Thoughts on today's economy
I don't really write much about the economy here, so I hope readers will indulge the occasional post.
Until last year, my 35-year working life has been a series of mostly forward moves. There were some bumps, of course. I got fired a few times, got divorced, even got my nose cut off once – but overall I moved ahead on a year-to-year basis.
My success was made possible to a large extent by the broader success of the US economy during that period. Until last year, some of the many economic indicators were always up. Inflation might be high, but unemployment was low. Or else the reverse was true. Through it all, people bought more stuff every year, so there was a constantly increasing demand, which created opportunity.
As long as the trend was up, I felt I could plan my life. I didn’t know high or how fast, but I had a reasonable expectation that life would get progressively better at some rate.
All that changed at the end of 2007.
When all the indicators turned down at once, the rules were fundamentally altered. When conditions rise, tensions ease and life becomes generally better for most people. That’s a formula for stability. When conditions fall, the result is the opposite. The closer the numbers get to zero, the greater the risk of collapse.
My car company has seen a 25% drop in service revenue over the last six months. I’ve never seen a change of that magnitude in the 20+ years I’ve been in the car service business. No one wants to spend any money. I can cut expenses, but that only goes so far. What if business falls another 25%, or even 50%? What happens when it’s no longer possible to pay the bills? That’s a situation I have never faced, because I lived in a world where forward progress was the general rule. That’s not true any more.
I thought diversification would protect me as I got older. It hasn’t. The market for my second book evaporated as publishers close divisions and lay off workers. I lost a tenant in my rental operation, so revenue is down there. My stock investments lost 35% of their value. My house lost a quarter of its value. My commercial buildings are sinking too. Nothing is immune. Even my collector cars have lost value.
It’s a male trait and an Asperger trait to judge my own self-worth by what I accomplish. For most of my life, that’s meant my work accomplishments. With every work activity in some state of failure, it’s no wonder I’ve sunk into a persistent depression. I’m sure many others are in the same boat.
Upward trends equal relief, because up is better. Downward trends end in a very bad place, and every day of new bad news just brings the seeming inevitable collapse a bit closer. Frankly, I'm surprised people are holding up as well as they are. Or are they? We had a spate of newsworthy suicides last fall, and one of our customers killed himself two months back.
Where will it end? If this year’s rate of decline continues - 20% every two months – the year will end with the Dow at 2,200, which is essentially what happened in the Great Depression. What would that mean in today’s world? Perhaps we’re about to find out.
There has not been an increase in crime where I live, but I imagine that’s coming. When times get hard some people start grabbing from others. Could unrest spread beyond individual criminality? Will newly-bankrupted countries go the way of Somalia? Even more, I wonder if they’ll turn on us as the cause of their trouble.
Could something like that happen in the United States? Can we maintain order during a cold winter with 35% unemployment in the old industrial cities? Or will the residents burn them for warmth? I fear for places like Buffalo and Detroit.
I wonder how the government is going to pay for all their recovery plans. Everyone knows about the deficit spending, but what no one talks about is the idea that tax revenue is going to collapse next year, as high income taxpayers stop paying taxes, because they are now losing money. And many others will go underground, running home businesses for cash, just as people did in the 1930s. So where will the government get its money? They can only print illusory money for so long.
I’m very concerned that a financial collapse will turn quickly into a societal collapse. You can foreclose and take one house in a neighborhood, or even ten. But at some point, the homeowners are going to take up arms and say, Screw you, we’re staying! What happens then?
I know the government hopes to prevent that by encouraging banks to adjust mortgages to keep people in homes. But if economic activity falls far enough, the affordable level may be very low indeed. If the stock market falls 60%, it may take a similar mass write-down of mortgages to keep most of them affordable. But doing so would wipe out most banks in the country.
My own son is just now becoming an adult. The world he grows up in will surely be very different from the one I knew.
Until last year, my 35-year working life has been a series of mostly forward moves. There were some bumps, of course. I got fired a few times, got divorced, even got my nose cut off once – but overall I moved ahead on a year-to-year basis.
My success was made possible to a large extent by the broader success of the US economy during that period. Until last year, some of the many economic indicators were always up. Inflation might be high, but unemployment was low. Or else the reverse was true. Through it all, people bought more stuff every year, so there was a constantly increasing demand, which created opportunity.
As long as the trend was up, I felt I could plan my life. I didn’t know high or how fast, but I had a reasonable expectation that life would get progressively better at some rate.
