causeandeffectworld.com Blog

The kindness of strangers

Nouriel Roubini, economics professor at New York University has studied the economics crisis in the 90′s:  Mexico in 1994; Thailand, Indonesia, and Korea in 1997 and 1998; Brazil and Russia in 1998; and Argentina in 1999.  He noticed the following:

• “most had huge current account deficits (they were spending more than they made),
• “they typically financed the deficits with by borrowing from abroad in ways that exposed them to the national equivalent of bank runs,
• most countries had “poorly run banking systems plagued by excessive borrowing and reckless lending,
• “corporate governance was often weak, with cronyism in abundance.”

Wow.  Does any of that sound familiar?

He also sez:

“Once you run current-account deficits, you depend on the kindness of strangers… This might be the beginning of the end of the American empire.”

And we were told to go and shop after 9-11.  Shop.  Not get off foreign oil.  Not go out and volunteer.  Not start paying for the war now so our kids don’t have to.  Shop.  Take on more debt.  Drive as much as we want.  Just spend our way out of the recession.

How are we going to explain to the next generations how we let this happen?