Monday, July 14, 2008

Doom and Gloom

I sent my dad this article about how Baby Boomers are constantly unhappy. He responded with some angry defense of how horrible his life has become in “the worst economy since the Great Depression.” Oh, sorry. I guess I was reading Hillary Clinton’s line.

Anyway, every time we go see them he basically asks me, “Isn’t true that we’ll all be living under an overpass and eating lead-laced dog food before I finish asking this question?” And I say, “I don’t think the economy’s that bad right now.” And he guffaws and probably thinks, “If that’s the type of economic education he’s getting, I’m glad I’m not paying for any of it.”

What’s ironic is that I’m pretty pessimistic about the structure of the American economy. It’s all based on people thinking everything’s going to be okay. When people start thinking otherwise, you get bank runs.

When we lived in California we opened savings accounts for our two existing children at IndyMac Bank after an extensive vetting process that consisted solely of the question, “Do you have a minimum starting balance?” We were such fastidious watchdogs that when we moved to Kansas and tried to find our closest IndyMac branch, we were surprised to learn they exist only in California. (We had assumed they were a Midwestern bank, what with the word "Indy" in their name.) So Persephone wrote a letter and closed our accounts and opened new ones here in Kansas. It turns out we were the extremely preliminary front end of a bank run. How 1930ish of us!

The real problem, of course, was mortgage lending. The type of mortgage lending that allowed my parents to sell their California house for seven times their purchase price to a couple that couldn’t afford it and now doesn’t live there anymore. But I don’t see my dad beating down his bank’s door offering any of his cash back. Until you stop sheltering the moral hazards from the problems of their own making, there will always be economic problems that convince my father his pity party is warranted.

Note: I can disagree with my parents without hating them. They're great people. They just are a little nuts about money.

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