While the media talks about recession, as if anybody who owns stocks needs to be reminded, I can’t help but wonder whether we are really talking about basic macroeconomics or a fundamental paradigm shift that happened back in 2001, and we just didn’t notice.

After the dot com crash, plenty of people were hurt, and hurt badly, as their saved assets disappeared in a flash.  Years of earnings from years of work simply disappeared.  And this was the big news.  But at the same time, other things were happening as well that changed the nature of the economy.

The U.S. stopped producing things.  We kept buying them from other places, but we stopped making them ourselves.  In the 1990s, we created companies that existed on ideas and technology, but that went poof with the dot com implosion.  During that time, we gave up any hope of maintaining a manufacturing base.  Who needed it, we were flush with internet money.  Let China and India have the hard work, while we make the easy money.

Then came 9/11, our great excuse for sinking billions of dollars into non-productive use in the name of Patriotism and paying Saddam Hussein back for trying to off Pappy.  That money had to come from somewhere, and rather than anger a huge segment of society by sticking the government’s hand so deep into our pockets that it could scratch our knees, they just printed up as many bills as they could and left it for some other day to pay.  Now, that money is gone, and it’s never coming back.  Were those big bombs worth it, in retrospect?

At the time, our real wages were stagnant or falling, and jobs were hard to find, and our economy, to the extent we had one, simply passed money around in a big circle until it finally got shipped overseas in our new flat world, where money only traveled out and never in. 

But we were happy, buying flat TVs based upon a real estate market that never quit.  As long as our piggy bank was full, we could spend.  But like all upward spirals, two things happened as they always do.  First, some scoundrels found a way to scam the system, sucking money from subprime mortgages out the back door.  Second, the bill for easy mortgage money came due.  Eventually, the bill always comes due.

The short term solution, favored by politicians of all ilks, is for the government to send us a check (as if it’s got a bunch of extra money lying around) for us to go spend on stuff that will be cool for about thirty minutes, and thus rev up our flailing economy and make us all happy again.

I’m not seeing how this resolves any of the systemic problems.  While it sinks our country deeper in debt, this money flows out to the producers of the shiny stuff, not to people who need a job since the real estate ATM shut down.  At some point, we need to realize that we have a real problem, not just a momentary glitch in the good life.  This flat world isn’t good for us, and we had no business mortgaging our future on a war.

The confluence of factors suggests to me that this may not be, despite the TV telling us otherwise, just a recession.  We may be at the crest of the hill looking downwards.  Unless the United States recognizes that without a manufacturing base, where we create something that someone elsewhere wants to buy, selling off our assets to the Saudis and spending money on a non-productive war might just leave us without anything left. 

The boom and bust cycle may be over.  We may have hit the final bust this time.  Of course, I’m no economist, so I may have no clue what I’m talking about, but I just don’t see where the money is going to come from to bail us out of this one.  If the rules have changed, then we either need to bite the bullet and recognize it or we are in for a very long, hard trip.  Talk of a “brighter tomorrow” isn’t going to create a viable economy when we’ve run out of money and have nothing left to sell.