All that changed at the end of 2007.
When all the indicators turned down at once, the rules were fundamentally altered. When conditions rise, tensions ease and life becomes generally better for most people. That’s a formula for stability. When conditions fall, the result is the opposite. The closer the numbers get to zero, the greater the risk of collapse.
My car company has seen a 25% drop in service revenue over the last six months. I’ve never seen a change of that magnitude in the 20+ years I’ve been in the car service business. No one wants to spend any money. I can cut expenses, but that only goes so far. What if business falls another 25%, or even 50%? What happens when it’s no longer possible to pay the bills? That’s a situation I have never faced, because I lived in a world where forward progress was the general rule. That’s not true any more.
I thought diversification would protect me as I got older. It hasn’t. The market for my second book evaporated as publishers close divisions and lay off workers. I lost a tenant in my rental operation, so revenue is down there. My stock investments lost 35% of their value. My house lost a quarter of its value. My commercial buildings are sinking too. Nothing is immune. Even my collector cars have lost value.
It’s a male trait and an Asperger trait to judge my own self-worth by what I accomplish. For most of my life, that’s meant my work accomplishments. With every work activity in some state of failure, it’s no wonder I’ve sunk into a persistent depression. I’m sure many others are in the same boat.
Upward trends equal relief, because up is better. Downward trends end in a very bad place, and every day of new bad news just brings the seeming inevitable collapse a bit closer. Frankly, I'm surprised people are holding up as well as they are. Or are they? We had a spate of newsworthy suicides last fall, and one of our customers killed himself two months back.
Where will it end? If this year’s rate of decline continues - 20% every two months – the year will end with the Dow at 2,200, which is essentially what happened in the Great Depression. What would that mean in today’s world? Perhaps we’re about to find out.
There has not been an increase in crime where I live, but I imagine that’s coming. When times get hard some people start grabbing from others. Could unrest spread beyond individual criminality? Will newly-bankrupted countries go the way of Somalia? Even more, I wonder if they’ll turn on us as the cause of their trouble.
Could something like that happen in the United States? Can we maintain order during a cold winter with 35% unemployment in the old industrial cities? Or will the residents burn them for warmth? I fear for places like Buffalo and Detroit.
I wonder how the government is going to pay for all their recovery plans. Everyone knows about the deficit spending, but what no one talks about is the idea that tax revenue is going to collapse next year, as high income taxpayers stop paying taxes, because they are now losing money. And many others will go underground, running home businesses for cash, just as people did in the 1930s. So where will the government get its money? They can only print illusory money for so long.
I’m very concerned that a financial collapse will turn quickly into a societal collapse. You can foreclose and take one house in a neighborhood, or even ten. But at some point, the homeowners are going to take up arms and say, Screw you, we’re staying! What happens then?
I know the government hopes to prevent that by encouraging banks to adjust mortgages to keep people in homes. But if economic activity falls far enough, the affordable level may be very low indeed. If the stock market falls 60%, it may take a similar mass write-down of mortgages to keep most of them affordable. But doing so would wipe out most banks in the country.
My own son is just now becoming an adult. The world he grows up in will surely be very different from the one I knew.
Comments
I write romance novels, which are actually selling BETTER in this economy. People want escape.
Despite the impending changes, I'm optimistic. Growth can be uncomfortable at first, but ultimately I believe the world will be better off.
Mark and I have felt this sting since 2003 when he lost his job. It's startling to fall. To lost ground. To watch your expectations (not dreams, that's different) evaporate and morph into something frightening. But... I am here to tell you - it's survivable. In fact, by replacing expectations with appreciation for what's of value in your life, you can prosper. We've done it - by force, not choice. That's a big part of my memoir - 3 kids with autism, 3 times unemployed - and yet content and happy as people.
Society as a whole? I think we're seening a good shift from voracious consumers to (dare I say it) savers. We had a 5% savings rate last month in America. We need that.
Younger people will start acting like their great grandparents who survived the depression. More frual. Smarter financial choices. The realization the house is NOT an ATM.
I've seen my nypical husband struggle with the realization he can not provide the lifestyle he'd intended. But supporting him, I hope I've eased the stigma. And there's nothing like having my three girls to make you realize that "stuff" doesn't mean jack squat compared to the reality of knowing they may never leave the nest. The pressure on us is almost unbearable - and yet we're happy. It's possible. I don't know what makes man grab a gun versus grab a new opportunity. I wish I did. Your Aspergian logic probably works against you right you. You've done everything RIGHT. And yet... life is out of your control. As a nypical - it's easier for me to roll with the punches, and we've had some big ones.
