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Nov 01
2010
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Forget Japan, what are we doing?Posted by Bill Streeter in Editors Column   |
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Ever since the economic recovery lost steam a few months ago, there has been much discussion about whether the U.S. is repeating the Japanese experience. After that Asian country’s stock and real estate bubbles burst, it has not been able to regain its economic mojo—struggling with deflation and slow growth for 20 years.
You can learn from others’ experiences, but comparisons often do more harm than good.
Comparing two struggling economies is no different from comparing two struggling banks. The differences outweigh the similarities, which is why bankers don’t like it when examiners compare their institution with another bank they’ve just visited.
Performance data are frequently compared, of course, but what produces the numbers differs with each bank—management skill, board involvement, employee experience, customer base, and so on.
When looking at a specific situation—how to move bad real estate loans off your books, for example—it can help to hear how others have handled it. But broad comparisons between companies or countries, just like comparisons between people, rarely produce anything positive. The comparisons with Japan actually run the risk of inducing a self-fulfilling mind-set.
This country’s economic fate is in our own hands—leaders and citizens, alike. And, yes, we’ve got our hands full. Instead of looking over our shoulders at Japan, however, a better approach would be to take a sober look at what brought us to where we are, what needs to change, and how we bring that about. It’s not going to happen overnight. Our current situation is the product of many factors, some of them percolating for a long time.
One of those factors was described by community banker McCall Wilson, CEO of The Bank of Fayette County, Moscow, Tenn., during a panel discussion at ABA’s Annual Convention last month. In response to a question about the causes of the financial crisis, Wilson, who is 44, said this:
“The problem was caused by people of my generation. We expect to graduate college with $50,000 of student loans. We expect 100% financing on our house. We expect a home equity [loan] to buy furniture in order to fill the house. We expect to go to a car dealership and buy a car with 100% financing. My generation is a consumer debt-laden society. We thrive on it. The capitalist system exists to feed a need. The need was the consumer wanted more and more and more.”
We think there’s a lot of truth in what Wilson said. Returning to a “consumer debt-laden society” is not a viable choice for a sustained recovery. But it will take time for consumer behavior to reset to a new normal where debt and savings are in better balance. Judging by Wilson’s comments, bankers get this, and we think some consumers are beginning to get it. Our national leaders, however, so far don’t get it.
Let Japan worry about Japan. We need a sustainable remedy to our own unique situation. •
The electronic version of this article available at:
http://www.nxtbook.com/nxtbooks/sb/ababj1110/index.php?startid=8
By Bill Streeter, Editor-in-Chief, bstreeter@sbpub.com
You can learn from others’ experiences, but comparisons often do more harm than good.
Comparing two struggling economies is no different from comparing two struggling banks. The differences outweigh the similarities, which is why bankers don’t like it when examiners compare their institution with another bank they’ve just visited.
Performance data are frequently compared, of course, but what produces the numbers differs with each bank—management skill, board involvement, employee experience, customer base, and so on.
When looking at a specific situation—how to move bad real estate loans off your books, for example—it can help to hear how others have handled it. But broad comparisons between companies or countries, just like comparisons between people, rarely produce anything positive. The comparisons with Japan actually run the risk of inducing a self-fulfilling mind-set.
This country’s economic fate is in our own hands—leaders and citizens, alike. And, yes, we’ve got our hands full. Instead of looking over our shoulders at Japan, however, a better approach would be to take a sober look at what brought us to where we are, what needs to change, and how we bring that about. It’s not going to happen overnight. Our current situation is the product of many factors, some of them percolating for a long time.
One of those factors was described by community banker McCall Wilson, CEO of The Bank of Fayette County, Moscow, Tenn., during a panel discussion at ABA’s Annual Convention last month. In response to a question about the causes of the financial crisis, Wilson, who is 44, said this:
“The problem was caused by people of my generation. We expect to graduate college with $50,000 of student loans. We expect 100% financing on our house. We expect a home equity [loan] to buy furniture in order to fill the house. We expect to go to a car dealership and buy a car with 100% financing. My generation is a consumer debt-laden society. We thrive on it. The capitalist system exists to feed a need. The need was the consumer wanted more and more and more.”
We think there’s a lot of truth in what Wilson said. Returning to a “consumer debt-laden society” is not a viable choice for a sustained recovery. But it will take time for consumer behavior to reset to a new normal where debt and savings are in better balance. Judging by Wilson’s comments, bankers get this, and we think some consumers are beginning to get it. Our national leaders, however, so far don’t get it.
Let Japan worry about Japan. We need a sustainable remedy to our own unique situation. •
The electronic version of this article available at:
http://www.nxtbook.com/nxtbooks/sb/ababj1110/index.php?startid=8
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