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After The Great Recession

Updated on April 22, 2010

The Great Recession

Our most recent economic downturn is being called the Great Recession. We're just now starting to finally see some signs that we are in a recovery mode. Still, we have a long way to go to really see any real results, and getting back to the healthier economic times we came from may be even farther away—if we can get back to that at all. The fact is that since the beginning of this recession, the United States has lost around 8.7 million jobs. By all accounts, if we were to expect to be back to where we'd started, we'd have to add at least those jobs we've lost. That's not accounting for any growth by the way.

In March, it was reported that the economy added around 162,000 new jobs. But, the reality is that if you discount the 48,000 or so jobs that were added as a result of the census bureau hiring temporary census workers, that means we actually only added 114,000 new jobs. In February we added 150,000, so actually the new March numbers would suggest to me that jobs growth actually slowed slightly.

The big nut is, of course, consumer spending and unemployment figures. Unemployment has been fairly steady around 9.7%. Still, looking at real unemployment figures, which account for those who have given up the job search, have run out of unemployment benefits, or have had to take on lower paying jobs to replace their old one, that number is much higher. Probably more like 15%-17%. It stands to reason that consumers cannot spend, and will not spend if they are unemployed, or underemployed for that matter. Unemployment numbers and consumer spending numbers are one in the same.

DOW 11,000

Even though before the proverbial shit hit the fan, the Dow Jones Industrial Average, which tracks 30 top companies across a broad range of sectors, was at an impressive 14,000 or so at its peak, its recent break into 11,000 territory is a significant one. Especially if you consider our low points when we bottomed out around last March. We've come a long way, to steal a phrase. But that is largely a market recovery rather than a sign that the economy as a whole is well on its way to a recovery. Until jobs numbers can sustain adding about 150,000 new jobs, according to most economists, each and every month, we're not going to be able to claim any real victory just yet.

Still, I'll take any market advances as a sign of at least some confidence in the economy being restored. Investors who see bleak earnings in the future, or see any sign of a forthcoming pullback are going to be reluctant to put their money into the markets. Additionally, there's still quite a lot of money on the sidelines, and as confidence continues to build, more of that money will funnel in, and provide necessary capital for businesses to grow and create jobs when the time is right to do so.

So, if the economy outside the markets isn't necessarily quite out of the woods as far as a recovery goes, where's the growth coming from? How do we get to 11,000?

Much of it has to do with companies having used the Great Recession to slash jobs, cut salaries and wages, reduce benefits, and in some cases even raise prices on the goods and services they sell. This means more money in the coiffures. They've also been able to take advantage of growing their businesses in other parts of the world where there is actually quite a lot of growth—China, for example. So, that helps to improve bottom lines.

Credit largely got us here

What really got us all here to begin with is many fold. It's a very complex web of too much risk, too much credit, and too much confidence. The word naiveté comes readily to mind as well. Nobody thought the great money ride was ever going to come to an end. So, everyone had a role to play in the demise of the economy. We have to remember that.

The government certainly had its role. I mean, the housing market got out of control largely because of Fannie Mae and Freddie Mac, and this whole idea that everyone deserved to own a house. So did the large banks have a role, who took on way more risk than obviously they could handle, and a lot more risk that the government forced them to take. Yeah, banks invented derivatives, asset backed securities, and all these other fancy terms that basically had the economy sitting on the edge of a high cliff with a strong wind blowing at its back. But those were largely put into high use to curtail some of the risk of subprime lending. But the American people also have a role in this through the extensive use of credit.

The fact of the matter is that between 2001-2007, as housing prices soared, Americans were virtually using their houses as ATM machines through refinancing deals, which lowered their monthly expenses, and because housing prices were skyrocketing, people had ever growing equity which, at the end of the whole refinancing process, often left loads of new money on the table that could be used to buy cars, computers and other electronics, take vacations, and even bought second and third homes. On top of that, credit cards were being issued as fast as the cards could be pressed and approved, and that just meant more money for the consumer to have access to and spend on whatever they wanted. Money was cheap. Money was available. There seemed to be an endless stream of capital.

It's not that much unlike the stock market crash of 1929. While it wasn't the consumer with too many credit cards and overextending themselves who bit the bullet there—those things were largely unavailable back then—the average American definitely suffered as the Great Depression soon followed that infamous historical day. But it was largely credit that blew it all to pieces. Credit, called margin, extended to Wall Streeters, for the purpose of buying more shares of stock than their own money would permit. There were big gains to be made buying stock on margin, and so long as stocks kept going up and they were comfortable they could carry the margins, then all was fine and good.

Those margins, as the market began to stagger, began to be called in. People who had margin accounts were forced to come up with the money to pay their margins back. The only way you can cover a margin is by selling off the underlying securities. And so it went that as people began to panic and sell off their stocks to pay back their margins, the stock market went into a freefall.

This is exactly what happened in the subprime markets. Sometimes you could have as many as three or four banks all having money on a single mortgage, and when things got ugly and panic ensued, banks started asking for their money. When everyone is asking for the same money at the same time, somebody starts to run out of it, and so goes the collapse.

We need an attitude adjustment

After the Great Recession we are going to have to have an attitude adjustment when it comes to credit. I think we're going to have to have an attitude adjustment with regard to a lot of things. You can throw our thinking about jobs in there, and certainly wages, and we have to admit to ourselves at one point or another that a service economy is not a sustainable one. We are going to have to restore at least some industry in America if we want to prosper as a people. We're also going to need to demand more made in the U.S.A. goods on our shelves as well, to help send the message that we won't settle for more American workers being kicked to the curb to save a few pennies at Walmart. Sure, American made goods may not be as cheap. Cost of living may indeed rise. But that's okay. If we are all working, and earning, and prospering, we'll all be able to afford any premium that goes along with that.

