I haven’t written much about the financial mess in the U.S., mostly because I’ve just been too focused on other things to take the time to write a coherent post. I could’t even begin to address everything that is going on.
I’m sure that it will come as no surprise to anyone who has been reading this blog or my previous blog over the past three years that I’m not at all surprised by what is going on. I’ve discussed the housing bubble a few times starting in August 2005 and April 2006. I discussed the mortgage crisis and why it might be a bad time to buy a house back in May 2007. In July 2008 I even went out on a limb and said that I think we were headed for a depression.
Last night when we went to bed, David was feeling rather stressed about the whole thing. I felt a little anxious about it, but more than anything I felt fascinated. Fascinated because something I had been reading about and pondering for over three years was unfolding before my eyes. Perhaps it is that morbid fascination akin to slowing down to look at a wreck on the highway, but I don’t know how else to describe it.
There isn’t much I’m going to say about the whole thing except that there is no way – NO WAY – TPTB (the powers that be) didn’t see this coming. They saw it coming and did nothing to deal with it until they had absolutely no choice. I’ve been reading The Housing Bubble Blog for well over three years now and those people who discuss over there had this thing NAILED. I mean completely NAILED. Even I understood what was going on and I am not a brilliant person at all when it comes to finance. And I’m not just talking about the housing bubble. They have nailed the whole financial mess.
The fact that a group of people on a blog had this thing all figured out a couple of years ago is what I find so fascinating. They have discussed at length over and over and over again what was happening, how it would play out, etc. They perhaps didn’t have every detail figured out such as dates, but the general unwinding that would occur and huge financial fallout in our economy – absolutely nailed.
I have no idea what will happen from this point on. For one thing, TPTB keep changing the rules and acting in many irrational ways. But this is way bigger than can be controlled and manipulated by any one man or small group of people in power. They can keep fiddling with things, but, in my opinion, they are only delaying the inevitable.
Sorry to sound so gloom and doom. I actually am not as down about this as I might have expected. I actually feel relief that it is finally “happening” so it can happen and we can get on with moving forward. Bring it on so we can start moving in a new direction.
I thought I would just open up a discussion here for people to vent, talk, whatever. My only request is that you vent respectfully and in a manner worthy of the name of Christ. As David says, Jesus cursed the fig tree so anger isn’t wrong. It just needs to be expressed appropriately. And remember that God is still on His throne. None of this is any surprise to Him.
So what is your take on things? What are you seeing where you live? How are people around you responding? How are you doing?
I should be getting ready for a doctor’s appointment but I had to comment.
We’ve seen this coming for years now but we weren’t sure how it would play out. A friend of mine called me this week and her opening question was to ask me if it was strange seeing everything in the headlines we’ve thought might happen. 😯
I was very tense last night but I felt God was telling me I need to make certain to spend more time with Him and in His Word and less watching Fox Business News.
I truly believe we who have had to be as frugal as possible are far better prepared to deal with this than those who have been riding high on prosperity for many years now. We have the experience already to live on less.
At the same time, He is our Provider and in the midst of a national depression or recession, He has ways to meet our every need.
Keep up the great writing!
Brenda – What has been interesting for us the past few weeks is while all of this has been unfolding, we are busier than we have ever been with a more diverse client base than we’ve ever had. During the boom time of the previous few years, we could not scrape together enough work. Now we have so much work to do that our bigger concern is keeping up with it. God is definitely sovereign over all events both national and personal.
I think one of the “advantages” of not having anything much right now is that we don’t have much to lose. We moved David’s 401k into a money market option several months ago so it is just sitting there, collecting a pittance of interest, but it isn’t tanking.
I do feel sincerely sorry for those people who have been honest all along and are going to lose a great deal due to the greed of others.
And I’m glad I’m not one of those CEOs or upper level management. After what happened in India and with the growing anger in this country, I suspect they are feeling more than a bit of anxiety over the potential for a backlash against them. 😯
Sallie, like you my home business is booming right now. August and September were the busiest months I’ve had in over 14 years, and I’ve literally been turning away new clients and more work. Go figure. I think it’s one reason I’ve been relatively sanguine about unfolding events up to this point. On the TV and Internet I’m hearing about impending disaster, yet in my own little “bubble” I’m feeling more secure.
Best wishes,
Laura
We have been watching and waiting for the other shoe to drop. Now, there’s talk of bailing out the automakers. Like Sallie, we’ve been keeping in touch with the housing bubble (family in FL) for years, so we weren’t at all surprised by the current events.
