Coming Depression

[Wildflower]

+1 Well on our way! When our mortgage is done, I won't be too worried about finding a way to make it, just as my debt-free grandparents had no problem weathering the Great Depression.

We are both mortgage free and debt free, but struggling these days on our small fixed income. Realestate taxes, personal property taxes, and insurance on our very modest home, along with medical insurance, car insurance, rising utility rates, gasoline and food prices are making it tough these days.... I was sure we would be fine too when our home was finally paid for and other debt gone, but it has been a shock since DH was forced into an early retirement due to bankruptcy of the company he worked for for years - a shock that it has been more financially difficult than we ever thought. We are frugal to the max, but still it is hard and our small nest egg is losing value everyday due to inflation. I am scared of the future for ourselves, our kids, and grandkids....

I'm just sayin' that there is still LOTS to pay for even if you are mortgage and debt free, and frugal to the max....

[flowerseverywhere]

As others have posted, there is a fear of the "have nots" going after the "haves." Just look at the attitude many have towards public pensions and how ready they are to take them away from teachers and firefighters.

One factor, though is that we are starting at a much different level than our predecessors. Many of us here, that really aren't that old remember days when there were no cell phones (many people had party lines), you had to pay for long distance so you kept it really quick and infrequent, television cable, second car, home computers, internet, all these small appliances. Heck, I know people who grew up without running water and had outhouses. The house I grew up in had two bedrooms and four kids and like most of my friends, we rarely had new clothes, hand-me- downs from siblings and friends, and I recall lots of families that had multi-generations living with them. One black and white TV (that had intermittent programming), one phone connected to the wall, one car for a family of six. Can you imagine that today? Even the grocery stores, strawberries in January, all kinds of convenience foods, fast foods- the list goes on and on from the size of the houses, number of cars, and stuff used to fill these houses. Air conditioning is a new phenomenon. I remember the first fast food restaurant being built when I was a teen, now there are 5 within a few miles, not to mention the Olive Garden, Panera etc chains, and they are not cheap. And medical insurance, you used to pay as you go, but there was no such thing as MRI's, the extensive cancer treatments, all of these medications, transplants, gastric bypass, viagra, etc which all cost big bucks. Of course, many of these changes have been for the great betterment of society and individuals as a whole, but they cost money.

Our expectations are so high now, and that is what I like about reading here. People aren't afraid to be different, to learn to bake their own bread, make do, and be creative. Still, only the most frugal of us here match what they lived like a few generations ago during the depression.

This is not directed at any one person but as a whole to those of us living 2011 developed world lifestyles.

[pinkytoe]

We are seeing a clear fracturing. For the smart and ambitious, times are good and will stay good. The super-smart and super-ambituous now have a worldwide playground to treat as their oyster. But it is a different story for the commoner, if I can borrow and perhaps misuse an English term.

I think this is so true and I see it everywhere I go lately. I traveled back to my hometown this past weekend and some of the fine old neighborhoods are now downtrodden and full of poverty. The money-makers have moved to luxury, gated neighborhoods or posh downtown condos. Their lifestyle escalates while those just getting by slip further behind. We are from that last generation that was able to find steady emplyment without a college degree but will have to seriously downscale our fairly modest lifestyle soon just to hang on as we age. It is kind of like rolling a ball uphill.
I don't think it matters a bit who is in office anymore. Big business runs the world these days.

[freein05]

The worry may be overblown. We spent the month of May in Munich Germany. The friends and relatives we talked to were all worried about the German economy. Germany's unemployment rate is at a 10 year low it is now number 2 in the world in exports. In Munich and other areas of Southern Germany we traveled there was construction going on like crazy.

We were at a bear garden and three men set down with us. One was German, one was from India and had spent the last 5 years working in the US, and the other was Greek. They worked in IT for an American company. They were on a long lunch break while their boss was in Las Vegas for a company meeting. We meet another gut at church he was German his wife was French and they lived in Paris but he was in Munich for a year on special assignment for his company. It is an American company with it's European headquarters in Paris. You most keep in mind wages and benefits in Germany are high but the country seems to be doing good.

