Tales from the front lines of a fallen economy

October 15, 2008|By RON SMITH

Last week, I asked my listeners to tell me how the economic turbulence is affecting their lives. Personal stories can bring the abstract to life and make it seem more real, simpler, clearer.

A woman named Nancy told us she works in a mutual fund call center; on Friday, they never had fewer than 100 callers on hold and every one she talked to was "scared to death." Not that she wasn't, since the shrinkage in her retirement savings plan means she and her husband may not be able to help their daughter pay for college this year. Another caller, Daryl, said his house was in foreclosure. He lost his job shortly after buying the house, but even newly employed, he said, his payment history leaves the bank unwilling to strike a deal with him.

A woman who works for an engineering firm said in an e-mail, "I've been thinking all my working life (no pension plan) that the 401 scheme benefited businesses and the guys at the top. The telling factor ... is the multiplier for the CEOs versus the average worker."

It's certainly true that setting aside a tax-deferred percentage of one's salary adds up to a lot more if that salary is many times that of the average worker. This reminds me of Monday's Dilbert comic strip, which had Dogbert the CEO saying to an employee, "My salary is 400 times more than yours. My goal is to jack it up to 410, maybe 420." The worker says, "I hate you for this." Dogbert responds, "So you admit you're selfish."

Greg in Jarrettsville says he and his wife took their three kids to a resort dude ranch in upstate New York last year and this. He says: "In 2007, you could barely find a seat by the pool ... In 2008, the number of guests was off by about one-third. Many families said they were not coming back in 2009 due to the economy."

Our 10-year-old grandson has R.E.M.'s "It's the End of the World as We Know It (And I Feel Fine)" as his cell ringtone. Apparently, the talk of a downturn has reached all the way into the fifth grade.

Most people don't mind all that much that the smart, well-connected people get rich. What angers them is when they're sold a bill of goods - when the scheme goes sour and they realize they're going to have to pay plenty because the clever guys have screwed things up.

Times being what they are, when NBC News anchor Lester Holt told me Sunday evening that I was about to hear the truth about the global economic meltdown, it was not even surprising that the analyst from CNBC who was going to reveal this truth was named Liesman.

Have you seen news reports on the gatherings of international pooh-bahs who are trying to figure out some workable methods to restore the public's confidence in the markets? Do the somber, even glum countenances on those dark-suited men look like they belong to guys who think there's a silver lining to this credit cloud?

Still, there is a chance that last week's historic market plunge may have seen a bottom formed. It's possible that aggressive governmental intervention can resuscitate faith in the financial institutions by guaranteeing bank deposits and investing in troubled banks, pumping up the money supply and averting an economic depression. Let's hope so.

The designers of the Titanic were confident she was unsinkable - as sure as the people responsible for the current crisis were sure they had created unsinkable financial markets. The shipbuilders were wrong. We have a pretty good idea by now that the bankers, brokers and politicians are, ahem, in the same boat. Their calculations were distorted by greed and couldn't stand up to reality.

Shouldn't people in charge of things have learned in their fancy schools that markets don't move in the same direction all the time? To be honest, most of them know that, but there was a status quo to protect, the one that benefited them all, and big money to be made. In the end, they probably figured, they wouldn't get hurt too much. Even if a Wall Street honcho's Shady Bank and Loan Co. or overleveraged brokerage firm goes belly up, he's still going to be very rich, and free to spend the end stage of his life lowering his golf handicap or working on his tan in locales fancier than a dude ranch in upstate New York.

Ron Smith can be heard weekdays, 3 p.m. to 6 p.m., on 1090 WBAL-AM and WBAL.com. His column appears Wednesdays in The Baltimore Sun. His e-mail is rsmith@wbal.com.

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