However, looking at this photo I am reminded about how dangerously vulnerable our country is right now. Obviously our country is fighting two wars, and our physical infrastructure is shot to hell, but what about our financial infrastructure?
Personally, I do think our financial system is strong enough to weather this storm in the long run, but in the short term (1-5 years) its obvious that our "financial levees" will ultimately give way. When will the "break" occur? I don't know. What I do know is that there are still 100's of billions of securitized credit card loans, car loans, alt-a POA's, heloc's and commercial real estate loans that will go bad.
Ultimately, it will take many more years before we de-leverage our banks and our consumers (ie our negative savings rate) to responsible levels. The housing boom was just a manifestation of this country's love affair with debt and over consumption (America had a very similar "fling" during the roaring 20's, which didn't end well). Of course, beyond changing our individual lifestyles, this country must also address its current accounts (think exports vs imports) and budget deficits so that we can avoid a hard-landing in the form of foreigners cutting off our lines of credit.
Fortunately for NOLA residents, their levees were able to weather a CAT 2 Hurricane like Gustav, I wish I could say the same for our financial levees, which appear overwhelmed in the face of a CAT 5 credit crisis.
No comments:
Post a Comment