The US economy is in shambles. Recent government bail-outs of shaky investment banking, brokerage, and insurance companies, most with dramatic exposure to huge volumes of bad mortgage debt, have raised the national debt exponentially, to a bit more than $10 trillion. The president has proposed, and the Senate and Congress agreed, to raise the national debt ceiling to $11.315 trillion dollars. That amounts to a debt of $37,220 for each and every US citizen, as if average personal debt were not bad enough already. If the volume of dramatic business failures continues, the new ceiling should be reached before the end of the year. This despite the fact that many political pundits and economic gurus assured the citizenry mere days before the latest catastrophe that the economy was in fine shape. Their rosy opinions aside, it may be time to quit talking about recession and begin using the “D” word, as in full-blown depression.

How did we get here? First, as a country, we have lived beyond our means since the baby boomers began to come of age in the ‘60s. Personal savings have been, more or less, nonexistent. Personal debt has doubled, and doubled again, and doubled again. On a personal level, we have leveraged ourselves to our eyeballs. Instant gratification has become our mantra, just making ends meet an acceptable personal financial plan. One trip, one slip, one bump, and we are done. That is on the personal level.

Within the larger marketplace, a feeding frenzy of greed, the likes of which has seldom been seen, has swept the country in the last two to three decades. Driven by
Wall Street’s singular focus on quarter-over-quarter improvements in performance rather than on sound, long-term strategy, companies have sacrificed not only long-term health, but employees, social responsibility, and ethics to the god of avarice. So long as there has been money to be made in the short term, anything has gone. Enron, WorldCom, Lehman Brothers, Merrill Lynch – they all knew, or should have known, better. But the siren song of immediate, easy wealth and gratification is strong, much stronger, apparently, than the urge to engage in responsible corporate governance and management. And the sting of Wall Street rebuke when one fails to meet quarterly expectations is very painful. In that milieu, it is easy to make loans at substandard rates on terms that cannot be defended to people who clearly don’t qualify because, in the short run, it pads the books quarter to quarter. Hence, like the average American, the economy has been just a trip, a slip, or a bump away from disaster.

As we rolled around to the latest disaster, we were a county in debt, with an economy in debt, with a populace in debt. Skating on the edge of solvency, one trip, slip, or bump would send the whole into collapse like a row of carefully placed dominoes. And, like the falling dominoes, once the collapse started, it would be almost impossible to stop.

The trip, the slip, the bump was energy prices. $100-plus per barrel oil and $10 Mcf natural gas raised the price of everything, from fuel to food to creature comforts. For a people, an economy, and a nation balanced on the razor edge between solvency and insolvency, this single factor was enough. At the ground level, people unable to make mortgage payments and meet other obligations began to default on mortgages. With perhaps a trillion dollars in shaky mortgages in circulation, the snowball grew rapidly.

Can we weather this disaster? Poised on a razor edge earlier, the US is balanced on an economic pinhead now. While falling demand will moderate energy prices, any similar disruption may send the economy into a deadly spiral. Chicken Little panicked when he should not have. Maybe now is the time.

Editor’s note: Due to Hurricane Ike, we were unable to ship our October issue to the printer on time. We apologize for any inconvenience.