Households at the Edge

According to a recent survey, many people would find it impossible to raise just $2000 in 30 days from any source - savings, credit, family, friends, etc. - in a pinch. The table below is extracted from the article, which is well worth reading.




The results are shocking to say the least, especially for the USA - supposedly the "richest country in the world." $2000 is not a lot of money when one aspires to a middle-class lifestyle; it could represent the cost of car repair, a home repair, a minor medical problem, and so forth.
These sorts of things crop up continually.

Mexico is no great surprise, but the fact that the UK, Germany, and the USA (all supposed major economic powers) rate worse than Argentina - a country with serious issues in its struggle to remain prosperous and civilised - should be cause for concern. This survey, if accurate, indicates that not only are half of UK, German, and US households there essentially broke, but most of the other half is so frayed financially they are in no position to help out poorer friends and relations; or perhaps simply socially support networks have collapsed. In either case (and both could be true) the situation is terrible.

This is not the sort of economic information we would like to see near the beginning of this Depression - and yes, we are still early on in this thing. Faced with falling income and no standby resources to fall back on, it is clear that more and more supposedly 'middle class' households are going to sink into financial ruin merely from routine financial stresses.

Our advice to our readers is simple: make sure you are living well below your means; that your net worth is rising and not falling; that you have ample financial resources (savings, lines of credit, willing friends or family) to draw upon should the need arise. This is serious stuff - it may require you to drop many of the trappings of middle class life in order to prevent ruin.

There are ample horror stories out there about people who discovered 'middle class poverty' by not changing their spending habits in the face of income loss. Typically they expect "something is going to happen" to fix their deteriorating situation: a new job; selling the house; etc. But that "something" never happens.

More and more, what were for many once reasonable expectations - say, getting a full-time job - are going to be as likely as having a winning lottery ticket. In a nutshell, this is why getting through the Depression is going to be about survival. Don't delude yourself; ignore the blather on the telly; get real about what is happening.

Debtoholics

This article from Maclean's shows the sorry state of a typical middle-class family with poor money management skills whose ambitions for affluence exceeded their income-producing capacity. Stories such as this one are becoming ubiquitous as ever more households suffering from job loss and overindebtedness careen toward bankruptcy.

At least one organisation - Debtors Anonymous - looks at using debt for spending as a seductive but destructive process. We wonder how much of the current economic woes result from people having a serious borrowing problem.

It was, after all, the sub-prime mortgage fiasco that set this whole Depression thing rolling. People become bad credit risks (sub-prime) because they don't manage their money well. Often that results from compulsive borrowing and spending.

We suspect that the damage to the borrowing class as a result of the Depression will be so dreadful that everyone now living will be very cautious about borrowing any money ever again. This development would be horrifying to the financers of consumerism and their minions (a.k.a. the Government and the Media), so we expect a tremendous push to coax the populace into perpetuating their spendthrift ways. The recent hatchet piece by Newsweek is a good example.

We hope that the people will not be so unintelligent. Happily, savings rates are rising, and household debt is falling. Unfortunately, there is a good chance that a false spring of recovery will get the masses borrowing again. But that will be the last hurrah for the debtoholics.

The Shame of Downward Mobility

We're pleased to announce we've started posting on Stylishly Cheap Living. On this blog, we will write about how we try to make our living costs go down, and living quality go up! We hope you'll find something of interest.

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A spectre is haunting the USA: Ruin and homelessness for hundreds of thousands of formerly hard-working, decent, law-abiding citizens. In spite of the import of the subject, this is not a story you will read much about in the mainstream media, or even in the blogosphere. It seems bank bailouts are infinitely more newsworthy, somehow.

Our efforts to find coverage on mushrooming homelessness have yielded only a few stories gleaned typically from local news such as this report , and this one.

We suspect the news blackout comes from a simple psychological bias. Downward mobility is just not part of the script that Americans have for themselves either individually or collectively. The 'American Dream', the 'American Way of Life', and the American 'Free-Enterprise System' are all about making it, if not making it big. There is no reverse gear.

Aside from the copious shame newly homeless individuals heap upon themselves as they see their lives dissolve, there is more broadly in the public consciousness "no place at the table" for them. They must be invisibilised, if you will.

Out of the public eye, they are also out of the public policy arena. Where in Mr. Obama's recession-cure are additional funds for soup kitchens and shelters? Religious, non-profit, and local governmental agencies serving the destitute are being stretched to near the breaking point. This situation will be worsening in the coming months and, because no one is really paying any attention, will create a stealth crisis of gigantic proportions.

