One benefit of the current economic crisis is that financial news is now interesting; we’re all trying to find out why our banking system crashed and why the whole system is so vulnerable (at least I am). Until recently I would rarely read an article about business but now it’s like reading adventure stories.
Eventually I worked out my own theory of what is wrong with our economic system. The key word in understanding the crisis is leverage. The meaning of this comes from the word lever, a metal bar which enables you to lift objects which are much heavier than you could normally lift. American and British bankers took this concept to an extreme. They would have a dollar in the bank and they would make loans of up to $30. They were lending money they didn’t have. It was a confidence trick, a pyramid scheme. And it was allowed.
The other American practice that is effecting us all is toxic or sub prime loans, and what this means is they would give out mortgages (money for people to buy their home) even if they knew those people couldn’t repay them. Although this was a specifically American problem, the globalised structure of the banking system has ensured that the effect has spread worldwide. One result of all this is that banks no longer trust each other, as they don’t know who has toxic loans or who might go bust next. This is why banks are not lending any more. It turns out that our banks are not the honest guardians of our savings, as we had assumed, but are really just a bunch of gamblers.
What has shocked me most about this whole farce is that shopping, it turns out, is the basis of our whole economic system. I had always assumed that industry, agriculture, services and trade are what keeps the system going. But no, I was wrong, those things are merely the mechanisms that produce goods that are demanded by shoppers. Now that people are buying less cars, for example, the entire global car industry is in a state of crisis. And the same is happening across all sectors of industry: demand is falling (in other words people are shopping less) and factories are closing. Is this really the best way to run the global economy?
I’m still struggling to get my head round the fact that our whole system is based on people going to the shops. Newspapers still describe the process in grand and clever economic terms that somehow makes it seem more stable and impressive than it is, and it is hard to find real insight in the media. I was missing the perspective of a real shopper, and I realise that the media never really give ordinary people the chance to express themselves, to write an article for example. They are only ever quoted in very short bursts, and are always under the control of the journalists and editors. When have you read an article by a shopper, or a person living in Gaza for that matter? These people are not considered worthy of having an opinion worth reading
But then I got an email from my friend Michou Jardini, whom I first met in Sadova village in Suceava 17 years ago and who now lives in Portland, Oregon. She is married to a doctor and has become a regular suburban Mom (or so she claims). We keep in contact now and again and I asked her to describe her experiences at the centre of the global financial crisis.
Initially she dismissed my request and said who would want to listen to the ramblings of a housewife, but I said American shoppers seem to be the driving force of the global economy and I am looking for an insight.
This is what she sent me:
The Guardian just published an article saying that I am responsible for the world’s financial downfall. I kid you not. They just published an article titled Twenty-Five People at the Heart of the meltdown.
It lists all of those who are (supposedly) responsible for pushing us on the road to ruin. It doesn’t matter which side of the political aisle you think you adhere to, you’ll find friends and foes on that list. Plenty of them. And on that list, somewhat buried amidst famous and obscure names – there’s ME and everybody I know on this side of the Atlantic.
After a heavy list of politicians and bankers there is a list of “Others” and there we are in our entire splendor – The American Public. I wish I could say that it made me mad, but really, it didn’t. It is the truth. If there would be such thing as the Olympic Games of Consumerism, America would take the gold in every single category.
For that is what we did best for years on end. We consumed. We wanted stuff. All of it. We shopped as means of entertaining. Not because we needed things. But because we were afraid we won’t be up to date. Maybe it wasn’t so much fear, as it was pure want. I’m not quick to point my finger and forget about myself. Yes, I own one (seven? seventeen?) too many frocks.
Also quite a few pairs of jeans (not the 19.99 a pair kind). We won’t even mention the shoe department (I can easily blame that on my childhood – poverty and deprivation and all), but I could open a small store in some town.
