For anyone still wondering how the U.S. got into the economic mess it is now entangled in, this entry is for you. Here is a hint, as put by Alan Pisarski in this Washington Post article.
“You keep doing what you’re doing, and you just keep assuming that growth is going to go on forever. And then at some point it just drops out from under you … ”
Alan was speaking about the glut of automobiles now on the market since people have stopped buying, but it applies equally well to the majority of the overall mess. I thought we might have learned from the dot.com crash, but people just found a new ‘get rich quick’ scheme to chase after. But, the bigger concern I have is if people have learned any lessons… and not just about investing.
Most public companies are run as if they are operating in the above fantasy world… the growth just can’t possibly stop or even slow. Making constant profit is no longer the mark of a good investment, but year over year growth by some percentage X. In places I have worked, X was often over 100. It doesn’t exactly take a rocket-scientist to figure out that this can’t continue. The damage this kind of investing has done to companies is horrific. Super short term thinking and operation has become the norm.
The only hope the U.S. has of getting out of trouble is if the average person, as well as the government, stop living on borrowed money… AND companies start running in a more long-term, sustainable manner. If not, the house of cards will fall… if it hasn’t already started beyond repair.