May 31, 2015
Why gross domestic product (GDP) and other popular metrics are no longer an effective measure of America’s economy and well-being.
For what shall it profit a man, if he gain the whole world, and suffer the loss of his soul?
– Jesus Christ
(0-33 A.D., Troublemaker to some and Savior to many.)
As the U.S. and much of the industrial world struggle to recover economically from the 2008 global credit crisis, the Federal Reserve’s policy to keep interest rates artificially low to spur new growth among businesses, through hiring and capital spending, hasn’t worked. Following the housing bubble and the home foreclosure crisis, policymakers and politicians have been looking for the next red hot industry to expand our economy. There have been attempts to make new and used cars sales that next industry using, once again, sub-prime loans. Maybe we have it all wrong. Could it be that we’re going in the wrong direction?
To put it simply, America suffers from an excess. With our basic needs met, we’ve become a nation of unquenched wants (mostly in the form of consumer products and services). Anyone who wants a roof over their head already pays a mortgage, rents or lives in government housing. All come with utilities and are furnished, electronics, a closet full of clothes, food in the refrigerator and in the cupboard with transportation sitting in the driveway or out on the street. We have too much of everything and that’s become a major problem. All the while, families are drowning in debt with little or no savings for retirement.
Our economy with its material excess is undercutting our nation’s character, both, as individuals and as a society. Sadly, few of us can see it. Drive to any shopping center, strip mall or mall and walk the aisles of stores. What you’ll notice is that there’s not a bare space on any shelf in the… bed and bath store, big box store, department store, grocery store, electronics store, hunting and fishing store, shoe store, sporting goods store, discount store or dollar store… Remember the days of the Cold War and watching on the evening news images inside of a Russian grocery store showing bare store shelves? We all gasped at seeing and hearing that Russians spent hours waiting in line for their turn to walk inside to buy rationed meat, milk and a loaf of bread. We knew, immediately, that their economy wasn’t working for them. I would argue that our economy is no longer working for us.
For all the acres of brand-new cars for sale, the mega Wal-Marts and Targets, our nation has become a nation of addicts, both, legal and illicit drugs. Every day can be Christmas morning. Buy now, enjoy now and pay later. Where’s the discipline and patience in saving? Credit is weakening our discipline and our patience. Rather than use it for emergency purposes only, credit now allows Americans to live beyond their means year-around, which is no different than the behavior of our own government. Back in the day, doing something special might result in an occasional trip to Baskin-Robbins or Dairy Queen for ice cream. It has, now, morphed into a daily trip to Starbucks for a $5 drink and whatever the kids want. We’re fat and from a national security standpoint that’s becoming dangerous. Everything has to be “luxury” or upscale: our cars, clothes, electronics, purses, watches and even our coffee.
With our economy on steroids, our population has broken down into two classes – the rich and everyone else. The larger group admires and wishes to be just like the smaller group of billionaires, but the billionaires could care less about this larger class of debt-ridden Americans. As I look around at our materially-rich country I wonder, where are all the happy people?
Since Chairman Ben Bernanke resigned from the Federal Reserve, I keep seeing “Mr. Fix-it” getting all these new gigs. First, it was as a fellow at the Brookings Institute (an American Think Tank, in Washington) now as a senior advisor for PIMCO (a global investment management firm) and I can only shake my head. This former Princeton professor who studied the Great Depression (1929-39’s) and all that went wrong was supposed to come to our nation’s rescue and turn our country’s economy around, but it didn’t happen. Now, he’s being rewarded from coast to coast not for his success, but for his many contacts made while sitting on the Federal Reserve Board and as its Chairman. Generally, if you fail in your job you don’t get rewarded.
In Washington and on Wall Street, you don’t have to know squat, if you have the right resume. Got an Ivy League education? You go to the top of the stack, but try telling a working man how to dig a hole, which none of them can. That’s America’s problem. That’s what’s wrong with most of our recent presidents and Washington, in general. They’re long on talk and short on having any expertise. Our constitution means nothing to them and yet most are lawyers.
The reason our economy hasn’t “recovered” is because we really need little more than the basics. Our wants-based economy has caused our insanity and our crime. Remember our grocery stores of the 1950’s, 60’s and 70’s compare them to today’s Wal-Mart Supercenters? Our wants have become a larger part of our economy than our needs – the 5,000 sq. ft. McMansions over the 1,500 sq. ft. with only one bathroom, the must-have BMW or Mercedes over a Chevrolet or a Honda, private schools for our children over public, the newest Apple product on the market – it’s time to upgrade because we want to. Inexpensive or free is old fashion and no longer good enough. We’ve been programmed to spend our money before going back to work.
We need an economy that better matches our true needs while developing the character (more muscle and less fat, less waste) of everyone for the sake of this country. We need a shared reality rather than having 320 million different versions. That’s something that GDP and all the other metrics don’t measure. In a recent conversation, over Spring Break, with a University of Alabama student who’s studying the Classics, she said that America looks just like what she’s reading about in the fall of Rome.
I’m of the opinion that the United States needs to allow the economy to contract and let interest rates, reset. Only our federal government is crazy enough to try digging a hole to China on worthless money, no person, no family and no business could without going bankrupt, along the way. At some point, every person, every family and every business would be forced to say “Uncle” except for “Uncle Sam” who’s gambling our future away like some drunken’ fool sitting at a Vegas craps table at 3 in the morning. Given our fitness-crazed society, conventional wisdom might call for getting our financial house in order. To live within our means, but it’s not. Isn’t our soul worth saving?
Brookings Institution, http://en.wikipedia.org/wiki/Brookings_Institution
Great Depression, http://en.wikipedia.org/wiki/Great_Depression
Jesus Christ quote, http://www.brainyquote.com/quotes/keywords/gain.html#SKufDQvo8XmkGfUh.99
PIMCO hires Fed Chairman Ben Bernanke, http://www.pimco.com/EN/PressReleases/Pages/PIMCO-Names-Former-Fed-Chairman-Ben-Bernanke-To-Serve-As-Senior-Advisor.aspx
Copyright © 2015. All Rights Reserved. “Why gross domestic product (GDP) and other popular metrics are no longer an effective measure of America’s economy and well-being.” by Ted Burnett. This paper was edited by Michael J. Pereira, a financial adviser with Merrill Lynch.
My other essays and videos can be viewed at my website – http://www.tedburnett.com. I can be contacted via email at – firstname.lastname@example.org.