Eco ... zzzzzzz

If you're like me, the mention of the word "economics" can put you right to sleep. I don't know anything about it, and in fact, I already know more than I want to. When the two minute reports on the economy come on the news, it sounds to me like Charlie Brown's mother, you know, a trombone going WAAH WAAH WAAH. When I see Suze Orman on TV, I change the channel immediately, because it makes me nervous to watch her since I can't understand a single word she says.

Yet last night I found myself in a lengthy phone conversation with the Sibs on this very topic. She started by saying how terrible it is, and how we should all be taught something about this in school. In fact, starting next year, the state of New Jersey will have an economics component as part of its standards for Social Studies. How do I know this? Because K nearly went into a panic when she heard about it; she's had to take three economics courses, all of them her lowest grades. The Other Chai, who is a master teacher of incredible quality, has been written up in the New York Times twice and has been teaching politics, government, and history for nearly 40 years, says that when they tell her she has to include economics, she'll say "Well, thank you, it's been a nice career." Economics makes everyone queasy, except the Hubs, of course, who was an economics major at Georgetown. (Actually he double-majored in economics and government. So yeah, he's a smartie.)

Here is what I said to my sister. First of all, the only people who are really going to be hurt by this are the ordinary everyday yous and mes. The CEO of AIG and all those other bigshots are doing just fine. They're still taking their trips and furnishing their mansions and driving their hundred thousand dollar cars. They are not suffering at all, even though the whole thing is their fault. (The best explanation I've seen of how this all happened is here.) http://www.youtube.com/watch?v=VABzL8acwWM

Anyway, we were discussing how ordinary people have "lost" so much money that many are not now able to retire as planned. I do understand that this is how people perceive what's happened to them. However, here's what I said:

People who have lost money in the stock market have not actually lost money at all, because it's money they never had. Let's say that, for example, years ago, you bought $100,000 worth of stock, and you've held onto it and four months ago, your portfolio was "worth" a quarter of a million dollars. Does this mean that four months ago, you had a quarter of a million dollars? No. It means that four months ago, you had something that, if you sold it, you could get a quarter million dollars for it. Until or unless you sold it, it was worth, kind of, nothing. At any given moment, it was only worth anything if you sold it, and then it would be worth whatever you could get for it.

Let's say that now, your same stock portfolio is worth $150,000. Did you lose $100,000? No, because you never had it. What you lost is the potential $100,000 that would have existed if you had sold your stock before. In fact, you're $50,000 ahead of where you were when you bought the stock.

All along, people were thinking that they had a portfolio of x amount of money, and it would always be there at that amount (or more), and when they retired they would have that much "money" (which didn't really exist unless you sold it and actually got money that you could put in a bank or in your wallet) and "live off the interest" or "live off the dividends" or whatever. The fly in the ointment here, again, is that unless they cashed out, the money was never really there. Whatever, now, people who had all this money invested in the stock market in risky stocks are screwed, and what they expected to be there isn't there, and now they have to keep working.

Not everybody fits into this category of losing money they thought they had (but didn't) because clearly, not everybody invests in the stock market. There are those who do have the money to invest, and they buy land, for example. ("Land, Katie Scarlet O'Hara ... it's the only thing that matters ... the only thing that lasts.") So for those of you who had money and bought land, ten extra points.

But most people don't invest or buy land or gold coins. Most of us are just getting along, day to day. (Years ago, a broker got in touch with the Hubs and offered to help him create a portfolio. "I'm sorry," said the Hubs, "but all of our money is tied up in survival.") We're still going to get screwed because of how this mess affects everything else, from credit cards to the prices of goods to the ability to get car loans and mortgages, and no one is bailing us out. I think it would be totally cool if Congress passed a bill that says I don't have to pay my credit cards anymore, just wipe'em clean.

Anyway, I'm not proposing a solution, certainly, because all I really understand is that someone direct-deposits my paycheck and then within 24 hours I send it all away to other people. The only investments I ever had were what my parents left me, and once my children went to college, that was the end of that. The only other thing I know is that I have a contract with the state of New Jersey that says when I retire, they will pay my pension. Government pensions, folks, that's the way to go, especially when you have no idea what you're doing out there.


WATCHING ELLEN :: ENTRY #1909
READING: The Nine by Jeffrey Toobin