The credit crisis is real, and it is visiting the doorsteps of millions of Americans.  The old adage about those who forget history are doomed to repeat it couldn't be truer than in today's economy.  The American history lesson that seems to be lost on our citizens and leaders are the very hard lessons that our country learned as a result of the Great Depression.

The frugality of last century's depression era generation has been replaced with the gotta have it now and pay for it later buying mentality of Americans who embrace the glitzy marketing message of credit card companies, home builders, and luxury good purveyors.

The Great Depression touched the lives of every American in the 1930s.  The national unemployment rate was 25 percent in the early 1930s and was still hovering at 15 percent at the start of World War II.  The American market collapse led to a global depression in nearly every industrialized nation.

Easy credit was the fuel of the Roaring 20s and the cause of the Great Depression.  Easy credit was the fuel of this decade's housing boom and the cause of the current foreclosure crisis.

Now the bad decisions of fast and loose lenders have landed in the laps of the American public as Congress moves to insure that there is no accountability for bad corporate decision--just federal bailouts with the taxes of hardworking Americans.
 
Current news reports state that one out of every 416 homes is in foreclosure, and while Congress has moved to enact legislation to help lessen the crush of bad debt, the dominos are already starting to fall in the U.S. economy.

Fannie Mae and Freddie Mac, the government backed bankers to the mortgage industry, followed the Allen Greenspan philosophy of artificially low interest rates to stimulate the economy.  The federally chartered lenders loosened lending standards to promote home loans for those who had no visible means to pay them back.  Zero down payments, adjustable rates, and low initial monthly payments that rose beyond the borrowers' monthly income were common.  No documentation "liar loans" were routinely processed by mortgage companies who simply "churned and burned" borrowers who they knew would be back to refinance the loans every couple of years as housing prices continued to rise at unsustainable rates. 

More loans meant more fees.  The mortgage lenders would then package questionable loans as investments to the commercial and investment banks and infect the entire financial sector with portfolios of questionable loans.

It is time for a federal prosecutor and congressional hearings into corporate malfeasance.   Excessively compensated CEOs were making decisions that enriched their pocketbooks because they knew their companies would be bailed out by the federal government.

Bank takeovers and rushed mergers and acquisitions of troubled banks are the headlines on the financial pages of the nation's newspapers.  IndyMac, Countrywide, Bear Stearns, Merrill Lynch, and Lehman Brothers are just a few of the high-profile banking failures that have made headlines.  The Federal Deposit Insurance Corporation (FDIC) regulates banks and insures deposits to $100,000.00.  The agency has reported that 21 banks have failed in 2008.  No banks were reported as failed in 2007, and only one bank failed in 2006.  Only seven other banks were reported as failures this decade.  The taxpayers are barely beginning to feel the burden of institutions that played fast and loose with their credit decisions.

The economic needs of WWII combined with mass deficit spending on the part of the U.S. government refueled the economy and ultimately ended the Great Depression.

There is one very large difference between the Great Depression of the last century and the current economic crisis--unsecured consumer debt.  Credit cards are unsecured debt that the debtor agrees to pay based on their signing an agreement.  The first modern credit card was issued by Diners Club in the 1950s.  Diners could sign for their restaurant bills at any establishment that honored the card.  Diners Club would pay the restaurant, and the cardholder would pay Diners Club.  This was different than the prevailing direct credit relationships between a company and the creditor.

On September 8, 2008, the Federal Reserve issued a statistical review on consumer debt that indicated there was $2.5 trillion dollars in consumer debt, which was an increase of a half trillion dollars over the last five years.  This vital information went virtually unreported by the mainstream media.

Additionally, it is estimated that 43 percent of American households spend more than they make on an annual basis.  Easy credit has made it convenient to buy now and pay later. 
For many of these borrowers, the plan was to take an equity loan out of the piggy bank they called home.  On paper, the mortgage brokers made leveraging a larger lifestyle than was affordable an easy option.  But the anticipated paper gains haven't turned into real earnings as the bubble burst on the housing market.

Now, bad credit policy threatens everyone.  As consumers scramble to pay their collateralized debt on homes and cars, more and more debtors are forgoing their credit card payments. It is a choice between paying the mortgage and car payment, or paying the Visa bill.  The Visa (or American Express, Master Card, or Discover) bill has a lower priority than keeping a roof over their head, wheels on the road, food on the table, or medical care.

The threat of ruined personal credit doesn't carry much weight when millions of hard working Americans face a common opponent--their spending habits.

Many Americans who are having financial trouble are struggling with the rising costs of fuel, food, and medical care.  There just isn't as much money in the budget when essentials start costing 40 percent  more than they did just six short months ago.
Personal bankruptcies have skyrocketed in the last decade largely due to consumer debt and healthcare costs. More Americans will find themselves looking for ways to escape crushing debt.

Other differences from depression and recession cycles of the past are alarming.  The U.S. economy is largely based on consumerism and service sectors.  If we stop buying foreign manufactured goods from international conglomerates (or communist regimes) the dominos will start falling globally.  Market economies are poised to struggle for a decade or more.

There is hope for free markets.  The 1980s-2006 were economic growth periods in the U.S.  The 1980s ushered in dramatic social and political changes in Eastern Europe.  President Ronald Reagan's appeal to tear down the Berlin Wall has brought lasting change to the former Soviet Bloc.  Many of the changes were the result of peaceful political and economic reform.

It has been 28 years since the Reagan Revolution.  The world is a different place.  Religious fanatics have replaced many of the world's despots.  Americans are not safe at home or abroad.  

And globalism has not strengthened the U.S. economy as jobs in technology and manufacturing have moved overseas for cheaper labor.

It is time for America to face a new reality.  Self reliance at home and in the world marketplace are crucial elements to the new reality.  Much of our nation's debt is held by foreigners.  Bank and credit card debt is backed by funds controlled by foreign investors in places like the Middle East or countries like China.

Energy independence is key to breaking our county's dependence on foreign investment.  If Brazil can be energy independent, the U.S. should be able to break the chains of petroleum imports.  We import oil from countries like Chad, Venezuela, Nigeria, Russia, Libya, and Columbia to name a few.

There are more than enough oil reserves in the United States to fuel our domestic needs, all we need to do is drill.  Alaska, North and South Dakota, Wyoming, California, Texas, Louisiana, Pennsylvania, Ohio, and West Virginia would all benefit from a renewed interest in domestic exploration and refining of our natural resources.

There has not been a new petroleum refinery built in this country in thirty years.  New capital investments in refineries would loosen the bottleneck on the delivery to gasoline to the pumps.

Food and transportation costs would drop and the economy would resume growing.

The environmentalists will wail that we are doing irreparable harm to our environment.  To most of them it is a NIMBY issue.  It is okay to drill overseas as long as it is not in my backyard.  It is okay for me to over-consume goods and services produced in third world sweatshops as long as I don't have to see the starving women and children who toil for the artificially low-priced goods I buy--as long as my world is safe and warm.
Safe and warm is irrelevant if we can't pay our bills on time.