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The Open Wounds of Class Warfare

October 12, 2008

The checkout line at the grocery store is generally an uneventful place. I’m usually moving as quickly as I can to get home and rarely hold conversations with anyone. My thoughts are focused squarely on domestic issues at that point, my work concerns have largely vanished. This Thursday was different. The person bagging the groceries in my line, perhaps to the chagrin of the store manager, was speaking in loud tones to anyone willing to listen. His voice could be heard not only in the line I was in but at least three lines in either direction. He was mad, and I mean mad in a way that kind of freaks you out if you are standing in the line in which he is working. He was mad because he had lost a substantial amount of his retirement money in the market free fall, and he was letting anyone within earshot know that he believed the criminals responsible for this loss should face the long arm of the law.

This feeling was echoed in several blog comments I received based on my “Bailout Envy” post and blog reference in an article that ran a few days ago on Yahoo! Finance . For the first time since I started this blog, I decided to reject some comments — their language unfit to print. A reasonable characterization of their position is that I should be ashamed of myself for coming to the defense of Wall Street executives and that the U.S. prison system should be enlarged to handle the inflow of financial services employees who should soon be residing there.

In both the case of the grocery store employee, and the comments (some posted others not) to my blog, the open wounds of class warfare are evident. The anger is palpable. 

Some banking executives deserve to go to jail. I have little doubt that this will occur. At the same time it is so incredibly convenient, so grossly unfair, to blame the entirety of what has happened on banking executives and mortgage brokers. Many of these people, just like you and I, saw and understood what was happening in only a very partial way at best. Perhaps they should have understood, but that is a tall order in such a complicated market. Let the first person who has never failed to mention a defect in the used car they were selling cast the first stone.  

The cold, tough reality here is that these banks would have never been able to profit from these loans if Americans had not, en mass, made a headlong rush into purchases they could not afford, debt they could not handle. It is easy to blame bank executives. It is somewhat harder to blame the people we know in our lives who took out mortgages based on highly speculative bets on home price appreciation, to blame those who used their houses as piggy banks — taking out home equity loans to finance their current consumption. And it is the most difficult of all focus our anger back towards ourselves, our individual failings. We are all to blame, collectively and individually. Our banks, our neighbors, and many of us lived a life of cheap credit and easy money — a life we could not afford. The demon lies not in the guilded towers of Wall Street, but in our ourselves.

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6 comments

  1. Thanks for the post. I can’t begin to express the gratitude I have for living simply…and well beneath my means. Am I still being hit by this? Absolutely. But not because I contributed to it. Thankfully.


  2. We need legislation to put limits on how much people can borrow for home mortgages and credit (remember the simple Assets to Debt Ratio of 25%-30% of income!!) If we do not access the risk, then the “Savers” in America … will continue to pay the price for the LACK OF DISCIPLINE of the Spenders! I am personally a saver and I personally don’t want to keep bailing these people out because they can’t control their spending.


  3. You hear constantly about the near criminal leverage employed by hedge funds and the late Bear and Lehman. What about leverage rates of 20x to actually infinite leverage for those that bought a house with literally 5% down or at times even no money down? The latter making Bear & Lehman look conservative in comparison!


  4. It’s not just getting into debt that is the villain of this piece. The “investment” mentality is just as much of a villain, subtler but no less damaging. As a society, we talk of our “money working for us” as a pretty euphemism for “other people working for our money” gained through interest (usury) or dividends. We happily gamble on the market, always hoping for that next big hit to validate our choice to risk what capital we do have. We are addicted not only to credit (debt), but to the idea of a payday with no work or sacrifice attached to it.

    It’s very much like the cubicle jockey complaining about the executive board and the shareholders and their meddling in his job, while happily pumping money into his 401k. People don’t look at how the two are related.

    Of course, tied to this is the idea that “saving for retirement” actually means “investing in a diverse portfolio”. I’ve said it before, and I’ll keep saying it: Saving is not investing. Investing is not saving. That the two have been made nearly synonymous is a symptom of the investment disease.

    An economy cannot grow indefinitely. What growth an economy does see cannot be exponential indefinitely. (Interest is exponential.) The only way to be assured of long-term viability is to live beneath your means, as individuals and as societies. Living on borrowed time is a recipe for disaster. It’s mathematically assured.


  5. Currently, I am now wishing I spent more money on myself and saved less. But, in reality I have to assume the market will eventually turn around and I will be able to reap some reward for “dollar cost averaging”.


  6. thank you for this great article



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