We want cheap. We don't want to have to have cheap. Let's make that point abundantly clear. And furthermore, if we are going to have a global economy, and everyone is going to get a benefit from that, let's make sure that they (the foreigners we've given our jobs away to) are buying as much from us as they are selling to us. Whoever said we could actually have our cake and eat it too? It's just not reality.

The plastic plague killed wages

One argument I've been making for quite some time is that part of the reason we have stagnant wages in this country, and certainly it fits into my previous attitude adjustment argument, is largely due to credit having effectively replaced the need for the working American consumer to grow his wages. It makes perfect sense to me. People who are consumers obviously need money in order to make purchases. The difference is that in the old days, people obtained that money from a job. They worked. They received a paycheck. They made purchases with the money they earned. But somewhere along the line, this all changed. Banks, who before would not lend to people who didn't have money suddenly realized as wages were going up, and while the economy was strong and seemed to be growing quite nicely, that people they wouldn't ordinarily lend to, could potentially be a gold mine. Installment pay is where it really got started, and once that ball got rolling, there was, of course, no stopping it.

Bob Hope used to joke, "A bank is a place that will lend you money if you can prove that you don't need it." That joke, of course, became obsolete, and banks fast became an empowering extension, and in some ways, the source for driving American consumerism.

What this meant was that wage growth could slow down. It didn't have to grind to a halt. But it didn't have to increase as rapidly either. And so long as a person's standard of living could be maintained what did the wages matter? Would the average worker have even noticed that their wages weren't moving much? They had more stuff. When they looked around them, never mind their bank accounts or their paychecks, things looked great. And, hiring companies knew there was no need for wage growth if credit could be offered to increase a consumer's purchasing power. They knew the dupe would be an easy one. Perhaps it's possible that really, the last big manufacturing job in America was, in fact, the very manufacturing of artificial economic prosperity.

At the end of the day, so long as purchasing power was strong, consumer demand could be strong, and so the cylce of the economy could go nowhere but up. Demand would be there to support jobs which would support the ability of any individuals who did extend themselves to pay those debts back—even if the gap between what you earned and what you could buy through credit was slowly widening beyond anyone's full comprehension of it.

Come to think of it, isn't this really what Bernie Madoff did? How's about Ken Lay or Jeff Skilling? Mr. Ponzi himself? At some stage of the game, which was probably right about the time the economy started to hit a brick wall, we all saw first hand that the entire underpinnings of the economy were all but a sham. Nobody really had any money. But everyone sure owed a lot of it to somebody else. Nearby lay the cash cow, dead as a door nail.

An illustrative reflection

When you look at my father, or my uncle as an example it sort of illustrates a little bit of what I'm talking about when it comes to wages, even if it is a more recent example. Pardon me in advance for beating a dead horse here on wages, but quite frankly a lot of people have what I argue is a false notion that wages are just fine. In fact, some argue, that some people even make too much money. Especially when we're talking about those know-nothing dummies who work on assembly lines. It's not an entirely fair assumption, and I'm completely leaving out my thoughts on the rate of increase in executive pay vs. the average worker—there's just not enough space here, and so I'll spare you my rant.

This credit thing really started taking off, of course, in the 1950's. But if you consider average earnings in say, 1975, it was around $14,100 per year. Today, it's around $40,500, or just a little less than 3 times what our fathers and our uncles made.

In 1975 the average price of a new car was around $4,250. Today, you'll need to shell out around $27,900 or roughly 6 1/2 times what a car cost in 1975. In 1975 a house cost $39,300. That house today would cost an average of $258,000, or again, roughly 6 1/2 times what that house cost in 1975. In 1975 the Dow Jones Industrial Average was in the 800's. By the time we hit our peaks it had risen to 14,000, or nearly 17 times what it was in 1975.

My illustration is simply to point out that while the economy was definitely in a massive growth mode, with the markets on a steady rise upward—granted, with a few hiccups along the way with a couple of smaller recession periods in between, one of which I should note, incidentally, was actually in 1975, when unemployment then was also around 9.2%—wages didn't have much movement at all. The cost of a car, or a house rose 3 times more than wages did between 1975 and 2009. It stands to reason that if the stock market had risen 17 times it's 1975 numbers to 2009, it was largely due to consumer spending. People were spending their money on goods and companies were making profits which reflected in the stock price, and the markets rose. That much is clear. A lot of money certainly was changing hands in order to drive numbers up in that way.

But where was it coming from? Economic growth? Better jobs? Higher education? Sure, people were working. Sure, jobs were plentiful. I've been in factories since I got out of the Navy in 1996, and guys who I've worked alongside on the production lines, who were on production lines in the 1970's, also talked about how easy jobs were to come by.

"You could literally get fired from one job at noon and have a new job by 3 o'clock that same day," one co-worker told me. Sounds like good times to me.

What fueled that growth was credit. Not prosperity. Not real prosperity. With higher credit lines and more borrowing power, that's how a person could only see his wages increase by 3 times, and still be able to afford purchasing a car that was selling for 6 1/2 times more. That's how that same person could also afford to purchase a house selling in 2009 for so much more than it did in 1975.

The logic is that so long as credit could be made available, wages were insignificant. Who needed money from a job if a credit card could cover the difference? Who needed to worry about a wage if the value of your house would increase at twice the multiple than your wage did? Things would cover themselves. Things would take care of themselves. And so long as things were taking care of themselves...

You could be fired from one job at noon and have a new one by 3 o'clock. No problem's folks. All is fine and good. Everything is covered.

The sad truth

The sad truth is that in the aftermath of this undeniable disaster, I'm still hearing so much about credit and its importance to the economy, and to our recovery. I'm not suggesting that all credit is bad. What I am suggesting is that credit is not the answer. Go back to my argument about wages, and about needing a return to American labor. All of that really is also about the restoration of a middle class in this country. It's about the restoration of real economic growth and prosperity.

