Wandering with Reckless Abandon

As I am typing this, I am listening to the tail end of the first Presidential debate. I am pretty much done with this whole election season. I am tired of hearing both candidates listen to a question and then twist their answers to fit their talking points. I am tired of watching Jim Lehrer ask them at least a half dozen times how the financial crisis will affect their presidency without getting a solid, substantiative answer.

For the last several months I have been thinking about the financial mess that we are in as a country, and I have come to what will be a very unpopular decision. I believe that this country needs to let the market fall apart.

Our current economic mess will not be solved by a massive bailout. It will not be solved by the government helping people pay the mortgages that they can not afford. I highly doubt that it can be solved by the government at all. The problem is one of money and how we value it.

Growing up, I had a Great-Great-Aunt Mary who new the value of money. She grew up in the depression years, and learned a great many lessons from it… the biggest was the value of a dollar. Mary never owned a car, and would walk everywhere she needed to go. My mother would take her food shopping once a week, and when I was out of school, I would go with her and “help”. Shopping with Mary would drive me (and my short attention span) up the wall. She would buy things only after analyzing the unit price, and making all sorts of comparisons to ensure that she was buying as inexpensively as possible.

After lunch we would go to Friendly’s for lunch. Mary would buy us lunch, and we would all get the happy ending desserts afterwards (they were free). Mary was a coffee drinker (black), and as we left the table, she would scoop up the half-and-half that the waitress would bring for her coffee. Mary would take the half-and-half home and save them, until she had enough to make cream of potato soup with. In all my shopping trips, I never once saw Mary buy half and half, she would always use the little cups from restaurants.

The ultimate story of Mary’s frugality was something that we discovered after her passing. Mary had left very detailed instructions for us (written on the back of val-pac flyers). We were to purchase the cheapest possible casket, and everything that we did was to be done as inexpensively as possible.

Mary was not what we would consider to be poor. Mary was very well invested, and money was not an issue for her. She was not frugal by necessity, she was frugal because she knew the value of money. She was frugal because she had lived through the tough times, and new the importance of saving.

I tell this story because I believe that we are in a place in the history of this country where money has no value for a large part of our population.

Since the end of the great depression this country has experienced a period of amazing growth, and has seen her economy change from a heavy reliance on the blue collar to a huge dependence on the white collar world. And while there is no one that will say that money comes easy these days, we have not been through a period of late where money comes hard. Over the last several decades we have reverted back to a pattern of living that corresponds greatly with the roaring twenties, and we are living with little financial margin.

Why is this?

I think that there are a few reasons for this, but the biggest is our arrogance. In our arrogance, we have started to believe what Madison Avenue tells us… We have started to believe that we DO deserve the luxury automobile, the big house, and the luxury labels. We have started to believe that it does not matter what the price is, we deserve it… and it will all work out.

This attitude has allowed us to minimize the importance of saving money, because after all we should be seizing the day, we deserve it. And so we find ourselves living lives with no financial margins. Over the years the personal savings rate of this country has been in a nose dive, in recent years a negative rate was not uncommon… meaning that people are spending more than they are making en masse.

And so we stretch ourselves thin… buying the big house with a mortgage payment that we can just afford (if nothing happens), buy the car with the shiny name plate (seriously, I deserve a BMW), and the huge flat screen lcd tv (because the 32 inch regular set just doesn’t cut it). We do this while leaving next to nothing in reserve, and then we wonder why we can’t pay our bills when gas prices start creeping up.

If nothing else, those who lived through the great depression came away with an understanding that the future was uncertain, and they needed to prepare for the unexpected. They needed to stash some money away just in case they lost their job, or the economy tanked again. They did not buy the large house just because they could, they bought the house that was practical, the one that did what they needed it to do. They didn’t buy an Escalade because it was popular, they bought a Ford Focus because it was reliable, good on gas, and did what they needed it to do.

We have lost this, and we need to regain it.

Unfortunately, the only way that I can see us becoming a nation that values money… a nation that embraces the idea of thriftiness, is to experience an economic collapse.

It will hurt.

Badly.

But I am convinced that the American people are resilient, and we will bounce back from it smarter, and stronger than ever.