These six signs demonstrate how the signs are all around us. The coming economic crisis is at our doorstep. This level of excess and corruption cannot support stability very long.
The vultures are circling
You’ve seen their ads on television and online. The lenders are back and they are eager to secure sub-prime borrowers again. That means the money is flowing faster through the banks with less regard to safety and risk management. It’s not the wild west that we saw in the years prior to 2008 but this is the first time we have seen the ads so abundant since the economic meltdown. The increase of these ads means lenders are competing to give risky borrowers money. That’s a recipe for disaster as we have seen.
The safety nets are decaying
Increasingly we are seeing more and more stories like this one from the Washington Post. In this instance the federal insurance fund protecting millions in pensions is running out of cash. In some instances the gridlock in Washington DC has meant unemployment benefits being lost and The Nation reports that many states have cut back drastically on their unemployment benefits due to budget restraints. These stories are contained in the back pages of the newspapers and rarely at all on the television networks but behind the scenes a weakening of the economy’s safety nets is taking shape.
People have work but not enough work
While the employment numbers are looking better they hide a disturbing and persistent trend of underemployment. This number is currently about twice what the unemployment rate is, meaning there are about 6 million people with part time jobs who continue to look for full time work but can’t find it. Beginning in 2014 the Economic Policy Institute began reporting on the “missing” workers in the American economy. These are people who do not have a job but are no longer looking. They have given up and are therefore not showing up on the official unemployment numbers. These aren’t high schoolers working fast food cashier counters. These are parents with families who are finding themselves left behind in the American economy and their reality does not balance against repeated positive reports from the department of labor.
There are a number of positive trends in the economic reports that have released in the last half year. The problem is, these positive trends are limited to specific geographical areas. In other areas, especially less metropolitan areas, there is a very different story unfolding. The middle class is being hollowed out. This means they are shrinking. Many who qualified as middle class in prior years have fallen out of those ranks and into the poverty classifications.
Less hope and ambition
The Financial Times recently reported that US productivity has fallen for the first time in decades. Entrepreneurship has been on the decline in the US for some time. High growth young startup firms have been in decline since 2000 according to Fortune Magazine. According to Venturebeat first time financing for startups fell in the first quarter of 2016 by 31%. Inc. reports these declines are based upon a new generation of Americans in the work force who are more averse to risk than their predecessors were.
Another way to say it – people don’t trust in the American dream anymore. When an economic system loses its base of trust, a coming economic crisis is on the near horizon.
6. Assumed Corruption
This summer the Democrats and Republicans each held their own political conventions where contenders Donald Trump and Hillary Clinton were nominated for their respective party’s presidential tickets. It escaped almost everyone’s attention that both political parties held these conventions in arenas named after and benefitting major lenders. Wells Fargo Center in Philadelphia hosted the Democrats. Quicken Loans Arena in Cleveland hosted the Republicans. This is more than ironic. It is a clear demonstration that the names who were involved in the 2008 economic meltdown are not only still around but even more tightly interwoven to our politics and culture. Corruption, conflicts of interest, and an at least partially purchased political system are no longer scandals in American culture. They have become assumptions. We assume our leaders are corrupt. We assume the big money players are deep in their pockets.
After the Great Recession President Obama signed into law the Dodd Frank Act which would help prevent the greedy excesses in the finance system that helped bring about the crisis. Senator Chris Dodd for whom the act was partly named after retired from the Senate in 2011 and went on to bigger and better things, financially speaking, as a lobbyist. Barney Frank, the other half of the Dodd Frank Act has also retired from Congress and now serves on the board of a New York based bank. It is not an issue of foxes guarding the hen house. America’s political leaders have delivered the hens to the fox’s house. We barely blink at corruption in our leadership anymore. We assume it is there.
All of these play into the reality that the US economy is heading to a dark place. It might not be in the next year but the supports which uphold the economy are giving way and when they fail, the safety nets and the underlying trust and hope that made this engine once rumble will be suddenly realized as absent. We should not be surprised when the coming economic crisis finally arrives.