Friday, October 10, 2008

world wide web

My job is reasonably secure. We bought our house long enough ago that we probably still have some equity. And, though sheer dumb luck, I pulled my 401(k) out of the market a few weeks back. But still, watching the vertiginous swings of the international stock markets and reading about the credit crisis and bursting of the real estate bubble has been making me just a little queasy these last few days.

Drawing on my (extremely limited) knowledge of economic history, I was wondering if there was some kind of analogy that could be drawn between the current financial crisis and that unpleasant episode known as the Panic of 1873. And I did a tiny bit of googling and, of course, found that someone else had already thought of the idea first.

Anyway, what's your take on the state of the economy? Is this the end of the world as we know it? Have you been making changes in your lifestyle or your plans for the future? Or do you see the current financial turbulence as something that isn't likely to have much direct effect on you?


CLC said...

I work in this industry and for one of the major banks that is still left. I am stressed. Although there are no signs of layoffs hitting my particular group, I worry about losing my job every day. Luckily, I don't have any credit card debt, but we have a fairly large mortgage. And since we just moved last year, our savings isn't as cushy as it should be.
I think that people have to readjust the way they live. This isn't the end of the world, but this could take a very long time to come out of. And credit will certainly be hard to come by, unless you have excellent credit. So I think that will be the hardest part for "Main Street" and how they will be affected the most. Even if your job is not at risk, Main Streeters are going to have to learn to live within their means and feel entitled to buy tihngs they cannot afford just because they see it on TV.

Kymberli said...

Frank and I have been discussing this a lot lately, as most Main Streeters have. In the past, when there have been grumblings of financial crisis, it seems like it has been in the upper echelons of big business and industry and was never of a big concern to us. We'd merely shrug our shoulders and say, "That's not us - big deal." Now, this has trickled down to "your average Joe Six-Pack and soccer moms" (oh, how I loathed that phrase), and everyone has major cause to worry. We are very concerned. Property values haven't decreased too much where we are so we have a decent amount of equity. Still, we are a single-income family with Frank being a SAHD. We're doing okay, but we've definitely felt a pinch and have needed to tighten down and save a little more. The size of our house is adequate, but we wanted to build a new, larger house in a few years. We sense our future plans shifting somewhat. We've always planned around me being the only working parent. That's necessary because Frank's MS is unpredictable. He's fine now, but we can't really bank on him being able to work full-time 15 years from now. So, we're nervous. We don't ever want to depend on his income, but before we thought that him working would be nice, but not necessary. Now, we're thinking it might not be absolutely necessary, but we might need it so that we're not feeling quite so squeezed and also easier to accomplish the goal of building a larger house.

Elizabeth said...

I've been harboring this uneasy feeling that I ought to be paying more attention to the financial news, but find it far too easy, instead, to focus on the mound of tasks directly in front of me that are demanding my attention.

We live simply. We have lived comfortably with far less than we have now. We have lived up close and personal with third world poverty. I guess I take the long view - it'll all wash out in the end, somehow, and we'll be fine. Perhaps this is a head-in-the-sand position? I guess we'll find out.

Elizabeth said...

p.s. I love that photograph.

thordora said...

Being Canadian I think it's easy to feel isolated from the problem-but it's going to send it's trickling feelers out in a few places.

We already live modestly, and could cut out even more, so honestly, I don't worry. We bought a home well within our budget, neither of us work for industries that should have any layoffs (at this moment) and we aren't needing any real major purchases, aside from a roof.

But then, I don't worry about what I can't control. I prepare, but I try not to worry. But I wonder why it was so bloody easy to get there in the first place.

Melissia said...

We need to sell our first home and would like to make some much needed cosmetic changes to increase the chances of selling it. We held on to it after moving because we restored it, a 1902 Victorian, and rented it for 11 years to the same tenant. Regardless of our good credit and the equity, we are having difficulty getting a loan as we have lived debt free for the last 10 years so we no longer have an established credit history. A year ago this would not have been a problem. Today it is.

Aurelia said...

Well, I posted last night an explanation of the difference between and credit crisis and a recession....and now I just wish to god the bonehead politicians I speak to would listen as well.

1873? Mmmm, there is still a difference between today and then in that now, we don't grow our own food or have any connection to our land or to necessities. Reality is that if our food supply was cut off tomorrow, we'd starve. Back then, most families, even urban ones could source farm food. Now, no one can.

And yes, this is the end of the world as we know it, because in a credit crisis every one is affected, even those with secure jobs and no debt. We won't starve, but I think that large portions of the population are going to have to start accepting that they aren't going to get to live with 46 inch plasma TVs in every room, and they just might have to save up to buy a house with a downpayment. Turns out that we all don't get to have the lifestyles of the rich and famous. Speaking of which, the rich might have to pay taxes!

Aurelia said...

See, even Santa Claus has been affected.

The Nanny said...

Well, I don't know much at all, but I do know I've lost about $10,000 from my college bank account. But we're not pulling out. We're just hoping it'll go back up. Is that stupid?

Betty M said...

Well if it means people stop thinking that a mortgage of 6 x their salary and no deposit is a sensible way to buy a house which is not uncommon here then it is probably a good thing. I have always been very dubious about the City as I used to work there and I had to litigate cases around the sorts of financial instruments that have got us into this mess and I never really understood how they were supposed to do what they said they did and I am feeling a little "I told you so" at the moment.

