Tuesday, February 24, 2009

Lenten Silence & The Credit Market Freeze

For the last twelve to eighteen months I have had a nagging sensation that I should make our family as self sufficient as possible. That I should work to take us off the grid as much as possible, that we should bring food animals onto our little farm, that we should jettison as much of the flotsam and jetsam of our lives as possible. I’ve never felt myself in the Chicken Little camp, but for some time I’ve just had a nagging feeling that the world may get very ugly very shortly.

Our world is wobbling. When I say our world I’m speaking collectively of the world we all share, and I’m speaking of the micro world of my family. We all know that economic times are challenging just now, but I’ve recently become aware of a trend that frankly has me very concerned.

It’s all about the banks. We have business acquaintances that’ve had their banks call in loans that are not currently due, we have ridiculously qualified clients that can’t get financing, we get nothing but smoke and mirrors from the banks we deal with. “Oh, yes, we have money to loan,” they say, but the money never materializes for these client’s loans.

They don’t have any money to loan.

They are calling in loans that aren’t due.

It is all smoke and mirrors.

As I was discussing my concerns with Hubby last night and we were game planning ways to do right by our clients and not lose our shirt he stopped in mid sentence and said, “What you are describing is a total collapse of our system, if the banking system collapses our entire financial infrastructure collapses, should we pull out some cash and keep it in the safe?”

“Maybe, yea honey, I know it’s extreme, but something’s not right.” “I’ve been dealing with five different banks, Chase, Key, First Federal, Huntington, and Level One Bank, and they all claim to have money to lend and then duck and cover when it’s time to close the loans.” “Something is not right.”

I’m not a trained economist; I’m a small business person with an absurdly qualified clientele. If these people can’t get loans to build, no one can, it’s a simple as that. If no capital is available to those who are extremely qualified whole segments of the economy cease to exist. If whole segments of the economy cease to exist the whole economic infrastructure implodes.

Images of the cold war build up between the US and the USSR keep coming to mind. We were able to outspend them and they collapsed, pretty much ran out of money and imploded. Have we outspent ourselves in our trinkets and trash gorging on material goods? Will our nation’s material gluttony cause us to collapse? Are we out of money?

I pray that what I’m seeing is short term, temporary, that capital will free up and that with a short period of bare bones operation, and a few self financing clients our little company will be well positioned to move forward when the recovery comes, but I’m concerned, I’m very concerned that we as Americans may have binged ourselves into a very deep, dark hole.

I’m logging off the internet for Lent. Off of the MSM sites, off of my favorite blogs, off all of it. I’m going to do my best to fast and pray, to call on the name of the Lord and to prepare my mind and heart for the coming of Jesus this Easter.

May God have mercy on us all.


Anonymous said...

I agree with your concerns, the question is whether money (paper currency) will even have value in the event of a total collpase of our economy? Talk about smoke and mirrors.

Anonymous2 said...

I have the same concern as Anonymous above. I am not convinced that burying cash in mason jars will be effective in the long run because our currency will be worthless. I am also not convinced that a bank is any place for our assets, because like you, I think there's a good chance they'll all crumble.

Anonymous said...

Yes, there are a lot of us thinking this way. And the scary part is that when the complete collapse happens, it will go very fast. Little warning, other than what we see right now. (Look at what just happened in Iceland; it all happened very quickly.)

Pray, fast, and prepare. Not much else we can do at this point.

Anonymous said...

Luke 21:25 “And there will be signs in the sun, in the moon, and in the stars; and on the earth distress of nations, with perplexity, the sea and the waves roaring; 26 men’s hearts failing them from fear and the expectation of those things which are coming on the earth, for the powers of the heavens will be shaken. 27 Then they will see the Son of Man coming in a cloud with power and great glory. 28 Now when these things begin to happen, look up and lift up your heads, because your redemption draws near.”

Katie said...

I'm very concerned with the economy. Prepare for the worst, hope for the best:/

Anonymous said...