Like Brenda, we have used our finances very cautiously. Although my husband makes a good living compared to most, we live on about 58% of his income, and invest the rest (well, we also tithe a large percent). We’ve been big savers since the day we married. However, we also started putting away some of our income in other areas, so I guess you can say we diversified very early on. That has been our life raft. So, while the economy may be taking a nose dive, my confidence in God as our provider has become so strong that I know whatever the PTB do, God will continue to provide for us since HE is directing our lives, not the government. I know some people would answer that with ‘but if everything fails you won’t have anything’….I’m not sticking my head in the sand. What I’m saying is that God is bigger than all of this. He knew me when I was being fashioned in the inner most portions of my Mother’s womb. He can certainly keep a roof over our head, and put food on our plates.
Having said all that, I’m still angry at the TPB. The greedy people at the top of these institutions knowingly risked unsecured debt (high-interest credit cards and mortgages) to fill their pockets, playing the time old game of gambling with other people’s money. Top add to that, during the Clinton administration there were numerous bills introduced to put constraints on Fannie Mae/Fannie Mac. Did they vote to put those in place??? NO! 😡 As I have seen in the past – they will reap what they have sewn. Somehow, someway. You cannot break God’s Word and go unpunished.
I hate to say that I’ve been worrying about this for over a year now, and I have tried to get my husband to start thinking about our finances and all that for some time now. (I was letting him “lead”, but he is a procrastinator. And I fear this will catch up with us somehow because I waited on him. I’ve told him recently that if we didn’t do an updated budget by the end of two weeks from now, I would be taking over the finances and doing it all myself. Of course, this is offensive to him and many others, I know. But I have 5 small mouths to feed, and I cannot sit and wait.)
I know we’re not supposed to worry as Christians. The worry is a result of not pro-actively doing something larger to prevent major financial problems in our family. I have been proactive as far as living with less and trying to be more economical in supplying the house with food, basics, clothing, etc. I believe God wants us to be proactive and prepared. My husband has not made it a priority to think about these things.
Outside of that, my husband did get a raise this past week. How weird is that? He works for a large product manufacturer. With gas and product prices rising, that will help out for basics and diapers for our youngest three.
We are eating out less (once a week at a cheap to moderate expense restaurant), buying “used” and “on sale” clothing if we can’t find hand-me-downs. I do not worry about if my clothes are trendy or new – never have anyway. I only run errands once a week and drive nowhere except to the school down the street and back. Christmas gift budget is smaller. And we may not do a Fall/Winter family vacation. I did not donate a dime to the school fundraiser preferring instead to continue focusing on church tithing and missions. That’s the sort of thing we’re doing.
We do have some debt we are paying off along with the house payments and one vehicle. I use only cash, and we sock away $$$ for educations , retirement and investments (been doing that since we were first married). I’d feel better if we had 0 debt and owned that 2nd car with no payments.
Ten years ago, we bought our first house. We easily made our payments, and loved that little house and neighborhood. . . it was about a year after we moved in that we observed something odd in that neighborhood. Lots of “questionable” families began to move in around us. One home was occupied by at least three families (never could tell – people coming and going). Another seemed to have nighttime activities going on. . . etc. Foreclosures started. And we kept wondering how these folks could afford housing in our neighborhood – we were two income (engineer and architect).
Honestly, I think it’s a sin what the individuals taking advantage of the system did/are doing to the honest, hardworking folks. My debt is a sin, and I’m trying to get it gone. . . so I can help better take care of those who truly need our aid, for God’s ministry. I am angry at the lazy and greedy people in our society, and I have to fight bitterness when I think my children may have to increasingly shoulder these burdens of their peers brought up to take and not give.
Jesus didn’t promise things would get better before He returned. I try to cling to the peace He gives us.
But I’m determined to become more self-sufficient and prepared so I can help myself and others.
I’m rather disturbed by the idea that none of the PTB wanted to have a resession during their term in office (might not get re-elected) so they wontonly set the country up for a Depression! any student of history or economics should have seen this coming! I think those who have padded their own bank accounts at the expense of others, should be the ones to feel the pinch of their own unwise investments. the taxpayer should not have to subsidize the bank officials who allowed such risky behavior.
I guess the part that bugs me the most is that those most responsible for this mess will probably be the least affected by it.
MrsN
I read a housing blog too and it was amazing the precision with which those guys (and some gals) predicted all of this. There’s no way TBTB didn’t know.
I am angry beyond belief over it all. I also don’t believe the number they are floating (700 billion). The defaulted mortages only total 100 billion and even then there are still houses attached to them worth something.
If we couldn’t trust TPTB to keep us out of this mess, why are we supposed to give them a 700 billion dollar blank check to get us out?
Give us all of your money so you don’t lose all your money. Riiight.
Just the thought, the mere thought, of TPTB talking about 700 billion dollars causes me to break out in itchy hives (okay, just one and it might be a bug bite).
I am really scared about this.
I do believe that God is in control. I’ve no doubt about that at all.
But putting the ones who created this mess in charge of getting us out of it?
That is insanity.
And from what I know about insanity, it is incapable of dealing with reason.
