Before I really answer this question, and I will, I would like to explain some simple truths that we seem to forget from time to time.
The United States (since I presume the question was directed toward the “US economy”) is still the world’s richest country. Whether you personally feel rich or not is immaterial. By most measures the US has more wealth per capita than any other country on Earth has now… or has ever had. We have the highest percentage of home ownership, the highest percentage of automobile ownership, we eat more on a per capita basis than anywhere else in the world (and exercise less, as evidenced by our growing obesity statistics), we consume a disproportionate amount of all of the planet’s resources, led by energy consumption, but followed by all of the other “stuff” that we import from around the world.
Forget about money for a minute. We have more of the “stuff that money buys” than anyone else in the world. You own a share of that, too. We also have the lion’s share of the world’s credit, to boot. This indicates that along with that credit, as a nation we have earned a high degree of trust from individuals, organizations and governments around the world to handle our credit somewhat responsibly and to pay it back.
So despite some current problems with your job or mine or a few plants closing down here and there, and despite all the news about foreclosures and bad mortgages and shady dealings—which are all true enough—we’re still the richest country the planet has ever seen, and we still have the trust of our creditors, even if that trust has been reduced somewhat. Ships still land at our ports daily and disgorge billions of dollars’ worth of goods and fuel, to be paid for per the terms of the contracts that bring them. There isn’t mass starvation or food riots in the streets, there isn’t an army of homeless people marching on state capitols or on Washington, and the vast majority of people who dress in rags pay higher costs than I do in order to achieve that “look”. Things aren’t so bad for the nation as a whole—and I’m not just talking about the plutocrats that so many (at least on this site) seem to think “run things” and “control us”.
My own town has been hit pretty hard by foreclosures, but I notice that the homes that go on the market are actually selling pretty well right now. On my three-mile drive to work in the past few months I’ve seen at least a half-dozen homes go on sale during the summer, and they’re now sold and being moved in to by the new owners. I still see a lot of “optional” driving, shopping, home decorating, eating out at restaurants, luxury items purchased at supermarkets where I shop, and generally full parking lots at shopping malls.
So here’s my take on what is wrong: not a whole lot.
We hit a bump in the road. Some people—a lot of them—made some bad decisions, thinking that because housing prices (for one thing) were going up “so high, so fast” that they could make a killing by “owning a house at any price” now and selling it later for “lots of money”. And some lenders were stupid enough to lend on that premise. (Maybe some were corrupt, too, but I don’t subscribe to the idea that this was a huge conspiracy.) Other people purchased those mortgages, thinking that they could get rich off the interest, and they didn’t know what they were doing, or how risky the mortgages were.
Added all up, it was a huge inflationary balloon, of the type that has happened with humans since credit economies began to proliferate (and will continue to happen) and a lot of bad investments were made. We’re working off the excess now. That is, those houses I mentioned earlier along my commute? They’re undoubtedly selling for less than they could have sold for three years ago, probably a lot less. But they’re selling now “for what they are worth”—today. And those kinds of imbalances and “corrections” are working their way through the whole American economy, and being magnified overseas. (If you think things are bad here when a few plants shut down, you should see Chinese ‘factory cities’ of 50,000 or more shut up and send everyone ‘home’ when we stop buying from them temporarily.)
And there’s also a pretty huge problem of perception. I doubt very much, for example, that the OP was correct when he said “every plant has closed down within a 30-mile radius” of where he is. I doubt if that’s even half true, literally.
We could be richer if we ever decided to become a nation of investors and producers again—which is how we got to be ‘the richest nation ever’ in the first place—but even now, as fat and comfortable as we are, and as happy as we are to be ‘consumers’ instead of ‘producers’ or ‘investors’—we’re still the richest nation on the planet, and will be for decades, probably.