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It is pretty obvious that there is trouble and that there's going to be more trouble. Perhaps something like the early 80's recession, perhaps worse. Probably not better, though. And now some "encouragement":
I am one of very few here who actually lived during a *real* economic collapse-- that in Russia in the early 90's when the Soviet system (including the economic component) melted into thin air. I already posted somewhere what that was like so I won't reiterate-- suffice to say that life got very hard for many people and everything changed.
And yet, it took the country about a decade to build a new economic system: banks, insurance, stock market, lending institutions, real currency...everything. That's right, a huge, completely bankrupt state, with no experience in modern capitalism managed to create a decent economy in a decade, from ground up. The standard of living is nowhere as high as in the West, of course, but there is stability and most people manage to meet their basic needs.
Going back to the present situation, let me point out that the US already has all the institutions in place. There is also a broad understanding of how Capitalism works and a strong tradition of making it work. Russia in early 90's had nothing, including knowledge-- that is obviously not the case in America today. America already HAS an economy, has all the financial machinery in place-- it just malfunctioned and can be fixed.
So here's my prediction: if it took Russia a decade to build economy from nothing, it will take the US much less to fix the one that it already has. I believe that in 2-4 years this will boil over and will be forgotten. During the next presidential election economy will not be the primary concern-- we'll be back to whether two men or women should be allowed to marry (ok, simplifying a bit, but you get the idea).
PS. I concede, standard of living may drop, as I don't see how all the wealth this country has is "deserved" in economic terms. But what matters for comfort is stability and meeting the basic needs-- not all the extras we're used to. People get used to things quickly, good and not so good. It is uncertainty that causes anxiety and that, I say, is for a few years only.
Overly optimistic. It'll take longer than 4 years to purge all the bad paper from the mortgage ponzi scheme, let alone rehash an economy that has been addicted to the services industry, no real production, and cheap credit.
I do agree with you that the median american will experience a lowering of quality of life. That's already happening, but I disagree with you that americans will adapt quickly. We are thick as they come, people will continue to overextend themselves clinging on to the idea of a gated subdivision, two SUVs and the picket fence, people will work longer hours, people will continue to drive longer commutes, in the hopes of maintaining this facade of a lifestyle. I am more conservative on my outlook, I say 10 years before you can say with certainty that the american economic landscape is night and day from what it was in the 2000's up to today. If we don't reverse the trend and impose a truly genuine fiscally conservative monetary policy, in 10 years the myth of an american middle class, and those who a decade before belonged to it, will be in a position to actually consider expatriation and emigration as a means of INCREASING your quality of life, a first in post-industrial american history. Times are changing, the coasts already belong to foreign investors anyways. Here's the kicker, it can be reversed by the right monetary policy (i.e. the opposite model as the one we have today) but americans have grown too soft-bellied to give up their individual immediate circumstance, too thick to change until it's upon them. I rather give my conutrymen the benefit of the doubt but the last 20 years have set a bad record on that regard.
Of course we'll survive. We may have to give up broadband or cell phones that do more than just make and receive phone calls. We might drive cars for 10 years instead of buying new ones every couple of years, and we might chose cars based on how much they are and how much they cost to operate instead of based on a deep-seated need to impress people we don't even know. We might spend less for gifts at Christmas time.
I agree with all of the above... but the time frame will take much longer for recovery.
America will survive... it always has. But what disturbs me in the posts above is the reference in good cheer to Russia. Because to talk about Russia's growth you have to awknowledge it's collapse... and AIG, Lehman Bros. Fannie & Freddie and Bear Sterns all point to significant market collapse for Wall St. As Greenspan has said, this is the type of event an economy experiences every 100 years. And Americans never signed up for it.... we didn't expect it to happen 4 years ago... or eight years ago. And it's certainly not what you would expect from a singular world superpower.
People accepting this as a 'cycle' or an expected 'downturn' does not change the fact that this event was set in motion by careless legislation and accelerated through personal and corporate greed.
Remember this very important moto:
THE WORLD CAN ONLY END ONCE!
How many end of the world, end of the US as we know it, etc has happened in the last 20 years alone - S&L failures of the 80's; "Black Monday" in 1987 when the stocks went down 20%; post 9-11 recession, etc...those were all the end of the world at that time.
This is a serious financial situation, but NOT the end of the world and not a reason to hide money under mattresses, not a reason to liquidate all assets and build a shelter in the rockies, not a reason to bow down to karl marx.
I see some good in it. Get these harvard trained MBA jokers in wall street with outdated financial models out of business, get the deadbeat quadrant of the american citizens who insist on living beyond their means back to a realistic standard of living (tighten up lending), it's a good reality check for the people - a kick in the head is exactly what this nation of whiners needs and sooner of later they won't blame in on big business and presidents and put the blame where it belongs - on themselves.
The market will correct itself and stabilize, and yes it will take about 3 to 4 years. I see a new high tech rally, speculation markets will hopefully be a thing of the past, or will be moderated. My only fear is politicians meddling and making things worse. Regulation, yes we need to update it. No we don't need the government to take it over and/or bail out and "infuse" these failing markets.
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