If you’re going through Hell, keep going.
-- Winston Churchill
The recent past and not too distant future in America presents a set of challenges unknown to most generations that did not experience the Great Depression. For all practical purposes, the economic meltdown, which came to head with the failure of Lehman Brothers in 2008, was a defining moment in our history. At the same moment in time, the failure of Bear Sterns and Lehman were nearly joined by A.I.G., Morgan Stanley and Goldman Sachs, as well. Only after hastily arranged “marriages” for Merrill Lynch, Countrywide, and a number of smaller investment firms, were the majors saved by Federal loan guarantees (JPMorgan acquisition of Bear), actual loans (A.I.G.), and essentially unlimited money via the Fed discount window – was the system propped up.
As a result of bailing out the banks with TARP money, taking over Fannie Mae and Freddie Mac via a conservatorship, and giving huge loans to certain “too big to fail” entities, we now have some stability. But, it is a stability that comes with a high price.
That price is looming inflation from printing trillions of dollars, deficits that are thrown forward for nearly a decade and, ultimately, both higher taxes and a severely reduced standard of living. We either had to take the hit all at once with a worldwide Depression, or, slowly, and painfully, as a wasting away of a life of plenty. There is no mystery about it. We have been taking the money from one pocket and putting it in the other, rather than generating and producing like other countries. The derivatives market, all $700 Trillion of it, has assured us of this dubious future.
For at least the next decade, expect higher taxes; lower entitlement programs like social security and Medicare, a higher chronic unemployment, and a dollar that buys less. No retirement may become the price that we all pay for the excesses of Wall Street and the manipulations of the credit markets. We may not have accurately predicted a “double-dip” for the third quarter of this year but all of the non-governmental feedback is that many Americans are suffering, and will continue to suffer, as if we are indeed in the midst of The Great Depression II.