Brian Fuller's blog on the media, marketing and content creation

What’s old is new again

Posted on | October 2, 2008 | No Comments


Busy as hell the past two weeks, astonishingly so, given the financial meltdown around us. I felt bad about not blogging, but then again reading The Wall Street Journal every morning was enough to paralyze me.
I remember ’87. I was in Rhode Island at the time. I just happened to pop into my broker’s office in the afternoon when the market crashed. I had no idea, as this was pre-Internet and I hadn’t been listening to the radio. My Kidder-Peabody guy had his silver bull statue turned upside down after the market when 500 points south. More than a dozen years later, I saw Worldcom evaporate before my eyes along with a chunk of hard-earned investment.
This one is different. It’s a good old-fashioned panic. Most of us haven’t seen anything like this in our lifetime. In previously market runs or recessions, there was always credit. It may have been more expensive money, but it was there to be had. Today, there is NO credit. There is only fear.
On NPR today, a woman who runs a small business in the Bay Area said her credit line is frozen. She’s had to lay off half her staff of 40 in the past few days. I chatted with the deli owner across the street. She has a customer, an accountant, whose firm’s largest client was a European company with offices in San Francisco. They retrenched and killed the S.F. presence. There goes half that man’s business. Multiply those cases by, what, tens of thousands? Overnight. Boom. Done.
This could be a doozy. I’ve worried for years that the real estate speculation bubble would mirror, in its collapse, what happened to Japan in the early 1990s, when asset prices said sayonara and the lost decade ensued.
We can hope that ours won’t be that prolonged. We tend to move more quickly, rip off the bandage faster. But it will be painful. Then again, 24-hour media so hyperventilates today that it could all be overblown, couldn’t it? You just don’t know.

Joe Biden said tonight in the VP debate that this collapse was driven by greed. Sure enough. But let’s be honest: we’re all complicit. Rank and file Americans had access to cheap money the past 10 years that was unprecedented. Bad oversight sure. But didn’t you feel, somewhere deep down, that at the peak of it all something was amiss? In the past 10 years, when your neighbors were taking weekend trips to the islands or Europe, didn’t that strike you as just not right? New everything every couple of years, second and third homes? Technology brought us boom times, but could it really make us mini King Croesuses?

My parents both lived through the Depression, neither uncomfortably. My godmother did too, but she remembered toast and water for a long time. They were forever changed by it. Credit to them was something to be avoided at all times, save for buying a house. My old man had plenty of money but held onto our cars for a dozen years, bought sport coats at Kmart for 10 bucks. It was a fabulous deal to him and an eyesore to mom, so much so she wept every time he wore it public.

We may have an astonishingly resilient economy, spurred on by technology and creative, risk-taking minds with renewed access to credit. That’s the upside. The downside is our standard of living could completely change overnight and we’ll all be shopping for burgundy sports coats at Kmart, assuming it doesn’t go bankrupt again.

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Comments

No Responses to “What’s old is new again”

  1. Kerri
    October 3rd, 2008 @ 6:10 am

    If you don’t have the money for a 60″ plasma TV, or a Mercedes, or whatever, don’t BUY it. What happened to SAVING UP for what you want, rather than buying it on credit and paying extra? What happened to layaway? What are we teaching Americans if we bail out Wall Street, and then leave those folks there to rebuild their greedy empire with our money?

    No, it’s not plausible to buy a house, or usually a car, without credit. But if you can’t MEET PAYROLL because your credit line dried up, there is something wrong with the way you’re running your business. It’s called irresponsible growth. Like feeding the hungry with McDonalds instead of healthful protein and vegetables — the difference between bloat and growth.

  2. Loring Wirbel
    October 3rd, 2008 @ 9:50 am

    You’re one of the few people with the guts to say that the greed observed in hedge-fund managers is mirrored in the way people consider their own 401k’s, in the way they conduct private real-estate transactions, etc. If we all would settle for single-digit profit margins, both in what we demand from commercial banking institutions and what we expect from our own lives, our problems wouldn’t be nearly as great. Yeah, right, as if. We’ll just bounce from bubble to bubble to bubble.

  3. Loring Wirbel
    October 6th, 2008 @ 4:04 pm

    Jim Kramer said Oct. 6 if you need cash within the next five years, get it out of the stock market now. Now there’s a vote of confidence.

  4. wretch
    October 8th, 2008 @ 2:47 pm

    For at least the last quarter-century, it has been government and industry policy to actively encourage individual irresponsibility.

    When we bought our house 15 years ago, our real estate agent was encouraging us to buy a house at double that what we actually paid for the one we’re in. Our real estate agent assured us we could afford more. Our bank assured us we could afford more. Common financial advice at the time was that we could afford more house.

    I don’t think I was all that smart back then, I think I bought only as much house as I thought I could afford because I was just being a pussy.

    The point is, when everyone tells you it’s safe, at some point, some people are going to believe it’s actually safe.

    YES, YES, YES, individuals have to shoulder some blame. Did everyone read that? Voters have to shoulder some blame for voting for morons advocating “free” markets (aka voodoo economics, sh** running downhill — oops, I mean “trickle down” theory, or financial anarchy).

    But for all that, the blame being heaped on Wall Street snake oil salesman and the government that aided and abetted them is justly apportioned.

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