Is the Economy Ever Going to Get Better?
78Three years on, things still look bleak
Back in the early spring of 2008, not long after I decided to ditch my then seemingly secure life as a high school teacher in Florida and embark on an adventure living and teaching overseas, what would eventually become a full-blown and long-lasting global financial crisis was in its infancy.
The news was beginning to look grim, with daily reports covering front pages of newspapers and magazines and of course the home pages of many news-related Web sites. But at that time, even the direst of predictions indicated that even if a recession would occur, that it would last a year, perhaps a year and a half.
Well here it is almost three years after the first rumblings of a financial meltdown began, and, uh…, it's not looking any rosier.
As of October 2011, there were still 14 million Americans without jobs, the meltdown of the European economy seems to grow worse every day, and even mighty China is looking a little peeked in the financial sector. Spain, Portugal, Italy, and Greece are so unbalanced that the euro is in constant threat of breaking down. Of course since the economy in which we now exist is a global one, what happens in one part of the world affects almost every other part.
So the United States and rest of the world are still, two years after the US President declared an end to the recession, smarting in the wallet.
I currently live and work in Saigon, Vietnam, where I am an administrator at a private international school. By far, the majority of our students are Vietnamese. Enrollment has dropped a bit, but this cannot necessarily be attributed to financial stress felt by the families. The goal of most students is to go study in abroad, primarily in the US, Canada, or Australia, so in large part, our decrease in enrollment is due to students leaving for this reason.
The Vietnamese economy is certainly not strong and indeed the nation is wracked in many parts by abject poverty. But there has been no widespread layoffs of employees, consumer confidence has not waned, spending certainly has not declined, and, most impressively, unemployment stands at a mere 2.6 percent for the first half of 2011! That of the US remains a stubborn 9 percent.
What is of concern for Vietnam, however, is the skyrocketing inflation rate: 21.6 percent as of July 2011. The US inflation rate is a very manageable 3 percent. Additionally, the per capita income for Vietnamese workers was about US$100 per month, but the families are so tightly bound that in many cases, three generations will live under a single roof. Thus, with the cost of living in Vietnam being so far below that of the typical developed nation, the combined incomes of those living in the same premises provide at least a subsistence existence.
Yet it seems the financial crisis continues to rage on in the US and Europe. Every time things appear to be improving, suddenly there is another setback. Simply put, the US economy is not able to create enough new jobs to make up for the ones that were lost during 2008-09, when the country was officially in a recession. And even the ones that have been created are part-time, offering no benefits and very low pay.
What will it take for the global economy to recover from this long-lasting sickness? It seems the answer to that question is a far way off.
For more information on the economic indicators mentioned in this article, please visit the following:
- Indicators for VIETNAM
Free Economic Indicators Data for VIETNAM - Indicators for UNITED STATES
Free Economic Indicators Data for UNITED STATES
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Hi Wes,
What I am going to say comes from a politically impartial place, from a person who has had employees and who has made a payroll. I can tell you that the single most important reason that the US employment rate is so high is that small business owners, like I was before I sold my business, are deathly afraid of the costs of Obamacare. My friends who still have businesses are literally sitting this President out. One of the biggest costs you face every month when you have a business is healthcare (your portion) and this new health care bill threatens to put many small businesses under. So, what do they do? They just hold on. They are not hiring and not spending too much either. That's the reason the economy is sluggish, in a nutshell.
Hi, Chris. Thank you for your thoughtful and informative comment. I agree with you that people living beyond their means has contributed significantly to the financial fiasco that many parts of the world are now facing. I currently live in Vietnam, where credit cards are virtually non-existent and people generally do not spend more than they earn. In fact, with the exception of the youngest generation, the Vietnamese, as are the Chinese, very good at saving part of their income, low as it may be. But this certainly cannot be the only contributing factor to the global meltdown. The reason I use the word "crisis" in my post is not due to what big business or governments or the "theorists" are experiencing, but rather due to the suffering of the millions of average hard-working people who have lost everything they worked for through no fault of their own. The term "adjustment" doesn't really work because adjustments are short lived and it seems this current situation, now almost four years old now, has no end in sight. Thank you again and take care.
Hi, quatrain. Thank you for your comment. I guess history will ultimately be the judge and jury for Obamacare. One thing I have always felt is that indeed employers have long been expected to foot too much of the bill for their employees healthcare costs. I remember when I was a child, my parents (my mother was a teacher and my father was a police officer) had private insurance and if someone in the family needed to see a doctor, my parents had to pay for about half the cost of the doctor visit and insurance covered the other half. My parents both had insurance from their jobs but it was catastrophic insurance, only to cover the costs in case of a serious illness or accident. These days it seems employers are having to pay for far too much of the insurance costs and many people are going to the doctor for petty injuries and illnesses, which drives up the cost of the workers' insurance to employers. (I know this because I used to work for a large HMO.)
But I must beg to differ with you and to point out that the financial "crisis" we are now facing began in late 2007/early 2008, long before Obama was even elected President. Also, most authorities attribute it to the mortgage practices of large banks and to the excesses of Wall Street, not to the costs of health insurance to small businesses.
Thank you again and best wishes.
Wes, my comment was on a very "macro" level with little respect to the individual and personal suffering that a crisis brings with it. Certainly there is much pain associated.
My point is: All those who use credit cards should not be too upset if they loose money in a financial crisis. After all, they lived on credit for some time, that is they lived on money they didn´t have.
I would be quite disappointed of the outcome of the crisis if the essence were: "Borrowers get a haircut and live happily ever after. It pays to live on credit"
That result would be amoral.
Fair enough, Chris. And it's not just those who abuse credit cards. I am likewise opposed to those who entered into mortgages they knew they could not afford having their debts paid off by the governments.
The larger issue is that people simply have to start making responsible choices BEFORE they do something as well as accepting consequences for making poor choices after the fact. It certainly sends the wrong message for the governments to pay off mortgages of those who knew they could not afford them in the first place. Again, living beyond their means.
That being said, the mortgage lenders should not get away without footing part of the bill either. And it makes me furious when the government bails out banks and other institutions that make bad choices and the individuals responsible for contributing to the crisis go unpunished. That, too, is immoral.
CHRIS57 Level 5 Commenter 6 months ago
I don´t have the impression this is a long lasting economic crisis. After the first readjustment in 2008 (Lehman Brothers) things went fine for the BRIC economies. Readjustment is when real economy and bubble economy come to terms.
There will have to be another adjustment in Europe with the Euro debt crisis.
What really creates the pain is that a lot of developed economies including the US and Southern Europe live beyond their means, are heavy on debt dope and try to stay on dope as long as possible to avoid the days of cold turkey.
The world of today is now split into economies that already had their good life (and have debt) and those that did not enjoy their life yet, because they did not use their money earned for their own well being, but for paying the others debt.
One thing is for sure though, those economies who never were on debt dope will live through any crisis without much pain. Those with high debt will hurt, even if the lenders generously cut the debt burden. Debt is accumulated balance of spending more than you earn. Even after financial correction you don´t earn more (create more value...), so the standard of living will become lower. If you call that a crisis, please do so, i would say it is an adjustment to real world conditions.