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| Saturday, June 20, 2009 |
| When you got nothin', you got nothin' to lose. That's recession in West Virginia. |
The Atlantic article: Taking Comfort in Small Joys has reporter Christina Davidson traveling to the second poorest state - West Virginia - to see how people there are reacting to the current recession/depression. What she finds is that people who have always had little are doing just fine. Marietta and Betty explained things as well as I ever could, so the following is an excerpt of our conversation, edited for clarity and concision.
Marietta: I don't feel like the recession has hit us as hard as other places because we're more independent. Prices can hurt us because of gas, utilities, and groceries, but we know how to live lean. People have cut back on what they can cut back on--not going as far on vacation and such.
Betty: Yes, you can maybe see a change in the gas prices and in people traveling. But I've always had to save money, so nothing really changed for me.
Marietta: I never really had a big payday, never had a big amount of money, so I never had a lot to lose. I guess the rising prices have us going back to live more like grandma did. I imagine in other places people don't know how to feed themselves by gardening and canning. But I can remember my parents, my grandparents keeping us fed from the land.
Betty: I've always raised my own garden and canned. It's something I was raised up with, that my mother was raised up with, that my grandmother was raised up with. I buy basics like meat and cheese at the grocery store, but I grow the rest. In my garden there's tomatoes, cucumbers, radishes, peppers, carrots, green beans, potatoes, lettuce, onions, corn and some others--staples, mostly. What we don't eat fresh gets canned and put in the basement for winter.
Marietta: We don't have foreclosure here because most people own their homes and have always owned their homes. Most people have jobs, and if they lose one, it probably didn't pay much anyway. We don't have much bankruptcy because most people know their limits. We don't have the expenses of people in the cities. I always sewed and made all my kids' clothes--I have five. I always cut their hair myself. We never bought what we didn't need. That's just how we live.
Pearl Buck once said: "Many people lose the small joys in the hope for the big happiness." In the state of her birth, the small joys of simple living add up to something infinitely more meaningful and lasting than any 'big happiness' I could imagine. I love that phrase - "we know how to live lean". I feel like that is my approach to personal finances. My "live learn" experiences have shaped my financial actions over the years. I also tend to pay more attention to others experiences to see what has and has not worked for them. This has always carried more weight with me than what an expert says in a book or a financial company's advice. Not that experts and finance companies can't give very good and sound advice - but whatever advice I read or hear I have to be able to translate into something I can relate to and generally that means connecting it to a real life experience.
Reading the ladies interview I am reminded of the way my grandparents and great-aunts and uncles lived. No consumer debt and no mortgages. They also tended to live in multifamily homes (these are easy to find in my neck of the woods). Observing them influenced my decision to take the leap into becoming a landlord. Someday I hope to get to the "no mortgage" place as well.
I think the whole country is live-learning some very valuable personal finance lessons right now. What do you think? |
| posted by Boston Gal @ 9:06 AM *
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| 6 Comments: |
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Some of my wife's relatives live in a county where life is very much as described in that article. I sometimes say, "if you shouted really loudly on the front porch, you could be heard in VA, KY, TN, and WV."
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I think you're right, BG. A lot of us are learning and living a new way of life. I know for myself the previously mild desire to have no mortgage or any debt of any kind for the rest of my life has become a burning need. I am amazed at the amount of money I've been able to find in our budget over the last eight months in order to beef up our savings for likely job loss. We have vowed that when this recession ends for us we are going to put every effort into retiring our mortgage. There's nothing out there to buy that is more attractive to us now than security and peace of mind.
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Asset prices (e.g. housing and stocks) are positively correlated with debt.
Areas like West Virginia have low housing prices due to low mortgage debt. Areas like Seattle (where I live) and Boston have high housing prices due to high mortgage debt. Of course, housing prices are falling in both Seattle and Boston due to the reduced availability of mortgage debt.
That's why asset prices are a Catch-22. We've been tricked into thinking that asset prices are a good indicator of financial security. Hence, the obsession (not just Boston Gal's, but my own, too) with tracking one's net worth.
However, asset prices depend on debt. When debt levels become unsustainable in the sense that they can no longer be serviced out of current income, we experience a precipitous fall in debt levels, asset prices and net worth.
I don't know how many people understand the connection among these things. It is not in the interest of the financial services industry, which includes Wall Street, banks and mortgage brokers, to explain it. Also, you won't hear it from our politicians, who are completely beholden to the financial services industry.
The people of West Virginia are less affected by today's downturn because they never got caught up in taking on too much debt. I'm not sure this is because they were especially prudent in avoiding debt. It may be that it was just never made available to them, and for that, they should thank their lucky stars.
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I think when times are better, most people will go right back to their consumerism. Additionally, I think that many people are not experiencing hard times right now, and their consumerism marches on.
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I think a lot of professionals who thought they would always have job security - lawyers, engineers, IT - realize that they are more vulnerable.
I don't feel terribly optimistic that a lot of the savings and living a simpler lifestyle lessons will stick. After all, during the 70's lots of people composted and baked their own bread (including my family) and left those practices behind during the 80's.
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&Michael, your comment about availability of debt correlating to asset prices is likely true not only for real estate, but also for college costs.
@Susan, anybody in the IT industry that felt invulnerable wasn't paying attention. The 2002 recession and offshoring hit that industry hard and I don't think that it has recovered.
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Some of my wife's relatives live in a county where life is very much as described in that article. I sometimes say, "if you shouted really loudly on the front porch, you could be heard in VA, KY, TN, and WV."