The ramifications of the credit crisis are/will be many. Here’s one that’s good: sustainability.
A morsel of sanity comes from David A. Rosenberg, the North American Economist for Merrill Lynch. Instead of some horrible economic apocalypse, he forecasts a near future of frugality, where people concentrate on paying off their debts, and live a simpler life.
The meat, via Paul Kedrosky (and a few others):
As far as I know, there are only two ways to eliminate debt. You either walk away from it, which people obviously are doing, which is why we got these write-downs and these foreclosures, or you pay it down. I think people with a FICO score that they are concerned about are going to pay that down. That means that the savings rate is going to be forced higher. This, again, is going to be very, very disinflationary. It means that fashions are going to change. It means frugality is going to set in. We’re going to be living in smaller houses, driving smaller cars and living more frugally. It’s not going to be the end of the world; it’s going to be a necessary process to truly embark on getting the balance sheets down to more comfortable levels so that we can actually embark on the next cycle.
A question and a thought. From the hospital’s perspective, what does a frugal America mean for health care spending? Answering that question may be a good task for the planning departments in hospitals where capital projects have been pulled because of the credit freeze.
This, though, could also be a backdoor to sustainable health care. A more reasoned America may very well begin to reduce health care spending at the “America’s health care system” level. Slow and gradual would be the desirable approach to such thoughts of reduced growth. Because if the financial crisis is any indication of how a requsite pullback in health care spending will occur, we know this: it will be long and painful.