Man OH Man I am so ready for Jesus to come back!
Sallie, did you see Bill Moyer’s last night on PBS? His Journal was right on the mark with his guest from Boston U. Go check it out and watch it, it was awesome and sheds some light on all of this for the layperson like me.
My dad is a banker and rural appraiser. He told me years ago not to get a sub-prime mortgage and why. He’s a smart, cautious, frugal, guy, but he’s not one of TPTB. It doesn’t take a lot of to figure out why these mortgage schemes didn’t work out. It’s basic economics.
I am furious about the bailout. I emailed all my congresspeople, and I encourage you to do the same. The thing that makes me even more angry is that, even though 80% of Americans are opposed to the bailout, and even though Congress is being flooded with angry phone calls, they’re still probably going through with it, scared that somebody will blame them if they don’t throw money at the problem.
I’m angry, but I don’t think I’m worried. We’ve been trying to save money and live frugally for awhile. My husband has a pretty recession proof job in law enforcement. We actually just bought our first house after years of saving for a down payment. We have good credit, and that has helped us. Ironically, Freddie and Fannie getting bailed out made mortgage rates go down to their lowest level since 2005, and we locked in at that. =) And our area has not seen much of a housing slump. There is fierce competition for affordable homes. Large, luxury houses and new construction are sitting on the market, but not average, middle class homes in town.
Maybe my home’s value will go down. Maybe it won’t. We’re planning to stay in it for the long haul as a home, not as something to flip. Because some are less able to buy, rents are going up around here. We will be paying less per month in mortgage for this house than we are in rent at a much smaller place in a less desirable location. We prayed long and hard about it, and God seems to be blessing this decision to buy. This will be our first home. So we are, and only God knows exactly how it will all turn out.
So… this doesn’t look good, but I think that we can ride it out. God’s totally in control, anyway. I’m just glad that we have had good financial counsel from our families and good training in finances. We are so thankful for that! We’re still hurt by the bad financial choices of others (rising food, gas, goods prices), but I know it would be a lot worse if we’d gotten into revolving debt or a subprime mortgage ourselves.
We, too, saw this coming. My husband was in home loans for a number of years, and it got to the point where the price of the average home in our area far exceeded the ability of the average household income in our area to afford it. Part of this was that folks from the Los Angeles County area actually moved here to “afford” homes and commute up to two hours each direction to get to work.
I wonder how that commute is looking now?
Anyhow, we tried to watch the signs and prepare as best we could. This included selling our home (well, that was a financial decision, but it worked in our favor in the long run) and renting throughout the bubble build-up. The housing market probably hasn’t hit absolute bottom, but we did pick up a house this summer at an auction for well under the appraised value. It also came with a mortgage lower than our rent, and enough land for us to attempt to raise some of our own food as a way of educating our children and lowering our grocery bills at the same time.
Am I talking too much? I actually like dicussing this subject, even though it is sort of depressing.
Anyhow, one thing we’ve been talking about with friends and families is how the numbers don’t seem to add up. After all, there were really only three years of really terrible mortgages given out. Most of what I have read says that about 20% of those mortgages are in jeapordy. If that is the case, it seems like $700 billion dollars for a bailout is a bit much. Perhaps $200 billion, but not seven. It makes me think that there are other things going on here that we aren’t being told. Are they also throwing in bad credit cards and student loans or something?
I left a long comment and forgot to add the numbers so it was eaten 🙂
Here is what I said in a very quick nutshell: Don’t assume that folks who are down on their luck right now have either made horrible decisions or are just not frugal enough.
Sometimes bad things happen to good people. For us, we had a child with special needs. Medical bills pretty much put us on a bankrupt slope. We made too much money for help (we made about $50K at the time) so even though my child could get SSDI and medicaid for her only, we were denied because of salary caps. We have decent private insurance, but $40 copays everytime we got to the doctor and therapy have added up. We averaged 3-5 therapy/doc appointments A WEEK for the first few years of her life. Do the math. We’re still paying on it.
Then, my husband’s job is in the automotive industry. He builds school buses for a living. He is hardly working….school systems and municipalities are not buying new buses b/c their entire transportation budget is for fuel now and there is nothing left over.
We’ve ALWAYS been frugal. Sometimes being frugal has nothing to do with it. I know Christians don’t like to talk about luck. I don’t know how else to describe it, really. Sometimes you have no control over what happens to you. I don’t think God waved a magic wand and punished us because we had a child with profound medical needs and a job that went south. We didn’t buy a McMansion, and we didn’t blow money on credit cards (don’t even have one!). So please, do not assume everyone who is hurting is hurting because they’ve done it to themselves.
So, i chose to give up homeschooling and go back to work teaching school. I put my 3 kids in the “dreaded” public school system. I am helping out.
