Friday, October 10, 2008

Seriously, Let's Get Back to Work

I am neither economist nor historian. In fact, all I know about economic theory can be summed up in the following – "The rich get richer, the poor get children." All I know about history is that whether we learn from it or not, it seems we are doomed to repeat it.

I’ve been giving a lot of thought lately to the Great Depression; looking at which administration to blame. Herbert Hoover gets a bad rap because he was the one in office at the time of The Crash. However, we really have to cut him some slack because he had only been in office for 8 months before the crash. He’d hardly had time to do too much harm. Calvin Coolidge preceded him, but while Silent Cal was famously pro-business, historians don’t seem to lay much blame at his feet. The notorious Harding came before Coolidge. Harding is famous for having had the most corrupt, scandal-plagued cabinet but I don't know if blame for the economic collapse falls on him.

Then there was that Dust Bowl thing. It was the early 20th century version of climate change.

It took Franklin Roosevelt to do what was needed to guide the country through the crisis.

In the current situation, the finger is pointed at the mortgage crisis and the housing bubble. I heard that only 8% of homeowners are defaulting. Only 8% and the world’s economy is brought to its knees? How did this happen?

I confess, my husband and I are the beneficiaries of sub-prime lending. We were smart enough to get a 30-year fixed, but we weren’t smart enough or disciplined enough to save for a down payment, so 0% down it was for us. If we had been required to cough up 20% of anything, the best we could do would have been a Barbie Dream House. So as we slam the sub-prime trend, also remember that it benefited a lot of us.

If it hadn’t been for the attractive interest rates and easy lending of the time, we wouldn’t have considered buying a house. We’d still be living in our beautiful West Hollywood apartment – enjoying our weekends, entertaining friends, going to museums and movies while the housekeeper came in every two weeks. On the downside, we would likely be spending the rest of our lives in that apartment or risk losing the benefits of our rent-controlled status – ‘cause under rent control, you can check out any time you like but you can never afford to leave.

We started our path to home ownership on the day that Bush 43 was sworn into office. I remember listening to the inauguration ceremony while on the way to a class about the ins and outs of mortgages.

When house prices started to really rise, with noticeable rises every week, we didn’t exactly panic, but there was pressure to get into something quickly. I can see where others might panic. So here we landed, with a sub-prime mortgage in a sub-prime house, in a neighborhood that wasn’t exactly my style. Six years later, the house has been almost completely rebuilt from the inside out; the neighborhood’s improved and so has my mood.

So much else has gone to Hell.

I don’t blame the 8% who defaulted. Not entirely, anyway. I don’t blame the banking system. Not entirely, anyway.

I blame our collective addiction to the lure of making money with money. I blame our collective failure to honor the value of Work and the Worker.

Back in the old days, people used to make money from working. Lately, people make money from money. It’s not enough to go to work and earn a paycheck. You’re expected to invest. You’re expected to plan for your own retirement and make financial decisions that you may be unprepared to make. We’re all expected to be professional gamblers. In the investment frenzy of the past decade, those who didn’t get caught up in the frenzy were looked down upon, dismissed by those who were making more money investing than they were making by working.

And in what were they investing? There is little manufacturing left in this country. Jobs are outsourced. People in this country make nothing. We make nothing and many of us have nothing. Many of us haven’t stocks or bonds or tulips
– but we have houses. Many of us have been living off the fat of our own houses, a kind of mortgage ketosis. And those who have much more than just their houses were willing to take advantage of those who have much less.

When we live in a time when money is made only from money, the rich can only get richer and richer while the rest of us scramble just to keep up.

There have been religious injunctions against making money from money. The sin is called usury.

There was a time when laws against usury were used to support bigotry against other cultures. Let us not return to bigotry, but let us return to Work.

It is time to honor Work and be done with Capitalism gone amok.

FDR understood the importance of honoring Work. That’s why he created the Works Progress Administration.

In his time, buildings of function and distinction were built –

Beautiful art was created –

And public infrastructure transformed this country and prepared us for the challenges of WWII.

Instead of investing in our society, recent political mantras have called for less government and lower taxes. This led to a country in which bridges fail, levees collapse and school children have limited access to libraries.

It’s time to stop living off of money that we didn’t earn and maybe build a few nice post offices. It’s time to get back to Work.


Jennifer said...

Great post. We, too, benefited from the subprime mortgages. We were young, buying right out of college. My husband had NO credit, I had plenty. He had the new stable teaching job, but not even a contract from it yet, and I was waitressing. We could only get a loan the stated-income way... but we KNEW that we were simply missing the paperwork and it wasn't much of a risk, as we knew exactly what our incomes would be in two months.

We also only had 10% to put down, from money given to us for our wedding. It was great that we didn't have to put a full 20% down.

4 years later, we have paid off the 10% extra, but do need to refinance to roll it all together into one mortage.

That rambled! Anyway, just saying I agree withalmost ever word you wrote today!

Why S? said...

Thanks, Jennifer. I think it's important to keep the positive effects in mind as well.

Muskego Jeff said...

"It’s time to get back to Work."

Too bad so many people these days have a strong dislike of this thing called "work". Too many people just stand there with their hand out these days, waiting for the government to provide for them.

Why S? said...

Jeff, I've heard of those people, afraid of work and waiting for gov't handouts, but I haven't come into contact with any - - except for myself, of course. I'd LOVE a handout. That's why I keep playing the lottery.

Just A Girl And Her 1911 Craftsman Bungalow said...

This is a great post. I also lived in the "West Hollywood Apartment" and lived a great lifestyle of dinners, movies, the bi-monthly housekeeper (for my 850 sq feet), and made regular trips to the Mac Make-up store --and I had plenty of shoes. I missed the first opportunity to get into the market 10 years ago when everyone started buying and prices started going up. People were flipping houses, making money. I sat on my savings not sure if the bubble would burst and just watched. Finally, a year ago as I could tell the market was taking a turn and I saw prices going down, I got my first house (in your same neighborhood!). I also did the stated income loan (which nobody is allowed to do any more). I feel very lucky that I got into the housing market at all in Southern California. I'm also thankful I got the 30 year fixed loan with payments I could afford. I might have gotten a "fixer-upper" with my 1911 craftsman bungalow but at least I can afford to live here. Although I confess there are a few days every once in awhile I look back fondly at the worry free life as a renter, I am more excited to learn about the history of my home and to fix it up. Priorities have changed-- I don't go shopping for clothes, I go shopping at Home Depot but its the next phase of life.

Anyway, I loved your post and it will be curious to see if people will become desperate and ruthless in this situation and continue to try to build their lives on foundations of sand or if there will be a change in mind set. Will it make people angry and more grabby at trying to "get theirs" or will it inspire people to change their ways? I know for me-- I don't think consumption is "cool" any more. I'm not fascinated with "bling". I can remember when my friends and I would meet up and show each other the new purchase (insert shoes, purse, lipgloss, jacket, etc.) I am now fascinated with how people live on less and those who make do with what they have. I get inspired when I find out ways people are saving money, repurposing something they found, or making do without.

LBTudor said...

What a great post. The Husband and I worked our tails off to be able to buy our house. We paid off all our debt, saved our money and we able to get a good loan. We have a silent second that we need to pay off and in a few years we will need to refinance but we bought when it was right for us and we dont have a single regret.