sanpaku_backup | "maybe it was worth being poor for so long, to be rich for a little while"

It was only a matter of time before someone posted something about the housing crisis that cut a little close to the bone, and I'd end up in a stupid flame war with a libertarian. But there it is.

I think about this a lot, of course, being essentially trapped as one small piece of a gigantic macroeconomic experiment in how stupidity in a market causes misery to an individual. (The comments thread gives most of my thought on the subject.)

I was actually rereading Galbraith's The Great Crash: 1929 for my class about a week ago. This is one of the best books you could ever read -- it takes about three hours, it's incredibly brilliant, and it's filled with a sharp wiseass mentality that is addictive. You should find it and read it right now.

One of the things I like most about his point of view, though, is actually the non-wiseass point of view. It's easy to make fun of a bubble from the aftermath, but he points out that our culture loves judging and punishing people for flying too high. It's what makes the rest of us feel smug and clever and absolutely entitled to whatever luck we've been able to accrue.

When you study the Depression, what is striking is how eager people were to blame the millions of men who were out of work for reasons they couldn't control. Shouldn't they have saved for a rainy day? If they just worked for pennies a day they'd be fine.

Now, from the distance of time it's pretty obvious that these were people caught up in the equivalent of a financial hurricane. No one expects a hurricane. Unless you are hoarding gold under your bed, you aren't prepared for it. Stupidity has nothing to do with it. It's like planning for being told you have cancer tomorrow.

I'm not saying that people who got into bad situations financially today weren't being stupid on some level. I'm just saying I can empathize because I don't think there's a person alive with a family who can avoid the same stupidity on some level. We all get in too deep, and we all feel worried all the time, and we all wait for the gods to punish us, and when it happens, we blame ourselves. And having said that, I don't believe in punitive gloating over this situation. I'm on the shaft for others' stupidity as much as anyone here... but this is just how human nature is.

Being able to understand that you are you, and you did what you did for reasons I can't sit back in my leather fucking armchair and enjoy judging you -- that's what being a liberal is about. And that's why I prefer conservatives to libertarians. Libertarians miss no chance to tell you how bloody brilliant they are and how stupid everyone else is. A real conservative, at least, will admit to taking a primal pleasure in watching the suffering. Give me honesty over pedantic smugness any goddam day.

Flat | Top-Level Comments Only

From:

cellio

Thanks for the book recommendation.

I'm sorry if you thought I was gloating. I wasn't. I'm scared. I think I did everything right -- bought conservatively, saved, invested for retirement, etc -- and I think I'm about to get screwed, along with lots of other people, while the people who really did buy or lend recklessly (a subset of those with mortgage problems) are going to get bailed out.

From:

sanpaku.livejournal.com

I didn't mean you, I meant the other person who replied to cahwyguy about how friggin smart she was. It is definitely unfair that the bailout will primarily help those who got us into the mess. On the other hand, if we're all screwed, we need to set aside fair and unfair and figure out how to get unscrewed, is my inclination.

From:

cahwyguy.livejournal.com

Well, I decided not to respond to Miriam (

fauxklore), who I've known personally for over 20 years. Sometimes, it just isn't worth the fight.

From:

sanpaku.livejournal.com

So just to make this clear, I wasn't trying to say that you were smug or gloating, but that people with the same policy position certainly might be (and usually tend to be), as the other commenter illustrated nicely.

From:

cellio

Thanks; much appreciated. (Sorry I didn't reply earlier; can't access LJ from work.)

From:

eyelid.livejournal.com

what is striking is how eager people were to blame the millions of men who were out of work for reasons they couldn't control.

I think other than the joy of smugness, there are two reasons people do this:

1) it gives them an illusion of control - the idea that THEY could avoid this outcome. People are understandably scared of calamities they can't control.

2) It enables them to justify their desire to NOT do anything to help those people. If a person is impoverished through no fault of their own, maybe you have a moral obligation to help. if it's all their fault though, maybe you don't. Or at least, that's how many people's minds work.

From:

sanpaku.livejournal.com

Yes, absolutely. It's part of the same psychological package. It lets people say "there but for the grace of God go I... if I was a STUPID WORTHLESS IDIOT like that person." I call it smugness but really it's just part of imagining that all's right in the world because you are doing all right yourself. It's hard to believe people really believe that, but there it is.

