Simplify

This month's Reason magazine features a cover story titled, in bold yellow letters, THE NEXT CATASTROPHE. Subhead reads: "Think Fannie Mae and Freddie Mac were a politicized financial disaster? Just wait until pension funds implode."

Truth be told, every Boomer has heard for decades that by the time we're finally eligible for retirement, the cupboards will be bare. The question is, what are we doing about it?

Yesterday I heard a speaker state that the net assets of Americans declined over five trillion dollars last year. Now, unless my math is off, that is a very large number.

For years I have heard other people say that due to the global economy there will be a leveling out in our future. The earth would not be sustainable by raising all peoples to the living standard of (wasteful, debt driven, consumer) Americans. Yet many of us laughed this off. We prefer to listen to protectionist legislators who would help us keep our heads our heads held high, even if they were simultaneously buried in the sand, in denial regarding realities ahead.

I guess at the end of the day, what does this all really mean regarding how you face tomorrow? I would suggest the following.

1. Simplify your lifestyle.
Duane Elgin said, "Live in a way that is outwardly simple and inwardly rich." I don’t think this means we have to become like Gandhi and sit at a spinning wheel making cloth all day. I do think it means we slow down a bit, decide what is important and separate the wheat (things that nourish us) from the chaff (things that do not.)

2. Make a commitment to avoid, reduce or eliminate debt.
The average American family is drowning in debt, which incidentally (as if we need to be reminded) creates stress. Debt is a chain that restricts one’s freedom to come and go as one pleases. Learning to live more frugally now will help you later. Acquisition, the habit of collecting more and more material goods, can be as much of an addiction as meth or gambling, and not so easy to break as we imagine.

3. Increase your value as a person.
I would suggest this on two levels. In your career, commit to be a lifelong learner. Be someone willing to develop new skills and your value will increase steadily. Keep adding new tools to your toolkit and you will be an asset wherever you go. On a second level, become the kind of person others enjoy having around. If worst comes to worst, it’s better to have a network of family and friends who are there to take you in rather than to be the kind of person no one likes having around because you’re a cantankerous, self-centered beast.

4. Decide what is important to you and shuck the rest.
Probably a lifelong commitment as well.

5. Learn to notice and appreciate the good things happening in your life.

For some of us it's a little too easy to have our buttons pushed. For others, we're just moody puddleglums. In either case, we can often become oblivious to the wonder that ever surrounds us. The way the light reflects off a leaf. Or the shimmer of a butterfly wing. The turn of a phrase and multi-layered images in a sprig of keen writing. Or the wonder of music, its rhythms, melodies and harmonies massaging our souls and lifting our spirits to the seventh heaven.

One of the good things happening in my life are the various friends, acquaintances and special persons who have crossed my path over the years. Too numerous to list here, I hope that you know you're one of them. Thanks for checking in from time to time... and for your occasional word of encouragement.

At the end of the day, remember this: hold on to your dreams. Life is for living.

Naked Economics

Why did the entrepreneur cross the road? Because he believed he could make money on the other side.

The book Naked Economics, by Charles Wheelan, is a worthwhile read that I highly recommend to anyone. Wheelan puts in layman's terms many of the complex ideas and issues that have littered the minds of intellectuals and economists for decades. Of the book, 1992 Nobel Prize winner (for economics) Gary Becker wrote, "I recommend this book to anyone who wants to gain an understanding of basic economics with little pain and much pleasure."

One reason for reading books like this one, and getting familiar with how economics works, is because in our postmodern era it would appear that Capitalism has won the war against Marxist Socialism and it is important to understand the reasons Capitalism (with a capital C) became the force that it has in today's global society.

Another reason for reading books on economics is that with hailstorm of financial upheavals bringing major banks and investment houses to their knees, it can be helpful having at least a rudimentary understanding of why all this turbulence is putting so many retirement portfolios at risk today.

The reality is, capitalism is not a perfect system. Wheelan, in fact, argues that a market driven economy is to economics as democracy is to government: "a decent, if flawed, choice among many bad alternatives.”

Early on he states, “Economics starts off with one very important assumption: Individuals act to make themselves as well off as possible.” Is this not why many people from all over the world have striven to make there way to America? I've heard stories of people who came to the U.S. and we startled to find that the streets were not paved with gold.

In an early part of the book Wheelan notes that markets are not always fair, and that we especially see this in pay scales. “Small differences in talent tend to become magnified into huge differentials in pay... One need only to be slightly better than the competition in order to gain a large (and profitable) share of that market.” Horses that win by a nose, superstar baseball players... the difference in financial outcomes between best and runner up can be significant. If I have a job opening, and one person gets it, that person ends up with a living wage while the contender remains unemployed. Markets are amoral and not concerned with the apparent unfairness of this situation. In addition, they reward scarcity, which has no relationship to value.

Even if we do understand how free markets work, and why government controlled economies are problematic, I doubt we'll ever fully understand what's going on with the trillion dollar fiascoes like Freddie Mac and Fannie Mae. I've heard it said that when you have autopsies without blame, only then can you know why the patient died. In point of fact, power is a more important than truth, and you can be sure Republicans and Democrats alike will do all they can to make sure that blame gets placed at the other's doorstep.

In this instance, the Bush administration is being tarred for not having provided more oversight to these major mortgage institutions. But in point of fact, in 2003 when the Bush admin pressed for greater oversight, it was the Democrats who objected. (Read the N.Y.Times story here.)

I sat on a plane last spring next to a fellow who works for one the nation's largest housing lenders. He said that five years ago the government put pressure on them to loosen lending standards in order to get more people into houses. Easy loans are not always an easy burden to bear. The mess we're in was created by people inside the beltway trying to manipulate the rules in a manner that violated the way markets work. To paraphrase a popular saying, the road to economic hell is paved with good intentions.