Friday, September 07, 2007

Recession Reality: The Debt Epidemic

Well, we're in one. The job figures just made it worse. And now, as MOM notes, people will ask Why? She says that wealth creation was an illusion. People were just amassing debt. And now, people are looking to blame someone, anyone.

One thing I found very interesting:

The failure to admit what happened and how is very likely to create a toxic social and political environment. As we speak, the financing for smaller businesses is starting to dry up. How bad it will be depends on just how bad the previous lending has been, so the effect isn't fully quantifiable yet. This will be a shocking event to those affected, and a broad range of individuals will be affected. The aftermaths of bubbles always leave the survivors dazed, confused and harboring a sense of injustice. Those who bought into the bubble claim it is everyone else's fault, and those who acted responsibly and suddenly get caught in the undertow created by all the irresponsibility know it is not their fault. Everyone will be looking for the culprit.

Historically speaking, such events are associated with social and political instability and nasty turns in mass psychology. Pogroms, for example. Persecutions. Ejections of minorities.

Democracies have the ability to deal with these events differently, but only if accurate information is disseminated through the society.
This phenomenon closely mirrors the progression of infectious disease. For example, my family is extremely circumspect about using antibiotics. We use them rarely and only when we've given our immune systems months to fight the bug. Hospitals are notoriously irresponsible about hygiene (there is no government enforcement agency about this, if you can believe it), farmers pump their livestock full to the gills with prophylactic antibiotics (that is, the animals don't need them, but they give them in case they are exposed and because they are in such tight quarters that disease spreads so quickly), many people pop antibiotics like candy trying to knock out viri with them and make the bugs stronger because they operate unopposed. In short, most people have bought into the antibiotic bubble. The bubble is popping. The problem is that now the bugs are so strong, that even the people acting responsibly get infected now with the antibiotic resistant strains of bacteria or drug resistant viruses and suffer and die. The fault lies with doctors, hospital hygiene (or lack thereof), ignorant people, promiscuous people, mobility, and farmers. It doesn't matter. Everyone suffers when the bubble bursts.

The only thing that will bring people back to sobriety is a lot of death and destruction. Sensible measures like good hygiene, quarantine, prevention and restraint with medicine will come back into vogue, until the next bout of expedience and ignorance.

Debt has been the antibiotic, the drug of choice, of the money world. People incur it like it's no big deal to finance their colds and coughs and ear aches, when they should have prevented the debt-illness to begin with. So the market is crashing, and will ultimately have a salubrious affect on personal finances, but a lot of people are going to get sick and die in the process. Bankruptcies, fleeing the market and everything else will affect everyone--not just the promiscuous, unclean, and lazy. Let's hope this financial crisis doesn't become an epidemic, although I'm nervous that it already is one but we're just in the silent spread right now.

Now look at this and decide if you think investment homes are a good idea right now. The question: are we at the bottom? Is the epidemic burned out or just started?

2 comments:

Anonymous said...

Now look at this and decide if you think investment homes are a good idea right now.

All the Realtor-Spokesholes still hanging their "HOT REAL ESTATE! BUY NOW! REFI CASH-OUT NOW! DON'T BE LEFT BEHIND!" toilet paper on my doorknob sure think so.

I got caught in the last real estate crash, 10-12 years ago. (And here in SoCal, they happen every 10-12 years.) If this one follows the same pattern, I figure 2-4 years to hit bottom. Right now, everybody's still booking Egyptian River Cruises and waiting for Prices to go UP UP UP again. Just like 1929.

Top song of:
1929 -- Prosperity is Just Around the Corner
1931 -- I Have Five Dollars
1933 -- Brother, Can You Spare a Dime?

sandy said...

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