The Blessing in Disguise

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Financial crises are usually seen as blessings in disguise because they have the power change the course of history, mostly for the better. However, if the current crisis is a blessing in disguise, then it is in a very good disguise too. Low-income and middle-income family will suffer terribly; many will eventually lose their jobs. The pyramid schemes will be exposed. Moreover, in an age of globalization, there won’t be any miracle rescue packages nor economic Marshall plans. So, the bottomline is everyone must help oneself but have to bailout everyone else too. However, the worst of this maelstrom has passed us. A disastrous collapse of the Wall Street has been averted, so we can look ahead finally.

The financial crisis has already brought a blessing to Washington D.C.–the Obama administration. The crisis not only ended deficit ridden Republican Administration at its eighth year, it also revealed that two decades of Greenspan Chairmanship at the Federal Reserve—an undying legacy of Reagan’s  Republican Revolution—did more harm than good to the American economy.

moneyWhatever you may think about Greenspan, the maestro presided over an unprecedented economic boom and propelled American consumerism into the frontiers. Today, Americans consume 13 Trillion dollars of goods, most of them produced in the developing world. This mean that when American market is in turmoil, the entire world will suffer. China—optimistically looked upon as a global survivor—can’t replace America when it is saving a lot for future economic growth/investment (which is exactly what Greenspan Fed dissuaded in the U.S.) and only consuming one-tenth of what Americans are consuming.

So, the positive externality is that America foreign dependence is likely to go down as well. Chinese and Saudi Arabian investors have been gobbling up the U.S. real estate and investment markets in past few years. When the crisis came, the sheiks and communist cadres knew little, cared little and did little. The Obama administration will impose protectionist measures (which I don’t agree) but the silver lining will be that the Congress may now consider the foreign investments with increased wariness.

American unemployment is going up, but Mr. Obama has promised three million jobs—it is clear that he have a master plan to revitalize America. After the WWII, the unemployed masses found their salvation in FHA’s development loans for suburbias. Mr. Obama should direct a similar national initiative to reform mass-transport infrastructure into a system akin to those in Europe. An affordable mass-transit and GPS/Satellite roadpricing are two of many environmentally-friendly ventures American government can do with a large unemployed workforce.

Along the same lines, the congress should use the auto-bailout plans to enforce the Big Three automakers to produce the cars energy-efficient and market-compatible with foreign imported cars like Toyota Prius. During the last regulations on automakers under Nixon-Ford-Carter administrations, the American fuel efficiency nearly doubled—it is now time to do it again.

The global economies usually have boom-and-bust cycles nearly every decade, but this 2008 one is pretty big. It is the big one that they predicted since 1987. Yet, we were hit hard not because of warnings are ignored but also because we believed, we were led to believe, we wanted to believe—and we even hoped and prayed—this prosperity (which is tenuously built on the ever-expending gap between the rich and the poor and the exploitation of labor in the developing world) will last forever and that mortgage prices and demand will go up forever. In our past, there had been many boom-bust cycles, and in our future, there will be more, but this one—mainly due to the media coverage it receives in increasingly tech-savvy world—will serve as a cautionary tale for a few generations to come.

Or will it?

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