We don't want to be Japan, but we can't spend everything we earn either

A guy who I worked with, who was a temporary employee at the time, who was also a retiree from Caterpillar told me once, "the problem is when I was working back then we made $10 an hour and we spent $5. Today people make $10 an hour and spend $15."

My thinking is that had those guys who played with margin in the 1920's had something to fall back on. Had they had real money to cover their play money, perhaps when the shit did hit the fan, they might not have been totally out of harm's way, but they'd at least have been held up a little bit. The same thing could have been the case with our more recent economic situation. Had people had real money to cover their debts, perhaps there would have been less of a freefall when things really got ugly.

I'm not saying we should sock everything away. We still should be able to live and enjoy our lives, and let's face it. We work hard. We want to play. We want nice things. But at some point we are going to have to resign ourselves to the fact that we need to be prepared for an unexpected rainstorm. We need to free ourselves from the banks and the credit card companies. We need to focus on America, Made in America, and wages. The thing to do now is not to wait for the credit cruch to end. The thing to do now is use this as an opportunity to start over. To change our mindset. To adjust our attitude about credit.

We went too far. That much is clear. We got way ahead of ourselves.

Start now with the 80/20 rule

The fact remains that most of us will not earn what we did before the Great Recession. Many of us have had to downsize our own lives. We've had to sell our homes, we've had to trade down our cars, we've had to stifle our vacation travel, our eating out. Our lives have been drastically altered. The access to money we enjoyed before simply is not what it was.

Therefore we have an opportunity to also readjust our thinking and slowly begin to return to living below one's means. Follow the 80/20 rule. That is, determine what 80% of your net pay is (I say use net because we never see gross), and live on only that. Put the remaining 20% away. And then apply this rule to everything else in your purchasing, especially the big ticket items. I call it the compound 80/20 rule, which, if applied properly, over time actually reduces the 80% figure and increases the 20% figure. If you can afford a $20,000 car, start looking for a $16,000 one. If you can afford a $200,000 house, start looking for one at $160,000.

One final argument and then I'll get out of your ear—this has been a long rant

We all complained when the credit card companies suddenly jacked their rates up through the roof. How dare they do this to us we yelled. People were angry and rightly so. We need to remember this after the Great Recession. We need to remember how we positioned ourselves to be at their whim. The banks, the credit card companies, they all had us by the balls. What could we do? You couldn't transfer the debts. No one was issuing new credit. You couldn't refinance the house to pay back the debts. Your house was worth less and no banks were issuing that kind of lending as well for the most part. And most importantly, you could not repay the debt, because rather than using credit to leverage appreciable assets, we used it to leverage depreciating ones, and so most Americans had virtually no savings to tap. So what do you do? You get mad. You make phone calls. But at the end of the day you either suck it up and pay the 15%-20% they now want you to pay, or you throw in the towel and file for bankruptcy.

We have to change our thinking. We have to be responsible. After the Great Recession we cannot simply go back to the way things were. It has been proven to be unsustainable. It has proven to be disastrous.

We cannot expect that the government to be there to bail us out, or even the big boy, fat cats on Wall Street or in America's boardrooms. Who's bailing who out by the way? That money the government gets to bail anyone out is going to come out of our pockets no matter who you tax, or how much you tax them. Think the big boys will all have to cough up more? Probably. But who pays their taxes? You and I, of course. When they pay more, prices go up. Wages go down. Benefits go down. Jobs get moved out of the country. Rich people didn't get rich by giving their money away, folks.

We pay. So, we need to think hard and long about the future of things. We need to think about what we can do to right things. After the Great Recession we have to come away from it having learned something. Otherwise history may just repeat itself—again. And you know what they say about third times being a charm.


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    • Springboard profile image

      Springboard 7 years ago from Wisconsin

      Without a doubt the credit card companies sometimes operate(d) in nefarious ways, not much unlike a drug dealer, though I caution putting it into quite that context. But it's NOT so much different from a credit card company telling a family that their dreams can be had with the use of a card in order to leverage those dreams, from a drug dealer who sells the relief of life's woes and troubles through some mind altering substance. Both will potentially create more problems than solve. And once you're hooked, there's really not too many choices to get away...

      Especially when the economy falters. You have no savings to pay it off. You have no job to pay it down. Filing for bankruptcy is sort of like the addict stealing for his next fix.

      Regarding wages, I think that one of the ways to increase wages is through companies paying employees in both salary AND by paying them in company stock. Granted, some people would have some reservation regarding that considering Enron and a few others that didn't do so well for employees. But I think when employees have a stake in the company, they stand the best chance of participating in the company's success, and they have a stronger commitment to encouraging that success through their personal efforts on the production line, or in the office. If you are an owner, you're going to take better care of things. You'll also be more involved in the company's processes by having the power to vote your shares on various issues, or introduce ideas at shareholder meetings for a vote by other shareholders.

      I'm rambling now. But thanks very much for stopping in and sharing your views. Much appreciated.

    • Dolores Monet profile image

      Dolores Monet 7 years ago from East Coast, United States

      Springboard, boy you've said a lot in a clear, articulate fashion. It's a lot to digest. I remember when passbook savings accounts paid 3% interest. Now, certificates of deposit pay 1 1/2%. People are not encouraged to save. And it's hard to save when prices keep going up but wages do not. I used to think that the whole credit problem was the fault of people who refused to take responsibility. But when I got credit card offers in the mail for my dead father and dead uncle, I started to rethink my opinions.

    • Springboard profile image

      Springboard 7 years ago from Wisconsin

      Thanks very much for taking the time to stop by and have a read. I'm glad you liked it.

    • James A Watkins profile image

      James A Watkins 7 years ago from Chicago

      This is an outstanding essay. I enjoyed reading it. I find it informative, wise, and well written. Thank you.

    • Springboard profile image

      Springboard 7 years ago from Wisconsin

      Absolutely. His policies are killing jobs, not creating them. And quite frankly, he's too keen on unions...I don't think unions are good for workers to be quite honest, and they certainly not good for companies either.

