Now that the US manufacturing base has eroded how long will the recovery take?
Fareed Zakaria: The Crisis's Silver Lining - PostGlobal at washingtonpost.com
Amid the financial chaos and economic uncertainty that has rocked world
markets, I can see one silver lining. This crisis has forced the United
States to confront the bad habits it developed over the past few decades.
If we can kick those habits, today's pain will translate into gains in the
Since the 1980s, Americans have consumed more than they produced and have
made up the difference by borrowing. Two decades of easy money and
innovative financial products meant that virtually anyone could borrow any
amount for any purpose. Household debt ballooned from $680 billion in 1974
to $14 trillion today. The average household has 13 credit cards, and 40
percent of these carry a balance, up from 6 percent in 1970.
But the average American's behavior was virtuous compared with government
behavior. Every city, county and state has wanted to preserve its
proliferating operations yet not raise taxes. How to square this circle? By
borrowing, using ever more elaborate financial instruments.
Local pols weren't the only problem. Under Alan Greenspan, the Federal
Reserve refused to inflict pain. Russian default? Cut interest rates. The
economic slowdown after Sept. 11? Cut rates. Whatever the problem, the
solution was to keep money flowing and goose the economy.
In 1990, the national debt was $3 trillion. It is now $10.2 trillion.
If there is a lesson to be taken from this crisis, it's an old rule:
There is no free lunch. Now, debt is not a bad thing. Used responsibly, it
is at the heart of modern capitalism. But hiding mountains of debt in
complex instruments is an invitation to irresponsible behavior