C Thomas comments on how people lack in understanding economics and why we should have empathy in situations that might arise soon.
Good morning, I’m Austerity Jones. After G Spot took the reins last week, you seem refreshed and all fired up C Thomas.
Thank you, I am Austerity, and good morning. I wonder why people are so ill-informed about economics. Micro, macro, and even personal finance. The lack of understanding is quite amazing. My sneaking suspicion is that they have never had to be. Americans for example don’t know about exchange rates, why because they have never had to know about them. You ask a street vendor in Cabo San Lucas or Bangkok or St Moritz and they all know how the local currency translates into dollars and how to do the math. Therefore Americans won’t learn economics until they have to then their money is on the 3:10 to Yuma and they are chasing behind saying “What the hell happened? What’s inflation?”
I recently heard this story and it serves as a good reminder. A friend said he remembered when he had friends that he worked with during the Great Financial Crisis and they were buying houses while he was living with roommates. They were like, “you should buy a house.” he said, “I can’t afford a house.” They said, “I just got a house and we have the same job.” He replied, “I know, and you can’t afford it either.” It is a great way to piss your friends off, but two years later the same friend would be asking “What do you know about short sales?”
I have a feeling we are going to be revisiting these kinds of conversations soon. Maybe it won’t be about houses but cars or maybe about how inflation just eats away at someone’s retirement or how someone who thought they had a nice nest egg set aside finds out that it is more modest than it was. If you are listening to this then it is likely that you will be a little more prepared than your friends who are going to come to you with a little sob story or maybe even a full-blown horror story. This is when we need to practice empathy, our word of the week.
Empathy: the ability to understand and share the feelings of another.
I don’t particularly like this definition. After all, we are sharing those feelings because we have made different choices hopefully, and are not experiencing their pain. I like to think of it as understanding the emotions of another person if you were in their shoes. If we lost all our money in crypto that would be traumatic and we would feel awful. Since this person in front of us has done so, we need to be patient and kind and not say “I told you so!” This is what the have more grace challenge is all about. This week let’s try to listen to a sad story from a friend, a bad beat at poker, or a tale from the bad boyfriend vault but let’s not wait for our turn to talk. Let’s not wait to one-up them. Let’s just listen. Let’s work on that muscle that we will need when lots of people are feeling down and sad and ruined. How are we going to act then? We will be empathetic.
Now, just because we are empathetic doesn’t mean that we need to bail them out. The people writing letters to the judge regarding the Celsius scandal. You need to learn a lesson here. That lesson shouldn’t be free. If you get some money back fine, but at some point, the bailouts have to stop. I’m not just saying for the individual investors- the airlines and the cruise lines and the banks and the big insurance companies and the auto companies and the government. This doesn’t mean that I don’t have empathy. I have a very strong belief that poor stewards of capital need to go lose capital and it should sting and next time they might use their resources more wisely. I don’t think the American taxpayer needs to bail out the banks. Let them go broke, sell their assets at a distressed price, and if that trickles into the regular economy then so be it. The rest of the world has to be looking at us saying how are they so ridiculous? The answer is we earned the right our father’s fathers earned the right by winning a world war on two fronts. That’s how. When we were done kicking ass and saving the world, we helped rebuild it. The last two or three generations haven’t been quite as impressive leaving their mark on the world. We do have gay rights, climate change policies, participation trophies in youth sports, reality television, octogenarian presidents, and social media- in case your followers wanted to know what dressing you had on your salad for lunch while you continue to live yourself absorbed life of no consequence in the public eye.
This is a fine place to make the distinction. I have empathy for people with whom I have personal contact. Friends, co-workers, neighbours, etc. I do not share the sentiment of the public. Bailouts don’t build character, they breed more bailouts. I do not share that sentiment for generations and I do not share that sentiment for society at large. We need to struggle, we need to do without, and we need hardship. That is what our fathers’ fathers went through and that is what they earned. Easy doesn’t teach, easy doesn’t build, and easy doesn’t last. We have had it easy for three generations now and when you look around all we see is decay: socially, morally, and financially. We are reaping what we have sown. The main purpose of what I write is to awaken some memory that a long-lost relative told you about a penny saved is a penny earned (Ben Franklin in paraphrase) or rather to go to bed supperless than rise in debt (also Ben Franklin) or experience keeps an expensive school, but fools learn in no other (Ben Franklin again). People, maybe not alive today, have gone through tough times. Not my Netflix bill went up two dollars or can you believe she didn’t get a rose on the tele difficult. I mean depressions, I mean hyperinflations, I mean eating thin soup and that’s all you have. It was less than 100 years ago that 1 out of 4 people was unemployed in this country. That means that there were only jobs for 3 out of 4 mostly men at the time. Since women didn’t work at nearly the same rate then as today that means that there were probably only 3-4 jobs for every 8 men and women. That would be almost 50% unemployment today. We lose our minds if we go up a couple of points. Being open-minded isn’t just accepting people how they are. That’s nice but I’m not certain how helpful that is. Being open-minded is thinking about all the outcomes and trying to prepare for them so that you are not the one eating the see-through soup. We think of the great depression of the 1930s and it was bad and long-lasting, but read about the depression of 1893. 18% unemployment nationwide, over 43% in Michigan, causing soup kitchens to open just to feed people who were facing mass starvation. People worked not for a wage but for something to eat, that is how cheap labour became. Women turned to prostitution to feed their babies. Bank runs were common and people lost their life savings.
What is a bank run? A bank run is when a lot of people try to withdraw their money at one time. Banks never have enough money to satisfy all their depositors at once and if enough people start to demand withdrawals this can put the bank at risk of failure. Now the US government has backed the Banks with FDIC insurance, but many many banks failed and people lost everything in the depressions of the past. Because of that FDIC people just assume that their savings are safe, but we learned from Cyprus in 2008 that the banks have the money, not you, and possession is nine-tenths of the law. Is a bail-in possible where banks seize your money? Remember our job is to keep an open mind and think about all possibilities. The answer is maybe, but highly doubtful. What about this scenario, the FDIC will reimburse you for your $250,000 required by law, but maybe that depreciated $250,000 buys a car instead of a house (it doesn’t buy much of a house now but it did when that was changed). $250,000 bank bailouts might not be enough someday very soon. Think about all of the possibilities because everything is in play.
Sincerely yours,
C Thomas Printer
Also born on this date:
Mike Piazza,
Mickey Cohen,
Paul Harvey,
Beyonce Knowles,
Tom Watson,
and Dr. Drew.