(De)fault: Don’t buy economic blame
November 14, 2011
As students at the College of William and Mary, we are all familiar with the consequences of the recent economic recession — rising tuition costs and until recently, frozen salaries for College employees. In times of economic strife, many people are quick to blame the financial sector. In some instances, this stance is justifiable. However, it also has a tendency to ignore a significant aspect of the economic equation: the rest of us.
When banks across the country announced last month that they were going to be charging a small fee for use of their debit cards, they were met with outrage. Many students were the first to voice their concerns, as the fees were to be applied to smaller checking accounts. As much as I admire the coordination with which the public reacted, I also sympathize with the banks.
Our economy tumbled from artificially inflated heights in the latter half of 2008 and has been sluggishly recovering ever since. One could look at the Dow Jones Industrial Average and remark that our economy must be stable, as its value has changed little since February.
But in fact, it has changed greatly. Instead, the Dow has swung wildly both up and down in that nine-month time span. The Chicago Board Options Exchange Volatility Index, which quantifies the stability of market movement by tracking the Standard & Poor’s 500, has been increasing unstable — especially since August.
Banks have not fared well throughout this process. No one has. There is an increased sense of desperation on both Wall Street and DoG Street, no doubt fostered by increasing fears of a double-dip recession, greater instability in the European Union and domestic political impasse. This has driven banks to seek a means by which they can recoup some of the money they are now losing — due to recent government regulations that halve the 44 cents previously chargeable to places of purchase by banks, in order to repay fees to MasterCard and Visa. We can hardly blame banks for attempting to stabilize their losses.
In a time when headlines scream about “We Are The 99 Percent” protests across the nation, massive riots throughout Greece and even mob violence in London, many onlookers are left wondering where to cast the blame.
That is entirely the wrong frame of mind with which to confront the problem. The blame is cast on all of us equally: on the banks, whose credit default swap speculation lacked any essence of due diligence, to the governments which have regulated their economies into stagnation; on the nations, which have responded to the crisis without leadership; and on the people who don’t confront the problem but judge by their emotions instead.
If we are going to survive as a global economy, we must stop seeking revenge. That will only take us downward. Instead, confidence must be inspired across the markets in order to stabilize their movement.
How is that accomplished? Political stability is key — especially in Europe, as is an increase in consumer spending — which drives the U.S. economy. But what is most important? That we realize our part in the problem, stop complaining and start working towards rebuilding market and political confidence. Until that happens, we are all trapped in a boat too small for the swells surrounding us.