I’m still startled to read mainstream articles that openly admit the depth of the economic disaster – and to read them still nearly four years after all the stimulus plans were underway and following four years of “green shoots” puff pieces in the press about how recovery is right around the corner:
The United States has a confidence problem: a nation long defined by irrational exuberance has turned gloomy about tomorrow. Consumers are holding back, businesses are suffering and the economy is barely growing.
There are good reasons for gloom — incomes have declined, many people cannot find jobs, few trust the government to make things better — but as Federal Reserve chairman, Ben S. Bernanke, noted earlier this year, those problems are not sufficient to explain the depth of the funk…. Americans have lost a vast amount of wealth, and they have lost faith in housing as an investment. They lack money, and they lack the confidence that they will have more money tomorrow.
Many say they believe that the bust has permanently changed their financial trajectory.
And the theory as to why this is happening? It’s the same as in the 1930s: conventional thinking say it is that prices are too low. “That has led a growing number of economists to argue that the collapse of housing prices, a defining feature of this downturn, is also a critical and underappreciated impediment to recovery.”