Monday, October 10, 2011

Tough Problems - But We Want Easy Answers

Being lazy is fun, but you can't goof off all the time and expect to succeed.

The other day, I was on a website that allowed comments, and some idiot posted, "We need to get rid of all these immigrants - they are taking away our jobs!"  I was astounded that in this day and age, such simplistic thinking still exists.  Here in Georgia, we hounded many immigrants out of the State, and the result has not been an increase in jobs, but rather crops rotting in the fields.  Most of these immigrants - legal and illegal, are doing jobs that no US-born American will take.

Today, people demand simple answers to our complex problems - complex problems that were brought about by activities that included huge groups of people - including ourselves.  We want the economy to turn around in a hurry, but we don't personally want to do anything on our part to make this happen.

Tax the other guy!  Lay someone else off!  Foreclose on someone else!  Toss out those immigrants!  Go after the Wall Street Fat Cats!  Throw those bums out of office!  Get rid of Obama!  Buy American!  Drill for Oil!  Cut my taxes!  Restrict Imports!  Flat Tax!

And so on....

The problem with these sorts of "solutions" to our problems is that they are not solutions at all.  First, not a one of them has a hope of coming about, in the near future or perhaps even in our lifetime.  So pining for pie-in-the-sky solutions to everyday problems is not really a realistic way of dealing with things.  And yet, so many people would rather blame their personal woes on intangible and intractable external problems than look within.

Why?  Simple.  If you can blame the Trilateral Commission for the fact you are unemployed and living in your Mother's basement, it allows you - enables you - to continue to be a slacker and not even try to look for work.  It is the ultimate easy way out.

How we got to where we are today was the result of weak thinking.  Folks thought - and still think - that you can become wealthy without work, and that everyone could be a millionaire, if only the fat-cat bankers didn't screw everything up.

So, in the 1980's we all invested in Real Estate, and went bankrupt in 1989.  In the 1990's we all invested in "Dot Com" stocks, and went bankrupt.  In the 2000's we all invested in Real Estate again (lacking any real imagination, apparently) and went really bankrupt.  And now in the 2010's, we are all going to invest in Facebook and Twitter and go super bankrupt.

But here's the deal.   There is no free lunch.  There is no simple investment you can make, for a few thousand dollars, that will make you a millionaire.  Yea, once in a while, some stock takes off like a rocket.  But in most cases, it falls back to earth again.  For most of us, the way to wealth is by working hard and saving.  Chances are, more than half your savings are going to be the money you put in, not the money you earn.

But we all want it to be otherwise.   We all want wealth without effort, wealth without work.  And such wealth doesn't exist.

An individual and indeed even a nation is only as wealthy as their productivity.  And people who do not work and do not save will never be wealthy.  And nations that do not work and do not save will be poor as well.

In America, despite the vaunted projections about increased productivity over time, we by and large do not work as hard as people in other countries.  We bitch and moan and whine and text all day long, but most folks simply goof off most of the time.  And a huge portion of our population never works at all, but instead lives off of one or more "entitlement" programs of one kind or another.  And as our population ages, fewer and fewer people work, and more and more relax.

And the flip side of the coin is our savings rate, which in the 2000's actually went negative.  We spent more than we made, and over time, guess what happened?

And no, that was not the fault of "Wall Street Fat Cats" but of all of us.   If you took out a home equity line of credit or refinanced your debts with a second mortgage or a "ReFi" back then, well, you are part of the problem - because you were spending the phantom equity in your home, not money you actually had.

And millions of Americans did just this - convinced that since their house was worth so much, they might was well spend a little and enjoy life.

And THAT is what caused the mortgage meltdown, not Wall Street - plain and simple.  Yes, odious mortgages should not have been offered to homeowners.  But no one put a gun to anyone's head and said to take them.

And the simple answer today that people want is "mortgage adjustments" - knocking tens, if not hundreds of thousands of dollars off the balance of some irresponsible person's mortgage, and letting them keep their house at a steeply discounted price.  A simple answer, to be sure.  But who pays for all that lost money?  You and me, of course.  Which in turn just shifts the burden onto the taxpayer and perpetuates the problem.

We are in for a long, hard slog to get out of this mess.  It will be years, not months, before it turns around.  And simple answers are not the answer.

Americans will have to go back to work - usually for less money and yes, at a reduced standard of living.  But once people start working again, the economy will turn around and wages and the standard of living will increase.

We still are at the stage of denial - thinking our houses are worth a ton and our labor is priceless.  Until more people start to sober up, nothing will change much.

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