We have had a seven-year-old spending a couple of weeks of her summer hols with us; this afternoon I left work early and we took her here for a few hours one Friday afternoon.
While there, I did a little people-watching. There were, of course, a lot of kids and young people racing around, high on sugar. There were people eating overpriced food that was not very good (we ate there and regretted it) There were a bunch of exhausted-looking parents looking for a place to sit and praying that their little treasure would stay on that bouncy castle for just a few minutes longer…
Money was spent; fun was had.
The one overriding impression that I got was that things are not quite as bad as the prophets of doom and gloom would have us believe.
You can’t turn on the TV without hearing some talking head telling us that “we are in a recession”. They need a new dictionary; a recession is defined as six consecutive months of negative growth; we have yet to experience one. Some say that the official GNP figures are suspect; they may be right, but it is also true that nobody pays any attention to talking heads that say “relax, things ain’t that bad” – it’s the doom-and-gloom mob who get the airtime.
Times are certainly hard. Businesses are cutting back and closing, and the cost in human misery is considerable; but I cannot help thinking that much of the problem can be attributed to human stupidity. Too many businesses are have been operating too close to the edge for too long, leveraged to the hilt with no reserves for hard times. Those businesses that operate debt-free (there are some, Walgreen’s is one) are doing just fine.
Another example is the so-called Mortgage crisis. That’s a misnomer – actually, it’s the sub-prime mortgage crisis (it affects very few people with conventional mortgages). It is caused, for the most part, by people buying more house than they can afford. Mortgage lenders lent money to people who did not know how to budget and often could not afford to buy a house. To compensate for the risk, they lenders used a higher (“sub-prime”) interest rate. When the borrowers could not keep up the payments, they lost the house, which was then repossessed. The Lenders then find themselves unexpectedly in the real-estate business in a buyers’ market, and then they are in trouble.
So who is to blame for this comedy of errors? It is easy to blame the Big Bad Banks for lending money to people who obviously could not afford the house that they were buying, but the buyers have to share some of the blame. And it must be remembered that the government forced – or at least strongly encouraged – the banks to provide Mortgages to the “underprivileged”. It may sound heartless, but in my book the “underprivileged” have no business buying a house until they earn themselves some privileges. Ignore the TV car salesmen – you deserve what you can afford and no more.
Yes, there are people who have lost their homes through death, illness or other tragedy, but that happens in good economic times as well as bad, and will not go away anytime soon. The rest of us – most of America, sadly – are living above our means and wallowing in debt. Financial pundits say that you should have three to six months of expenses put by for the proverbial rainy day. Do you? How about those you know?
I challenge you to find a family who saved and lived within their means and had three to six months of expenses saved, who lost their house because they could not keep up the payments. Go ahead; prove me wrong.
Look for the quiet ones; the plodders who live in modest houses, drive ordinary cars and don’t take lavish vacations. Those who look like they have got it all together – the snappy dressers with the nice cars – are probably playing games with debt to stay afloat.
The average family spends $300 per month (FITA*) on entertainment; eating out, movies, cable TV, games… They have money to spend on beer, cigarettes and lottery tickets. Sports fans routinely spend hundreds of dollars to see their team play.
And then they complain that it costs $100 to fill up their SUVs with gas.
Now Reading: Tough Choices: A Memoir, by Carly Fiorina
* FITA: Finger In The Air estimate.