Yesterday I had a nice long chat with both of my parents, and the big topic of the day was the economic situation.
"Is it as bad in England as it is over here?" my father asked. Yes, I told him. Every day the papers are full of it and people are talking about the crisis up and down the high streets (England's version of the main street). Banks are failing and councils (like our city governments) who've invested in them are losing overwhelming amounts of public funds. I discussed the situation awhile longer with my parents, then hung up. Moments later I was involved in another discussion, this time with my "English mother," a self-employed small business owner who's been carefully monitoring the situation herself. This afternoon my "English sis" ranted about having been given an unsolicited credit card. She thought she was applying for a store card to buy a purchase at a discount, but instead received a MasterCard with a high credit limit.
"All of those bankers should be hanging their heads in shame!" she cried, just before paying off the small amount, calling MasterCard to cancel the account, and cutting the plastic into shreds. Part of my work at the church now involves helping folks to get out of debt, and I couldn't agree more. Crippling, life-limiting debt is so easily achieved these days, but trying to pay it off literally drives some people to suicide.
Today my aunt, Becky Liestman, emailed me a few thoughts that I thought my British readers might find especially interesting. It comes from a well-educated Baby Boomer with considerable financial understanding. What strikes me most about Aunt Becky's email, though, is the way she ends it on a characteristically optimistic note. As Stephen Fry would say, only in America!
This economic crisis has gone from lurking somewhere out there in the news to the only real thing people here are thinking about. All you have to do is walk down the street, and people are talking about the losses in 401K retirement plans. And remember, here it is the only safety net for retirement/crisis emergency money for most Americans. There is no government health care. And no social security, or welfare system big enough to provide a safe haven. People who pay their bills and have done all the "right" things to save for the future are taking a big hit, especially those in my age group and above, who don't have the 10-12 years necessary to recover their lost savings. Anyway, it must be interesting in Europe, as well.
(her conclusion is on the next page)
I don't think the sky is falling. Something will shake out. But I do think that markets got so unregulated and derivatives so fantastically designed that who knows where the buck is. Too much play money in a handful of (a few thousand, I hear) young global traders (usually 20-25 years old) who were chosen to take high risks with the global money. The middle class and lower incomes are being hit the hardest. Prices are rising, home values are falling, adjustable rate mortgages are resetting really high. One in six American homeowners are upside down (they owe more on their houses than they are currently worth.) If job losses accumulate from this, then oh boy.
I'm sounding all gloom and doom, but our country has survived crisis before. And we don't know how much is just today's panic and not a long-term reality. Really hard to figure out what that is today. The big money ran away quickly, and went into cash and securities. They'll go back in when the bottom hits. But for the average person, that's difficult.
Still, I am grateful for what we have, and what we have been able to achieve, individually and as a country. There really has been an American dream. People our age only have to look at their parent's childhoods to see that. We are unmatched in human civilization with the way we have such a large population doing well economically. Reducing poverty among the masses of Americans has been phenomenal since 1929. That is something I have hoped we could retain and spread across the world. Somehow we need to curtail the desire to overbuy and overspend and instead look to the overwhelming social good of reducing poverty and having a stable society. We've been an uneven test case in how to achieve it, but the reality is that it has happened, and on a massive scale. So when this all shakes out, I'm hoping poverty numbers don't rise substantially here and abroad.
One of the big problems we have in the UK is that housing is treated as a commodity.
People have been encouraged to buy a house low, renovate (paint & carpets) and then sell high. This has escalated into property developers building apartments that are bought by investors (to rent out or sell for profit) immediately. The housing market is a race to buy what is available and sell it on. So with a 50 year mortgage, you may need to buy a 2nd property to help pay for the first one, borrowing with something you do not actually have. It's all pretty crazy and feeds back into the current financial issues.
Long term financial security (for anyone) will not be gained by enslaving someone else to pay off our own debts.