Uh, just in case the Normal Middle thought I was saying that people are only in trouble because of their bad choices… I definitely wasn’t. There are tough things that life hands us that aren’t our faults. The bad choices of others lead to a slumping economy that leads to the job losses of responsible people. I was just remarking that it could be worse for me and others if someone hadn’t given me good financial advice in the past, and for that, I am grateful.
Ellen, I wasn’t singling anyone out. I know all too well how easy it is for anyone to slip into blame when stuff like this happens. Trust me, i’ve done my fair share of staring down my nose and assuming people are in a mess because they asked for it in the first place. I guess God humbled me and my judgement because I am learning first hand it isn’t always in your control….
I promise I wasn’t saying what I said above directed at you or your comment. It was an “in general” observation.
Be blessed!
I just wanted to add here that this is a global crisis, not just American. I live in the UK, and because of global fiscal policies and the collapse of the sub-prime market in the States, our banks here are in crisis too. Our insurance companies, pension funds, banks all shared the risks and rewards of the US sub-prime market, and are consequently taking the loss as well. The bottom has fallen out of our housing markets too, and jobs are going. Energy and food prices are through the roof.
There have been 2 banks nationalised here so far and other mergers as well to keep them afloat. Europe is the same. The huge issue is the drying up of credit. I don’t think many realise that most companies , if not all, operate on a credit line which, even though the companies are healthy and doing well, is drying up. Gone. This is potentially disastrous, as they may not be able to meet their payrolls. That means that the money supply could just stop. So it doesn’t really matter how safe your job is, the money, at the end of the day may just not be there on pay day. No-one trusts anyone else in the finance world, not right now, and that is why the sums needed are so massive.
It all goes back to credit in the end. And how we learn to handle money from childhood on. There have to be huge changes in everyone’s thinking in the days to come. The soaring costs to heat our homes, fill our cars, feed our families will mean that no-one will be able to avoid looking at their finances with very great care. I just hope that we all learn from our mistakes.
Sallie,
I’m a little late in responding to this conversation, I know. But just this weekend it dawned on me that we have entered into the Fourth Turning. You mentioned this book a while ago and I was so intrigued by it that I bought the book. Although it was written in the mid-90’s, I feel it is still relevant. As I was reading the book, I really felt that we had not had the crisis that would propel our society into the Fourth Turning. I don’t think 9/11 was it. But the crash we are seeing worldwide just may be the event needed to turn our society around.
Five years ago we bought our house from my parents. They did not owe anything on the house and only wanted the price to cover the cost of the condo they were buying. The house appraised at WAY above their asking price. Since it was a private exchange, the banks really didn’t know what we were actually paying. Our credit score is very high, my husband had a very secure job and so did I. We were very aggressively pursued by several banks to finance with those risky loans that we now know helped cause this disaster. We did not fall for that scheme. In fact we financed through my husband’s credit union at a fixed rate. Our monthly payment was a little higher, but at least it was secure. I know of others who decided to take the “easy” way and make low payments at first. Oh dear, I see the results of this every day.
I am a home health nurse. My community has been economically depressed since the 1970s when manufacturing left. We are in the rust belt for sure. I see first hand how tough times are for people. I see people like NormalMiddle everyday. My heart breaks for the tough choices they have to make daily. And this was BEFORE this latest economic mess. I try very hard not to bring my work home, but I can’t help thinking about how these poor folks are going to survive. Contributions to charitable organizations are down in my area because money is tight everywhere. The usual resources for these people are drying up. It is so very, very sad.
I want to end this ramble by relating to you something that one of my patients was sharing with me. This gentlemen is 92 yrs old and crippled with Parkinsons, he can hardly carry on a conversation because of his weakness. But his mind is sharp as a tack. He was telling me about how life was with his family when he was a youth during the Great Depression. He knew times were tough and money was tight, but he said that no one really knew it was “The Great Depression” because this was the way everyone lived. He and his brother shared a pair of shoes. Whoever had to work in town that day is who got to wear the shoes. His mother worked at what he called “grunt” work for others while his father tried desperately to find work. They lived on the edge of town and had chickens and a cow, they planted a garden and lived off of food they grew. They rarely had meat to eat. And the point that he made that stuck with me the most was that no one, NO ONE, expected the government to bail them out. He sees that today’s crisis, while not nearly as drastic as the Great Depression was (yet), has everyone EXPECTING a government bail-out ,or handout as he put it. He doesn’t think our grandchildren will really know what it is like to live in a republic. He thinks our population has a very definite socialist mindset and that is where our country is heading. That really gave me a lot of things to think about.
Brandy said:
LOL! I know. I am the same way. I find this all so fascinating. I read stuff before I go to bed and David doesn’t understand how I can read these depressing blogs and websites before I go to bed and fall asleep as soon as my head hits the pillow. 😆
So many great comments above that I can’t even do justice in responding to each one. Thanks for such thoughtful comments, ladies!