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I woke up in a panic this morning, worried about how my husband will be able to retire. We've been saving at least 15% (we're now up to about 35%) of our income since he began working professionally almost 20 years ago, and we have absolutely no debt, not even a mortgage. Nonetheless, our portfolio has plummeted nearly 40%, and right now I don't know that we can set aside enough to live comfortably at retirement age, even if we invest aggressively for the next 20 years. My husband doesn't have a pension; we're on our own. He and I always thought we were doing things right, but obviously that's not the case.
I guess my point is: if we think we're in a bad position, how in the world do people with huge debt think they're going to survive once their working years end?
I suggest people read this very well-written historical once-over of the 1930s. It's clear that the era sucked for nearly everyone...but it was an entirely different level of pain for those that went into the First Great Depression in debt.
Another good read is Pierre Rinfret's recollection of living poor in the First Great Depression. This gives an idea of what the unprepared will be going through.
I disagree with Mike that you should rest easy and have faith that things will come back. I don't know whether to believe the republic will ultimately come apart at the seams, or that we'll "just" have a miserable couple of decades. Historical analysis suggests that busts approximate the length of the boom that preceded them...if that's the case we're in for more than 20 years of pain. I don't think the equity markets will come back for a long, long time...I don't say that to discourage, but rather to impart a realistic sense of the scale of the disaster before us. I do not have faith that there is any sort of short road out of this mess...quite the opposite, in fact.
"Doing things right" is never guaranteed to get you to your goals, but it will darn sure make things easier than burying yourself in debt would have done. Doing otherwise would place you at risk of some day living like the Rinfrets had to. Working into your 80s but having a warm safe place to come home to without fear of becoming homeless is a far different thing than being a couple paychecks away from homeless desperation, like so many millions of debt slaves toiling for their credit-card masters all across the looted plains.
Keep doing what you're doing. Avoid risk if the downside is unacceptable. That means weighing the risk of having to work longer against a very real possibility you could lose even larger portions of your wealth before this is over, with not enough time to catch back up.
I, myself, wouldn't buy or own stocks right now if a gun were pointed at my head. I've been thinking we'll get to Dow 5000, but I think Harry Denton's projection of 3800 looks more possible by the day. And complete failure of the currency and government default is not solely in the realm of the tinfoil hat crowd any longer.
And if things weren't dark and macabre enough already, there's a Detroit Pentecostal Bishop doing an old-time revival while sharing the stage with with three gleaming new SUVs. We truly live in Bizarro World now.
The thing that is sad now is that we--and our leaders--are desperately trying to hold on to the discredited and failing artifacts of an era that has ended before our eyes--most notably our fixation with the automobile and the living arrangement of suburbia. We should quit wasting money--bailout or otherwise--on either. At least half of the auto production capacity in the US (and probably worldwide) just needs to go away--the sooner, the better. Throwing money at it to prop it up is pure waste. Similarly, we are in a real estate meltdown because at least 1/3 to 1/2 of Americans can't really afford the homes they are trying to buy at current prices. Those prices need to fall at least 35-50%--maybe more. When they do, home ownership may become actually affordable again to the middle class--not "affordable" only by applying the "illusion" of affordability by bogus financing and other imprudent antics as has been the case for a decade or more now. The collapse in real estate prices should be allowed to run its course without the lame attempts (with billions/trillions of dollars being wasted) to try to shore them up--they will still collapse whether we waste bales of money on trying to stop the inevitable or not.
Rebuilding our infrastructure actually is a good idea--but not blowing the money on a highway system that has no future in its present form. We should be rebuilding our rail system, and water transportation system in the areas of the country where that is viable (Mississippi River, etc.). Blowing money trying to prop up the airlines makes no sense, either. They are going to cease to exist as we have known them--jillions in subsidies won't save them from the forces of change now upon us.
As a nation, we had better rethink how much immigration we will permit--legal or otherwise. We are going to have a damned hard time having enough jobs and natural resources to support the population we currently have--much less very many additional mouths to feed.
In Colorado, we'd better figure out that trying to base an economy primarily around real estate development, trophy houses, second homes, goof-off recreation, and other non-productive crap is complete bull**** in what will likely be the national economic environment for at least a decade or two.
The two links that Bob provided above concerning survival of the first Great Depression are pretty darned instructive. We should take heed. The one thing in the US that we DID avoid during the first Great Depression was hyperinflation. Germany did not--and their answer to that was Hitler and the prosecution of a war against all of Germany's neighbors to gain militarily what they could not achieve economically. We should be thinking of that history as we debase our currency and let our government spend money (that it doesn't have) like drunken sailors--inflating the p*** out of everything about 12-18 months from now.
Last edited by jazzlover; 12-11-2008 at 08:00 PM..
I disagree with most people on the cause of all this and what could be coming in the future. All the debt and greed and failures are symptoms of a larger problem of socialistic behavior on the part of the government and enabling the system and people to get loans people could not pay back all under the guise of economic justice and fairness. Not to mention the pork barrel wasteful spending on the part of all sectors of government.
All this plop about cars being the cause of this and stuff of that nature is just that, plop. There is nothing wrong with cars or houses, both of which have gotten greener as the years go by. Personally for me, a car is a freedom to move as I want. I don't need the central committee running my life.
