Can all this bad really be good?
Things are tough. It seems that “how bad things are” is the theme of nearly every newscast and talk show. I even spend much of my time on television talking about our economic woes. The economy has gone to hell and the stock market sucks and foreclosures, layoffs and unemployment rates are soaring. I get it – it’s bad. But let’s consider this question: Can a bad economy, layoffs, bailouts, foreclosures, bank failures, and government corruption really be a good thing? Absolutely.
Let’s look at the positive impact this economic downturn will eventually have on the credit industry. Just think, we are going to reach the place where credit is going to be given based on a person’s ability to repay the loan. Loan applications will have to be accurate. The amount loaned will be based on the real value of the asset instead of some inflated amount. A definite good thing.
Let’s consider work. Yep, good old-fashioned work. That thing you used to do in order to keep your job but forgot to do when things were good. That thing that got overlooked by your boss and your employer because they weren’t working too hard either. Now, people are afraid of losing their jobs because there are no other jobs to be had, therefore they are working harder at keeping their job. They are showing up on time, not slacking off, working harder, being nicer to customers and coworkers. Again, this is a good thing! Customers will benefit and the employer will actually get the work they are paying for. Hooray!
Companies are going to have to work harder to get customers and will have to serve them better in order to survive. Survival of the fittest is going to force us all to become more fit in the way we do business. The companies that don’t serve their customers well will go away. Good riddance I say, as we can all do without companies who provide bad service.
Corruption in our government may force us to look harder and pay more attention to the people we are electing.
Bailouts, while they make us angry, make us think about our core values of fairness and justice. They will also make us ask more questions and demand more from our elected officials. We have needed more interest in where our money was going for a long time and these undeserved bailouts are creating some well-deserved indignation that will hopefully trickle down to the voting booth. The more citizen involvement we have in our government, the better our government will be.
Foreclosures will force us to think before we buy things we can’t afford.
Let’s get personal. With the high cost of eating out, most budgets simply can’t afford the luxury of going out to a restaurant and people are going to need to stay home to eat. The same applies to going to the movies and to other various sources of outside entertainment. That means that families can’t afford to spend money for entertainment so they are going to be forced to stay home and communicate with each other. They are going to have to learn to cook and eat together and talk to each other. This will have a positive effect on the family in many ways.
One of the biggest positives I see coming out of all this negative is that people now have a better handle on their finances than in the past. Whether the news is good or bad, people are beginning to take stock of where they are financially. That is something few people were paying any attention to before this mess. They didn’t have a clue who they owed or how much they owed. Now, probably for the first time, people know where they are. They are saving more, spending less, and not going in debt as much as they were. They are learning to live on what they earn instead of spending more than they earn and financing a lifestyle they couldn’t afford with credit cards. If they don’t have the money, they aren’t willing to go in debt to get it and they aren’t buying it. All good things. Plus, Americans now know more about how our country’s economy works than they ever have before.
Face it folks. The reality is that things were good, jobs were plentiful, money was flowing, credit was easy to get and people stopped paying attention to how they lived. That, as much as any other factor was the cause of the financial ills we are all now experiencing. We can complain about this mess as most are doing or we can use it as a wake-up call that in the long run will make us better people and a stronger society.
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Good points, Larry. Way to look on the bright side. Another point I would add is that because of this crisis, the more likely people will be better prepared next time this happens. At least I’ll be. I’d love to have a lot more cash right now to invest in all the stocks and real estate that are seemingly on sale.
What if you’re in the ‘service industry’? I get that everyone could stay home to have dinner and re-connect and all that but what about all those people who work at restaurants, hotels, etc.? I have three daughters who work as bartenders – I just don’t get how all of these people are supposed to just disappear.
Larry:
You are about refreshing! More people need to hear about you.
You piss off my wife though because I keep waking her up with my laughter as I read the truth in your book (You’re Broke…). I am on the path you laid out and my pragmatic personality couldn’t agree with you more when I look at myself honestly. I thank you for your “uncommon sense.”
I also want to know where you buy your designer shirts. Are they your sons designs? Get me a website or something so I can check them out. Maybe I can sport a little “Winget Fashionista” style.
Thanks you for telling me I don’t have to burn all the money I bust my ass for. Seriously.