[Lainey]

+1
And one final point on the Community Reinvestment Act: it *only* applies to federally chartered banks. Countrywide and other non-federal banks had no such regulation, and they were handing out risky mortgages and repackaging them right and left. Finally, most of the mortgages that went under were not sub-prime, they were from debtors who lost their jobs and/or decided to walk away from underwater mortgages.

So, facts notwithstanding, I'm sure the 2012 campaign will continue to repeat the story about how the CRA was the cause of the U.S. housing and economic crisis - it's like playing whack-a-mole with these urban legends.

[Tenngal]

in 1999 we bought the house in which we now live. At the time, we qualified for around a $250,000 loan and we were not high income. We spent $110,000 and borrowed $72,500 of that amount. It is now paid off. It seems that too many times people have let the mortgage companies or banks tell them what they can afford. We should know better. I knew better, I settled for what I was comfortable with paying off and it is done.
Greed has been all around over the past few years.

[Bronxboy]

Maybe. I think you still run into the same supply/demand issue you do with most things. If you increase the number of auto mechanics, you can expect downward pressure on wages for auto mechanics. There is a fairly fixed amount of auto repair work to be done. Ditto plumbing. Scientists and engineers, on the other hand, have a much more open arena. They aren't playing in a zero sum game.

The ability to repair things is not really a zero-sum game. Many of the things we own are disposed of with much usable life left because of the poor economics of repair. While much of that problem relates to parts cost, a more robust industry of fixing things would result in a more efficient aftermarket parts industry to support it.

As for engineers and scientists, unless someone has a new idea and the ability to bring it to market as an entrepreneur, they have the same problem of finding a job in an existing business as the mechanic.

Statements about engineer and scientist shortages have always left me jumping up and down, yelling "no, no. no!!!".

[Gregg]

then I'll believe that we are going to get serious about our economic problems. I do fault the public for living well beyond their means but in defense of some, no empathy, they bought into the HGTV marketing scheme of flipping, building, and totally thinking that they could afford to live HIGH with very little effort. After all the house became the bank account for many and many thought that it would never end - well, not everyone.

I have compassion for anyone who worked hard to purchase a home that was within their means and has lost it or is upside-down with their mortgage. I do NOT think the government should bail them out somehow. Buying a home was and is still optional as far as I know.

House flipping HGTV style is a business venture. As soon as someone buys a fixer-upper to renovate and resell they became a real estate developer. During the whole history of this country there have been more fortunes created in real estate than any other industry, but it is also very risky for exactly the reasons we are seeing now. Flippers stuck with homes are no different than anyone else who starts a business and finds out there is no market for their product. How sorry would anyone feel for a guy who invested his money in a machine to make liver flavored snow cones and then went broke because he found out there are no buyers? Most of us would just say, "duh" and not spend a lot of time blaming the company that made the machine.

[Mangano's Gold]

The ability to repair things is not really a zero-sum game. Many of the things we own are disposed of with much usable life left because of the poor economics of repair. While much of that problem relates to parts cost, a more robust industry of fixing things would result in a more efficient aftermarket parts industry to support it.

As for engineers and scientists, unless someone has a new idea and the ability to bring it to market as an entrepreneur, they have the same problem of finding a job in an existing business as the mechanic.

Statements about engineer and scientist shortages have always left me jumping up and down, yelling "no, no. no!!!".

I take your point on after-market markets not being fully developed. But to the extent that there are opportunities here they are dwarfed by opportunities presented by science and engineering. We don't even know what's possible in these realms, which is why they are so wide open. I would expect scientists and engineers to have among the lowest unemployment rates, and for that to be the norm as far as the eye can see.

As you allude to, there needs to be both capital and a way to monetize the "new". There is no shortage of the former. And people (and governemtns) of the world are getting better at the latter.

I think the US needs way way more scientists and engineers. And less financiers.

[Gregg]

I think the US needs way way more scientists and engineers. And less financiers.