Thinking Time

Typically we all have our trigger-point issues that ultimately determine who we vote for on the Presidential ballot every four years (assuming, of course, that you, dear reader, actually vote). These are usually top-of-mind issues for most voters, and the guy that delivers the best position on our trigger-point issue gets our vote. This year the trigger-point issue for the majority of voters is the economy - no surprise there. However, the scary thing about voting on the economy as our trigger-point this year...the fact that no one - not even the smart guys - know what the hell we are doing, how it will impact the economy or what to do to make the economy better. We are virtually on an economic learning curve with the potential to permanently change the way we live our lives.

Yes, I do mean permanent. This crisis entails permanent change in governmental behavior and spending, institutional change at the regulatory and financial levels and all that trickles down to change in our personal fiscal behavior.

Oh, she's not beating that dead horse again!

No, I'm not, but I am going to beat on the permanent change drum. As a nation, there needs to be fundamental and permanent change to ensure that we never return to this state of economic crisis again. We need to become a nation of producers-and-savers, not borrow-and-spenders. That is like the old Sunday school song, "so-and-so built his house upon a rock" and his house stood the weather-beating. The guy who built his house upon the sand? Well, it all got washed away! (Comment if you remember who the guys were in this song - I can't remember.)

We built our economy on the idea that if people keep borrowing money, everyone gets rich. People borrow and then spend, and Home Depot's stock goes up, and the investors get richer, and the banks make m0ney on the interest of that loan, and the banks have more money to lend, and people go out and borrow more money and spend more money and everyone gets what they want...what a beautiful fiscal cycle! Ooops, didn't work out so well when Joe Six Pack stopped making his loan payments. And then a couple of his neighbors did the same thing and on and on throughout neighborhoods in America. Bad Joe Six Pack! He ruined the whole thing! Everyone could have kept making money if it weren't for him and his over-spent, over-indebted buddies.

Wrong.

Let's take a deeper look at Joe Six Pack. First of all, his wages have been stagnant these past eight years while costs kept rising. In a lot of cases, Joe Six Packs have actually taken pay cuts...pay cuts after being laid off because his factory went overseas, and the unemployment was running out, and he needed a job at any cost, even to the extent of working for less. Hey, some money is better than no money.

Here's another thing about Joe Six Pack. When he was on unemployment, chances are he did get behind on his bills since he was probably maxxed out on expenses for his income level. When that income level dropped to unemployment compensation something had to go, and it wasn't his grocery bill. When he took that lower paying job, it is doubtful he was able to get caught up.

Then there's the matter of health insurance. His family most likely lost their coverage when he lost his job. Oh, there's Cobra coverage, but at $1000 premiums for a family, chances are they didn't opt for it. So, the family only had a couple doctor's appointments while Joe was out of work, but it only added to the debt load. Now the creditors are calling about that, too.

So, Joe goes back to work and even with his annual 2% raises, he's not getting ahead; in fact, he's getting poorer. Eventually the pressure from creditors pushes him to make payments that he can't afford, and he begins to get behind on his house payments. Default. Auction. Foreclosure. And his family becomes the scapegoat for a society that placed their bets on way-too-long odds.

For Joe Six Pack, losing his job sucked, but the subsequent financial meltdown enveloped his family in misery for years as they struggled to keep afloat, eventually hitting rock bottom with the foreclosure of their family home...and their family dream. And all the banks have to say about it is he never should have fallen behind in the first place. So, you're out, buddy.

In hindsight, Joe shouldn't have maxxed out his income for nicer cars, a nicer house and the nicer niceties of life. He should have saved more, spent less and lived within his means. On that, I am sure we all agree.

But fundamentally, what went wrong in Joe's life? His employment situation. Gosh, doesn't it just make you wonder if there was something fundamentally wrong with the economy when so many Joe Six Packs went through the same thing?!?!

Ok, you know my answer to that question. But here's the follow-up: Ready for this? Ok, here it goes...

If the fundamental problem was an economy that could not support jobs and wages consistent with a middle-class lifestyle, how do you restore an economy that supports jobs and wages when the bottom just fell out of the economy, and no one has any money from Joe Six Pack all the way up to the Federal Reserve and all the financial institutions in between?

And that is where my theory of permanent change comes in. Look, folks, I hate to be the harbinger of gloom-and-doom, but we have not seen the bottom to this crisis, and while world powers scramble to restore stability to a fundamentally off-kilter world economy, we are left with the challenge if living day to day and somehow meeting the challenge of rising costs and lower wages. Or no wages at all.

And to make matters worse, we can't look to Washington to help us out since they've maxxed their credit capacity on bailing out our greedy rotten banks and such. Which means, folks, we are on our own in spite of all the Presidential candidates are proposing. There just isn't the money.

So, since the President and the Presidential candidates don't have the courage to tell us to change our lifestyle - in the absence of true leadership - we will have to take it upon ourselves.

God, that sucks.