Surviving After the Crash
By Jim Smith
Is Wall Street headed toward a depression-sized crash? If so, how will we be able to survive?
These questions are on the minds of millions of Americans, and not just a few over-extended Venetians.
But first, if you have your nest egg, 401(k) or other much needed wad of money invested in stocks, here is a word of advice: SELL!
If you sell before the market tumbles, you won’t lose a thing. If the crisis passes, you can always reinvest as if nothing happened. But if you wait until half the value of your stocks is gone, you’re screwed. It might mean that you have to work another few years before retiring, or that you’ll have to live more frugally for the rest of your life. Such is the fate of many people every time there is even a modest downturn in the stock market, let alone a crash.
For many homeless people, the depression struck long ago. In 1929, millions of Americans suddenly found themselves homeless. “Hoovervilles,” named after the hapless president, sprang up around every city. Will we soon see “Bushvilles?” Probably not, given the aggressiveness of modern-day police forces. Unless the crash assumes overwhelming proportions, its victims will likely be scattered throughout cities, without even a cardboard shack to call home. (A note to those haughty and heartless homeowners of Venice who are working to drive the homeless out of Venice: next year at this time, it might be you walking the streets, or living in your car. Where do you think the homeless came from in the first place?)
Both pro-capitalist and anti-capitalist economists know that boom and bust cycles are a natural part of the economy. Since WWII, the government has been moderately successful in limiting the severity of the crashes to the margins of society. This has been accomplished by manipulating the money supply, the interest rate, government investment (mainly in the military) and by providing a safety net for the victims.
During both the Clinton and Bush2 regimes, the safety net has been eroded, both intentionally (by Clinton’s destruction of welfare), and by neglect (such as the low federal minimum wage, SSI and social security payments, and lack of Section 8 housing). Because of the weakened safety net, any downturn will cause more human suffering than it would have 20 years ago.
Why is a crash a possibility today?
Economists can no more predict the exact timing of an economic crash that seismologists can predict the timing of an earthquake. But both know that we live and work on shaky ground. It’s only a matter of time.
Many economists marvel that the economy has staggered on so long without a crash. The underpinnings of a strong U.S. economy were removed when globalization became a force in the late 1970s. The industrial base of the world economy began shifting from the U.S. and advanced industrialized countries to the third world. The North American Free Trade Agreement (NAFTA), that Clinton and Gore campaigned so hard for was the final kiss goodbye to American industry, and a kiss hello to millions of displaced Mexican workers and farmers who could no longer survive under U.S. industrial domination.
Meanwhile, Americans began selling financial goods and services to each other, and called it production. In reality, it was a house of cards. It’s also been called “casino capitalism,” where speculation rules - for a while.
Union membership has been in free fall since the 1970s, and with it, decent pay, benefits and pensions.
The immediate cause for concern is the default by many homeowners who have been sold sub-prime adjustable-rate loans. When their monthly mortgage payment skyrocketed, many borrowers could not afford it any longer. Others have been able to squeeze out their mortgage payment by defaulting on credit cards and other loans, or by avoiding the mall. As a result, every business from Wal-Mart to our local stores is feeling the pinch. And chances are the crunch is just beginning. The mortgage crisis may well turn into a classic under-consumption crisis that will idle production lines around the world.
Personal survival in a world gone mad
In a way, the coming calamity is one of our own making. We should have done more to resist NAFTA and the WTO (World Trade Organization), when they were converting good union jobs into $1 a day sweatshop work in Latin America and Asia. We should have done more to help third-world countries bring their standard of living up to our conditions, instead of waiting until we were headed down to their conditions. Now that the crisis is nearly upon us, we can learn much from the way that people survive around the world on almost nothing.
First off, we’ll all have less personal space in which to live. You can keep your home if you convert that den into another bedroom and get a roommate. Working couples can still afford a roomy house, if you invite some of your closes friends to live with you. If a three-bedroom house rents for the outrageous price of $3,000 a month, it’ll only be $500 a month if it’s occupied by six people all paying their share. At least you won’t be out in the street, and you may learn to enjoy other people’s company!
Less personal space means that we need more public space. In Venice, we are fortunate to have a huge park on our doorstep - the Pacific Ocean. In addition, we need to insist that the city help us convert vacant lots (many of which are city-owned) into community gardens. Even private lots are a possibility for a garden if the city will assume liability.
If you make housing and food your top priorities, you may have to sell that $50,000-plus Hummer, BMW, Mercedes, or other rolling palace. If you are able to get any money out of your car, spend some of it on a Zebra electric car, a bicycle, a bus pass and a new pair of walking shoes. Not only will you become healthier, you might become happier now that you don’t have to drive in gridlocked traffic. You probably won’t have to worry about getting to a job, anyway.
Other ways to survive on almost nothing - a typical Venice lifestyle - include getting rid of that expensive satellite or cable subscription, check out the Venice thrift stores and 99 cent store, cut down on movie going (rent DVDs instead), and do more positive and interactive things with your life. Create a theater group and put on plays for the neighborhood, organize block parties and get to know the neighbors, plan a weekly pot luck dinner with your closest friends, carpool, get involved in making Venice a more livable community for people of all incomes.
For more on living a Venice lifestyle, check out “You don’t have to be rich to live in Venice,” at <www.freevenice.org/Beachhead/Aug2005/ Beachhead-Aug_2005.pdf> go to page 5.
Posted: Sat - September 1, 2007 at 06:46 PM