This is a great post.
KIM
http://www.youtube.com/watch?v=dt1fBjCm49g
Homes have been lost, jobs shed, businesses shuttered. Our health care is too costly, our schools fail too many, and each day brings further evidence that the ways we use energy strengthen our adversaries and threaten our planet.
These are the indicators of crisis, subject to data and statistics. Less measurable, but no less profound, is a sapping of confidence across our land; a nagging fear that America's decline is inevitable, that the next generation must lower its sights.
Today I say to you that the challenges we face are real, they are serious and they are many. They will not be met easily or in a short span of time. But know this America: They will be met.
On this day, we gather because we have chosen hope over fear, unity of purpose over conflict and discord."
~ President Obama's Inaugral speech
".. by replacing expectations with appreciation for what's of value in your life, you can prosper."
~ Kim Stagliano (no less profound)
KIM
I can't wait to see what happens when we stop making payments on this house after we move, which we must do for employment, irregardless of whether the house sells. We paid $800K two years ago. It is now worth, according to eppraisals and Zillow, somewhere between $475K and $575K. We are WAY upside down but if we don't go, we still won't be able to pay. So, we're going!
It is interesting to note that people are going to the movies in droves. Especially since the movies are so expensive relatively speaking. When I was a kid I paid a quarter to go. 50 cents when I hit high school. Even adjusting for inflation it's more expensive now. People are indeed looking for escapism and entertainment, and who can blame them. It's tough times.
Call us next winter when your toes are freezing! :)
KIM
xo
I do think the person who has the least debt will be able to ride out the economy.
Paying off any high interest credit cards, and in fact, putting them away or shredding them isn't a bad way to go.
Despite our hardships, we're lucky. We've got none of that kind of debt.
But I'm also realistic. I think as jobs disappear, healthcare plans become more expensive, transportation costs rise, and people start running short on cash --alot of stuff is going to go on credit cards. Right now 65% of all transactions are paid for by some kind of card. I know it's just going to rise and there will be people who will never get out of debt. Ever. Sort of like the U.S. which keeps bailing out companies that shouldn't --AIG being a prime example.
Three weeks ago, I started with a company in a Medical division. Most of my fashion work has dried up, as has much of the editing work. So I went back to being a healthcare rep. And lo and behold. I got a call from the CEO and he decided to shut down the entire division. But he's offered us jobs in another. So I'll go Monday to see what it's about.
I'm so sorry to hear about your busines and hope that you can survive on what you have, intellect, writing, and great photography.
www.thegirlfromtheghetto.wordpress.com
she says, "I can't wait to see what happens when we stop making payments on this house after we move, which we must do for employment, irregardless of whether the house sells."
her family is ‘upside down’ on their house and she (or her husband if I understand correctly) has found work or better work elsewhere. so they will simply wash their hands of their obligation? what about renting a relatively inexpensive place wherever they are going in order to pay the mortgage until the house sells, or to put it another way, to live up to their responsibility?
with all due respect to marianne and what is obviously a difficult situation, as i read her comment i found myself wondering whatever happened to integrity.
the current value of the asset that she and her husband bought has nothing at all to do with the contract that they entered into in order to buy it. they agreed to pay back that money. period.
i think it’s safe to assume that paying off the loan wasn't contingent upon the house maintaining its value. was she planning to throw in a little extra each month if it were increasing in value? nowhere in my mortgage is their any word of a profit sharing agreement or any mention of a stop loss arrangement. i’ll stand happily corrected if I’m wrong, but i’m guessing they are not in hers either.
i feel badly that her house has lost much of its value. so has yours. so has mine. we’re all struggling. but if we all say screw it and walk away, the banks collapse, the infrastructure implodes completely and we all meet at the soup kitchen.
i don’t mean to take a shot at marianne personally. there may well be far more to the story than she’s presented in this limited format. but i find it hard to read that stuff without reacting.
I had the feeling for many years that we were living on speculation, (greed is such a poison to society) whilst ignoring our responsibilities as members here on planet earth.
Money or no money, I do not believe I am a more deserving person to have the fortune of basic medical care and others around me none, the whole system needs one massive shake up.
Here's to a better world, I agree with wrongshoes, growth can be uncomfortable. In the long term I am optimistic, meaning we need to ride the waves for the next few years or more, be creative and face the many challenges.
Hugs to all.