      Thanks for stopping in.

    • jjmyles profile image

      jjmyles 7 years ago from Pacific Northwest

      Very interesting and right on spot! Credit and procurring more debt will not help get us back on track. The Obama adminstration needs to take economics 101.

    • Springboard profile image

      Springboard 7 years ago from Wisconsin

      Thank you.

    • carolina muscle profile image

      carolina muscle 7 years ago from Charlotte, North Carolina

      Interesting perspective!

    • Springboard profile image

      Springboard 7 years ago from Wisconsin

      The good news is that if you were in the camp of those who played it responsibly in the best of economic times, any pain from the recession is and was certainly less felt. That really is at the heart of my article, that if you live reasonably, you'll actually live better, and when you have more control over your finances, including keeping a well accumulated stash of cash on the side, you are better equipped to bail yourself out of trouble if it should arise.

      Glad you enjoyed the article, and I'll keep my fingers crossed for those jobs. :)

    • scottkap profile image

      scottkap 7 years ago

      Wow! I am totally blown away by this article. You nailed it right on the head! I was completely enthralled with this Springboard.

      During the housing boom, my wife and I stood by and watched our neighbors use their houses as ATM's, as you said. Now, I did refinance and take a very small amount out, but nowhere near what others were doing. Now, they are way under and suffering from their greed and desire to have all they ever wanted. To tell the truth, I have absolutely no sympathy for these people. We carry no credit card debt. I pay off my 30 yr home equity loan n a year. We just paid off a four year car loan in under 2 years. My wife makes a great living and even though I am on disability, a fact I am embarassed about and try every day to get off of, we live modestly. We drive our cars into the ground. We take one vacation a year. I haven't bought anew pair jeans in four years.

      I guess what I am saying is, I was living the 80/20 lifestyle even before the Great Recession because we were fiscally responsible.

      Yes! We need to start building again. This country has relied too long on servicing foreign goods. I know you are not I huge fan of Obama, but I am really hoping his clean energy policy will produce jons here in the US. I also believe that if this country ever gets around to fixing it's decaying infrastructure, then people like you can get back to work building the machinary we need to do the job. I am amazed that so many years after the Minneapolis bridge collapse, there is still not a major National effort to repair or replace our roads and bridges. This would not only put our construction workers back to work, but the ripple effect would be endless!

      Great Job!


    • Springboard profile image

      Springboard 7 years ago from Wisconsin

      Getting started with the 80/20 rule is half the battle. The other battle is keeping it going. It really does have to be habit to stick. You can't treat it like the lastest diet. My fear is that when things start to feel like they are really improving, people will have already forgotten the past situation.

    • BJBenson profile image

      BJBenson 7 years ago from USA

      Every one seems to have bad credit now? I like what you wrote about the 80/20 rule. The problem is doing it. So many people need to get back on their feet. When they do I hope they are listening to you.

    • Springboard profile image

      Springboard 7 years ago from Wisconsin

      vhwang—thank you very much for stopping in and sharing your comments...much appreciated. :)

      As far as regulation goes we need to ensure we have just the right amount that it doesn't wind up having a negative impact on business. One teeming example of a little over the top regulation came after the Enron debacle with Sarbanes-Oxley. We simply need balance when it comes to regulating, as well as when it comes to all other things in our lives. Balance when it comes to what we spend and how we use credit. Balance on saving and investing.

      Too much of anything is never a good thing. Most of the time anyway—I'm not sure I could ever have too much money, for example. :)

    • Springboard profile image

      Springboard 7 years ago from Wisconsin

      scheng1—in that regard I agree with you. I probably should have been more clear in my comparison that I was referring more to the savings rate in Japan which was actually so high as to stagnate growth. Even though people had money in the bank, it did little for their economy because per capita savings were so high. My suggestion is that, in the U.S. we cannot be spending beyond our capacity to earn, or at a rate faster than wages grow (such as via the use of credit), but we cannot also save at rates not conducive to growth in the economy as a whole.

      Thanks for stopping in.

    • profile image

      vhwang7 7 years ago

      This hub has been AWESOME! About your argument on credit, I think everything that is happening now is a great lesson to those who have been reckless with their spending. After all, as you said, it was our whole "make $10, spend $15" attitude that brought us to this recession in the first place. I think government regulation, as annoying as it is to those involved in finance, is totally justifiable by the behavior of both consumers and banks, and it is going to exist in America for a very long time.

    • profile image

      scheng1 7 years ago

      Actually it is not appropriate to compare US with Japan. When the economic bubble burst in Japan, it hardly affected China negatively. If US cannot recover, China will panic. Too much of its assets is tied up in USD.

    • Springboard profile image

      Springboard 7 years ago from Wisconsin

      I'm a firm believer in the value of the 80/20 rule. Thanks for the compliment and for stopping in. Glad you enjoyed the article.

    • billyaustindillon profile image

      billyaustindillon 7 years ago

      A great hub - the platic plague is brilliant - it should be nothing less than putting away 20% very sage advice.

    • Springboard profile image

      Springboard 7 years ago from Wisconsin

      greatAmerican—absolutely no doubt that Unions mucked it up badly. It's a shame, I think, that workers have lost so much of their voice. We still can rise up ourselves out of all of this. I mean, there is another part of this dynamic that I really didn't touch on, and that is that when we DO live mainly on credit, and when we DON'T save, we lose our power as a people. We are now slaves ourselves, to a degree. We need the job to pay the debts. When we leave ourselves constantly on the edge, we can't afford to take a whole lot of risk on. So, we go in to our jobs, we take our tiny wage, we keep our mouths shut, and that's it.

      When there is money in the bank there's a sense of comfort in an individual's mind, and the very fact that a person can be fairly self-reliant, and can weather a storm, generates confidence and is empowering. You can wake up and be able to afford to tell your boss it isn't enough. You can afford to tell the credit cards when they raise your rates to go blow themselves. If the government can get away with it, and employers can get away with it, and credit issuers can get away with it, they want you to NEED them. They want to be extensions of you so that you can be in their control.