As a Canadian who's been online for 11 years (talking to Americans, watching America, visiting America) I'd like to make a few comments about what I see as the causes and effects of the current economic situation.
1. A major cause of the economic troubles now is a corporate culture that rewards short term thinking - bonuses based on quarterly returns for example - an action with a large short term benefit may not be in the company's best long term interests. Rev'ing an engine makes a really cool noise and makes you go fast for a while, but it burns out the engine. The economic engine is burnt out.
2. I realise that watching America through the Internet selects for a certain level of affluence, but "your" idea of comfort is very different than most of the rest of the world's - even a Canadian's! - idea of comfort! When a blogger posts, "We're struggling financially" then posts a picture of her house and neighbourhood, or talks about the great decorating find at the Pottery Barn or wherever, well, it's hard to be sympathetic. It's hard not to think that you don't actually understand what struggling is, and this inability to understand just how "rich" you are has led you into this mess.
3. The affluence gap. A "rich" Canadian may not be as "rich" as an American, but our "poor" aren't as poor either. I have traveled in the States, as has my dh on business and the evidence is very easy to spot from the window of a plane or the side of the highway. The gap between rich and poor in the US is extremely disturbing. Again, I think a great many Americans just don't understand and appreciate just how "rich" you are.
4. And may I say? This rev'ing of the economic engine to get more and have more, taking out mortgages for more than the house is worth in the expectation that you can sell it for more later, credit ratios of 30:1, and so on? Yes, this is what America did, and yes, you're taking the rest of the world down with you. I think that should be as much, if not more, of a moral concern as the workers in your company (I applaud your concern for them BTW) and your pondering the "deep dark hole that America has binged herself into"
Obviously, I'm going to post this as Anonymous, but I look forward to the comments on my comment.

SursumCorda said...

It's a little odd, leaving a comment that the writer of the original article won't read for over a month, but since the Anonymous Canadian invited comments, I can't resist:

1. You are 100% right. It's not the only cause of the problems, but certainly a major factor. Rewarding short-term thinking is...well, short-term thinking. Rather than the engine analogy, though, I'd compare it to over-fishing the oyster beds, and hope we haven't taken the last oyster.

2. I agree that we are all, even the poorest American, much richer than we think. And we have, indeed, become accustomed to a ridiculous level of luxury. But in defense of the examples you mention, it is not impossible to have a large, beautiful house and struggle financially, even if you didn't overextend yourself in buying it. Very few people can buy any house and not be dependent on a job to provide income to pay the taxes, let alone a mortgage. You might say they could sell the house, but probably not without a tremendous loss, and maybe not even then in this market. And you can buy "great decorating" items at places like the Pottery Barn for less than a meal at McDonalds.

3. True again -- about problems with the large gap, I mean; I don't know enough about Canada, unfortunately, to compare. But I think there are too many causal factors to make a country-to-country comparison particularly meaningful.

4. Yes, there was a lot of stupidity and crime to go around, and I'm glad to see someone blaming the folks who knowingly bought more house than they could afford as well as the banks that financed them. But I don't buy the idea that "we" are bringing the whole world down. A former Canadian Prime Minister (sorry I don't remember which one, but I think the quote is reasonably close to what he said) once said that bordering the United States was like sleeping with an elephant: when the elephant rolls over, the whole bed shakes. With the world as interconnected as it is, Canada isn't the only country affected, and the U.S. economy -- whether up or down -- makes waves that are felt worldwide. But we have no monopoly on greed and stupidity -- even the careful Swiss were taken in by Bernie Madoff, and the desire to improve one's lot is a universal trait.

What strikes me most about the whole situation -- and here I'll show my age -- is that once upon a time we knew the value of frugality, thrift, savings, and living within our means. Many people still do, but clearly not enough. How did we fail to pass this on? I think it all goes back to point #1 -- the rewards for short-term thinking, not just corporately, but all over.

Anonymous said...

