George: While I agree with all your points on the incentives required to turn this mess around, there's no data to suggest the standards of living for Americans will fall sharply. In fact, the only evidence I could find indicates precisely the opposite is likely even during serious financial debacles such as the last round of bank failures (the 80's) and even the great depression. As great as that depression was, living standards actually improved - there were fewer homicides in the 20 years spanning before and after the depression, fewer infant deaths per capita, and a far higher ratio of high school and college graduates per capita. Medical care, life span, transportation, personal savings, and wealth accumulation are up every decade since the turn of the first millennium. While your financial points are probably spot on, you need not attempt to scare me with misleading claims about living standards; it undermines your point. Besides, you had me at "Unless the Fed and the Treasury develops some sort of financing mechanism to help investors and speculators buy real estate ...". ;-) But I digress - isn't all the fuss about bank failures being blown a little out of perspective? In the 80's (I think) we had more than 500 banks fail in one year, and more than 1750 were on the edge. How many banks is the Fed showing in the "likely to fail" category this year and next? I heard it was no more than 200 [tops] for the next two years. This is a very small fraction of the almost 10,000 banks that are insured under the FDIC. And, doesn't a normal year have 30 to 50 failed banks? I'd love to see a post that compares the 80's bank failures to the current "crisis". Is it really as bad as everyone says, is it worse, or is it more political and media hype? I'm no financial genius, but the data indicates (as usual) that much of the problem is media hype. I digress further - all of our investments are real estate (at the moment), and things (from my perspective) are pretty rosy. Our home is up an average of 18% per year for the last 10 years and more than 21% this year. All our condo holdings are in the 25% plus category for the last five years. As such, we're planning on more real investments, not less. Am I ignorant, or just pleasantly dumb? ;-) Love your blog... but I also love Freakonomics. |