      So far it has worked extremely well. Again, we have to change our attitude. Quite literally, we have to get our head out of the sand—never before has there been a better time to start all over.

    • Springboard profile image

      Springboard 7 years ago from Wisconsin

      OpinionDuck—if I were in Congress I would be writing a bill prohibiting use of a credit card to pay taxes. I honestly think this should be illegal, though I'm sure there are many people who would disagree with me on this. Besides the fact that one need ask themself, when you have start paying a tax with your Visa, does this not signal serious financial issues in your midst? And if you are against high taxes and use a credit card, does it not come into one's mind that using credit to pay for a tax effectively increases your tax rate? Who would be in favor of higher taxes???

      ...keep quiet democrats... ;)

    • greatAmerican profile image

      greatAmerican 7 years ago

      Spring, Damned if you do damned if you don't.. Those illegals

      are slaves as long as they remain illegal immigrants and only have access to jobs that pay less than minimum wages.

      If they want to work, they are at the mercy of those who break the law and hire them. Strangely enough, the illegals

      are some of the hardest workers anyone could hire.

      As for minimum wages, they are only necessary to protect

      the earnings of un-skilled workers or entry level workers. The minimum wage is not the same in every state, some states today are about $10 per hour. Damned if you do damned if you don't, If the free market is allowed to compete for the better workers, those who are deserving will benefit, but those who don't make the grade, will be left behind and with the help of big government those businesses, which cannot hire everyone, will be ridiculed and punished by government. There was a time Unions were the answer, not only for better wages but also for better working conditions. Originally Unions were made up of workers, once taken over by corrupt leadership, that leadership found themselves working too closely with business and government. Government and Unions have the same problem they accuse big business of, 'they have become to big to fail'..

    • OpinionDuck profile image

      OpinionDuck 7 years ago


      Well said, and this topic does deserve lengthy comments because the problem still exists.

      I created a hub that has over 100,000 words in it, and there were only a handful of comments. So you got more bang for your hub than I did with mine.

      BTW, I thought it was interesting that you can pay your income tax with your credit card.

    • Springboard profile image

      Springboard 7 years ago from Wisconsin

      OpinionDuck—exactly. I cannot disagree. As with anything, there has to be sensibility, reason, and common sense. Maybe those are all one in the same. But my point is that credit is not bad if you manage it properly and correlate its use directly to your income and your real ability to repay. If I have a job earning $40,000 a year and I have a credit card even at $15,000 and my savings account only has $5,000 do I REALLY have the ability to repay the $15,000? The answer is no. And so that would be classified, IMO, as an irresponsible use of credit.

      Savings should also be something people have BTW. Responsible saving means someone has enough to cover revolving debt to at least a large percentage of that debt, PLUS additionally have enough money set aside to cover at least 6 months of their salary, AND need to have an emergency slush fund which is equivalent to about 1.5 - 2 months of their salary.

      AND when it comes to investing, it should not be treated as a get rich quick scheme, nor should one invest their money as though they just stuck it into a slot machine in Vegas. People need to be informed about what they are investing in, how valuations are calculated, and what fundamentals ultimately drive the sector, the business model, and the company as a whole.

      I lost a TON of money because I did not participate in the boom. I just couldn't figure how a company could have no revenue, but valuations that were through the roof. I couldn't figure out how a company with a P/E ratio of zero could be priced in the market at $150 per share. So I stayed away, and I missed it. In hindsight, I did the right thing.

      Even using margin to invest is okay. I use it myself and often. But the same rules apply to its use as it applies to the use of revolving credit. You have to consider whether or not you can honestly afford to carry the debt, and you have to be prepared to cover it with real money.

      These are the safety nets. We didn't have them. And so came the Great Recession. Part of the change going forward is the construction of our own safety nets. Restoring balance and responsibility. Changing our attitudes. Being PREPARED, rather than living on the edge clinging to the moment.

      I'm feeling very long winded on this topic by the way. lol... all my comments are about as long as my original post was. Yikes! :)

    • Springboard profile image

      Springboard 7 years ago from Wisconsin

      EyesandEars—yes, the sad reality is that we do need a minimum wage. As I said, "I do, however, think it is essential to have one set (a minimum wage) because...businesses will get away with what they can get away with if there's no one looking." If no one gave these businesses a minimum, they'd pay less in some cases.

      A fair wage IMO is one which takes into perspective the entire business and correlates the value of each contributor in the business to pay. There is a serious imbalance IMO in the way wages are paid today between worker and executive. The way it is now the worker is a liability and businesses will undercut the worker at every opportunity.

      Businesses that DO take care of their employees do very well, BTW, and there ARE companies out there doing it. They're just few and far between.

    • Springboard profile image

      Springboard 7 years ago from Wisconsin

      Wesman—use those busy times to spread it all out over the rest of the year. :) When you're not fixing air conditioners, get a couple of books on investing. It won't make you the next Warren Buffet...then again. lol

    • OpinionDuck profile image

      OpinionDuck 7 years ago


      I agree with the hub.

      In addition, it was the government that made the credit card companies so powerful. Congress allowed them to charge above usurious rates for credit.

      Ten percent was just below usury.

      Only loan sharks charge more than credit card companies.

      As for the stock market, the dot com was the dangerous deviation in what was a conservative business decision based investment. It became more gambling than investing.

      The stock market went wild, when they lost the over priced stock brokers, and allowed anyone to buy stock without any guidance or correction.

      Day traders were acting more like gamblers in Vegas, than investors. The stock for dot coms was carrot driven, buy now, not because this is a good company, but because the price is going up and up. This is the basis of a pyramid or ponzi scheme, and so it finally collapsed.

      But, the mechanism continued on with the housing and mortgage boom. It also contributed to the oil price scam, with investors artificially pushing the price up and up.

      anyway, that is my opinion....

