Simple Gifts

With the stock market meltdown this autumn caused in no small part by greed and overregulation, we see a new paradigm emerging in the consumer ranks... non-consumerism. Rather, could people be saving money? Shocking, I know.

The financial "tsunami" hitting our shores came from an abundance of cheap money: low, low interest rates that encourage spending, not saving. Mortgages, car loans, durable goods, could be had at low or zero percent interest rates (not the mortgages) for anyone with a sliver of credit. Mortgages in particular were marketed and sold to anyone, regardless of the health of their pocketbook or future earnings valuations. Pretty soon everyone slept on a bed, in a home, built with debt.

The government began forcing financial institutions to lend money to credit risky individuals in the seventies under the Carter Administration. Under the Clinton administration those laws grew more teeth courtesy of Janet Reno, by threatening to investigate lenders that did not report enough loans to people in certain classes, demographics, or geographies. By forcing "diversity" lending, the government created a false market, fictional lending. Oh the lending was happening alright, but was based on a footing of sand.

Then comes the greed aspect. CEOs and others beholden to boards of directors and stockholders, having billions of dollars in virtually worthless assets, mortgages that once the rates adjust will become impossible for many people to pay back, found a way to make a buck. Repackaging the mortgages and selling derivatives on how they will do. Basically, betting on which groups will be able to pay those loans back, and trying to pass off the bad paper before too many go bust.

But it didn't work. Over-regulation, by creating that false market, did the inverse of what was intended... it allowed home ownership among persons with lower household incomes but then cruelly steals it away with adjusting interest rates when those payments well exceed incomes.

Many of those borrowers were sold their mortgages easily, without enough, and in some cases any vetting of financial data. Then people consolidated their debt by borrowing against the equity in their homes. Pretty soon homes were overvalued. Then those subprime loans began adjusting and WHAM, foreclosures. Foreclosures affect everyone, because when your neighbor has to short sell his house, the value drops, dragging your house value down with it. Empty houses dimish a neighborhood, bringing down property values. Eventually, all those equate into less money into the tax base and less money for schools, public safety, and other municipal cost centers. And once a few people start losing jobs, the dominoes really start to fall.

And Americans had their own greed too... thirst for a new car every few years, flat screen televisions, newest computers, Blackberries, designer handbags, boots, clothing, power tools, cell phones, video games, etc etc etc.

Americans haven't saved any money in the last ten to thirty years. Really, much longer than that. Our current account deficit is at an all time high and will continue to grow, leaving America more and more in debt to China. Now that alone should be classified a national security threat. We do not make all our own automobiles anymore, our own televisions, our own anything, except perhaps food. And why?

Part of the problem are labor unions that look at their employers almost voraciously, preferring to eat an organization alive by adding obscenely to overhead costs while ignoring the big picture. Why have cheap healthcare and big raises, when it means layoffs or possibly closing a facility? There was a time and a place for unions, still is in some cases, but too many use their power abusively and ultimately contribute to the demise of a company, or even an industry. The high cost of labor in the US has entirely undermined the manufacturing might of this country, putting so much in jeopardy, that today nearly every company left in America is looking for a handout. What happened to asking for a 'hand-up?'

During World War II, with so many men at war, women ran the military-industrial complex. Women were on the front lines of building atomic weapons. Families sacrificed, kids collected aluminum foil, women went without pantyhose, for such materials were needed in construction in order to help our boys fighting enemies abroad.

What have Americans been asked to do to help this war? Spend.

Spend your money, buy a tv, here's a stimulous check - go ahead, spend it all in one place. No one has had to sacrifice anything, few have become directly involved in the war effort, with the exception of those families with soldiers serving abroad. There is no connection between the American people and the effort to win the war in Iraq. There is no sense of common purpose, no sense of strength, no sense of doing the right thing, even if it is hard.

So, to American I propose, it is time to simplify. its time to stop chasing the Joneses, time to stop coveting our neighbor's property (like his BMW or his flat screen tv), and start living simply. As the Shaker song says:

Tis a Gift to be Simple
Tis a Gift to be Free
Tis a Gift to Come Down
Where you ought to be
And when you find yourself in a place just right
It will be in the valley of love and delight.

When true simplicity is gained
To bow and to bend we shan't be ashamed
To turn, turn will be our delight
Till by turning, turning we come round right.

I want a flat screen tv too. But I also want my kids to stop watching television and play with their toys more, run outside, and read. Should I buy that tv or pitch the old one I have with the green blotch on the left side of the screen?

The more things we own, the more things own us. Its true. That snowmobile, boat, rv, motorcycle, you-name-it purchased to make life easier, make it more relaxing, just adds stress. Stress to make payments, stress to maintain the machine, stress to store it, start it, use it enough to make it worthwhile. Pretty soon you're spending weekens in the fall putting away the boat, rv, jetski, instead of spending that time with your family or actually relaxing.

I think simplifying is the way to go. My house has minute closets, and by minute I mean microscopic. My daughter's bedroom doesn't even have a closet. I can't own too many clothes, because I just don't have enough room for them. Forces me to only own a few pair of jeans, and replace them when they are worn out. I own a few nice sweaters, jackets, dresses, and about 6 pairs of shoes, almost enough to get me by.

Finding the right balance is hard between all the committments we have in our day to day lives. So we have to reprioritize. Is it better to give our kids everytoy, game, machine or gadget when those things will ultimately take time away from our family? Every year we take our children to the toy store to go Christmas shopping for needy children. The money spent on those children is not spent on my kids, and they know it. But they get such a kick out of doing something good and thinking about someone else. Isn't it simpler to help another than to find more time to maintain the crap you bought for yourself?

So, while I say all this, I will also add that my iPod is charging. Yes, I have one, I love it. But its also simplified my life. No more CDs falling all over the car when I turn. I can take my music everywhere, and clear out some clutter in the process. So, I'm not saying deprive yourself of something useful and possibly transformative, but choose wisely. Make decisions deliberately, live deliberately, and simplify.

This is obviously too long a blog entry and really, too late at night to be writing it. more on simplification in the future. Join the movement, and simplify!