Isn't it amazing how our economy went from penthouse suite to basement closet in a matter of a few years? I have noticed some very interesting attitudes regarding money that, if paid attention to earlier, could have saved us from the current mess we are in.I'm no economist, but I am part of the world economy (albeit a small contributing member). And it seems to me that greed, both micro and macro in nature, has led to the need that we now experience as a nation.
Case Study: Not long ago, I was working as a construction superintendent for a national home builder. There was a sense of invincibility within the company and we couldn't build the houses fast enough to meet demand. Lines formed outside sales offices and lotteries with all the flair of the NBA draft selected who would be able to buy a home this week. Most of the homes we sold went to out of state investors who heard about the "wonderful" deals that were "sure-fire" bets to make money. In-state buyers were generally mesmerized by the low prices and despite being highly unqualified to purchase a home, were "pre-approved" in a matter of minutes. Hence, we meet the perfect trifecta of greed:
The Home Builders - These heavyweight contenders just couldn't contain their greedy little selves and proceeded to build home after home after home. They didn't care what consequences would come from over-saturating the market with false equity and empty houses. They epitomized the attitude of "eat, drink, and be merry." How robust are those evening meals looking now? Wendy's dollar menu?
The Lenders - We know what happens to unscrupulous lenders...they get bailed out and spend a fortune on California vacations. Santa's naughty list included names like Fannie, Freddy, and those annoying little Lehman boys. These characters just couldn't resist the urge to take anyone's money, whether they had any or not. For the first time ever, mortgage applications had only 3 boxes: Name, Address (or location of the nearest 7-11 if address is unavailable), and Desired Amount of Cash. Downpayments for homes were less than downpayments for dogs at the mall pet store.
The People - The often forgotten culprits in this whole mess are the very consumers themselves. There are those, who in good faith, bought a house with a ridiculous mortgage rate and ended up upside down in their payments when the market collapsed. I don't think they were being greedy. But some were. The people with 2 kids who upsized to a 7 bedroom house. The couple who bought 3 homes in Arizona, just because they could. The guy who said "I already made $100k on this house in the past 3 months, I'm going to buy a boat with that equity." (True story).
The problem was, that family couldn't afford the payments on such a big house, and now they can't sell it to find a better fit. The couple who snatched up all those neighborhood "steals" now has a 2 page list of foreclosures on their credit statements. And the guy who had a bunch of equity? He hadn't made anything on that house because he hadn't sold it! And now his boat is a $30,000 reminder that he failed high school economics.
The housing industry was by no means the only culpable party to our financial mess. Investment firms, corrupt executives, worthless politicians, relentless unions, and others have added fuel to the fire. This small case study, however, is relevant to us all. The lesson learned is to live with what we have and save a little for a rainy day...or month...or year. Maybe even 4 years. (no political jab intended). The point is, until we can start living without greed, we will never live without need.
Who needs a boat, anyway? Too much maintenance.
I agree that greed is the bottom-line cause of this financial mess that seems to have enveloped the world "out of nowhere". One of the main symptoms of that cause, and was the actual catalyst to the eventual degradation of the economy is debt: federal deficits, state budgets, county and municipal spending, business (large and small) lines of credit, even churches, and yes, personal and family debt.
ReplyDeleteI love the fact that you mentioned the people as one of the ingredients of greed. In reality, it is the people (the individuals) who allowed all of this to happen. For, is not our federal, state, county, and municipal governments all made up of "We the People"? Is it not individuals who purchase stock in corporations whose bottom lines are always in the red but "they have potential" or their "fundamentals are good"? Is it not the individual's demand (greed) for the latest and greatest gadgets that push companies, small and large to produce product faster than they can pay for it? Is it not the individual who wanted to build the next "mega church" so badly that he or she ignored scripture that specifically warns against the use of debt? Is it not the individual and his or her desire to live like grandma and grandpa, or mom and dad NOW and not work for it like most grandmas an grandpas and moms and dads did?
Each of these ingredients put individuals, churches, businesses, and all levels of government in so much debt collectively and individually that there is now only one REAL way out of it. Finances are one area in which there is no "infinite redeemer". Contrary to what is going on right now, government is not a money tree and when they arbitrarily print money from nothing, it only causes more eventual pain. When entities make financial mistakes, they can't look to the omnipotent and omnipresent government to "forgive them their debts". Government cannot step in with "bailouts", stimulus packages and the like and provide any permanent fixes to this situation. All of these options only delay and magnify the pains of atonement for society's financial sins.
The only real fix is to do what we are taught by wise men from all ages. To stay out of all unnecessary consumer debt, and to pay off any "necessary" debt as quickly as humanly possible. This means that we will have to cut back on our spending (I agree that this is bad for the economy... in the short term, but this is a long-term problem with a long-term solution) and use that income to pay down and pay off our debts as individuals. We need to demand from our government officials that WE elect that they be fiscally responsible and balance their budgets and live as if there were always a recession around the corner. We need to purchase our goods wisely, buy high-quality goods that will last for years, then wear it out, fix it up, make it work, or do without.
This fix will be painful and will take a while to do. Things will get worse, in this situation, but they will then get better and the economy will then thrive. Real wealth will reappear and people will be able to choose to help others in need to get back on their feet again.
The current solutions that are being proposed and pushed through without public assent will make things a little better in the short run, but as in all things, the piper will eventually be paid, and boy will his wages be high. The answer does not lie in Washington, it lies within each and every one of us.
Here is to the great awakening of the American mind to the reality of economics. To the reality and necessity of personal and public fiscal responsibility.