    • EyesAndEars profile image

      EyesAndEars 7 years ago from Somewhere over the rainbow....

      No incentives for easiness. lol

      Okay, I think we agree. :)

      I don't like the idea of a minimum wage either, cuz employers base their pay scales on it. But, without it, what do you think would happen? Wages would go down MORE, I"m sure!

      You say you support what you'd classify as a fair wage...sounds like supporting a living wage. (?) Again, sounds like we agree. Thanks for the discussion.

    • Wesman Todd Shaw profile image

      Wesman Todd Shaw 7 years ago from Kaufman, Texas

      Well, you've certainly done our research-and some thinking besides. . . . .In Texas, I'm fine this time of year-I'll always be able to do okay repairing broken air conditioners, and replacing bad ones. . . . .but that's a hell of a lot of physical work.

      Whatever. I'll have a better notion of how things are in the fall.

    • Springboard profile image

      Springboard 7 years ago from Wisconsin

      EyesandEars—I won't argue that it isn't difficult. Obviously, based on your story you're not among the helpless. And I don't want to seem insensitive to anyone's plight either. It's hard to get ahead. Period. I mean even in my case where I feel I've been able to better myself despite not having a college degree, a fancy title, or a great paying job, I do all I can, I learn all I can, I save and invest and spend frugally, and I've done okay for myself. But there ARE obvious limitations to what I can accomplish, and how fast. I can't deny that. Those limitations are as much a product of my personal ambition, or lack thereof, though, as it may be of money. And I think earning in a minimum wage job has to be EXTREMELY difficult. I sure would not want to be in that boat. So, I can't argue with the difficult issues there might be in that situation either.

      Look, if you want to know, I personally do not support a minimum wage. I do, however, think it is essential to have one set because of exactly the reason greatAmerican pointed out, in certain terms, that businesses will get away with what they can get away with if there's no one looking. I support what I classify as a FAIR wage. Most people, IMO, especially people in jobs that are typically minimum wage are underpaid. When CEOs are paid 100-400 times the average worker, there's a real question mark there as to whether or not ANYONE is getting a fair wage. I'll say it again, "when corporations sit in their board rooms and decide what the workers are worth, they should be far more realistic as to what the value of each worker is."

      Still, in the end it's up to us in one way or another. The challenge that is the struggle is what makes the successes exciting. I'm not sure what the incentive would be if it were easy.

    • Springboard profile image

      Springboard 7 years ago from Wisconsin

      greatAmerican—that I don't disagree with at all. I didn't mean to appear as though I were an advocate for the jobs that those illegals represent. I think the term "slavemaster" may be a bit harsh in terms of these businesses, though I cannot disagree at all with the thought that MOST companies undeniably undervalue the efforts of their employees. I said in a response to EyesandEars earlier comment, "when corporations sit in their board rooms and decide what the workers are worth, they should be far more realistic as to what the value of each worker is." Guys who operate machines are not dummies like so many like to suggest, and CEOs IMO are not worth the exorbitant salary and bonuses they get. But that's not the only shortchanging going on with regard to American labor—it's not just that some businesses are hiring these illegals, they're sending the jobs overseas. Somewhere along the line cancelling out all American labor is a net negative IMO. I don't see the end of that being good. But what of that? Again, I go back to part of the argument I made about Americans having to change attitudes after the recession. Wages are part of that. Being more financially responsible is part of that. But we also have to look for Made in the USA, and support it whenever we can afford to do it. So long as we send the message to these companies in the way of our purchases that we're okay with what they are doing, they will continue to to do it.

      Like I said, it's a complex issue, and a tough nut for sure.

    • EyesAndEars profile image

      EyesAndEars 7 years ago from Somewhere over the rainbow....

      Thanks Springboard. No, I didn't mean to suggest minimum wage earners are helpless, just struggling. I have been there most of my life and let's just say there aren't 16 hours left in a day for a job search. (people need sleep, food, and have families or other obligations)

      --If one is in a job that doesn't pay well, it is incumbent upon THAT person to right that. If you can't help yourself, who's going to help you? And why should they?--

      I understand your point here, except for the fact that opportunities don't present themselves very often and let's face it. People are only human, not everyone can catch an opportunity when it presents itself.

      I will use myself as an example: I have had to struggle due to the lack of a support system. I am divorced with 3 children (1 disabled) and no family (parents died over 13 years ago, don't know aunts, uncles, cousins - sister is disowned, don't ask lol) My ex-family is a bunch of drug addicted criminals (yup, made poor choices - I'm human) How was I supposed to help myself out of poverty?

      Now that my children are almost grown, however, I'm going to school and I have to wonder...In 2-3 years when I finally get my Associate Degree I'll be able to earn, maybe, $30,000 - $35,000/yr, which will put me right back where I started from. Barely above minimum wage/poverty when you take inflation into account or below the living wages required for 1 adult w/1 child of $37,515 for my area.

      How is a minimum wage earner to help themselves out of poverty? It's an impossible mess.

    • greatAmerican profile image

      greatAmerican 7 years ago

      Spring, it has been said they are doing jobs Americans don't want to do, and as you say for wages most Legal Americans would not work for.. If those 12-15 million illegals were just shipped back to their homeland, most are Mexicans,

      perhaps those who hire them for slave wages will be put in a position where they will have to look for American workers to do those jobs and also up the wages to something better than the minimum. Not only are the illegals illegal

      but those slavemasters who employ them for less than minimum wages are also breaking the laws.. If the illegal immigrant can find those jobs, I believe our law enforcement should also be able to locate those employers who are nothing but slave drivers.. Amnesty for those 12-15

      million illegals is just the tip of the iceburg, they will be a drain on our Medical care, and social welfare system.

      I have no idea how our country can afford this, while we are struggling through bankruptcy.

