Live Suite Dilemma

[Peter Korsten]

Tony Scharf schreef:

> the 90s saw the collapse of the communist system on one extreme, and
> now we are seeing the collapse of the other competing extreme.  The
> true, best system, as usual, is somewhere in the middle.
> 
> The problem with a completely free market, is that once you have
> players of sufficient size to manipulate that market then it ceases to
> be free.  We see this in the software market with Microsoft (though
> their power is diminishing) and, in the states anyway, we really see
> it with mega super store Walmart.   They are a large enough player to
> completely alter the landscape of the market and force pricing on
> their vendors, which drives many of them out of business.

In my opinion, what we have now, and seeing isn't working terribly well, 
isn't even pure capitalism. That would be more around the time of the 
Industrial Revolution until, say the turn of the 19th to the 20th 
century, where labourers would work and live in the most appalling of 
conditions, and the bosses got all the money. At least in the western 
world, this is no longer the case. There are differences between 
countries, but outright poverty isn't as rampant as it once was.

But it also appears that in the USA and most of Europe, the lessons of 
the past have been forgotten, and that we were heading that way again. 
Because if this recession would really turn into a depression - and it 
still could - there would be poverty again, possibly with social unrest 
and armed conflict between nations.

> I think, really, our current mess is really a case of the 'Emperors
> New Cloths' gone terribly amok.  *everyone* knew that what was going
> on was crazy and unsustainable, but so long as they money kept coming
> in, no one wanted to admit that the Emperor (in this case mortgage
> backed securities) was stark buck naked.

Oh yes. Absolutely.

> So who is to blame?  Everyone, pretty much, in my country and around
> the world who bought into it.   Everyone who lived far beyond their
> means, people who bought houses, people who sold houses, Realtors,
> mortgage brokers, banks, investors, programmers of computer models
> that predicted no risk, credit rating agencies that marked the
> securities as safe...everyone.

Flip that house...

In our case, we have debts, a substantial mortgage, and three 
properties. But the debt is because of the real estate; by and large, we 
live a relatively frugal life. We don't spend money on things we don't 
need, and that's one reason why I don't have more gear, or more trains 
for that matter.

The end result, hopefully: our son, who has high-functioning autism, 
will have considerable financial resources when we can no longer look 
after him, or at least a flat where he can live.

And the debt is going down. That the European Central Bank has lowered 
its interest rate, and that our bank has followed suit with the interest 
rate of the mortgage, helps a lot. This saves us hundreds of euros per 
month.

> There is something my grandfather taught me: Any time you borrow
> money, sooner or later your going to get a bill.  Collectively, we got
> it and realized there isnt quite enough money in the coffers to pay
> it.  Now people are panicking.  He also taught me to never ever trust
> a financial transaction I couldnt fully understand.  There has been
> far to much of that going around.

I've found derivatives always confusing. I don't understand them, no 
really anyway. And I think too many people just saw profit margins, and 
didn't understand what they were doing.

And those who knew what they were doing, probably had their judgement 
clouded by testosterone. It's ironic that our financial systems are 
largely ruled by hormones. (I'm not making this up; they've done 
scientific research into this.)

The other day, on the BBC World Service, they were interviewing elderly 
people what they thought about the financial/economic crisis. These 
weren't economists, these were just old people who've worked hard, and 
*never* had a debt in their lives. They rented a house, and they saved.

What they said made a lot of sense, common sense mostly.

> But one thing I wish people would recognize so they would stop
> panicking:  These things are cyclical.  You have booms and you have
> busts.   the bigger the boom...the deeper the bust.   Its a necessary
> part of economics.  companies make lots of money...they get
> wastefull...then you have a bust, and they are forced to lean up. the
> weaker companies fall.  A lot of people end up unemployed for a time,
> but I actually think *that too* is ultimately for the good - it
> reshuffles the pool of skills and forces some people to strike out on
> their own creating new ventures and new innovations that will lead to
> the next boom....and the next bust...and the next boom...
> 
> So, ultimately, I am just going to ride it out.  Better times will come.

Well, the absurdly low interest rate is proving an opportunity. And us 
being frugal is something that had started a long time before. The 
company where I work is feeling the pain, but at least we're making a 
profit: the competition has lost money, for the first time, and is 
laying off 300 people, which in this country is an enormous amount, 
comparable to 750,000 people losing their jobs in the USA.

And the leaning up has started a couple of years ago. We were already 
pretty lean when the crisis hit. On the one hand, that means there's 
very little leeway to cut further, but on the other hand, the local 
operating company is turning a profit, and so is the multi-national 
parent company.

So yes, we'll ride it out. I'm hopeful, anyway.

- Peter