The people who created this country built a moral structure around money. The Puritan legacy inhibited luxury and self-indulgence. Benjamin Franklin spread a practical gospel that emphasized hard work, temperance and frugality. Millions of parents, preachers, newspaper editors and teachers expounded the message. The result was quite remarkable.
The United States has been an affluent nation since its founding. But the country was, by and large, not corrupted by wealth. For centuries, it remained industrious, ambitious and frugal.
Over the past 30 years, much of that has been shredded. The social norms and institutions that encouraged frugality and spending what you earn have been undermined. The institutions that encourage debt and living for the moment have been strengthened. The country’s moral guardians are forever looking for decadence out of Hollywood and reality TV. But the most rampant decadence today is financial decadence, the trampling of decent norms about how to use and harness money.
– David Brooks, “The Great Seduction”, The New York Times, June 10
Interesting article by David Brooks in today’s New York Times. The article seems to have been motivated by a recent report and related American Interest cover story by Barbara Dafoe Whitehead: “A Nation In Debt” (A Nation In Debt Magazine Cover).
Over the last 30 years or so, we’ve seen a huge change in attitudes and values towards money, away from thrift and saving and towards spending and consumption, as well as an absolute explosion in debt from all corners: governments, businesses and consumers.
America being a nation deeply rooted in markets, individual enterprise and the delay of gratification in the name of long term success, such a development is interesting and important.
Brooks and Dafoe, in her longer article, lay the blame on credit card companies, state government lotteries and payday lenders.
But these institutions are only consequences of a broader change at the highest levels of economic decision making. I speak of course of the keeper of the trust, the guardian of all our economic lives, the guarantor of our money: The US Federal Reserve.
Make no mistake: the business model of all of these companies was made possible by the easy money provided by the Fed over the last 25 years. The easy money available to them made the high risk lending practices that are the foundation of their business profitable in a way that they weren’t when money was tighter and as a result lending discipline had to be as well.
From a broader perspective, what we are going through is civilizational decline. The United States of America was a growing and healthy force which reached its peak in the generation after WWII. Since achieving its peak of success and economic and world power, the United States moral and economic fabric weakened and has been on a downward trend.
We should remember that in the 19th century, it was the British Empire that was preeminent. Few foresaw the decline of Britain and the rise of America. It was only in the 20th century that the US surpassed Britain as the worlds dominant power.
Those who understand history on the grandest scale can see something similar happening today: the 21st century will witness a shift in power away from the US and towards Asia.
This is the grand geopolitical and historical theme of the 21st century and its effects on world political and economic structure, including investment markets, will be transformational.