How well do the people in your immediate circles comprehend the depth of the economic mess?

[El Pinko]

Poll question: How well do the people in your immediate circles comprehend the depth of the economic mess?

I ask this because I am simultaneously stunned at the level of panic in the markets, but also at the level of complacency and denial in the streets.

I see people jumping on the bandwagon to sell, sell sell any investment they have (which is generally not a good thing to do when everybody else is in a panic) as though the whole stock market is going to go to zero and never come back again...


And then I see people around me who are still eating out at Applebee's every other night, charging up useless crap on plastic, and driving gas-guzzling cars, telling me that everything's gonna be fine in a little while.


Now don't get me wrong, I don't have rose-colored glasses on. I saw this all coming in 2005 when I first read in the Chronicle that a full 60% of all new mortgages in the San Francisco Bay area were "exotics", and that while the median house price was nearing $1 mil, area mean incomes were still only about $80K. Something did not add up, and it got me looking into the growing online community of economists and just regular folks trying to get the word out about the speculative bubble and the inevitable collapse that was building. I was already struggling, so I got my family OUT of the overpriced bay area, cut loose the card debt I had been struggling with (and my credit rating with it) and focused on paying off my student loans. I got to work on finding a better-paying job that would be as close to recession-proof as possible once the more frivolous industries started to fold. I got that job this spring, thank god. So this may be part of why I'm not as inclined to panic now - I have been trying to prepare for this for 3 years.

I don't necessarily think this will be another 1930s type recession. Our government certainly has innovative ways of making more debt possible to prop up our economy a few more years, and who knows, they might even start policies that would actually (gasp) create decent paying middle class jobs... EVEN FOR PEOPLE WITHOUT MBAs! You never know!

But it will be bad. At least as bad as the 1981-82 recession. Anyone here old enough to remember that one? 11% unemployment? I remember it because my dad worked for the federal government, and was furloughed without pay for a couple of weeks because Raygun shut down the government in a tantrum to get his tax cuts for the rich and cuts in school lunch programs or whatever passed. It was not a good time.


Anyway, I've rambled here. Are the people around you overreacting and panicking? Hopelessly clueless and in denial? What say you?

[marmar]

1. Barbara Ehrenreich wrote a great column on this:

How Positive Thinking Wrecked the Economy



Greed – and its crafty sibling, speculation – are the designated culprits for the ongoing financial crisis, but another, much admired, habit of mind should get its share of the blame: the delusional optimism of mainstream, all-American, positive thinking. As promoted by Oprah, scores of megachurch pastors, and an endless flow of self-help bestsellers, the idea is to firmly belief that you will get what you want, not only because it will make you feel better to do so, but because thinking things, “visualizing” them – ardently and with concentration – actually makes them happen. You will be able to pay that adjustable rate mortgage or, at the other end of the transaction, turn thousands of bad mortgages into giga-profits, the reasoning goes, if only you truly believe that you can.

Positive thinking is endemic to American culture – from weight loss programs to cancer support groups – and in the last two decades it put down deep roots in the corporate world as well. Everyone knows that you won’t get a job paying more than $15 an hour unless you’re a “positive person” -- doubt-free, uncritical, and smiling—and no one becomes a CEO by issuing warnings of possible disaster. According to a rare skeptic, a Washington-based crisis management consultant I interviewed on the eve of the credit meltdown in 2007, even the magical idea that you can have whatever you truly want has been “viral” in the business culture. All the tomes in airport bookstores’ business sections scream out against “negativity” and advise the reader to be at all times upbeat, optimistic and brimming with confidence—a message companies relentlessly reinforced by treating their white collar employees to manic motivational speakers and revival-like motivational events. The top guys, meanwhile, would go off to get pumped up in exotic locales with the likes of success guru Tony Robbins. Those who still failed to get with the program could be subjected to personal “coaching” or of course, shown to the door.

The same frothy wave of mandatory optimism swept through the once-sober finance industry. On their websites, scores of motivational speakers proudly list companies like Lehman Brothers and Merrill Lynch among their clients. Angelo Mozilo, the former CEO of Countrywide Mortgage whose subprime ventures precipitated the entire crisis, was known for his congenital optimism and described in the Guardian earlier this year as “absurdly upbeat” even as his industry unraveled. No one was psychologically prepared for hard times, when they hit, because, according to the tenets of positive thinking, even to think of trouble is to bring it on. In May, the New York Times reported that Merrill, caught up short, was suddenly trying to “temper the Pollyannas in its ranks,” and force its analysts to occasionally say the word “sell.” .......(more)

The complete piece is at: http://ehrenreich.blogs.com/barbaras_blog/2008/09/how-positive-thinking-wrecked-the-economy.html

[fed_up_mother]

2. Since I'm in a red area, most folks don't want to admit to themselves how bad things are

It would mean that they'd have to blame Bush and the rest of the republicans. They think the democrats were responsible for the fannnie and freddie mess, and that fannie and freddie can't possibly pull the whole country down. They're clueless.

[mrcheerful]

3. The democratic supporters are cutting back and toughing it out waiting for the final nail

Pukes on the other hand, for all their Nanny State talk, Believe that this is just a blip on the screen before the government makes everything safe for their lively hood and trust by using their credit cards and going shopping will save the economy instead of hurting them. Little do they think that maybe it was their use of credit that caused the current Wall street mess, nooooooo that was because democrats forced banks to give loans to the poor, Fox News said so.

They continue to live in the dream world that any day now they will wake up in 1950 land and live the life of little Beaver Cleaver. Never mind there was never a time anything like the 1950 land or the fact that their whole belief of that period in time was based on a TV show, nope it was like that because republicons were in power, though if you ask those who actually lived in the 50's, it wasn't all that great.

[adigal]

4. I agree with this - most Dems I know are worried sick

And most Republicans, including my family, don't see any problem here, except that their 401Ks and 403s are taking a hit. Life goes on. But TJ Maxx is much less crowded.

[Arctic Dave]

5. I voted "A mix of both"

Half of them see the crisis for what it is. A crisis and are planning their finances accordingly. The other half think if "our Sarah" can slay the liberals and open up ANWR every wrong in the world will go away in a blink. Are these people delusional? You betcha.

[CrispyQ]

6. I have one set of friends, who are considerably more well off than I am,

& another who are closer to my economic level.

My well off friends are DINKs (double income, no kids) & they have been making six figure incomes for a long time & are quite well off. I do not consider them wealthy (like my previous boss who is worth approx $120 million), but neither are they middle class. They are upset about their 401k's, but none of them are in danger of losing their house(s), nor do I see them cutting back on their life styles. They are only complaining about their 401k's. They would prefer to continue to work, if for health benefits only, but if any of them lost their job, they would survive - perhaps they would have to cut back their life style at that point, but they wouldn't be in any danger of losing their home. Most of them have families that have money.

My other friends, the ones closer to my economic level are worried. They have been using their home equity as an ATM & now that that is drying up, they are using more credit card debt to get by. They are cutting back on their life styles - saying no to the kids for the first time ever, taking fewer or shorter vacations that are closer to home, even shopping differently. One friend, who has 3 children, says that her shopping habits have changed. Instead of going to the grocery store once every two weeks & buying a standard list of things, she goes a couple of times a week & checks what's in the pantry before going. She makes meals around ingredients she already has, not just whatever sounds good. Still, last week when we went to lunch at a restaurant at the local mall, we walked around & she spent about $50 on impulse purchases, so they aren't doing that badly yet.

I live in an affluent area & it is definitely taking longer for houses to sell & the price may drop a little, but we haven't seen a big decrease in house prices here.