Wednesday, January 28, 2009

Time To Put Down The Bottle

At the Atlantic, Jim Manzi writes that we're a nation of children, drowning in debt:

American consumers are awash in debt, drowning in it. This is the fundamental issue with the stimulus proposal. We're trying to borrow our way out of debt. Unfortunately, we need a recession. That is, consumption must decline because for some time we have been consuming more than we produce or have reasonable prospects of producing. Monetary policy has been used to inflate a series of bubbles to avoid the consequences of excess debt, and the more we try to hold it off, the worse it's going to be. Bourbon works as a hangover cure, but only for a while.

It's theoretically possible for an intelligently-designed stimulus action to help smooth this landing a bit, but we can't avoid a painful adjustment. Americans are going to live in smaller houses, drive older cars, vacation nearer to home and have less impressive digital camcorders than they expect.

Welcome to the sober new world. Financially speaking at least.

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