Saturday, November 08, 2008

The Complete Collapse of the American Economy?

The signs are unmistakable – our economy is slowly sinking into a depression. There is no need to try to deny it, pretend it isn’t happening or run from the truth. With each passing moment, our economy is spiraling down into completely unfamiliar territory.

Reading a recent article in the New York Times regarding Iceland’s collapsed economy brought home the reality of where we might be headed.

Overnight, people lost their savings. Prices are soaring. Once-crowded restaurants are almost empty. Banks are rationing foreign currency, and companies are finding it dauntingly difficult to do business abroad. Inflation is at 16 percent and rising. People have stopped traveling overseas. The local currency, the krona, was 65 to the dollar a year ago; now it is 130. Companies are slashing salaries, reducing workers' hours and, in some instances, embarking on mass layoffs. Read entire article here.

My first thought was one of self preservation – what would happen to me if there was a collapse like this with our economy? Would I have a job? Would everything I know now and enjoy now, be just a distant memory of the good old days?

I really don’t know if an Iceland like, total economic collapse is possible in the United States? For all I know it might be possible. But at the very least, we are in for some very severe structural alterations to our economy.

We will not be returning to an economy that is so heavily dependent on consumer spending. There will not be a way to spend our way out of this situation. Spending will only prolong the inevitable and delay the changes that must be made.

The structural renaissance that is about to begin will be very painful and dislocating for millions of Americans. Our government will have to provide transitioning safety nets to literally rescue people from the spin-off repercussions of the coming changes.

In six months or a year or two years will I still be sitting in a comfortable home connected to the world with hundreds of dollars of electronic equipment? Or will I be sitting in a shelter waiting for my next meal? I guess only time will tell.

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