    • Springboard profile image

      Springboard 7 years ago from Wisconsin

      EyesandEars—You are welcome to barge in at any time.

      What you say suggests to me that you assume the poor, or let's just say those who are in a minimum wage job, are helpless. I don't think that's true. I think one needs to challenge themselves every day, ask themselves what's important to them? I DO think that making smaller amounts of money certainly adds to the difficulty in growing money, but again, it's about attitude, and intestinal fortitude. If one is in a job that doesn't pay well, it is incumbent upon THAT person to right that. If you can't help yourself, who's going to help you? And why should they?

      It stands to reason that if you work full time for McDonald's for $7.25, you have 16 hours remaining in the day to apply at Walmart for $10. And if you get that job at Walmart for $10, you've got 16 hours in the day to apply at Boston Store for $11, or a factory for $12. Or you could spend some of that time getting a certificate, or a degree, or just learning something new—like learning how to INVEST a dollar instead of learning how to simply spend it.

      I'm not saying it's easy. But I just don't see the helpless woe is me thing being of any real value to a person's personal plight.

    • EyesAndEars profile image

      EyesAndEars 7 years ago from Somewhere over the rainbow....

      Sorry, I seem to be making it a habit to constantly be barging in..., but what I meant was the discrepancy between the 'rich' and the 'poor' in terms of minimum wage. The rich get richer because there is no limit to how much people can earn, but the poor get poorer because minimum wage keeps them there. IMO it has nothing to do with opportunity or risks taken or not, it has to do with standard of living. Sure, the poor can overextend their credit just like the rich do, but I doubt many do. Why? Because they are fighting to maintain their standard of living and don't want to end up homeless - something the rich don't usually have to worry about.

    • Springboard profile image

      Springboard 7 years ago from Wisconsin

      Thanks Ann, I just hope I didn't get a bit carried away in my rant. :) and entertainmentplus—thank you.

      EyesandEars—some of the reason the rich get richer is because of manipulation, or perhaps molestation is a better word, of capitalism. But it's only part of the story. There's a lot of hard work, and know-how, and risk that allows a person to hit the marks that take him to the land of riches. Same thing goes for the poor who get poorer. BUT, sometimes the poor get rich too, if they are smart enough, and able enough, and willing to put themselves out there to do it.

      One fact is that it does not take money to make money. It takes brains and intestinal fortitude. Anyone can inherit $100,000 and plop it down on a few stocks, for example, or start a business. If you don't know what you're doing the value of that $100,000 is zero. By contrast, if you know what you're doing $100, or even $1, has unlimited potential.

      I take myself as an example. I've been a factory worker my whole life so far. I was in the Navy before that. I've never made enormous amounts of money. But I do have money i n the bank. I own properties, stocks, certificates of deposit, bonds...

      I don't own a business, but I make it my business to NOT let that mean I will be poor.

    • Springboard profile image

      Springboard 7 years ago from Wisconsin

      Tom—yes. Very much so. We are definitely credit junkies. Wages are key, but even if wages go up, it MIGHT mean that if credit is still available to the extent it was before, that it may still pose a problem. Attitude has to be in the equation. An attitude for saving, living below one's means, AND using credit responsibly and wisely.

      I still think it's a tough nut to crack. But that's what would need to happen to help to avoid another fallout.

    • EyesAndEars profile image

      EyesAndEars 7 years ago from Somewhere over the rainbow....

      Nah, Springboard, you were right. Never say never, all, always.... But I still believe the rich get richer while the poor get poorer - the sticky point is, why? Why is it a constantly ridiculous imbalance?

    • entertianmentplus profile image

      entertianmentplus 7 years ago from United States

      Very well done hub. I agree with you.

    • profile image 7 years ago

      Awesome hub. Some great insights here, thanks Springboard!

    • Ann Nonymous profile image

      Ann Nonymous 7 years ago from Virginia

      I learned a lot Springboard. And then got chapter two througout the comments posted! It's always good to see some action!

      I love how you hit upon the past, present and future in your well written hub! Good job!

    • Tom Whitworth profile image

      Tom Whitworth 7 years ago from Moundsville, WV


      I think the main point you are making is "WE ARE ALL CREDIT JUNKIES." Yes the government overspends its revenue but so do the people. I guess we are co-dependant junkies!!!!!!!!

      At least we should kick our own habit even if the government won't!!!!!!!!!

    • Springboard profile image

      Springboard 7 years ago from Wisconsin

      eovery—I certainly cannot find myself in disagreement with anything you said.

      POP—absolutely true. But I think until we also, as a people accept that it's NOT just the government that got us here we're going to still be stuck in the quagmire. It's going to take a collective effort by everyone to get it right coming out of the recession. The government, the businesses who pay wages and do business with American consumers, AND the people.

      While I am absolutely wanting of a republican victory in November, I am not convinced that that alone will change the course in quite the direction we need it to. That will take much more effort on the part of everyone, and we'll have to be willing to make a few sacrifices along the way as well. I don't think we can really go back to the way things were without getting right back sqaure where are now sometime in the future.

    • breakfastpop profile image

      breakfastpop 7 years ago

      Certainly, our current predicament is not entirely the fault of any one entity, but let's face i, the current solutions are not going to accomplish anything but plunge us into debt beyond our wildest imagination.

    • eovery profile image

      eovery 7 years ago from MIddle of the Boondocks of Iowa

      Interesting, but it may just be a double dip with the way our government is putting is in debt further. Debt got us here, debt can't get us out. What is recovering is the business people are figuring out to make money, and leading the recovery. The government needs to get out of the way and let the recovery happen.

      Keep on hubbing!

    • Springboard profile image

      Springboard 7 years ago from Wisconsin

      Did you just say I converted you? Hmmm. lol

      In reference to my conclusion, just so I'm not inadvertently taken out of context, it's important to state again that I also stated that I did not believe either claim that "IF it is as simple as saying that all the rich are greedy, then we HAVE to state as simply that all of the poor are lazy" was entirely accurate.

