Monday, July 6, 2009
The long-term consequence of this economic shift is one of the great unknowns we live with this summer of 2009. Few of us imagined that the government would succeed in the short term at turning back the clock to the way things were. Statistics support the view that a multi-billion dollar infusion of cash will fall considerably short of our high expectations.
On one level or another, all of us are working on strategies to cope. We are looking for more than survival, we want to capitalize; to seize the opportunity.
We’ve been bumped right out of the rut. We’ve been pushed to reconsider what we really want. What we really care about. When a bubble bursts, you can’t remake it. Maybe that’s what they were getting at when they told us the story about Humpty Dumpty and all the King’s horses and all the King’s men. Sometime it breaks. You start over. And here we are, back to the proverbial drawing board.
But already, I’ve seen at least one tangible benefit to this global size correction. I experienced it this weekend.
We all know about economic cycles; the fundamentals of supply and demand. We understand that market value is simply defined. What will a willing seller take from a willing buyer? That’s your value. It certainly is not fixed; value goes up and then comes down. Price fixing never works for long. People who create products race to meet demand. But the minute they produce more than the market will absorb, value falls. Simple as that. When you run out of buyers, price drops. That’s the way it works.
Some argue that market forces are right up there with earthquakes and hurricanes. Now that capitalism has been unleashed all over the globe, the ebb and flow of market tides are beyond the reach of governments and corporations and boardrooms and taxing agencies.
There is a whole new generation of bright, tech savvy, eager young people who just twenty-four months ago viewed the American dream as the impossible dream. Apart from access to a major chunk of cash from wealthy family members, the possibility of home ownership remained well out of reach; especially here in Southern California. When entry-level homes start at six or eight hundred thousand dollars and a one hundred thousand dollar annual income qualifies you, maybe, for a three hundred thousand dollar mortgage, what’s the point? It’s not going to happen. (Unless the bank gives you a loan you can not possibly repay.)
When an entire generation is robbed of the possibility of a home and neighborhood and a place to drop roots and build a life, what is the consequence? Motivation goes, too. It’s no wonder that a whole wave of twenty-somethings seem lost and tentative toward commitment of any sort. When an education is no guarantee of marketability and incomes fall way short of providing a path toward upward mobility, why even participate?
Blame who you will, the market is cleaning itself up. Bloated corporate expenses are disappearing. Banks that made loans without bothering to check credit-worthiness are paying a serious toll. Money managers who manipulated markets are washing out. The government cannot possibly prosecute every abuse of the system; but the system can. And it does. It’s not a perfect justice, but it is a kind of justice.
So now, thanks to a substantial market drop, a new generation has been invited into the system. Values are back within reach. Our own kids have been on the hunt for property for several months. They competed with other young buyers – ten to twenty offers per house on average. Last week they closed escrow on their first house.
Trust me when I say it needs work. Carolyn and I were there this weekend scraping and painting and sanding and sweeping and demolishing old stuff that needs to go. We were back at Home Depot again. It will take time and sweat and care to create the space of their hopes and dreams.
It is a community of twenty-somethings all helping each other. A whole pack of friends joined in. Our grandson will celebrate his fourth birthday next week in the living room of his own place; and we’ll be clearing a play area in the back yard. And in a month or so, he will welcome a new sister.
It is hard for me to put into words the pride I feel in those kids putting in the long hard days, making the decisions, working with their friends and getting the place ready. We were there, too, back then.
What is at work here? Something primal. Right off the script of “It’s A Wonderful Life.” Sixty years ago.
Just before the big dance over at the high school, the two of them at the dinner table, George and his father discussed the merits of the Building and Loan downtown. The senior Mr. Bailey said,
You know, George, I feel that in a small way we are doing something important. Satisfying a fundamental urge. It’s deep in the [human] race for a man to want his own roof and walls and fireplace. And we’re helping him get those things in our shabby little office.
Later, when George and Mary Bailey stood on the front porch of a new home. In dedication, they presented gifts and pronounced a blessing with the whole neighborhood listening in –Mary: Bread! That this house may never know hunger. Salt! That life may always have flavor! And wine!! That joy and prosperity may reign forever. George: Enter the Martini castle! The crowd cheers.
As Carolyn and I looked back, sweaty and covered with splotches of paint, soreness here and there, at the little house there on Timothy Drive and our kids working so hard to make it their own, we cheered, too.
Copyright Kenneth E Kemp 2009