Yes, perhaps a little odd, but the first blog that I've come across that had a topic that seemed appropriate for the comments that I've wanted to make somewhere for a very long time. And blog-visitors can always have a conversation while blog-host is away.
PM Pierre Trudeau said that sharing a continent with the US is like living with an elephant, when the US sneezes, we get a cold. Perhaps I am generalizing, or single-cause blaming just a bit too much, but I think the US's prominence in the world (deserved or not) confers more responsibility than privilege, and a large part of the responsibility for this mess is US spending habits: governmental, corporate and personal.
It's hard to 'see' an acceptance of that global responsibility in stimulus bills requiring US-only purchasing (for example).
As for your example of a purchase from Pottery Barn costing less than a meal at MacDonald's - what is the cost of a meal at MacDonald's? What are you doing eating there anyway? when a sandwich from home takes as much time and costs so much less for more nutritional value?! (Just as an aside)

DH and I are self-employed,and have not yet financially recovered from the dot.com crash of 2001. There was some light at the end of that tunnel though, until this fall...it's all a little hard to take.
I'll show my age too - I was raised in the era when saving, frugality and living within our means meant something. When a budget meant 'not now', instead of 'we'll get it on credit.' Canadian Anonymous

SursumCorda said...

Sorry, Canadian Anonymous, I didn't mean to give the impression that we eat at McDonald's. I did eat a chicken sandwich there about a year ago when I had a coupon for a free one, and I was surprised that it was a pretty decent sandwich. But, as you point out, I can (and do) make better, cheaper, sandwiches at home. Why, I'm so old that our kids and my husband always took homemade lunches to school/work! I used McDonald's to make my point because, as far as I can tell, no one in the U.S. considers himself too poor to eat there. But my point may have been wrong, anyway, since I confused the Pottery Barn, which I do not know, with Old Time Pottery, which I think of as a place to buy cheap, though sometimes useful, junk.

Thanks for identifying, and correcting, the Trudeau quote. I was sure it had something to do with the elephant rolling over...but having already admitted my age I can admit a sometimes faulty memory. :)

You say this is "the first blog that I've come across that had a topic that seemed appropriate for the comments that I've wanted to make somewhere for a very long time." If it's not rude to hijack you, I'd love for you to come over to my blog and continue the conversation. My readership is not large (okay, it's very small), but includes differing nationalities as well as a range of ages, life situations, and political opinions. One thing they nearly all have in common, however, is that they value saving, frugality and living within their means, and agree that a budget means "not now" instead of "we'll get it on credit."

eulogos said...

I did go through quite a long period in which my family was too poor to eat at McDonalds. In 1987 we had 8 children and a total income for the year of $12,000. We also got about $3000 in food stamps. We heated, cooked, and even heated water, with wood. The little kids had baths in a tub on the kitchen floor next to the wood stove. I gardened, and canned on the wood stove. It was hard work to keep those three non-airtight stoves going, and hard even in the summer to have to build a fire to cook a meal. Hard to combine it with modern life. Drive a kid to soccer, the fire goes out. Go pick him up, the fire goes out again. Both adults away from home in the middle of winter for five or six hours, and the fires are just about out and the house temperature is just above freezing. Also difficult for children when their lifestyle is so different from that of all their friends. Difficult when the parish has a fish fry, and the pastor says, "We don't do this to earn money, we do this for parish fellowship" but your family can't afford to attend, and when you tell him this he says, perplexed, "But it would be cheaper than taking your kids to McDonalds." And you have to tell him, "My children have never been to McDonalds. Not even once."

Since then I have become a nurse and then a bureaucrat, and my husband works for the post office, so we have a lot more money. When we were poor, we had no debt. No one would lend us any money!
But as we started to have more, we started to think things like, "It really would be safer to replace this cracked chimney" and began to incur debt. Also, our kids reached college age, and rather than being poor enough to receive complete scholarships, we discovered that colleges thought we could come up with immense sums of money each year...more than we had even earned in a year a few years back. One winds up in financial difficulties even when one is much less poor.

Like everyone, I wish I knew if this is just alarmist talk, or if I really should buy gold with the little (less and less) money in my employee pretax stock buying plan.
My husband says if you think you have to buy gold, you had better buy a gun also, because if things fall apart to that point, you will need it to keep someone from taking it from you by force.

Susan Peterson

Susan Peterson