In its recent look back on the first 10 years of the century, Time Magazine
proclaimed the period to be "the decade from hell". The editors made their case
based on what they saw as the signature events of the past 10 years, notably
the ravages of terrorism, failed wars, and a global financial crisis. Taken
together, these factors produced an era that Time is convinced will be
remembered as one of the low points in our history.
As the media hate to dwell on the negative, the commentary was rife with notes
of optimism about pending recovery. It could hardly be accidental that in the
very next issue, Fed Reserve chairman Ben Bernanke was named "Man of the Year"
for his supposedly Herculean efforts to keep the economy afloat as we departed
the Naughty Aughties. Although Time takes pains to point out that the "Person
of the Year" honor reflects impact rather than
adulation, its profile of the chairman was triumphant.
Even if you believe the "survived the worst/turned the corner" narrative
offered by Time, it still should strike anyone as ironic that Bernanke, a chief
architect of the economic problems that surfaced in 2007, should be held in
such high esteem.
Apart from its misplaced reverence for the Fed chairman, I would take issue
with Time's entire characterization of what has now become history.
Under no circumstances could the past 10 years be described as "the decade from
hell". In fact, in terms of economic good fortune, the period shares parallels
with the Roaring Twenties. I would describe this as a decade of sin that paved
the way to hell.
Yes, we had spectacular problems like September 11, 2001, and the invasion of
Iraq in 2003 - which were horrific for those who were directly affected - but
for most Americans, it was a time of unexpected wealth and unearned prosperity.
Up to the days of the stock market crash, the economics of the decade will be
remembered for cash-out refinancing for millions of homeowners, no-doc liar
loans, no-money-down car purchases, eight-figure Wall Street bonuses, cheap
Chinese imports, and trample-to-death holiday sales. In other words, the decade
now closing gave us the biggest and most irresponsible spending orgy in US
history. The past decade was the party; the one ahead will be the hangover.
The fact that Time completely ignored these issues shows how poorly the
mainstream media understand the forces bearing down on our economy. Yes, they
were able to identify some of the adverse consequences we experienced this
decade. That's the easy part. But as far as seeing the causes behind the
effects, they haven't a clue. As a result, Time has no ability to see the
underlying pattern and will happily encourage our leaders to repeat the
mistakes of the past on a grander scale.
For now, Congress and the president remain as clueless as Time. To show its
resolve to "get to the bottom of things", the Barack Obama administration has
impaneled a commission to investigate the causes of the financial crisis. Do
not expect the proceedings, which are just getting underway, to come up with
anything but the most politically useful explanations.
Blame will be laid at the feet of "ineffective regulators" who failed to "get
tough" with industry, banks, and corporate leaders who held the "public good"
hostage to their "personal greed." There is no hope that anyone who actually
saw the crisis coming will actually be asked to testify. If they called me, I
would be happy to give them an earful. Unfortunately, the only way my views
will ever be heard by the powers-that-be is if I am elected to the Senate -
which is exactly what I plan to do next fall in my home state of Connecticut.
My sincere hope for the coming decade is that I can help our leaders see what
Time cannot: we need to stop committing the economic sins that are leading us
to hell, so that our stay down there will be as brief as possible. We need
everyone to stop spending more than they earn. That is true not just for
individuals, but for our government as well. Just this week, the Treasury
Department removed its internal caps on bailout funds to Fannie Mae and Freddie
Mac. Meanwhile, another bailout was proffered to ailing GMAC. If we continue
the same bad behavior, it might not just be one decade from hell, but several.
However, if we can confess our sins, and vow to reform our ways, perhaps this
will merely be a decade in purgatory. Perhaps we can turn it into the decade of
hope, hard work, individual liberty, savings, production, investment, sound
money, de-regulation, exports, budget surpluses, capitalism, limited
government, and respect for the Constitution. These traits will harden us to
withstand the fallout from our reckless past.
As of yet, our troubles continue to snowball - and I don't like a snowball's
chances if we have a real decade from hell.
Peter Schiff is president of Euro Pacific Capital and author of The
Little Book of Bull Moves in Bear Markets. Euro Pacific Capital commentary and
market news is available at http://www.europac.net
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