Who knew?

The signs were all there -- at least we now look back and see the signs that the experts missed or ignored. What seems to have been lacking was common sense.

Nobel Prize winning economist Paul Krugman writes in Monday's New York Times:

Last week the Federal Reserve released the results of the latest Survey of Consumer Finances, a triennial report on the assets and liabilities of American households. The bottom line is that there has been basically no wealth creation at all since the turn of the millennium: the net worth of the average American household, adjusted for inflation, is lower now than it was in 2001.

At one level this should come as no surprise. For most of the last decade America was a nation of borrowers and spenders, not savers. The personal savings rate dropped from 9 percent in the 1980s to 5 percent in the 1990s, to just 0.6 percent from 2005 to 2007, and household debt grew much faster than personal income. Why should we have expected our net worth to go up?

Yet until very recently Americans believed they were getting richer, because they received statements saying that their houses and stock portfolios were appreciating in value faster than their debts were increasing. And if the belief of many Americans that they could count on capital gains forever sounds naïve, it’s worth remembering just how many influential voices — notably in right-leaning publications like The Wall Street Journal, Forbes and National Review — promoted that belief, and ridiculed those who worried about low savings and high levels of debt.

Then reality struck, and it turned out that the worriers had been right all along. The surge in asset values had been an illusion — but the surge in debt had been all too real.

So now we’re in trouble . . .

Not only do we have the staggering trillions of dollars to fix the system and save the institutions, but then we have the kitchen table version of too much debt, no savings, no rainy day cushions, and retirement funds decimated.

It was insane to think we could fight a war and cut taxes at the same time. It was insane to think we could have it all, even if we knew we couldn't make the payments.

I'm just old enough to remember the shadow of the 1930s depression and the sacrifices of World War II. Back then, people saved up to buy things they wanted. Or they would put something on layaway, make their monthly payments, and only when it was paid in full could they take it home. Then came credit cards, and we all got used to having it now and paying later.

Credit got easier and easier, lenders sold off the debts and had no further risks so they took bigger risks, and advertising made it all seem so desirable and necessary.

I'd hate to give up my computer and the internet -- but sometimes the good old days look pretty good.

Ralph