by Dr. Boyce Watkins
http://www.boycewatkins.com/1) FDR had it partially right when he said that "We have nothing to fear but fear itself." While we have other worries as well, the greatest obstacle to economic progress is the HUGE psychological impact of Americans watching the stock market plummet right in front of their faces. This is going to cause consumer spending, lending, borrowing and investing to freeze like a deer in stadium lights. When people stop spending, economies start dying.
2) This crisis was a long time coming. De-regulation pushes down on the economic gas, but increases the chances of an economic crash. The dramatic growth of the past 8 years was a result of the same policies that are leading to the huge challenges we are faced with today.
3) Much of the impact of this crisis is a financial illusion. A large percentage of the devaluation in stock and home prices is driven by the fact that the original value was incorrect in the first place. When prices are out of whack, they must correct themselves. While a crisis may also be a correction, a correction is not necessarily a crisis.
4) Prepare for a period of "Financial McCarthyism" in America. Many baby boomers are closing in on retirement, and scared to death. To boot, many of these individuals have not properly prepared for retirement. When Americans get scared, politicians get nasty. We will likely see some of the most Draconian legislation in history.
5) What makes this crisis such a concern is that even before the meltdown, the economy was already quite fragile. With soaring gas and food prices, the economy was the #1 issue on the minds of most Americans. The decline of many financial services firms was, for the most part, a logical continuation of the fact that many homeowners were defaulting at the start of the year. This crisis is most certainly going to shift the political landscape and might give us our first Black president.
6) Yes, this market drop was the largest in history, 770 points in one day is nothing to sneeze at. But keep in mind that this drop doesn’t even make the top 10 in terms of percentage declines.
7) The American consumer is not off the hook. The “Wall Street Greed” angle of this story completely denies the fact that many American consumers tend to overspend and over borrow. Many Americans were buying homes they could not afford and borrowing against their home equity in order to go on vacation. It takes two to tango and banks rarely forced anyone to take the loans being offered to them. If Obama can tell Black Men to take more responsibility for our economic challenges, then he should be willing to say that to the rest of America.
