Suddenly, predicting the country's financial future is as scientific as reading tea leaves.

We are in uncharted territory. Never before has the government owned so much of the "private" banking industry. World stock markets continue to fall. Each small gain is corrected by a loss two times as deep. What began as bad lending practices in the United States mortgage industry has become a world wide economic downtown.

The government is attempting to intervene and control the markets, the same thing it did before the Black Tuesday in 1929. Only back then, the Federal Reserve raised interest rates to discourage the booming stock market, only to drop them rates from 6% to 4% four months after the crash. Interest rates are again falling.

Is this really a parallel? A harbinger? It's certainly being argued that it is.

The only thing that can be known for certain is that since the turn of this new century, Americans have been living in a "Minimum Payment Economy. Living on credit, planning for a future when income will outstrip personal spending by virtue of imagined wage increases. Though predatory lending practices were certainly widespread throughout the mortgage market, particularly in the subprime arena but elsewhere also, these practices could not have flourished without a consumerist "gratify today, figure out how to pay for it next year" mentality and economy.

After the 1974 recession, the worst since the great depression, the personal savings rate was 5.1% alarming at the time. In the early 80's it rose to 5.8% but after 85 it plummeted to 3%. Think Oliver Stone's Wall Street, Gordon Gecko declaring "Greed is Good" and the "Me" generation.

1990-1991 saw another recession, a recession that crippled New England closing banks, driving our manufacturing south and sending unemployment into double digits. In Connecticut, the recession began in 1989. We didn't recover until 1992.

Our state history mirrors the nation's recent off-shoring of manufacturing jobs. India and China are the New South. Technical jobs and skilled labor continue to dwindle.

One wonders what the new century has wrought. Personal savings in 2005 was negative 1%. Currently it hovers under 3%, but it is on the rise and in fact is touted as soaring. Soaring because the savings rate in 2006 hovered around 1% and dropped closer to zero in all four quarters of 2007.

So, in 2008 personal savings of 3% is a breakthrough, in 1987 a disaster. Yet this time around Americans aren't greedy the McMansion buyers and credit card shoppers are duped and hoodwinked. Same net result, only repackaged: self indulgence and instant gratification in a non-judgemental world.

Worldwide, demand is down for commodities. OPEC laments falling oil prices. The steel industry is down, indirectly signalling a slow down in China's construction market. Two years ago, China consumed 40% of the world's steel.

Domestically, there are warnings about hedge fund sell offs. Other warnings are the rising unemployment rate. It's at 7%. The crippled domestic auto industry. The energy industry. What will the ripple effect be hedge funds sell off their stocks and flood the market, if they flood the market? Will grocery stores suddenly be unable to stock shelves because their stock will drop to the floor? Will the big three car makers disappear altogether?

REIT's, Real Estate Investment Trusts, which own large portfolios of real estate paying out dividends and returns to shareholders have artificially driven market prices up over the past five years, intensifying in the past three. But, now, there aren't any checks in the mail heading into REIT headquarters. Promised returns are not being achieved. What happens when they sell off assets and large tracts of property, hundreds of thousands of square feet of distribution, office and warehouse space? The short answer is that local entrepreneurial investors will be able to buy property for its true value, but will there be a demand? Is their cash well enough in reserve to keep commercial real estate values from tumbling?

Doomsday predictions are in Vogue, but is there an upside? Yes. Maybe this is the wake up call that we as a country needed.

Maybe the government and citizenry will realize that the United States can not succeed as an economy that simply consumes. Now is the time for venture capitalists, hedge funds and cash holders to invest in those niche products that only we can sell.

We gave our old economy away. Industrial, manufacturing, sewing, call center operations are gone, but there are new frontiers in medicine, stem cell research, fuel cell technology, nanotechnology, gene therapy to be explored. While our political system may prevent us from taking advantage of these breakthroughs we can and should sell them.

Once again, we can sell to the world instead of eating everything it produces. After the Great Depression, the war machine and the war economy were heralded for righting the Great American Ship.

In truth we were making and selling what the world needed and couldn't produce, so this time, instead of producing tanks, planes and bombs for the United States, and our old allies, it will be a reclamation of American ingenuity, technology, cutting edge software and medical techniques.

If only we heed the wake up call and trump doomsday.


October 21, 2008