Robert Stein 1924-2014

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If anyone has comments, questions or condolences, please feel free to send a private message to the family at robertstein@optonline.net.

Tuesday, December 04, 2007

Credit Crunch from the Cheap Seats

For the middle-class old, of which I am a card-carrying member, the sub-prime mortgage loan crisis is like distant thunder. As storms roil the markets, most of us know we won't be drenched but, from experience, we are braced to pay a price for our prudence.

It happened when the dot.com stock market bubble burst, and it's happening again with the drop in interest rates to help bail out the greedy, the gullible and the reckless that will cut into what we can get from Certificates of Deposit and bond-fund holdings to supplement Social Security and pension income.

Many of us, recalling our parents' shock in the Great Depression, mistrusted the stock market boom of the late 1990s and, in large part, resisted the euphoria over the "new economy."

Just before the Millennium, in a doctor's waiting room, I felt old and foolish overhearing the receptionist and a messenger comparing their capital gains on AOL and Amazon stock. Maybe there was a free lunch after all, and my generation was just too stubborn to belly up to the bar.

When the bubble burst, our conservatism was rewarded with the lowest interest rates in half a century that cut modest incomes from savings by more than half. As Social Security became the largest part of our safety net and the costs of health care rose, we were becoming the newest poor until interest rates finally began to inch back up from 1 and 2 percent.

Now that another wave of greed is threatening to swamp the economy, the government will rightly do what it can to save the homes of people who were roped into no-down-payment and variable-rate mortgages by sharks who "innovated" credit markets into disaster.

It would be churlish to complain about our modest losses compared to the real victims, but there is cold consolation in having lived long enough to know enough to resist the something-for-nothing lures that keep coming up for each new generation.

1 comment:

bethany said...

I agree with this article about the moral of the economic stories resulting in 'there is no such thing as something for nothing.' It's these deals and ploys that have eaten away at our already existing legitimate programs to the point where our in place systems are now at risk of dying. Low payments on home with variable rate mortgages for instance were used as lures but bit almost everybody in the behind later. I think the key here is moderation and being reasonable. Drastic actions usually end in drastic measures elsewhere down the road. Now Social Security and Medicare and Medicaid are dying on the vein. As if these programs were not already enough in jeopardy from the high premiums and nurse shortage and everything else they are battling. The AARP is aware of the problems and they have addressed them with a website where we can stay informed and sign a petition in order to have our voices heard. http://www.thisissoridiculous.com I know about this because I am working for the AARP in support of this important cause that affects all of our futures.