When the Smoke Lifts, We Will Discover a More Vibrant Economy

The extraordinary year that was 2008 will be remembered as the year the first person of color was elected to the most powerful position on the planet.

It was also the year that China was thrust to the forefront of world affairs by the spectacle that was the Beijing Olympics.

But when historians review the year that was, they will study it through the refractive prism of an economic lens.

During the past year, we have witnessed tectonic upheavals in financial markets whose temblors will be felt for years to come.

Wall Street, as we know it – the central hub of the world economy – has been altered almost beyond recognition.

As the air gushes from the global real estate bubble, home foreclosures are at historic highs.

The rising tide of defaults has swelled into a financial tsunami that has swamped an economic system cobbled together by an intricate network of little understood credit mechanisms that netted unimaginable wealth for a few, but has now disintegrated like a rotting house of straw.

Investment institutions with roots stretching back more than 100 years, like Bear Stearns, Lehman Brothers and Merrill Lynch have been permanently vaporized from the financial landscape. Although other lions of this bygone era remain, the unfettered ways of these river boat gamblers may be changed forever.

The federal government already has committed more than $2 trillion to breaking the credit logjam. Interest rates are at 50-year lows. The printing presses at the U.S. Mint have been running 24/7.

To date, major national banks have received a direct federal infusion of $350 billion with another $350 billion in the queue.

But still, our nation’s vital lending apparatus — the life’s blood of our economy — remains frozen.

Insurance giant AIG, at one time the world’s largest insurer with a triple AAA-credit rating, is on life support. Its unchecked soiree into the dark realm of risky investment vehicles has left its once solid balance sheet in a shambles.

After receiving nearly $160 billion, and still counting, in federal bailout funds, AIG’s assets have been virtually nationalized.

This year saw the flawed decisions of the Detroit’s Big Three – 20 years in the making – come to roost. G.M., once the pride of American manufacturing and the keeper of the American Dream, has been reduced to the welfare rolls.

Although their tambourines have been piled high with billions from the federal coffers, G.M. and Chrysler are still walking the Green Mile; a treacherous path that will likely end at the steps of the bankruptcy court.

Portfolios big and small have been crushed., and 401k has become a dirty word.
Those counting on an early retirement will have to work longer. Those in the midst of their golden years will have to do with less. There is pain all around.

In 2008, hundreds of thousands of jobs have been lost. Nearly 160,000 businesses have shut their doors, with the prospect of 200,000 more shuttering in 2009.

Credit card companies have already slashed $2.5 trillion in available credit. This has not only hobbled the American consumer, but stifled small businesses who rely on these credit facilities when cash falls short.

The business and financial world is counting the days until the bumblers at 1600 Pennsylvania Ave., pack their bags. Their final curtain call cannot come soon enough.

President-elect Obama and his transition team have been temperate in their cautions to the American people that the worst is not yet over. They have promised a massive stimulus program and thorough overhaul of the failed institutions that have allowed us to stumble to this precipice.

In our recent history, the chaos and dislocation of 2008 can only be matched by the political turbulence that engulfed our nation during the mayhem that was 1968.

As we look back at 2008, even the massive larceny perpetrated by master felon Bernie Madoff will only appear as only a minor footnote.

If the American narrative has taught us anything, it has shown that from the rubble that was once the U.S. economy will come the building blocks of a new and stronger economic order.

There are new businesses and entrepreneurs still obscured by haze rising from the scorch whose ideas are yet to be revealed.

We Americans are a resourceful and resilient lot.

The world may see us as spoiled children; but America also is an unparalleled mix of invention and opportunity. While too much innovation may be our Achilles heel at this crossroads, it is this same penchant for creativity that will be the key to our resurgence.

We truly are at our best when the worst is upon us.

What 2009 will bring, no one can say.

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But I am optimistic.

I believe that when the smoke lifts, we will discover that an economy of even greater vibrancy has emerged from the ashes of our present anguish.

[img]272|left|||no_popup[/img] May 2009 bring you a gentler wind of joy and prosperity.