Rethinking Luxury

First off, we're pleased to announce the launch of another, sister blog: the Silver Money Report. This blog will deal exclusively with topics pertaining to silver, notably in its investment and monetary functions. We have other blogs in the works, which will be rolled out for public consumption in the future.

For today's post, we would like to look at the idea of 'luxury.' We're sure that, to most, 'luxury' is probably brings to mind the lifestyle of a movie star or pop singer, rather than the middle-class living standard of yesteryear. Luxuries typically embody a large amount of wealth, whether financial or otherwise. In the past, one could demonstrate one's wealth by, say, gold-trimmed plates and solid silver silverware. The American rich of the late 19th and early 20th Centuries bought automobiles to show off their wealth.

Westerners in general (and Americans in particular) have forgotten just how much of their lifestyle is actually a luxury. Eating meat is a luxury; indoor plumbing is a luxury; a private room is a luxury; more than twenty square feet of living space per person is a luxury. We're sure these things sound more like necessities to you, Reader, but rest assured they definitely are not. Rather, these are the 'victory' of the 20th and 21st Centuries: making the luxuries of the 19th Century the necessities to the masses.

We're not saying that these things will necessarily once again become luxuries, but we're willing to bet the 2007 Depression will push the average closer to historical norms than Americans (and Westerners) are willing to accept all at once. Average living space in the West may not become ten square feet per person again, but it will probably be closer to 200 than the 1,000 Americans enjoy presently. Indoor plumbing probably won't go away, but the average person almost certainly won't have their own, private bathroom.

Perhaps the biggest luxury that Americans especially are unaware of is being able to live anywhere. Many areas of the United States are not viable economically, either from lack of productive capacity, remoteness, or outright uninhabitability. As energy becomes scarcer, and the 2007 Depression squeezes the economy even more, the 'live where I want to' mentality of Americans will likely end.

We could go on, but we instead will suffice with saying that knowledge of the living standards of the 19th Century is something one might want to be more familiar with. Not to forget, there are 4 billion people in the world who do not have even the quality of living as the average in the 19th Century. They are perfectly willing to fight tooth and nail, and work as hard as humanly possible, to get their indoor plumbing. They will work harder for this than you ever will, or ever have.

The Myth of Progress

A notion bandied about, both in the media and in academics, is that of 'progress.' The idea, put simply, is that society will always improve itself. A problem immediately arises: one cannot define 'progress' any further than this. It is even more nebulous than 'globalisation' in meaning, and just as contentious a subject. In order to more clearly define progress, we will give our personal version thereof. Progress is:

An unending and inevitable process, moving the world towards a post-industrialised service economy. Society progresses towards an American-style middle-class lifestyle, and technology becomes both more efficient and less polluting. Progress is widely considered a 'good' thing, both a desirable and positive development.

Before we go further, let us say we consider 'progress' a load of bunk. For example, in the year 1800, the world population was around 1 billion. The vast majority of people then (i.e. 'the poor') were landless peasants. They had houses, they had food, they had beer or wine. The phrase 'poor but decent' comes to mind, in a general sense.

Fast forward to 2001, when 2.4 billion people lived on less than $2 per day. That's over twice as many people alive as in 1800... all completely or nearly destitute. Could you, Reader, live on about $730 per year, have only the clothes on your back (maybe a cinder block hut)? For the record, having less than $2 per day to live on is considered only 'moderate poverty' by the World Bank.

Another bit of 'progress' is the development of nuclear energy. It is argued that developing the power to split the atom was a 'good' thing - a 'good' thing which later acquainted itself with Hiroshima and Nagasaki. Is it a positive development that the planet could be rendered medically sterile several times over by fusion bombs? Even with 'peaceful' nuclear power generation, there is the deadly legacy of the radioactive waste; barrels of lethal crap which will exist for thousands of years to come. Progress?

Clinging to the idea that 'progress' is both a good and necessary thing is foolhardy. To believe that the old ways of doing things (a.k.a. business as usual) were the 'right' ways, is to be a casualty of the 2008 Depression. In the 2008 Depression, as with all past Depressions, one must adapt to the changes brought. For a closing metaphor, consider 'progress' the mirage of an oasis in the desert. One cannot afford to chase mirages; one must seek shelter.