How much does a balloon have to blow up before it pops? Americans should know since we are experts at pushing the limits, which is a good thing under the right circumstances. Certainly, by the end of World War II, our hard work and innovation helped build a dominant military, the largest middle class in our history and cities with impressive infrastructure. Americans not only saw their achievements, they were living in them.
By the 1960s, though, the investors helping to build that nation — one coming out of a depression and a war — began pushing the limits, taking larger risks by using mergers and acquisitions to grow, often buying companies that were totally different than their core business. As it turned out, the diversification didn’t pay off, and many of those conglomerates’ holdings were sold off. The 1980s saw a still more risky group of large hostile takeovers from investors who wanted to buy companies by going directly to the stockholders. If successful, they would quickly break up the companies and profit by selling the individual operations. Hostile takeover attempts were met with equally wild leveraged buyouts from managers who took the company private using junk bonds to finance the purchase. That resulted in many bankruptcies because of their inability to meet the demands of the exorbitant debt. Is this starting to sound familiar?
By the 1990s, the small investor got the fever, picked up the dice and bet on a tech-driven stock market. The rotten results of those poor decisions didn’t prevent the home buying spree that became the economic disease of this decade.
Our short term memories must be devolving with every passing year. Otherwise, how could we believe that our new house’s value increased by 50 percent in two years or the tech stock we bought — from a company that had not made a profit — is worth 10 times what we paid for it? In the past few decades, we have been too easily deluded, believing that we could buy houses but not repair our failing infrastructure. In short, we have become the Inflation Nation — not the scary decline-in-the-value-of-money kind of inflation, but the more personal inflation, where owning bigger homes and cars and fat bank accounts is the definition of the American Dream.
We’ve not been alone in our quest for life’s excesses. The Inflation Nation has a skilled support system complete with easy money marketers selling prosperity right around the corner. For many, though, the prosperity was simply a mirage. But by the time they realized that, those who benefitted from the sale submerged back into the shadows to wait for the next person who defines the American Dream as more than they need or can afford.