I blame you, but it’s OK
I leave the petty details of fixing this economic crisis to others. I shall focus on a far more important task: assigning blame.
I particularly want someone to blame because last Friday, Best Life magazine offered me $7,500 to write a cover story on actor John Krasinski, which I accepted because I’m a huge fan of both Krasinski and $7,500. But on Wednesday, Best Life folded, and now I’ll never get to meet that $7,500.
My first target was former Fed chief Alan Greenspan, partly because he’s made himself vulnerable by apologizing and mostly because he sort of looks like Mr. Burns on “The Simpsons.” But then I thought back to my interviews on a bench in Central Park on Sept. 10, 2001, of liberal economist Paul Krugman and a conservative economist for a CNN segment called Global Village Idiot that never aired for reasons, obviously, that had to do with Wolf Blitzer being threatened by more handsome competition.
Both Krugman and the other guy blamed Greenspan for not dropping interest rates fast and hard enough after the dot-com crash. Now, we’re all blaming Greenspan for making money too easy to borrow. But the truth is that the man who chided us for “irrational exuberance” was trying to hold the avalanche back. Also, we can’t blame Greenspan because we used up his time forcing him to testify in front of Congress every few weeks so lawmakers could ask him how inflation works. Between those hearings and the ones about steroids and virtual online worlds, Congress was just a really bad junior college.
George W. Bush seemed like an awesome person to blame because even though bashing him is totally pointless now, it can still get you on The Times’ most-e-mailed list or a special on HBO. And Bush did amass government debt by idiotically lowering taxes and waging pointless wars. (Note to editor: Use that last sentence in the headline.) But Bush isn’t the one who leveraged banks and insurance companies at ratios unsustainable through credit default swaps. We can be sure of this because there’s no way he understood any of that.
That leaves the bankers. Blaming bankers is a great idea because it worked so well in “It’s a Wonderful Life” and in every game of Monopoly. Bankers are rich, don’t produce anything useful, take government handouts, commit usury with sneaky credit card offers and stammer wimpily in heist movies.
And just as it was stupid to loan money to people in the 1920s so they could buy stocks, it was pretty stupid for bankers to give out all those highly leveraged real estate loans when there were plenty of signs of serious risk. The Economist was running covers on the dangers of the housing bubble, house prices versus salaries were historically out of whack, half my friends were waiting to buy a house until prices came down, and one of the fastest-growing regions was Phoenix. Seriously, somebody should have flown out to look at Phoenix.
Sure, bankers should suffer for their excessive risks. But it’s just not satisfying to blame the people who are getting stiffed on the loans they made. Which leaves the people who amassed more debt than they could handle. Which means, I blame you.
Household debt -- mortgages, credit cards, car payments, bookies -- is now at 100% of the gross domestic product. If we all worked for a year and didn’t eat or pay taxes, we could just pay off our debt. The only other time it’s been even close to this high was right before the Depression. “The problem is us,” Columbia University professor David Beim told NPR. “Our living standard has been rising dramatically in the last 25 years. And we have been borrowing much of the money to make that prosperity happen.” One of the clearest indicators of financial panic is that I’m listening to economists on NPR.
We are so far down the borrowing hole that it’s hard to believe that the advice on buying a house used to be to spend twice your salary.
At some point -- and it seems to be when you owe as much as your salary -- you panic and stop borrowing and buying, and instead start paying off debt. That’s when you suddenly think, "$1 million for a two bedroom is crazy,” and the Ponzi scheme falls apart. Then the markets overcorrect as irrational exuberance turns to irrational fear, and debt versus GDP plummets past even normal levels. And John Krasinski has to spend the night alone.
The thing is, though, I can’t stay mad at you. Partly because you’re just a rhetorical construct I built for this column. But also because your irrational exuberance is what made the last 25 years so great. Your irresponsible borrowing gave us tasting menus and backyard bouncy castles. If I have to pay for that kind of party with a 10-year hangover every 80 years, that seems like the best deal out there. Next boom, I’m getting an outdoor kitchen.