OK, now let's jump in. We're past Memorial Day and into summer now, so let's hear some good news! Well, the Congressional Budget Office said today that the US economy will resume growth in the second half of 2009.  Woohoo!  And consumer confidence surged almost 15 points in May, the largest jump in six years. Effin-A right, man! Rock that shiznit! The headlines are trumpeting these modest developments, styling them as signs that the recession is finally over. Then, unfortunately, we read the fine print. This will be a largely jobless "recovery," with unemployment expected to actually rise to 10.5% in 2010. Mortgage debt, both personal and commercial, remains at a staggeringly high percentage of overall GDP. Gas prices are making their annual summer march up the mountain. And through it all, the government continues to pile up record levels of debt, burdening our children's children with vast oceans of red ink.

Following Posner, there are a few important things to keep in mind. First, there is this general desperation emerging regarding lending. We all remember Obama's major speech a couple months ago on why the huge bailouts were necessary: because the credit gears had seized up and frozen, bringing investment to a grinding halt. Banks are hoarding cash, as are individual families. This is perfectly reasonable behavior in uncertain times. But as lending and spending drop, due to fear over the future, the economic outlook spirals further down, as more jobs are lost, defaults rise, and deeper depression looms. 

So everyone wants to get the lending process going again, to spark the "recovery." But the question is, what exactly are we supposed to be lending and spending our way back to? What are we recovering to? Posner predicts that there will be many "false positive" signs as the depression drags on, because some manner of spending will be necessary, as durable goods simply wear out and need replacement. But these are simply temporary lurches in what is likely to be a contracting economic picture overall. As long as the long-term circumstances are uncertain, banks and families will continue to hoard cash, which dampens the prospects for economic growth and fuels the downward spiral.

I think the big blind spot in our hope for recovery is the true nature of the dreaded Housing Bubble. Politicians, pundits, and even economists (Posner too) view the American housing crisis as just another asset bubble, like the tech stock bubble of the 90s, or like housing bubbles in other countries like Japan. And our particular bubble, in this view, was caused by just a few basic factors: artificially-low interest rates preserved by the Fed, the ensuing long stretch of easy credit and questionable loans, overly-complex and under regulated securities made up of the shaky mortgage debt, and the usual piling-on of investors that drives every bubble. Consequently, the bursting of the bubble just means that the assets will return to their natural prices, and the toxic debt that is coursing through the system will be "unwound." Then we're good to go.

But this is a misunderstanding the housing bubble. As Jim Kunstler repeatedly points out, the housing crisis is really just one part of a much larger thing: the greatest misallocation of resources in world history; i.e., the building of suburban sprawl and "Happy Motoring America." We have not just been dumping easy credit into the real estate market for the last 10 years or so, because of some temporary conditions. We have been pouring our souls, lives, and identities into the sprawl culture for decades, essentially since the end of WW2. We have transformed our national economy from farming, manufacturing, and shopkeeping into a "service industry" world, where every commodity is geared to building, filling, and maintaining the strip mall, the interstate, and the tract house. The single family house is not just an arbitrary economic alternative to renting; and home-ownership cannot just be dismissed as a less-desirable option for the future. Home-ownership is the apotheosis of the entire American experience. All of our advertising, teaching, training, and laboring is intrinsically wound up with getting that stand-alone building on a faux-British mini-estate in the burbs, so that we can fill it with the loot from our dreams: SUVs in the driveway, lush green grasses, flat screens in every room. Every Best Buy location. Every news report on retailer confidence in the upcoming Christmas season. Every Presidents' Day automobile blowout. These are all testament to the abiding power of the American Dream as embodied in the private home space.

This decades-long project of filling the American heart and landscape with sprawling schlock has been taking on water for a while. There are several avenues of assault on this American Algorithm. First, labor itself has been losing value. Developments in the global economy have allowed American jobs with higher "value-added" quotients to be shipped overseas. Technological advances, especially computerization and automation, have eliminated wide swaths of the labor market, rendering automatic what used to be professional skills. This general de-skilling of labor has also led to the rapid decline of unionization, further depressing wages. New legal and financial tools have also fostered the centralization of economic power, both in the nature of corporate structure itself, and the general funneling of wealth upwards to an elite investor/finance class.

The point here, for now, is not to lay blame. These are all general macro-trends that have eroded the position of the individual worker and family. So as the US GDP has steadily climbed over the last few decades, regular people have had to work longer hours, commute longer distances, and add workers to the household, just to stay in the same place financially. Even with all of this, savings rates have steadily declined, and household debt has increased. And this is not all just conspicuous consumption. This is largely due to rising costs in housing, health care, secondary education, etc.

So how do you keep a mass consumption society going when the fortunes of the people who make up that society are declining, due to general macro-trends like globalization and technological unemployment? Well, in America, we dumped all of our eggs in one basket, and started filling up our empty spaces with highways, cars, suburbs, offices, and malls (strip or otherwise). This whole project was highly self-referential and derivative, with no eye to what would happen when we reached the saturation point. How long can we sell lube jobs and marketing schemes to each other, when the actual substances and products that fill up these residential shells are made elsewhere? What we're seeing now is a massive deleveraging of these sprawl-dependent occupations.

In short, all of America has been one huge bubble, an overinflation of the suburban project that has been going on in earnest since the war ended. We poured all of our energy into this one living pattern, and began frantically bailing out as it began to take on water in the mid-70s, which was the high point of equitable wealth distribution. Rather than exploring different ways of working as labor lost its value, or different ways of inhabiting the landscape as over-dependence on the automobile decimated small towns and cities, we kept shoveling more products, more careers, more debt, and more consumption into the gaping maw of sprawl.

And of course, the whole thing was incredibly wasteful and destructive to the environment, and was completely predicated on the eternal existence of cheap oil. Well, now Peak Oil and catastrophic climate change, not to mention the general collapse of most other natural systems, are about to lay waste to the whole idea of Bubble America. We may have some kind of economic recovery, but the general ratios of labor to economic health will simply not allow the One Person-One Job/One Family-One Dwelling social form to gain traction again. Our bubble is burst, and there will be no next one.