There appears to be a sort of ripple effect happening in the economy.
There are a lot of people in the area who have been laid off from their jobs, without warning. Suddenly, they cannot pay their mortgages and insurance and utilities. The remodeling job that they started eight months ago suddenly loses priority in their list of bills to pay. So the guy who made the cabinets for their new kitchen and installed them two months ago has not been paid for his work. The homeowners would pay him if their bank would just let them refinance their mortgage, but this has become quite difficult since they were laid off at the boat factory.
So the cabinet maker doesn’t have enough money to pay his own bills. He paid up front for the wood he made into the cabinets. The last thing he has in line to pay in his own bills happens to be the rent for the house he is living in. The landlords are happy that there is someone living in the big house, keeping the utilities paid and the place warm. An empty house can deteriorate awfully fast. And there don’t seem to be people lining up in the streets waiting to rent houses.
But the landlords have to pay for insurance and for the mortgage on that house, which is coming out of their monthly income. Suddenly, the flow of funds dries up and they start looking at all aspects of their life and deciding what they will do without in order to make ends meet.
We are the landlords, and I haven’t started looking at the dog and seeing curry yet. There are quite a number of people around here who have had to take their pets to the pound because they simply can’t afford to feed them. We aren’t there yet, but the wolf is at the end of the block, making his way from door to door on his way here.
Thank goodness we have the mortgage on this place all paid up.
It is such a worrisome time! I fear it will only get worse. We are living from paycheck to paycheck, fearing no one is immune from this economic epidemic of woes. Hope things straighten out for you. Hate to see my friends in any form of hardship, of course. If mentally ill people stay out of the hospital, maybe my psychiatrist husband won’t have his state job either.
Brenda
Our lives are complicated by the fact that I am self employed, and if people can’t afford massages I don’t work. Fortunately, I have priced myself at a level that is quite affordable, and I have quite a few very loyal clients. So I still have work.
And Jim is retired from the military. We get a stipend each month, which if we didn’t do anything extra at all it is enough to cover the mortgage on our rental house, the car payment, taxes and insurance on everything, and basic utilities. We could get by. But things would be tight and we’d probably have to get rid of the DSL connection (gasp! horrors). Satellite TV is definitely a luxury also. Not even close that that point yet.
Oh, a military pension is a wonderful thing! But I can relate to the anxiety of self-employment. I’m grateful that my particular niche of the publishing world has been fairly immune to the economic downturn — academics still have to publish, after all.
I hope that your tenants receive some of their receivables soon. I’m sure it’s very stressful for them, too. Though I would normally put rent on the top of my list of bills to pay…he must be very confident you won’t evict him!
Your post illustrates well the domino effect this financial crisis is having on ordinary people.
The recent years of plenty have encouraged us to be wasteful in many ways, especially in our use of this planet’s resources.
We need to relearn our grandparents habits of thrift and careful husbandry.
Of course, for those already practising careful habits, whose budgets are already worked out to the last cent/penny – it’s going to be difficult and excrutiatingly painful.
Things aren’t as nearly as bad now as they were in the Carter years (double digit inflation, double digit interest rates, gas lines, etc.), and we’re already starting to come out of it, assuming congress does no more damage than it already has…
You’re right. Things could be much worse. I don’t remember the Carter years very well, though. I was living in Fairbanks Alaska at the time, and Washington was very far away. My husband and I were busy building a cabin, there weren’t any gas lines in Alaska and everything was so damned expensive up there that nobody really noticed that there was inflation. Just moving to Alaska was like going through 100% inflation just by virtue of stepping off the plane.,
of course, we’re well situated, too, with house and car paid off (thankfully), taxes paid and the freezers full. But I did have a moment of panic the other day when it was announced on the news that Sirius/XM satellite radio was filing for bankruptcy protection. They can’t possibly go out of business or thousands of (spoiled rotten) radio addicts like myself will go berserk!!! It’s amazing what we have come to expect and think that we can’t possibly live without!!If they take away my satellite radio and TV and DSL, I may have to break out the old deck of cards and book of Hoyle!! HORRORS!!!
Oh Jeri, you could always go get some more books. I hear they have them for free at the library. . . Surely you can’t get in trouble for bringing books home to read that will go BACK to a shelf that is not in your house. . .
Thank goodness for Netflix
This is the deflationary spiral. Money supply dries uo wherever you look, making human activity grinding to a halt. It is deadly. Classical economy knows only one way out: keynesian state spending, to put some currency back in circulation. But in a world where states (especially federal states) have to borrow money into existence (instead of being allowed to print it, as it may lead to hyperinflation if not strictly controlled), this cannot go on for very long, as the financial markets hesitate to lend to states that are essentially bankrupt. In addition, even if they manage to borrow, the fact that there are interest rates means that a lot of the new activity and the resulting wealth will be channeled right to the money lenders.
