If you haven’t been living under a rock, then you’ve heard of the financial world’s collapse over the last two weeks (if you have been living under a rock, then congratulations - as Jon Stewart said, yours is the only real estate that has appreciated in value). Starting with Bear Stearns, the list of firms where the destruction is absolute is mind-boggling. Merrill Lynch, AIG, Freddie Mac, Fannie Mae, Goldman, Washington Mutual. And who knows which firm is next? In essence, you have what I believe is the defining crisis of our times, and not the War on Terror, nor the Rise of China.
The reason is simple – the Subprime Crisis has affected every level of the economy, and will impact the lives of individuals in every wealth bracket. That can’t be said of the War on Terror, an event that is highly relevant for military families and the war industry, but almost irrelevant for the majority of Americans, who still struggle to locate Iraq and Afghanistan on a map, and wonder what we are doing so many, many miles away from home.
The Rise of China had had a more pervasive effect on the American people, no doubt. It is hard to go one day without purchasing something that is not either made in China, or relies on components that were made in China. But outside of the economy, what difference is China making? Are we experiencing a cultural impact? An intellectual impact? The Olympics were widely hailed as China’s coming out party – despite China’s decade-long stranglehold on cheap manufacturing, it took an event as grand as the Summer Olympics for China to make a public impression on the outside world. “Hey!” China was saying. “Look at us – we matter!” This despite its long pace of breakneck growth, and increasing influence in foreign affairs.
No, it is the Subprime Crisis that has fundamentally changed, or is about to fundamentally change the way we live our lives. Homes are no longer safe economic shelters, loans for everyday purchases are disappearing or becoming harder to obtain, jobs are vanishing en masse as firms collapse, and most importantly, the global ripple effects form this crisis continue to magnify the pain. And I don’t even want to begin talking about how our retirement wealth is evaporating before our eyes, or how the phrase “consumer confidence” has descended into irrelevance.
The Great Depression, the Cold War, and now the Subprime Meltdown. Ladies and gentlemen, welcome to this generation’s defining crisis.
Imagine if you are about to retire in two months, like my father is. He is watching his entire pension plan get wiped out and there's absolutely nothing he can do to even save the little bit that's still there.
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