What really has surprised me has been the speed at which this downturn has taken hold. I was not surprised by the housing market bust because the ever increasing prices to salaries was unsustainable. The rate at which this has brought everything else down though, is quite amazing – in a scary kind of way!
I guess now it is all a confidence game. If I don’t think you can pay me back the loan, then I won’t lend to you. Isn’t that a novel thought! Maybe if the bankers et all had kept their heads and used this same rule of thumb to start with we wouldn’t be in such a mess.
A few years ago I was amazed at how blase people were with money. The 20 something working in McDonald’s making $10 an hour and he buys a BMW. Maybe I am just a child of the eighties, but it seemed every time I was about to graduate from one course or another, that the UK was in a recession. I paid attention. I saw what happened, what people did and what happened to people and I tried to learn the lessons. I didn’t ever want to land myself in the situation of owing more on my mortgage than the house was worth and then not being able to sell it and therefore not being able to move to where the jobs were.
This whole credit house of cards has just been waiting to fall. At the same time though, the economy does need credit made available. Course, now all the banks who risked the money on sub prime and bad debtors are facing the music and don’t want to lend any of their precious cash. So the companies can’t get credit, the customers don’t buy, the companies have layoffs and there are no customers left.
And where does the media play a role in all this? As usual they hype everything and make everyone get really scared. “The Great Depression is back”, etc. Well, if you weren’t scaring all the consumers they might still be buying stuff which would keep your manufacturing industry going and there might be a bit of credit around. Even I haven’t been spending as much as usual and I have no reason to have really changed my habits, just hearing everyone bleating on about tightening their belt has changed my habits too. I have money I can spend, but I am not. I don’t have any credit card debt because I was always responsible. I never took an equity loan on my house.
My mother taught me well and of course, I’m a Scot and we are frugal creatures! No point flinging out the 32″ TV so I can get a flat panel HD 1080p LCD when the 32″ is working fine. That is a waste. Wait until the 32″ goes phitz and then research and purchase the best deal at the time. Prefereably on a 0% credit card so my savings can keep earing interest while I pay of the card. Simple!
Pay yourself first, then your bills and then you see what is left over – that is your spending money. Companies need to do the same – paying yourself first though is called inward investement. Like the bailout plan using it to create jobs via infrastructure building. You are not just spending money, you are investing it for the future too. A better high speed internet connection for every home in America not only creates jobs in laying the lines, but enables other jobs for those that can then use the high speed connection to do better business.
Wow, Monday morning sugar rush from the donut I just had I guess. Oh yeah, when did it go from being a doughnut to a donut or a tyre to a tire? I figured these were maybe just American spellings, but when I was back in the UK a few weeks again I saw a sign in a shop that said Bakery and Donuts. Aahhh. Admittedly it was in an ASDA which is owned by Walmart, so maybe that was why.
So I guess we will get through this mess somehow eventually. Och, now I am depressing myself! So anyway, my Mum arrives over from Scotland on Christmas Day for a few weeks. She doesn’t know I have a new puppy yet, so hopefully it will be a pleasant surprise for her! I think for her Xmas present I will book a session for us with a photograher and get our potrait done. There – that will keep some area of the economy rohbust for a week or so!
Wishing everyone a very Merry Christmas!!