The Macro & Micro of American Economy

I haven't been here in awhile, I know. I have to be truly moved. Count on my old ally the NY Times to do just that. Gretchen Morgenson revealed a story common to many Americans on the front page of the Sunday, July 20, 2008 issue that reveals the micro of our economy. Her article, "Another Day Older and Deeper in Debt" is an old song title that keeps on hitting home. Peter S. Goodman gives us the macro on front page of Week in Review section of the same issue by asking that age old question, "Too Big to Fail?"

Morgenson describes a woman's present plight from her ponderous plunge into unmanageable debt. Many of us are there or have been there. Most of that debt is anchored by a mortgage we can no longer or never could afford. We were seduced by the ever present American dream of home ownership and fell into the unforgiving hands of the mortgage mavens. Then we stacked our school loans (don't forget we MUST be educated), auto loans, and credit card debts on top, only to watch it all start to build into a wobbly tower that we attempt to hold up with monthly interest payments. This, my friends, is the basis of the micro economic woes. Of course, it is more complicated and varies from individual to individual. But if you drilled down to the core of all the stories, you would likely find some version of this model.

What I found even more fascinating was Goodman's piece about the government's plan to bail out the mortgage giants Fannie Mae and Freddie Mac. Because mortgage backing agencies like Fannie and Freddie have supported the mortgages that banks and mortgage lending agencies have provided to homeowners, the world has been comfortable lending to the U.S. Countries like China and Japan see us as viable risks because our Freddie and Fannie are doing well. If they crash, the world gets nervous, sells its dollars for euros and the global economy. . .

When I started this post, my thinking was the global economy suffers. But maybe suffers is the wrong word. The global economy might be "reordered". Meaning the economy would be fixed on the euro, not the dollar. That has the been fear all along. That, rather we will admit or discuss it or not, was at the basis of the invasion of Iraq. Saddam Hussein had threatened to base the oil reserves in Iraq on the euro and not the dollar. The oil and energy industry in the U.S. had to gain control to stop that.

So Goodman's article and the mortgage crisis has brought us full circle back to what has been the fear all along. However, I am afraid it is our destiny.

(See my previous post "Waving Goodbye to Hegemony" which is a link to article by PARAG KHANNA Published: January 27, 2008)

Wake up America. We are there.