But even when I did over do it (trust me – I did, just like everybody else), I didn’t not left bills unpaid, or my kids unfed. Sure, there really wasn’t a lot of saving going on, but I wasn’t Debtor’s Prison material. And, since last September, I have slowed down. Don’t tell this to my well dressed fabulous friends, but it’s not all bad. In truth it is rewarding not giving in into one’s own impulses (not to mention saving the money I don’t spend). I cannot be hypocritical and deny that my lifestyle is quite comfortable and I’m not in the same situation with those who struggle to pay their bills and feed their kids. It is because there are so many people that are in that situation, that makes the buying craze even more obscene.
Did I just say people? Sorry. I meant the American Public. The very same one that took loans on their overtly inflated homes so they could buy cars, and take trips to just buy stuff. A few years back the American Medical Association put Compulsive Shopping on the mental illness’ list. Need I say more? It is an easy way out to blame it all on the bankers and politicians and “others”. Reality is that we are all grown ups and we should know better than to gorge ourselves on things that we know we can’t afford.
Yes, I am sorry for the ones that are losing their homes because they lost their jobs and cannot make the payments. But I can’t be sorry for the guy who lived on Social Security and refinanced his house so he could buy a used Camero. The car turned out to be a piece of crap and stopped working altogether. Now he is losing his house because he cannot make his payments. This is pure idiocy and I challenge anybody to tell me that I should show the guy some sympathy.
And there are so many people in this situation. That spent their money on crap. Yes. Crap. They spent it because things had a good price. Or they looked cute. Or the ubiquitous ads said you must have them. Or they just got bored of their own old crap (not that it stopped being functional). Pure want, rarely need.
I am curious now as to what is going to happen next. After months of avoiding the stores, I went out last week to do some returns (yes, America is the haven for those). And you know what? There were as many people around as there were a year ago. Or two, or three. Were they buying, or just looking? I don’t know – I feared sticking around – I’m weak and I love instant gratification as much as the next person. But it awed me.
I know how we got here – we’re addicted to buying. But I wonder what it would take to make us stop. How do you put a whole nation in rehab?
By Rupert Wolfe Murray and Michou Jardini
Postat în: February 9, 2009
Our economy is based on shopping
Eventually I worked out my own theory of what is wrong with our economic system. The key word in understanding the crisis is leverage. The meaning of this comes from the word lever, a metal bar which enables you to lift objects which are much heavier than you could normally lift. American and British bankers took this concept to an extreme. They would have a dollar in the bank and they would make loans of up to $30. They were lending money they didn’t have. It was a confidence trick, a pyramid scheme. And it was allowed.
The other American practice that is effecting us all is toxic or sub prime loans, and what this means is they would give out mortgages (money for people to buy their home) even if they knew those people couldn’t repay them. Although this was a specifically American problem, the globalised structure of the banking system has ensured that the effect has spread worldwide. One result of all this is that banks no longer trust each other, as they don’t know who has toxic loans or who might go bust next. This is why banks are not lending any more. It turns out that our banks are not the honest guardians of our savings, as we had assumed, but are really just a bunch of gamblers.
What has shocked me most about this whole farce is that shopping, it turns out, is the basis of our whole economic system. I had always assumed that industry, agriculture, services and trade are what keeps the system going. But no, I was wrong, those things are merely the mechanisms that produce goods that are demanded by shoppers. Now that people are buying less cars, for example, the entire global car industry is in a state of crisis. And the same is happening across all sectors of industry: demand is falling (in other words people are shopping less) and factories are closing. Is this really the best way to run the global economy?
I’m still struggling to get my head round the fact that our whole system is based on people going to the shops. Newspapers still describe the process in grand and clever economic terms that somehow makes it seem more stable and impressive than it is, and it is hard to find real insight in the media. I was missing the perspective of a real shopper, and I realise that the media never really give ordinary people the chance to express themselves, to write an article for example. They are only ever quoted in very short bursts, and are always under the control of the journalists and editors. When have you read an article by a shopper, or a person living in Gaza for that matter? These people are not considered worthy of having an opinion worth reading
But then I got an email from my friend Michou Jardini, whom I first met in Sadova village in Suceava 17 years ago and who now lives in Portland, Oregon. She is married to a doctor and has become a regular suburban Mom (or so she claims). We keep in contact now and again and I asked her to describe her experiences at the centre of the global financial crisis.
