After my last post, full of invective against greed by Wall Street bankers and corporate chiefs, it’s only fair that I mention that we are all guilty of some greed. When President Obama said in his inaugural address that the current financial crisis is a result of “our collective failure to make hard choices and prepare the nation for a new age,” he wasn’t just talking about Wall Street. “Collective” means all of us, and we all share some blame. Or if not actually “all,” at least most of us.
Most of us were on a consumption binge of one sort or another. Some were buying things they didn’t need, others were buying things they couldn’t afford. The most obvious, and painful, example, is in the housing market. Folks bought more house than they could afford, and often more than they needed, seduced by low teaser rates, or by the chance to get a big win by selling it later. Others bought houses purely as investments, planning to flip them, only to be squeezed by rising mortgage payments and falling housing prices. Some refinanced with foolish mortgages, so they could “take money out of the house” and use the tax-subsidized proceeds to buy consumer products.
But it wasn’t just houses. We bought giant flat screen TVs, charging them to our credit cards. We drove around in monstrous Ford Excursions (financed by the geniuses on Wall Street), burning a gallon of gas every 15 miles. We drank bottled water instead of tap, we carried Coach purses, we stayed at 4 Seasons hotels when our income was purely Hamptons Inn.
While the Wall Street big shots may have taken huge bonuses with our tax dollars, they weren’t the only ones looking for the big score. We all wanted some goodies, whatever our income level. Those days are over. The goodies are nice, if they haven’t been repossessed, but we can’t afford them anymore. We couldn’t afford them then, which is the whole point. The days of living beyond our means are over. That doesn’t mean we’re going to be in yurts, heated only by burning cow manure. It just means that maybe we don’t need to have the biggest and newest, all the time.