Moving Forward

No cracks have split the earth outside my home. No doubt my pathetic little investment portfolio has shriveled further, but it was only a lab specimen in a petri dish that I could use to observe the behavior of such things and extrapolate on the lives of larger organisms. It wasn't going to support me in my old age for more than about a week.

If we are to believe the press, someone, somewhere, is being badly hurt by all this. I have this primitive habit of living within my means, so I'm insulated from many of the direct effects of disruptions in the credit and investment sectors. It hits me and others like me through our jobs.

I've wondered for decades how much of our prosperity depended on people living beyond their means. Even if you don't, do you get money from those who do? People who live deeply immersed in their credit capacity feel the effects of tightening credit immediately. They cease to spend. As much as the market needs to be corrected, even fiscally cautious citizens can become collateral damage. The blow may not be fatal or significantly weakening, but it will hurt for a while. In some cases it can push a stable personal or household economy over the brink into a period of credit dependency. Or it can force the debt-averse to pull back even further.

Raise your hand if you were planning to die in debt, laughing at your creditors. It sounds like fun, but it's another selfish way to push problems onto future generations. Lending institutions can seem evil and predatory. Some of them are. But in the same broad category are the lenders who let Joe and Jane Average buy their first home and send little Johnnie and Julie to college. Lenders cover the spectrum from the benevolent credit union to the leg breaking loan shark. Even in the murky middle ground, credit card companies are trying to cover the costs of servicing customers like me, who steadfastly refuse to carry a balance or pay an annual fee, and habitual deadbeats who follow the introductory interest rate from card to card and never really pay off anything.

If you pay a credit addict's tab, it gets them to zero that one time, but it doesn't cure their underlying problem, which is the inability to manage credit. On the other hand, if you don't pay the tab, the problem mushrooms as fees and interest accumulate. You have to get to zero. You have to stop the hemorrhage. Unless you're willing to punish debtors drastically, whether you pay their tab or just forgive it, they're still not going to be able to cough it up themselves. The high rate of return was already lost. Now limited loss is the only gain.