It's curious how people have come up to me and asked me about what I think of the financial crisis, just because I'm opionated and seem to know about other things. But I honestly don't have an opinion yet, nor an understanding. I'm surely not alone in this. I was listening to a rather important and smart man talk yesterday who was asked about his opinion, and he said quite frankly, that he didn't understand the connection "between finance and the real economy". The stock market with its words of stocks and derivatives and shorts and longs and hedges is a mystery, even if you happen to own stock, or have a pension fund that is "diversified" -- or so you hope.
Where does that money go, when it is lost? Popular articles like this try to help you understand. But you may still be baffled -- I know I am.
What I do know is that the story of foreclosures is a lot more complicated -- and not as widespread as people believe. Here's an article Fleep found that lets us know that this already iconic meme of the greedy banker and the slacker American living beyond his means accounts for only 3 percent of mortages (yes! only 3 percent!) in those states hardest hit:
"Even in states with the most foreclosures — Ohio, Michigan and Indiana — those foreclosures still represent just 0.5 percent of all mortgages. In regions with the most subprime lending that also have struggling local economies, foreclosures may rise to 1.5 percent or 2 percent of all mortgages, Wachter predicts."
Problems aren't about buying so much as refinancing, or getting high-cost lines of credit on a property.
My own direct experience of foreclosure on our mother's house lets me know the picture is anything but the simplified caricatures we read in the mainstream media, or on the blogosphere. When I read the snarky comments by Silicon Valley like those of Jason Calicanis, to the effect that people are living beyond their means, I can only stare. People who live entirely off VC capital? Telling *us* that, who have worked hard all our lives and been paid by the hour or by the standard wage, with the standard savings account -- instead of by stock options or buyouts of their widgets? My parents worked hard all their lives, and saved. They sold a house after we kids left, for more than they had paid, and for more than the mortgage, and moved into a small apartment -- and saved. They had a summer house -- and they paid off the mortgage on that house on the Cape, which was cold in the winter. They had a small condo in Florida which they bought within their means -- with all those savings, with all those pensions carefully guarded by their managers all those years -- that was mortgaged -- and not by some greedy banker, but by their neighbour, perhaps some guy they went to church with or played golf with. There was no greed. There was no slacking and laziness. There was hard work and trust.