      Thanks again for stopping by.

    • EyesAndEars profile image

      EyesAndEars 7 years ago from Somewhere over the rainbow....

      We have to always have it in our minds that some people succeed or fail by accident, and some people succeed or fail on purpose.

      CEOs ARE rich, but there also happen to be a large number of affluent/rich people who are hard working, who have earned their money and deserve to enjoy the fruits of their labors.

      IF it is as simple as saying that all the rich are greedy, then we HAVE to state as simply that all of the poor are lazy.

      I have to agree with these statements, thanks for pointing them out to me.

    • Springboard profile image

      Springboard 7 years ago from Wisconsin

      Pamela—I am not for a VAT, or value added tax, which is what I think you are referring to. If anything I'm for very little taxation which I believe will allow people to make their own important choices about where their money goes, how and what it gets invested in, and overall, what causes are important to the individual to support. In my view, the only reason we might NEED a bigger government is because more people require services from it. In a sucessful, growing economy, people should be able to help themselves.

      I'm still not going to buy into the idea that it's ALL the government's fault for the state of the economy, as my article points out, but I WILL say the government is currently not making matters better by any measure, and I don't think that the attitudes of the people NOR the government that contributed to our getting here have changed enough yet either.

      Where we go from here is a bit of a puzzle if you ask me.

    • Pamela99 profile image

      Pamela Oglesby 7 years ago from United States

      If congress continues to spend and we are being told to expect taxes to be increased on goods, then if you are on a fixed income you are going to be in worse shape, especially someone like me who has a lot of medical bills. I don't see things getting better under this president. My hope is getting enough congressmen they want to shrink government and decrease the deficit. I hope I am wrong.

    • Springboard profile image

      Springboard 7 years ago from Wisconsin

      EyesandEars—welcome. When I stated, "If we are all working, and earning, and prospering, we'll all be able to afford any premium that goes along with that," I was speaking, to some degree, on exactly some of the things you mention. By my assessment credit has allowed wages to be held down. In a vital economy where globalization is in full swing, and both exporter and importer are beneficiaries of it on fair terms, and where Americans are gainfully employed in solid, good paying, benefited jobs, that would translate to higher wages, a better standard of living AND if we were to see higher prices, we'd be able to afford it.

      As to your comment regarding CEO and/or executive pay, I wholeheartedly agree with you. I began to touch on that a little bit when I talked about wages increasing at a dismal 3 times 1975 numbers (the number is actually around 2.8 times) while the stock market jumped 17 times 1975 Dow numbers. SOMEBODY was getting the money. It sure in the hell wasn't the workers.

      That said I strongly disagree with your assessment of the rich, and I really want folks to separate CEOs from the rich. CEOs ARE rich, but there also happen to be a large number of affluent/rich people who are hard working, who have earned their money and deserve to enjoy the fruits of their labors. I usually am of the ilk, "The rich get richer and the poor get poorer because the rich know how to make money and the poor don't." There IS some truth to that. We have to always have it in our minds that some people succeed or fail by accident, and some people succeed or fail on purpose.

      BUT, and this is a big but, IF the suggestion is that folks who are not paid a fair wage, or are encouraged to participate in a system such as the stock market are not on necessarily level terms with regard to opportunity, that might be overstating things a little bit. Obviously folks who participated in Enron's climb to the top took a hard fall, and not because the numbers that they could see lied to them, but because the guys giving the numbers out did.

      Still, poor people need to be engaged. They need to be involved. They need to be stronger than they are and lift themselves up. They might still fall. We all might. But it doesn't mean we stop trying, or that we sit around waiting for good things to simply fall into our laps. Conversely, when corporations sit in their board rooms and decide what the workers are worth, they should be far more realistic as to what the value of each worker is. There's a lot of shortchanging IMO in that area.

      IF it is as simple as saying that all the rich are greedy, then we HAVE to state as simply that all of the poor are lazy. I don't think either is an entirely accurate statement, and so I cannot accept that.

    • Springboard profile image

      Springboard 7 years ago from Wisconsin

      greatAmerican—the whole issue with regard to illegals is a daunting one. I'm not sure I know exactly what the answer is there. I've heard the argument that since most of the illegals are taking jobs most Americans don't want or won't do, that the real impact on the job market is nominal. I don't agree with that, of course. Though I will agree that the likelihood that most of these jobs being performed by illegals are not well paying jobs, and certainly they offer nothing in terms of real benefits to the workers, so those kinds of jobs, under that premise, would not provide much of a benefit to some of the arguments I was making with regard to encouraging wage growth, reindustrialization, and distancing ourselves from the need for credit, which I think is largely where our biggest problems lie.

      Always great to hear your opinion. :)

    • EyesAndEars profile image

      EyesAndEars 7 years ago from Somewhere over the rainbow....

      Excellent article! I agree with most of what you say - Except:

      Cost of living may indeed rise. But that's okay. If we are all working, and earning, and prospering, we'll all be able to afford any premium that goes along with that.

      This is not okay unless minimum wage increases and the company President/CEO's take major pay cuts! It's not going to happen - why? Because rich people are greedy! The rich want to claim they have compassion for the poor by 'donating' to the needy rather than proving compassion by raising wages to a decent standard of living - why? Because rich people are greedy! Rich people demand to be recognized for their 'good deeds' while enjoying the benefits of the poor peoples work.

      The rich get richer while the poor get poorer.... So the world lives on.

    • greatAmerican profile image

      greatAmerican 7 years ago

      Spring, with 9.7 percent unemployment and a Government that wants to add 12 - 15 million illegal citizens to our work force how is it going to get better.. That 9.7 alone represents 15 million legal Americans out of work.

      I have to suspect most of those illegals hold some kind of jobs, If they were deported, it could help a lot of legal Americans who are looking for work! We are not even close to getting better, unless the Government can dream up some 15 million more government jobs,,