Now, it is normal that we should not be able to afford all we have been used to: the planet is just not big enough. But there is a huge difference between not driving one’s SUV anymore and not being able to house and feed oneself – or get oneself a massage, for that matter.
This is why I am starting a LETS (local exchange trading system = organised barter network), so that people are encouraged to take their fate in their hands, and essential needs can still be met. The currency unit of such networks is human labor time, so that everybody who is physically able to work at something useful to the community can afford to ask favors from anybody else: one hour of your massages could buy you one hour of computer maintenance.
There was a barter system in use during the 70′s that allowed someone with something to provide to post it and someone in another part of the country to use it with the aid of a data base and credits that made it work. With the internet it would be easier now.I think, but not sure that the gov’t found a way to tax the transactions which effectively killed it.
I participate in initiatives with similarities to barter and alternative currencies, like Freecycle and Bookmooch. They are great social initiatives that encourage reuse and sharing.
The one problem with bartering based on time is that people have to agree that an hour of massage is “worth” the same as an hour of computer maintenance. Sometimes adjustments have to be made: in Bookmooch you get more “points” to redeem for future books if you agree to send a book overseas, because that fosters more sharing, even though the same book could be sent domestically. On the other hand, a big, heavy art book is worth the same points as a cheap paperback, which some people don’t agree with.
So it all comes down to what people will agree to.
I have been contemplating the barter idea for a while now, ever since the last time Mandarine mentioned it here. The problem with it here is that as long as the government believes that it has the right to take away your property because you didn’t pay your property taxes, we need MONEY, because you can not barter with the city and county government. At least not yet.
Also, I am not sure we can go back to the barter and trade system that existed in the past. I do not see how I would be able to get coffee. I suppose I should not be thinking in terms of my carbon expensive luxuries when I contemplate the barter system. In that kind of economic climate where the system has completely collapsed, sacrifices would have to be made. It makes me want to hoard coffee and chocolate NOW, buying it with the soon to be worthless money I have stored up. I wonder how many pounds of coffee I would have to buy to make sure I had enough to last me until the end of my life.
You have to look at complementary and local currencies as a way to use the few dollars you have only for the things you really need hard currency for (federal taxes, foreign goods, etc.). A huge proportion of money flows in any economy is local or regional (food, services) and can thus rely on local currencies, which a local organization (state, NGO, association) can emit.
A LETS is one example of micro-local currency system (e.g. within a 20-mile radius), in which a group of people decide to emit and trade LETS units for goods and services between them. In essence, it is an intermediate step between mutual barter and more classical currencies. I like to see it as a way to extend the reach of barter between people who will thus get to know each other enough eventually to stop petty accounting and promote gift economy (again, that’s only valid for micro-local aspects of the economy, but my guess is that 80% of our basic needs can be fulfilled locally, because that’s what people used to do before cars existed).
Note that in famous local currency experiments, local governments encouraged the use of the local currency by accepting local taxes to be paid in local money (which makes sense when a good proportion of local governments’ spending is spent on locally produced goods or paying locally employed people).
Instead of a flat global economy where every aspect of your life involves earning and spending euros or dollars (and which leads entire countries to abandon food sovereignty and to develop export industries and then import food from overseas, and in which the farmer next door has to compete with all the farmers in Argentina when he wants to sell me beef), I would love a Russian-doll economy with layers of local, regional, national, and international trade, with an associated currency for each layer. As energy/transportation costs rise (either because demand picks up, or because we get poorer from the deflation), it is bound to change that way anyway.
thanks for that explanation, Mandarine. I’m sure there is a lot more to it than that, but at least it makes some sort of sense to me. We already are starting to participate in a kind of barter with some of my clients and friends, but mostly it involves swapping one thing we want for something they want, and we also trade work with each other.
Ideally, I would like to see a gift economy too. It seems like that may have been a very ancient economic model. In this world, we have become too darned complicated. Somewhere, a “need” for cheap plastic stuff from China was created. I’m not sure how many things in my home were made there, but I would imagine not as many as there are at some other places.
Additionally, we have been convinced as consumers that we should be buying fresh tomatoes all year, even though those red things in the supermarket labeled as such are much closer kin to cardboard than an actual tomato. How the American consumer bought into that whole thing is a complete mystery to me. And yet, this artificial need for fresh apples and blueberries year round is so ubiquitous whole industries have evolved to satisfy it.