Second, consumers in many parts of the world are in relatively good shape. That statement might strike many as absurd, given the mantra of “consumers have been living beyond their means.” But it’s not just the third of American households that have no mortgage, or the 50% savings rate in China, or the still massive wealth accumulation in the Gulf region, Brazil and Russia. It’s that the credit system, even at its most promiscuous, didn’t allow consumers to take on the obscene leverage that financial institutions did. Millions of people who shouldn’t have been lent money were, either in mortgages or through credit cards. But they couldn’t be levered 40-to-1 as investment banks and funds were……..
…….The rush to declare the future bleak has obscured the fact that no one knows the outcome of an unprecedented event. No one. The worst course in the face of uncertainty is blind faith in conventional wisdom and past patterns. The best is to stay humble in the face of the unknown, creative and unideological about solutions, and open to the possibility that as quickly as things turned sour they can reverse.
The nonstop pronouncements of doom also have a certain self-fulfilling quality to them. People read them and change their behaviors based on a perceived threat. There are some troubling aspects to the speed of the downturn, but, as Karabell points out, there is no historical perspective here – the downturn is unprecedented.
Oddly, here where I live, the economy is not doing particularly badly. I recently met with the accountant who has done our taxes for years and she said that the clients she was seeing all were doing ok right now. Not that she was cheery about everything. Not everything is exactly as it is being reported.