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.