As far as Amos's other comments, I can only say the following:
Like it or not, much of this crisis was indeed caused by the banks and their willingness to make bad loans with no documentation. There are instances of one person owning about 40 properties all on no-doc loans (that is, no verification of income). It was the lack of good underwriting on the part of the banks that caused this mess - they probably SHOULD bear some of the responsibility for the huge market drop. I have always been a big believer in personal responsibility. Who is holding the banks culpable? Nobody - in fact, they are getting bailed out! The ones that are going to fail, and it goes for corporations as well - should be allowed to fail.
Now, Amos says he doesn't mean to sound like he is launching a personal attack. HOWEVER - have you ever noticed that when a person prefaces something with "No offense intended" or "I don't mean to sound like I am attacking you personally" and then they continue and in fact that is EXACTLY what they are doing? Rather than posing appropriate questions - let's pull out the nukes, shall we? It is a sign of this incredibly polarized society we live in, and the feelings that current events are bringing out.
It's usually the culmination of years of bad decision making. Usually one can survive years of faulty judgment, however, coupled with an economy that was hedging bets by playing with borrowed dollars things came to a a head for people that had never been in this position before.
While subprime lenders were being complete fools with money they didn't have, it really is up to individuals to know their financial situation and make decisions accordingly. A certain shrewdness is a good thing to keep around, even in times of prosperity.
This has been a difficult question for me over the years. Just a couple of years ago, I was having suicidal thoughts daily. These thoughts weren't the product of a failing economy, but it doesn't matter what the source of that hopelesssess was--it was just as real and desperate as the voices I have read in these posts.
Yes, the economy is bad. Yes, my husband, like so many's husbands, is unemployed--3 months now.
That is why I write. I am doing a disservice to myself, and to others, to be overcome by hopelessness. I was drawn out of suicidality, partially, in reading a book about children who have lost their mothers. I have also been pulled out of the pit of suicidality by something, AND SOMEONE, much more powerful.
Jesus is my hope. I have heard that said by many a religious one, throughout my life. Growing up around believers did not give me this hope I now posess. This hope only is possible by a personal relationship to the supreme life-giver.
I know that I may offend some with my post. I have lived a life of people-pleasing, of avoidance of "making waves." Part of my depression was due to being afraid to be who I am, being afraid to voice my feelings, my beliefs.
I don't want to stand on a religious soapbox; rather I just want to pass on the same words of life, that have been passed to me as a lifesaver, in a time that I was drowning.
"As the deer pants for streams of water, so my soul pants for you, O God. My soul thirsts for God, for the living God. When can I go and meet with God? My tears have been my food day and night, while men say to me all day long, 'Where is your God?' These things I remember as I pour out my soul: how I used to go with the multitude, leading the procession to the house of God, with shouts of joy and thanksgiving among the festive throng. Why are you downcast, O my soul? Why so disturbed within me? Put your hope in God, for I will yet praise him, my Savior and my God." -Psalm 42:1-5 NIV
1 "Hear my cry, O God;
listen to my prayer.
2 From the ends of the earth I call to you,
I call as my heart grows faint;
lead me to the rock that is higher than I.
3 For you have been my refuge,
a strong tower against the foe.
4 I long to dwell in your tent forever
and take refuge in the shelter of your wings."
-Psalm 61:1-4 NIV
1 "I waited patiently for the LORD;
he turned to me and heard my cry.
2 He lifted me out of the slimy pit,
out of the mud and mire;
he set my feet on a rock
and gave me a firm place to stand.
3 He put a new song in my mouth,
a hymn of praise to our God.
Many will see and fear the LORD
and put their trust in him.
4 Blessed are those
who make the LORD their trust,
who do not look to the proud,
to those who turn aside to false gods. [b]
5 Many, LORD my God,
are the wonders you have done,
the things you planned for us.
None can compare with you;
were I to speak and tell of your deeds,
they would be too many to declare."
-Psalm 40:1-5
11 "For I know the plans I have for you," declares the LORD, "plans to prosper you and not to harm you, plans to give you hope and a future. 12 Then you will call on me and come and pray to me, and I will listen to you. 13 You will seek me and find me when you seek me with all your heart. 14 I will be found by you," declares the LORD, "and will bring you back from captivity."
-Jeremiah 29: 11-14
I hope this is of encouragement to even ONE person. It will make this post worth the world to me.
"For God so loved the world, he gave..."
-John 3:16a
-Gallerhea
Please spread the word