Everybody, step one rung down
The recession is starting to take a heavy toll, and it will be a deep and long economic trough. Some prognosticators warn that we won't fully recover in our lifetimes. I tend to agree.
Bean over at The Vig had a great post about this on Friday -- a YouTube video of Peter Schiff, who called the recession with uncanny precision. Bean also linked to Schiff's current outlook, which is grim indeed:
We believe that the growing imbalances in the U.S. economy, its twin budget and current account deficits, its lack of domestic savings, and the erosion of its industrial base, have now reached a point where a severe recession, culminating in a substantial decline in the over-all American standard of living, is imminent. The Federal Reserve, Congress, and the President, for political expedience, are likely to continue seeking to delay this adjustment, unfortunately in ways which will exacerbate its severity, making the inevitable recession that much worse, and increasing the probability of a hyper-inflationary outcome, which would render the U.S. dollar, and all U.S. dollar denominated financial assets, practically worthless in terms of real purchasing power, potentially creating a situation of extreme financial, political, and social unrest.The New York Times' token conservative, David Brooks, sounded similar themes today (although he didn't mention which administration has presided over the unfolding disaster):
In this country, there are... millions of people facing the psychological and social pressures of downward mobility.At one time, I dreamed of being rich and independent -- in a mansion, traveling to all manner of exotic locations, able to live without working, living off investments, and keeping myself busy with discretionary worldly pursuits of my own choosing. That was then. Nowadays, I'll be happy to keep my excellent job and stay relatively comfortable working to the end of my days.
In the months ahead, the members of the formerly middle class will suffer career reversals. Paco Underhill, the retailing expert, tells me that 20 percent of the mall storefronts could soon be empty. That fact alone means that thousands of service-economy workers will experience the self-doubt that goes with unemployment.
They will suffer lifestyle reversals. Over the past decade, millions of Americans have had unprecedented access to affordable luxuries, thanks to brands like Coach, Whole Foods, Tiffany and Starbucks. These indulgences were signs of upward mobility. But these affordable luxuries will no longer be so affordable. Suddenly, the door to the land of the upscale will slam shut for millions of Americans.
The members of the formerly middle class will suffer housing reversals.... Suddenly, the home of one’s own is gone, and it’s back to the apartment complex.
Finally, they will suffer a drop in social capital. In times of recession, people spend more time at home. But this will be the first steep recession since the revolution in household formation. Nesting amongst an extended family rich in social capital is very different from nesting in a one-person household that is isolated from family and community bonds. People in the lower middle class have much higher divorce rates and many fewer community ties. For them, cocooning is more likely to be a perilous psychological spiral.
[I]t won’t only be material deprivations that bites. It will be the loss of a social identity, the loss of social networks, the loss of the little status symbols that suggest an elevated place in the social order. These reversals are bound to produce alienation and a political response.
Already I've had it better than my parents could ever have pictured having it themselves. Every generation hopes that its own children will be able to say the same thing, but now it seems that we'll just have to settle for handing them off something that's not too much worse than where we are today. May the Lord help us make it so.