From:

eyelid.livejournal.com

Well, I do think that it's also smugness - as a separate element. People who really buy it get to feel superior.

From:

cahwyguy.livejournal.com

I certainly agree with you. I regularly read the LA Times "LA Land" real-estate blog, and people there love to comment on how it is the fault of stupid people.

Were there stupid people trying to get something for nothing? Sure. Did some folks overextend themselves with home equity loans? Yup. Did people buy more house than they could afford, based on oversold loan types? Yup.

But what we forget is that the stupid folks aren't the majority of folks out there. Most folks were and are just trying to keep a roof over their head at an affordable rate. They will do what they need to do to pay their mortgage in full every month, if that means cutting back on other spending, pulling from savings occasionally, etc... and they will keep doing that until they have no other recourse. They are not the one who all of these "let's help the foreclosures" will help, because they are far from foreclosure.

What these folks need, and what many homeowners need, is the ability to refinance into affordable 30 year fixed rates, before a time bomb explodes. That time bond is the deflating equity in the homes. If it sinks too low, there is no way to refinance, and those homes will be lost and people will lose their shirts. Is this due to stupidity? No. It is due to overly tight credit, and this is where the credit crunch hits.

There needs to be a way of getting these rate cuts that the fed is making to show up in the mortgage loan rates, and to get the banks to make the non risky fixed loans that could help stabilize the markets by moving people into something they can afford. I don't think the banks want to do this, because as long as folks are in the higher rate loans, they make more money.

Its going to take some creative solutions to solve this problem -- and not blaming people.

From:

sanpaku.livejournal.com

Yes, you've put it very well. One scary thing about the current situation is wondering when those rate cuts will make any difference. I believe that in Japan in the '90s they actually reached a negative effective interest rate, and it still couldn't get credit to flow. There's certainly enough screwed up with this economy to make for some frightening scenarios.

From:

msmidge.livejournal.com

I think there's a particular American cultural ideology being played out in that smugness that exists across the entire culture but shows up in extreme form in libertarianism. It's a variety of individualism that pretends that humans are born as rational, self-sufficient adults who all start from a level playing field and then screw up or succeed entirely on their own merits. And seeing it as ideology makes me entirely disinclined to argue with it--you can't use rationality or facts to win an argument with ideology. At least, not if you don't want to spend a huge amount of time and energy.

From:

sanpaku.livejournal.com

Yes, it is usually wisest to leave ideologies to the birds. But what

flw used to call "reasoning by analogy" -- my position is right because I was smarter than you in the same situation -- is just too galling. Well, in general, this is why I don't read many political or Jewish community groups ("weirdjews" comes to mind); internet arguing is stupid and pointless.

From:

flw.livejournal.com

They are going to give the banks 5 times all the payments in the History of ALL welfare programs. And while they are doing it, they are going to pat themselves on the back for how "independent" they are and how they are "free atoms" in a dynamic, fast-paced environment. The Hypocrisy is mind-boggling.

Where is anyone getting the idea that they are going to bail out the people? They are bailing out the banks.

2003: Buy $20,000 house with $50,000 down payment and 30 year mortgage
2003-2008: Pay $200,000 in interest.
2008: Get foreclosed with zero equity.
Lose House

THEN the "bailout" happens. It's all about protecting the banks which have already made UNBELIEVABLE fortunes. You CANNOT BELIEVE the money that people made in this BIGGEST FUCKING SCAM THAT HAPPENED ALL OUT IN THE OPEN WITH EVERYONE WATCHING AND EVERYONE'S EYES OPEN in HISTORY!

It's a TOTAL FUCKING CONSPIRACY.

When they act like "no one could see this coming" I start reaching for the coke bottles, gasoline and rags... No one could see it coming? It is so UNBELIEVABLY OBVIOUS that this was PLANNED ALL ALONG...

On to the next Bubble...

From:

sanpaku.livejournal.com

There are some places that have tried bailing out the people -- I assumed the original post referred to them -- but the backlash has been strong because we need to Teach Financial Responsibility etc. The best part of the hypocrisy is that you can bet that as of one week ago, every one of the employees at Bear Stearns was saying how important it was to be Financially Responsible. They never apologize, though.

From:

flw.livejournal.com

The hypocrisy and self-righteousness... God! It was immediate!

"They never should have accepted the terms of that loan!"

Yeah! They should have had Daddy's Lawyers go over it. Gimme a fuckin' break.