This is a really cool little article in the latest New Yorker.
It's comparing our financial crisis and our current moment to the time when a child bumps her head right before she bursts out her scream, she's just pausing long enough to figure out what to do. The world has stopped spending for the same reason that a child cries. We've been hurt and we want everyone to pay attention.
A really great quote:
"Far from adjusting our expenditures to the needs of the moment, it seems, we tend to wildly overswing, according to our mood. The difference between the provident ant, who cautiously saves up for winter, and the carefree grasshopper, dancing and hopping, is a matter of what Keynes called “animal spirits.” It is better for the common lot if each of us is a hopper (and a shopper) rather than a hoarder. Being a nation of grasshoppers is allied to being a nation of hope."
"The seasonal classics demonstrate the same truth. In “It’s a Wonderful Life,” George Bailey’s Building & Loan is, let us recall, the reckless banker of Bedford Falls, giving what would now be called subprime mortgages to people like Mr. Martini, who would be better off renting. And it is mean, miserable old Mr. Potter who berates Bailey for the practice. “And what does that get us?” Potter asks. “A discontented, lazy rabble instead of a thrifty working class.” But George’s answer speaks to the larger emotional notion of what makes economies work and what economies are for: 'Doesn’t it make them better citizens? Doesn’t it make them better customers? . . . Just remember this, Mr. Potter, that this rabble you’re talking about . . . they do most of the working and paying and living and dying in this community. Well, is it too much to have them work and pay and live and die in a couple of decent rooms and a bath?'"
But in reality, Potter was right. Or to quote a recent home schooling lecture I recently listened to where the speaker encouraged her listeners not to take out loans for a college education because "debt is bondage". Can you imagine if we took the "debt is evil" to an absurd extreme? If we went back to (as we are now) to 20% down payments on home loans? Where people waited until they can buy a car with cash. We would all be poorer. Far fewer of us would be home owners, we would be driving miserable cars with high maintenance costs until much later in our lives.
Going into debt is an act of faith, both in ourselves and in the larger community. It's a "hope rooted in a common purpose". I'm not saying that we should go back to a nation where we don't save at all. We should scale back, but we're scaling back way too much.
"What makes Bedford Falls thrive is people feeling good about its future. George Bailey is a Capraesque Keynesian through and through, encouraging consumption rather than thrift, and hope rooted in the common purpose rather than fear rooted in the impoverishment of capital. "