Wednesday, February 25, 2009

Yanno, if those damn Chevy salespeople would just smile more...

I'm sorry to keep harping on this; I know it can get tedious. But tonight, two different network-news shows hit the theme long and hard, and I just can't let it pass without comment.

To set the scene: The market is tanking. A number of once-golden financial-services firms have simply ceased to exist. Major, historic bank franchises like Citibank and Bank of America have crashed and are bleeding out. (And those are the basically reputable financial
firms we're talking about. Then we have the Bernie Madoffs; Bernie himself made off with about $50 billion, wiping out whole families' retirement plans.) One-third of us, according to a new ABC News poll, have either lost our jobs or had our hours/wages cut, or know someone who has lost his job or had his hours/wages cut. If you have a home you want to sell, chances are you can't get a fair price for it, and if you find someone who's actually willing to pay a fair price, chances are that person can't get a mortgage. By now the travails of GM and Chrysler are common knowledgebut perhaps even more telling, Toyota's losing money, too. Looming in the background is the health-care nightmare, and Obama made it clear last night that we're going to have to do something, eventually, about social security. (Did you notice the careful, cagey way he phrased that part of his speech? That sound you thought you heard was false teeth rattling all across America.)

But you know what the biggest problem we face is, according to the intelligentsia at network news?


That's right! The problem isn't tangible and factual; it's certainly nothing as trivial as those disappearing jobs or those bad mortgages or all those companies (if not whole industries) going belly-up. Nahhhh. It's just fear. And those of you who thought we were weathering an economic recession are way off base. Uh-uh. It's a crisis of confidence. (I know because Charlie Gibson told me himself, and Charlie Gibson doesn't lie. He even had a famous psychologist on to reinforce the point.) See, everything would get better
we probably wouldn't be in this pickle!if people just had hope. Sure! If we had more hope we'd go out and continue to buy houses and sportscars we can't afford, and $500 purses to complement our $250 shoes, and we'd never let the mere loss of income get in the way of upward mobility. Right? We'd just keep borrowing and spending and eating out and charging vacations and...

Oh, wait a minute. Isn't that what got us here in the first place?

God help us.*

* But no, for the record, He won't either.


Stever Robbins said...

My understanding is that the "crisis of confidence" largely has to do not with the SHAM notion of personal confidence, but with the idea that the people who keep the debt/money flowing (primarily the banks) aren't willing to lend loosely enough because they are scared to the point where they're hoarding the cash they do have. It's the banks who need confidence, behaviorally, not the rest of us.

All I can say is, "Thank you Paulson, for giving the banks more money than God (stolen from the taxpayers) and not requiring them to move it out into the economy."

(*) I use a strong word like "stolen" as there was apparently no requirement nor structural way that the govt would get repaid, or--as to my whole point--even get the result we wanted.

Rational Thinking said...

This isn't popular, but it needs shouting from the rooftops - let's NOT go down this road again. The same message - consumers have to spend more to restart the economy - is being spread here in the UK. Now, given that the economy is in a mess, people are rightly cautious (not fearful - cautious) about spending money they don't have, or won't have if they lose their jobs. If the financial institutions had adopted the same attitude about NOT lending money without a clear plan about how they would get it back, then we wouldn't be in the mess we're in. We need to re-learn living within our means. I have yet to hear a politician on this side of the pond actually saying that. I liked Obama's speech - he seems willing to tell it like it is. Good on him.

Steve Salerno said...

Stever, look, I hear what you're saying about the banks and such, and I agree that a terrified consumer who simply hoards his cash (ha; like that's gonna happen here in the U.S.!; have you seen the savings rate in recent years?) is a major nail in the coffin of any economy. But for my money, what we've had in this nation for a good generation now is a crisis of too much confidence. And, as RT says, that needs to stop. My father used to say, "If you have to pay for it with plastic, you can't afford it." While maybe I wouldn't go that far, I think we do need a giant dose of that kind of caution to counterbalance the wild, unapologetic consumerism of the 90s and early 2000s, thereby tugging us back towards a saner view of such things as money, status, etc.

Anonymous said...

The political push on both sides of the pond seems to be to get us back to the financial position we were in 2007, i.e. riding to the crest of a bubble.
(A notable UK exception, RT, is Vince Cable, epitome of the old style, cautious bank manager)

There seems to be little political acceptance that this is a cycle that will play itself out over time regardless of hope, confidence, intervention or politics.

I suppose it would be political suicide for these posturing power brokers to admit the truth that they are in fact powerless.

Rational Thinking said...

Hi Anon 10.00am - my bad for overlooking Vince Cable - he's a voice in the wilderness. I liked his comment that we're not bailing the banks out, we're propping them up, because if they fail, then the economy fails.

It's interesting too that a financial adviser I spoke to yesterday opined that there is already concern that some of the measures the UK government is taking now will lead to very high inflation a few years down the line. Do we really want to continue this boom and bust forever? On purpose?

Steve Salerno said...

One hates to sound like a Doomsday-er, but if it were me, I'd also make sure that if we do nothing else here in the U.S., we keep up the military. We may need 'em.