I knew the day of reckoning was coming. I could see it everywhere. Nothing added up. But through the bad things I hope we find the good and the good can be getting a sense of community and personal responsibility again. We've got a long road to walk though.
I disagree with most people on the cause of all this and what could be coming in the future. All the debt and greed and failures are symptoms of a larger problem of socialistic behavior on the part of the government and enabling the system and people to get loans people could not pay back all under the guise of economic justice and fairness. Not to mention the pork barrel wasteful spending on the part of all sectors of government.
All this plop about cars being the cause of this and stuff of that nature is just that, plop. There is nothing wrong with cars or houses, both of which have gotten greener as the years go by. Personally for me, a car is a freedom to move as I want. I don't need the central committee running my life.
I knew the day of reckoning was coming. I could see it everywhere. Nothing added up. But through the bad things I hope we find the good and the good can be getting a sense of community and personal responsibility again. We've got a long road to walk though.
The very socialistic horse**** you decry has been what has enabled the automobile and the suburbia now in meltdown. Subsidized mortgages, deductible interest--all "manipulations" of the free market by government. As for the automobile--well, the US highway system is the biggest experiment in state socialism ever attempted on the planet. One should remember that the Interstate highway system, in particular, was a direct copy of the German Autobahn--the brainchild of a nationalist/socialist by the name of Hitler. The private automobile manufacturers never got anyplace until they figured out how to get the costs of the highways upon which to run their product socialized onto the public--with the construction and planning of those roads in the hands of federal bureaucrats. So much for the "free market."
I disagree with most people on the cause of all this and what could be coming in the future. All the debt and greed and failures are symptoms of a larger problem of socialistic behavior on the part of the government and enabling the system and people to get loans people could not pay back all under the guise of economic justice and fairness. Not to mention the pork barrel wasteful spending on the part of all sectors of government.
All this plop about cars being the cause of this and stuff of that nature is just that, plop. There is nothing wrong with cars or houses, both of which have gotten greener as the years go by. Personally for me, a car is a freedom to move as I want. I don't need the central committee running my life.
I knew the day of reckoning was coming. I could see it everywhere. Nothing added up. But through the bad things I hope we find the good and the good can be getting a sense of community and personal responsibility again. We've got a long road to walk though.
Although much of this mess was precipitated by the subprime implosion, I see the real culprit as Wall Street banking and complacent governance in D.C. The subprime orgy was just the final straw in decades of up-scaling of risk with other peoples' money, while skimming off obscene sums for themselves. The doo-doo is hitting the fan now, and if gov't doesn't get out in front and start perp walking these guys, I think we're going to see a few of them publicly burned at the stake Salem-style. Hopefully they'll have a few of the lynchings available on pay-per-view.
There's nothing wrong with cars and houses, until you wake up one day and realize that our world is revolving around our cars and houses...big inefficient ones at that. This insane fixation on cars has no better illustration than the Detroit bailout angst that's gripping the markets right now (the ticker says talks have now collapsed due to UAW not accepting the proposed wage and benefit concessions contained in the Senate version of the bill). Large portions of the country seem to think that the world will stop turning because bloated businesses employing overpaid union workers engaged in the massive overproduction of inefficient automotive behemoths have to restructure. Regardless of whether we send them thousands of millions of taxpayer dollars, they will have to restructure, and when they do, tens of thousands of them will be "made redundant" as the brits say.
Add to the fun, the revelation this afternoon that a NASDAQ market-maker and former NASDAQ Chairman named Bernie Madoff was arrested for running a Ponzi scheme under the guise of a major investment firm that he now says lost $50 Billion. Given that his funds had far less than that invested, it might pan out that he stole from the proceeds of the stock trades clearing through his "make" operations, which could have a stunningly chilling effect on an already shaken and tenuous sense of trust by investors in investment market processes. You know, like ratings agencies that slapped "AAA" on bundles of subprime loans that had no hope of ever being repaid, allowing them to be sold to profit-crazed investors the world over. Makes you wonder who else has been picking your pockets in this chocolate mess and hasn't come into the light of day...yet. Who knows, maybe we'll see that 1929-style lock-limit down day I've been waiting for tomorrow. Unless, of course, Helicopter Ben and Uncle Hank find some more interesting ways to give away even more billions of our future earnings.
As an aside, I was out and around in the stores today in Colo Springs. It doesn't feel much like 2 weeks before Christmas. No lines, no crowds. And I actually saw two people in line pay with funny green pieces of paper with what looked like presidents' faces printed on them. They must have lost their credit cards.
Debt will Drain you Dry
Last edited by Bob from down south; 12-11-2008 at 10:37 PM..
When Warren Buffet speaks, people listen, but only if they like what he says. In this thread, the blame game is where it's at because it feels so good to the ego to be absolved from the part we played in bringing on this fiasco. We are so much smarter than everybody else.
I don't worry too much about pointing fingers at the past. I operate on the theory that every saint has a past, every sinner has a future." -- Warren Buffet
Last edited by CosmicWizard; 12-12-2008 at 10:04 AM..
Reason: to fix yet another typo!
Humility is a good thing. Perhaps we all need a dose?
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