I have always been against high gearing and I am now a govt employee so personally my situation is ok. We have substantial deposit protection here so most people are covered for bank deposits up to $100000. It is years till we retire so I assume things will come right by then. I can see people round me tightening their belts - but it is all relative given the people I know are predominantly from my old life - I don't have a huge amount of sympathy for a bunch of lawyers deciding to forgoe skiing this year and just having the holiday in Provence.

Heather said...

I really don't expect this crisis to affect me. Sure, my 401(k) and Roth IRAs have lost value, but they're still above what I've put into them, so I'm not wishing I'd put the money in my mattress. I fully expect the stock market to recover and boom again before I retire in 30+ years, so I'm taking the long view, here. Can't manage to get pregnant, so no kids and their colleges to worry about. Our jobs are likely pretty secure, and we live in a part of the country that will likely be pretty resistant to house values decreasing. I don't think that means we're sticking our heads in the sand, but we already bike or walk to work, eat at home with food grown at local city farms, and just generally live well below our means. Other people who live at or beyond their means will have to adjust, but I don't expect much to happen here in the Heather household.

Anonymous said...

I rarely watch commercial TV, so during a recent viewing, I was surprised to see each commercial still promising the moon to folks with no credit, bad credit, slow credit. I hope most people are actually reacting at this point, not just shuffling along with their heads down.

I'm upset with myself because I have let my 401 (k) get dusty in the past seven years that I haven't been contributing to it. Pretty soon, it will be as though I never had that high paying job with dollar-to-dollar matching. Just one more pennant to file under "glory days."

We just moved last year, too. We're OK because we paid less for a fixer-upper. It just might mean that it will take longer to get hardwood floors and new furniture. There are a lot of extravagances in our life right now that we can cut down before I'd even feel like the belt was tightening. Lucky, yes.

Grad3 said...
This comment has been removed by the author.
Grad3 said...

(sorry about the removal of the last post- Lil P was crying and distracting me...)

I think that there will be major adjustments for those who have been living beyond their means (at least I hope so). But it's certainly not the end of the world. Those who have good credit (because they were making responsible financial decisions) will still be able to get credit... I am just not sure what the interest rate will be.

I think that market crashed harder (and is not rebounding like it should) because people saw that the gov. voted to bail out the private sector. And the gov. does not inspire confidence in a "free market"- ever.

Like a president once said, the worst thing you can hear someone say is, I am from the government and here to help.

Just my two cents... I am sure there are many who disagree me.

Katie said...

I have no house, I only rent, so I don't stand to loose out that way. Also, with being a teacher I have a better amount of job security than most. Again because I'm just starting out in my job I have very little in the way of savings. Apart from my student loans which are owed directly to the government I have no debts.
So overall my life has been impacted very little, on the other hand my parents are trying to sell their house with no luck whatsoever, the housing market is at a standstill.

Cara said...

We are with Elizabeth. Maybe heads in the sand but we prefer to be grateful for what we have: a house, food on the table and a little savings in the bank.

We'll see what happens next. (however - if the rich get exponetially richer and the poor..well you know that that WILL be a problem)

Anonymous said...

I really, really fear this is going to hurt pretty much everyone.

Anonymous said...

I have a very uneasy feeling in my stomach about what is going on now. Intuitively I'm scared. I guess I never believed anyone would let their wealth trickle down, not even back in the day with Reagan. The thing I find most unsettling is the apparent loss of any sense of morality when it comes to making gobs of money. I would just hate it if this didn't play out to make a more level financial playing field.

thirtysomething said...

A friend and I were commenting the other day that right now it is the people with no money, or at least living from wages alone, who are the most secure, which we both found a bit ironic.
Good thing about your 401K - whew.

Mad said...

My husband and I have a few things going for us:
We are Canadians
We have secure jobs
We own our house outright
We have no consumer debt
We are 20+ years away from retirement

Our paltry RRSPs have lost value but compared with where I came from, I am still sitting pretty. Who know what the next few years will have in store, though.

christina(apronstrings) said...

i agree with betty m. and i am going to spend my week buying stocks in my spare time. has there been a batter time?
*i am freaked* but we don't need to sell our house and since we are not retiring anytime soon-i am not worried about our 401k.

Elizabeth said...

And don't forget the bank failings in 1893, 1894? I read Larson's The Devil in the White City a few weeks ago (about the Chicago world's Fair), and banks were failing everywhere during it, contributing to a lot of economic uncertainty. Sounds familiar!

I can't bring myself to look at our 401K statement, but Husband is buying stock like crazy right now. We're trying to be more frugal but that's more due to our surrogacy expenses than anything else.

Tash said...

I'm sensing a lot more similarity between us now and Japan circa 1990 (somewhat helpful article here) thinking it will take a fair amount of time and policy to pull out.

Funny, (not haha,) when the financial adviser calls and tells us that things are bad but "we're young, and it'll come back" we both look at each other knowing full well that we will never again take for granted that ANY of us will live any further than that particular evening.

Furrow said...

Retirement is a long way off. I'm currently getting a bargain as I continue to invest in my IRAs and 401K. We have no debt but our modest house, we were already living quite frugally and have a bit of cash savings, and I have a relatively secure university job. So I'm not worried right now. Honestly, I feel like the country (maybe even the entire post-industrial world) needed this. I was pretty sick of the rampant consumerism, the desire for more stuff that was often confused with real need. The collective sigh may just be the pause for air and reflection that was needed.

Still, if I slap the smugness off my face for one second, I can see that a lot of people are hurting, and that sucks. One of my oldest friends has been trying to sell her house (too much house, really) from 2000 miles aways for nearly two years since they had to relocate for a job. That is very stressful and a sad waste of money each month.