binge, as folks began to think that selling phony tech stocks or real estate to each other in a series of Ponzi schemes was an engine for economic growth.
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