AS just asked me an interesting question. She wondered how optimistic (or despairing) frugal people are about the future (economic and quality-of-life-wise and existence-of-country-wise) of the U.S.
I told her personally I was 95% confident that the U.S. would continue in some form or another, that our self-interest as a country would save us, but that I wasn't confident our home or retirement investments would end up being worth anything, and that we might not be retiring, like, ever. But I don't think we'll be foraging for food in the city park, or be wiped out by mass starvation and hunger.
Without straying into partisan tirades on either side, what do you think are the best- and worst-case outcomes of our current financial distress?
What are the best- and worst-case scenarios?
December 14th, 2008 at 07:18 pm
December 14th, 2008 at 09:54 pm 1229291675
Worst case scenario? Not that we will be foraging for food like you said, I don't see that happening either. Worst case is that we learn nothing from this and go back to living like we did before, in a disposable society. Just my little opinion!
December 14th, 2008 at 11:13 pm 1229296399
December 15th, 2008 at 01:41 am 1229305298
December 15th, 2008 at 03:32 am 1229311975
But I think that the worst case is yet to come - people are waiting for the bottom and will exhaust their savings and opportunities. If they just hold on until the end of 2009, it will be all right, they think. We don't know that, and I think it will be painful for several years. Credit will get much, much tighter. Also, it going to be a worldwide bad scene - very few places to hide. Pace yourself.
December 15th, 2008 at 04:04 am 1229313852
The worst-case scenario is that we are only at the beginning of the economic collapse. As more and more businesses fail, there will be increasing unemployment and more crime. People with no jobs and no savings to fall back on will be displaced and forced to radically alter the way they live. Out of necessity, some families will need to pool resources to survive. The recession in the USA will have global repercussions that will last through 2012. The trillions lost in real estate devaluation will drastically reduce taxes collected, exacerbating the state and local government budget crises. The infrastructure will begin to show chinks... I guess I better stop, I am depressing myself.
December 15th, 2008 at 01:15 pm 1229346958
I agree with the above comments, and to add a slightly different view, frugal people are most likely the ones that will continue to be financially solvent, no matter what happens, but especially in times like this. We are the ones with the cash to afford things in buyer's markets like this. A buyer's market that, when it recovers, will put all of us much further ahead than previously possible.
So, that to me is the perspective that I think we should focus on: Personal economy. There are people who can financially suffer even in good times, and there are people who can thrive even in bad times. The trick is for us to manage ourselves well so we can thrive both in good times and bad....
December 15th, 2008 at 10:55 pm 1229381709
December 16th, 2008 at 04:19 am 1229401157
December 17th, 2008 at 12:28 am 1229473723
worst case- unemployment causes more foreclosures on not bad loans (for example I have a good loan- good terms) but any job loss would include a forclosure if I was not employed again at same pay rate within 3 months.
I think regardless of best case or worst case, we will see some benefits:
1) credit and credit ratings will mean more. People which walked away could not buy again and probably could not retire anytime soon- this will help SS and other handout type programs which require a tax base.
2) people with cash to invest come out ahead- if I stay employed and keep investing I think retirement will speed up because I am buying 40% off.
3) political change will probably follow. Someone, somewhere will be held accountable by the general public.