It's become the recurring story of the week: Such-and-such company admits that thieves hacked into its database and got away with the identities of tens of thousands of individuals. Disturbing indeed, and not only as a crime trend. Identity theft is a metaphor for an even larger yet untold story: the theft of our country’s economic identity.
In recent months, you may have heard about the work of identity thieves at ChoicePoint (145,000 personal files), the University of California at Berkeley (93,000 personal files), then T-Mobile International (only one cell phone belonging to a Ms. Paris Hilton, it seems), and most recently the database giant Lexis-Nexis (310,000 personal files).
That's a lot of citizens who suddenly worry that a faceless, nameless thief will take their name and destroy their credit — or worse. But bad as it is, maybe we're missing the forest for the trees: that is, the theft of the United States' identity as the economic leader of the free world.
Here are a few warning signs:
—The U.S. dollar. What if it's no longer the world’s reserve currency? Right now, institutions around the world keep massive deposits of U.S. dollars to facilitate their own currency exchange needs and handle international transactions. Some say the buck can't continue in this unique role, due to issues that include: a (very) fractional reserve banking system that encourages banks to lend out every dollar they take in; a fiat currency that is not backed by any “hard” assets; massive deficits; a population that does not save; a central bank that is known for easy credit; a workforce encumbered by historically high personal and corporate debt levels.
Last year the dollar plunged in value as quickly as we could spend it. It may rally a bit this year, but most smart analysts think the greenback is in for hard times over the long haul — up to and including the unthinkable: foreign governments abandoning it as their “go-to” currency.
—Our Energetic Lover: Oil. The U.S. loves its oil, as evidenced by the fact that we are its largest consumer in the world. But our liquid lover these days appears — how should we say this? — schizophrenic. Did it become its own evil twin at $56 a barrel? Is it the same steady commodity it used to be? What will we look like if oil becomes truly expensive?
—The U.S. consumer. We've never been diligent savers of money the way citizens of many other nations are, but for most of our history we kept some cash in the savings account. Yet today we've been replaced by pod people who believe it's their right to have whatever they want whenever they want it, even if they don't have the income to afford that new car or fancy electronic equipment. "Give me my line of credit now" is our new rallying cry.
—Manufacturing jobs. We used to make what we consumed. Now, most of the things we love — such as cell phones, computers, and cars — are being made better in Asia. Worse yet, we're not even engineering them anymore!
Since the recession of 2001, we've lost more than 3 million manufacturing jobs. We love our service economy, but what happens when our manufacturing plants have shut down, and we can't make things for ourselves anymore?
As Elliott Wave International's Robert Prechter points out, "The only reason the overall economy is expanding at all is the employment generated in the financial and construction sector." And while both of these sectors depend on ever-higher price gains in the investment markets and real estate, in neither case are continued gains a foregone conclusion.
—Housing. It used to be that people lived in the homes they purchased. Now, they're buying to flip them at a higher price. But one sign that our housing sector is getting beyond itself is a recent story in the May 12 Christian Science Monitor about the Aderra condominium project in Scottsdale, Ariz.
The developer wants owners to enjoy the swimming pools and the golf course, "but there is one thing they won't be able to do: sell their condos — that is, not until the developer has sold every one of the $190,000 to $400,000 units." The article goes on to say that developers have begun putting limits on how soon buyers can resell their properties in the hope of keeping "one of the greatest real estate markets in the nation's history from becoming one of the biggest busts."
If a home is only an investment, has its identity been stolen?
Nobody worries about identity theft until it happens to them. Similarly, most of us live in a dream-state about our economy, too. We buy expensive homes as investments, pretend there will always be enough good-paying jobs to go around, and expect the dollar to go on being the world's reserve currency.
It isn't easy to live happily ever after when a hacker steals your Social Security number and credit card numbers. Similarly, it won't be easy for the United States to live happily ever after when we wake up from our collective dream and realize that we're no longer the most powerful nation on earth, thanks to our economy being sapped by no one else but ourselves. We're the ones who overspend, we're the ones who fail to save, we're the ones who buy gas-guzzling cars. We can't wait for others to live more responsibly. Goodness knows, we're even letting our government get away with spending on an unprecedented scale.
So, the next time you read about thieves hacking into a database, think about how much of our national economic identity we've lost already.
Susan C. Walker writes for Elliott Wave International, a market forecasting and technical analysis company. She has been an associate editor with Inc. magazine, a newspaper writer and editor, an investor relations executive and a speechwriter for the Federal Reserve Bank of Atlanta. She received her B.A. in Classics from Stanford University.