Anatomy of a recession

Commentary: Our immediate-gratification mindset's partly to blame

MarketWatch

There is a marked difference between economic growth and debt-induced demand. Instead of letting the market take its medicine and enter recession in 2001, the powers that be injected fiscal and monetary drugs to dull the pain and induce stock gains.

The Federal Reserve understands the market is the world's largest thermometer and the driver of a finance-based economy. On the back of the tech bubble, in the aftermath of 9/11, following the invasion of Iraq and into the election, they administered stimulants with hopes that a legitimate expansion would take root.

Is this a conspiracy theory from tin-foil types sitting on a grassy knoll? The only difference between intervention and manipulation is communication, as we're apt to say, a fine line that's been all but erased in recent years. Hank Paulson recently highlighted The Working Group as a policy tool, an admission that effectively exposed the wizard behind the curtain.

While government policy set the stage for the underlying imbalances, our immediate-gratification mindset exacerbated them.

Consumers bought goods with no money down and financed those obligations at zero percent.

Many used homes as collateral and flipped into adjustable-rate mortgages at the urging of Alan Greenspan.

Total debt in this country rose to more than 400% of GDP as societal spending habits lost all semblance of consequence.

More after the click ... Any questions?