Falling apart

Ready for a downer? I'm in a bit of a funk here about the economy so I'm rambling on...

It feels, to me, like things are falling apart in our not-very-stable world. Though surely, at my age, I should be less 'reactionary' to bad news - specifically financial downturn and political news - I'm just not. I've lived through a lot, yes. I started my adult life in the middle of a recession and have lived through 6 of them since. Interest rates have fluctuated widely, inflation was rampant in the 70s and fixed mortgage rates during that time were over 18%. The top federal tax rate was once 70% and was only cut to 28% in the early 80s. Even with that retrospective though, I'm not feeling better.

First class postage was $.08 in the early 70's. (Computers don't even have a 'cent' sign on their keyboards now - the penny is so irrelevant!) Compound annual investment returns during the 80s and 90s were 17-18% but since 2000 have been minus 1.1%. We went from a record federal surplus of $236B to a record deficit of $412B in just a few years. (And yes, that is in 'funny money' but still...) The average wage in the 70s was about $10,000 while the average home price was about $27,000. Today the average wage is about $40,000 while home prices average $227,000. We earn 4 times as much, but pay over 8 times as much for our homes? (And I just don't live in a place where you could actually get a home for even that amount of money!) No wonder people asked for loans they had no hope of repaying. But why did they get approved for them?

My standard of living is going down, when I expected it to just keep going up. And I'm not happy about it.

I am close enough to retirement to wonder - no, panic is really the word here - about the future. Things have changed in the financial markets. Changes in the way the government regulates businesses, in the way businesses measure and report their earnings, in the way corporate boards oversee, and corporate management manages those businesses, in the way accounting is done, in the way we invest, in who invests, in what we invest for... all have made The Game different. The "changes" list goes on and on. How could it be 'business as usual?' How could 'trends' still apply as they did years ago? There is nothing organic about financial markets - so in a very real sense there are no laws of 'natural cycles' that actually apply, despite what we are being told by the experts. And guess what - Inverted Laws of Physics don't apply either: What goes down doesn't necessarily have to go back up again. (OK - that really isn't the physics law, but talk to someone trying to convince you to invest money in something and you'd have to conclude that it is.)

I'm not sure which is worse: thinking that the banks didn't really know that the mortgages they were issuing were worthless, or that they knew and decided the trade-off for immediate profits was worth the collapse of the economy later on. I'm sure a bunch of money went into someone's pockets - like the many-many-million-dollar bonuses paid to the top management at Bear Stearns last year - but so much money went back out of many-many-million-people's bank accounts and home equity at the same time. I keep hearing reassurances that the economy is so huge that it will weather big-impact crises like Enron, and even mortgage melt-downs. Really? The big economy might, but what about the little people? There's lots of us down here...

So what I really want to know is this: who is profiting now? Into whose pockets did my retirement savings go?

And somehow the probable answer, that it didn't go anywhere, it just evaporated, is not very comforting. Because at the end of the day the stuff in my grocery cart will still cost me over $200 when just a couple of years ago it cost only $100. And I'll fill my gas tank for twice what it cost me 3 years ago as well. Did our salaries keep up? (Well, by 'our' I didn't mean the CEO of Bear Stearns.)

I'm starting a new Conspiracy Theory: We were foolish to think, when on a large scale we started to save for own retirements, that 'they' would really let us keep it after we saved it. We should have suspected that once that wealth was created by all the little people, it simply HAD to be stolen away from us by the big ones. To think that I, of all people, could come to such a conclusion... well, it defies probability.

I'm angry and irrational. I'm discouraged.

I'm not going to do well as a poor person.

(And I don't even feel better now, having said so.)