More moons ago than I care to recall, a farm community banker told me to stay away from investments growing faster than 5 percent annually, preferably over a 15-year-period. This is what it means to be “conservative” where I’m from. That, and the fact that we were recycling long before there was a word for it.
Recycling came into vogue in the ’90s. Fiscal conservatism did so only as a catchphrase rather than a reality. The stock market indices are illustrative.
After 10 years of stagflation in the ’70s caused by Dolly Parton, Rod Stewart and Donna Summer sharing music genres, the markets began to grow in the 1980s at a modest but steady rate. After the ’70s, however, the economic growth of the ’80s was a radical departure, much like disco being supplanted by a tiny African American man from Minneapolis wearing platform shoes and women’s underwear.
Then came that pivotal moment during the ’90s when Prince put on a pair of pants. A high-profile contrarian executing a traditionally rational behavior is always cause for alarm. It’s the cultural equivalent of everyone else dropping their pants; or as Al “The Hammer” Greenspan characterized it, “irrational exuberance.”
Around the mid-’90s, the markets went bananas. Overnight fortunes were de rigueur. If you weren’t flush with stock options, you were clearly an idiot, or a journalist, which in hindsight… Then came the dot.com implosion, when people in their 20s had to give back the Lamborghini keys and live on Ramen like the rest of us in our 20s. It was a tragic time, akin to the Great Depression, only without the widespread hunger, homelessness, tuberculosis and 25 percent unemployment.
The dot.com economy was fiscal crack. Too many people had derams of instant wealth. I have a few friends made rich by stock options. Those who are still rich invested within their means. The rest are looking for work, and they’re not hubris-driven, Type As who tossed money into elevator portfolios. They trusted their money to the guys who preached risk like anything else was for little girls and lost kittens.
Half of what goes on in finance can be traced to the playground; intimidating gestures replaced by intimidating terms that make regular folks feel too dumb to manage their own money. That’s how you get part-time dog walkers into mortgages and unemployed students into $20,000 credit lines. And that, in turn, is how you get an economy to collapse.
After the dust settles, everyone who didn’t drink the overextension Kool-Aid will still be standing. They will form the foundation of a new economy in which risk is balanced by actual conservatism, and personal spending reflects autonomy rather than addiction.
I know of a certain farm community bank ready to start financing the sustainable-growth era.
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