Initially she dismissed my request and said who would want to listen to the ramblings of a housewife, but I said American shoppers seem to be the driving force of the global economy and I am looking for an insight.
This is what she sent me:
The Guardian just published an article saying that I am responsible for the world’s financial downfall. I kid you not. They just published an article titled Twenty-Five People at the Heart of the meltdown.
It lists all of those who are (supposedly) responsible for pushing us on the road to ruin. It doesn’t matter which side of the political aisle you think you adhere to, you’ll find friends and foes on that list. Plenty of them. And on that list, somewhat buried amidst famous and obscure names – there’s ME and everybody I know on this side of the Atlantic.
After a heavy list of politicians and bankers there is a list of “Others” and there we are in our entire splendor – The American Public. I wish I could say that it made me mad, but really, it didn’t. It is the truth. If there would be such thing as the Olympic Games of Consumerism, America would take the gold in every single category.
For that is what we did best for years on end. We consumed. We wanted stuff. All of it. We shopped as means of entertaining. Not because we needed things. But because we were afraid we won’t be up to date. Maybe it wasn’t so much fear, as it was pure want. I’m not quick to point my finger and forget about myself. Yes, I own one (seven? seventeen?) too many frocks.
Also quite a few pairs of jeans (not the 19.99 a pair kind). We won’t even mention the shoe department (I can easily blame that on my childhood – poverty and deprivation and all), but I could open a small store in some town.
But even when I did over do it (trust me – I did, just like everybody else), I didn’t not left bills unpaid, or my kids unfed. Sure, there really wasn’t a lot of saving going on, but I wasn’t Debtor’s Prison material. And, since last September, I have slowed down. Don’t tell this to my well dressed fabulous friends, but it’s not all bad. In truth it is rewarding not giving in into one’s own impulses (not to mention saving the money I don’t spend). I cannot be hypocritical and deny that my lifestyle is quite comfortable and I’m not in the same situation with those who struggle to pay their bills and feed their kids. It is because there are so many people that are in that situation, that makes the buying craze even more obscene.
Did I just say people? Sorry. I meant the American Public. The very same one that took loans on their overtly inflated homes so they could buy cars, and take trips to just buy stuff. A few years back the American Medical Association put Compulsive Shopping on the mental illness’ list. Need I say more? It is an easy way out to blame it all on the bankers and politicians and “others”. Reality is that we are all grown ups and we should know better than to gorge ourselves on things that we know we can’t afford.
Yes, I am sorry for the ones that are losing their homes because they lost their jobs and cannot make the payments. But I can’t be sorry for the guy who lived on Social Security and refinanced his house so he could buy a used Camero. The car turned out to be a piece of crap and stopped working altogether. Now he is losing his house because he cannot make his payments. This is pure idiocy and I challenge anybody to tell me that I should show the guy some sympathy.
And there are so many people in this situation. That spent their money on crap. Yes. Crap. They spent it because things had a good price. Or they looked cute. Or the ubiquitous ads said you must have them. Or they just got bored of their own old crap (not that it stopped being functional). Pure want, rarely need.
I am curious now as to what is going to happen next. After months of avoiding the stores, I went out last week to do some returns (yes, America is the haven for those). And you know what? There were as many people around as there were a year ago. Or two, or three. Were they buying, or just looking? I don’t know – I feared sticking around – I’m weak and I love instant gratification as much as the next person. But it awed me.
I know how we got here – we’re addicted to buying. But I wonder what it would take to make us stop. How do you put a whole nation in rehab?
By Rupert Wolfe Murray and Michou Jardini