Stew
To begin with, I agree with most of what you say. I feel that we had and lost it. Some our own fault and some the goverment. I truely believe that if we grew our own, made our own and then bought our own it would rebuild our country. I know I will get flak for this but I think if we had more concern for our own we would be back in the black. What is now being crammed into our minds with all these bail outs and plans from our wonderful goverment is nothing more then bull. If we stand by and let this happen we will be pushed to our limits to the point I feel we will not be able to recover. You said that at one time we had it all and did not pay attention. I think you may be right to a certain point. I remember when everything that at least we were aware of was grown and made in the USA and everyone was happy. We had money, jobs and freedom. Now we are in debt to so many and we give to so many and we are now falling flat on our face. STOP IT !!!!! We are America, for the love of God, Country and fellow Americans stop this snowball of debt and get back to basics. Fix ourselves before we try and fix others.
The best part of a sagging economy is that it exposes fraud Bernie Madoff would still be in business today if the money were flowing. Our business giants have had to expose their corporate sins.
I appreciate the fact that the economy has caused us to take a look at our own behavior and how it impacts others. I am certainly more humble.
Larry, hoorah for your words! I can’t agree with you more. 12 months ago before the economy really took a dive, I lost my job and was forced to learn to live within my means. What a great lesson that was. And, I learned that I made my own mess and, now that I have a job again, I am starting to clean it up. Keep up the reality check! You have people who agree with you.
Larry, I wish all these positives you list were true. According to a poll I read about recently (sorry, I can’t remember the source), more people are showing up to work late now than before. You would think that people in fear of losing their jobs would show up on time more, but these poll results state differently. How weird is that?
A few weeks ago, I had a problem with my laptop that I couldn’t puzzle out. So I called customer service of the Big Box Store from which I purchased the ‘puter back in 2007. From start to finish, the focus was on me, me, me, how could they help me? Because the item is under warranty, they told me to take it into the store. While I’d gotten satisfactory to good service in the past, this time they practically played trumpets while rolling out the red carpet. My problem was diagnosed (so far, it seems) accurately. If it turned out to need an in-home visit, no worries, we’ll get someone out the same day if need be.
Let’s hope this type of service goes on forever, that it’s the new business model, not just crisis thinking. In the meantime, it’s a lesson for myself in building my own business, that I should never forget that the clients are paying my bills.
As always Larry – great points!
No worries to Mary – there are those of us who continue to worked hard, continue to improve ourselves, add value to our organizations (thus get rewarded!) and continue to pump money into the economy. My husband and I take “economic impact tours” around our state to small towns – eat dinner, drink, stay at hotels for the weekend etc. It’s the ANTITHESIS of Oprah’s solution.
Ralph – sorry buddy, if the big three would have had any business sense, we wouldn’t be bailing them out (again!). The only thing I drive that’s made in America is my Harley. As a business owner, if high union wages are pinching my bottom line, I’m going to pursue what’s good for the business so I can reward my stockholders. Detroit has yet to learn that.
Stephanie: There are some worries in the service industry. People circulating dollars in restaurants/hotels are good, but meetings are BIG business throughout the nation. The cancelled convention or sales appointment (where people talk face to face instead of by email) affects hotels, restaurants, gas stations, etc. The waitress getting a tip from a conventioneer buys groceries in her local store. The hotel housekeeper pays city taxes out of a paycheck. Corporate sales no longer visiting clients and conventions being cancelled is usually Americans circulating their money to other Americans. I live in a city with excellent restaurants/hotels that give excellent service, but have had to cut out personnel due to diminished tourism dollars. The restaurants/hotels will survive, but with fewer staff needed for mostly local customers. The impact has yet to be felt.
Hey Larry… Great Blog! You make some really good points and I’m sending this link to everybody I know, as I did when I was first introduced to you through “Shut up, Stop Whining and Get a Life.”
As an early baby-boomer, I can remember the 50’s before we became such a credit-dependent society. People spent CASH and rarely , if ever, lived “beyond their means.” As far as debt was concerned, our parents probably had a mortgage, maybe had a car “financed” and even more remotely, may have had a “revolving charge accout” for some furniture. No Visa… No Mastercard… no superfluous debt. And we always had decent food, did things as a family and generally didn’t “want” for anything.
Recently, I got annoyed because a bank reduced the credit limit drastically on one of my two credit cards. Their official reason was “to limit potential losses.” Now, I really don’t care about the limit, but the effect of their action really ticked me off… because it suddenly dropped my FICO credit score . It seems that since the balance I owed suddenly became a very high percentage of the credit limit, I became an overnight “high risk.” Good luck if I needed to buy a car any time soon!
