Dec 06 2008

Maybe it’s not quite THAT bad

Category: economyharmonicminer @ 1:00 pm

A friend of mine around age 31 or so, with a couple of small children, recently put up a blog post about his sense of impending doom on the economic front. Herewith, my response, trying to make the point that things were actually worse for people his age in the late 1970s and early 1980s, in real terms, and there is reasonable hope that it will all work out, even with a blundering government that doesn’t quite know what to do, and is too proud to have the courage to do very little.

I used to hate it when old guys started out with, “When I was your age”, but…

When I was your age, we had just endured 4 years of Carter, and something called stagflation, when interest rates to buy a home were in the high teens (even 20%!), inflation was in double digits many years, and yet the market wasn’t moving at all. So, stagnant inflation, stagflation. Sometimes we waited in line for hours to buy gas.

The idea that I would ever be able to buy ANYTHING to live in was a complete joke. I looked at people around me who had bought real estate twenty years earlier when the prices were “low”, and realized I had no chance.

In fact, at your age, I was literally renting a room in a house in Glendora. Then another one, in another house. Shortly after that, I bought a 25 foot travel trailer that wouldn’t travel, but was parked in a trailer park in Arcadia full of very old people who seemed to need me to look in on them a lot (I have a talent with stopped up sinks and things). I could just barely swing the loan on the 25 ft trailer. That trailer was my first home with my new bride, Karen, in 1986. By then, interest rates were down to maybe 10-12 percent, depending, but I still had no hope of coming up with a down on a house.

I made some money on an arranging job, sold the trailer at a profit after two or three years (inflation was still cooking along) and bought a condo, again just barely, with a negative amortization for the first five years. After a few years, the neighborhood began to deteriorate, so we sold that condo and bought a house, again just barely. Then we sold that house and had another house built on a lot we had bought, but again just barely. That’s where we live now.  I think we’re close to being top-heavy right now, but not by a large amount.

Sure, things could go REALLY south, in which case some of us are going to have to move in with friends/family and share expenses till things improve. I’ve been there, on both sides of the equation.  But it probably won’t be that bad, and 20 years is a LONG time. You’ll bounce back.

There has always been an underlying vitality about America. We get lazy and complacent sometimes, and pay for it in blood and treasure, but we get the job done. We’ll do it this time, too, even with our government working against us, like it did in the 1930s, because at the core we are working for ourselves, not somebody else, so we’re just more highly motivated than most.

Of course, if our government manages some of its more egregious ambitions, many of us may begin to feel that we aren’t working for ourselves anymore. That will be very bad.

But I think maybe that won’t happen, at least not till your kids are grown, depending on how we manage things.

If we go permanently Left, of course, all bets are off. It has always been people who perceived themselves as working primarily FOR themselves that have gotten us out of economic hard times. This was true even in Rosie The Riveter days, when women got higher wages than they’d ever seen, building airplanes and tanks. Sure, they were working for our troops, but their short-term, right-now motivation was to get that pay check.

The allure of the Left is that, for too many people, it disconnects short-term positive behavior from short-term benefit, always true when you’re spending someone else’s money.  But maybe our new president is more pragmatic than ideological.  Pray that it is so, and that he does not keep some of his campaign promises, or we may be in for a tough sled.  We’ll survive him, just like we’ve survived before, but the pain level will be higher if the government tries to pretend there are no real laws of economics except some kind of social contract.


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