In the 80’s and 90’s as long as you paid your bills, they kept bumping your credit limits higher and higher. At one time a friend had two credit cards with $25K and $28K credit limits… he never asked for it, they just gave it to him because he was “a good credit risk.” Now they are taking these away as if it’s all our fault! They created the mess in the first place!
My point is that I agree with you. These banks are literally forcing many folks to live more within their means. A credit card wasn’t intended to be used for all your groceries and gas… and even more so… not to buy that pack of gum you so desperately need.
I think we’re in for some rough times… but I think we’ll emerge with a better National mindset… and hopefully a lot more of our “old” values will show up as well.
Thanks for always speaking your mind!
Amen! also as you have said in the past, get out of debt! It saved my families behind when all this hit. We don’t owe anyone, plus we have been able to increase our giving to those groups who need it.
thanks for you look at the world.
I do not see how retirement accounts losing between 65-70% in value is good thing. People were investing for years ,thinking they were doing the right thing for the future. Now they can’t think of retirement or borrowing of these funds for college for their kids. You seem to put responsblity on indivduals borrowing too much and not working hard enough. You are kicking people when they are down. We work harder and longer than mot European countries with less vacations and less to show for it. The problem is greed, mismanagement, and corporate abuse. Worker harder makes for a dull, uptight and exhausted victim.
I agree. Not to change topics but…
I’m very curious your thoughts on all of the Mexican drug wars and its leaking into Arizona.
Saul – I am certainly not saying that everything that is happening is a good thing. I am saying that there are good things that can come out of all of this bad. Read my post again. MUCH good is going to happen as a result of this recession.
But I will say that your comparison of us to European countries is not quite right. 1. We have less to show for our work because no where in the world do people live beyond their means like we do in the United States. 2. People, on the whole, do not actually work HARDER here than there either, we just put more hours in on the job. Most statistics say that the typical American only actually WORKS about half the time they are on the job. 3. Our problems are not based only on greed, mismanagement and corporate abuse. The primary problem that caused all of this is that people behaved stupidly as individuals and are now experiencing the pain of their irresponsibility. I don’t have much mercy for people who brought on their OWN problems. Even foreclosure or bankruptcy and the like. They should have known better than to spend more than they were earning and they shouldn’t have bought a house they couldn’t afford. AND, they should have had some savings for when hard times happened. Feeling that pain, as sad as it is, might make them not repeat their stupid behavior. For people who are in pain due to other’s mistakes, I do have mercy and am sorry. If this approach is, as you said, “kicking people when they are down” then I am guilty. But I don’t see it as that at all. I am only holding a mirror up to people’s irresponsible behavior and asking them to be accountable.
That said, we will emerge a stronger nation and a stronger people because of this. If we don’t believe that, and work toward that, then what is the point?
Larry
The whole situation frustrates me. I am an individual who has worked hard since I was 14 years old. I have made a lot of mistakes with credit and with loans, but through it all I have worked hard to get out of it. Nothing burns me more than to see people asking for government handouts to right the ship.
I do feel awful for those who have lost 60-70% of their 401k money; but we all are to blame. WE elected those officials. We found those that would look the other way to be trustworthy. WE decided to live outside of our means. Just take a look at this horrid housing crisis. How many people thought they could afford half a million dollar homes making $30,000 a year? People get caught up in the glamour and the glitz but don’t take the time to read the details and read between the lines.
My wife and I bought our first house 4 years ago. We paid $279,000 for it, we put $20,000 down and mortgaged the remaining $259k. When the economy started to shift, we took that $20k out in a home equity loan to pay off credit cards. We ran those cards right back up, and had the loan to deal with too. That was our fault and we learned from it very quickly. I am not now – nor have I even been declared bankrupt. I still own my home and I am still paying my debts, because I own that. I did that. Am I financially stretched right now? Sure I am, and my house is probably only worth $220-$230k now, if I’m lucky. But I learned a lesson that will last.
I guess what I am trying to say is this: Larry is very correct in stating that a lot of good will come of this. We are all more financially aware and are now *hopefully* going to pay attention more to elected officials and others whom we put our trust in. Sorry folks, I’ll get off my soap box now, I just had to get that out.