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Replies to post #99460 on Derf's Grotto
2023-01-16 07:00 by Karl Denninger
in Musings , 605 references
Were You Coerced?
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You know what I'm talking about.
Now think about why it was able to be applied to you.
Let's have some honest reflection.
Did you have a crushingly-expensive mortgage, a couple of nasty car payments and no reserves? Well, you knew that was stupid, right? How many people have told you over the years that six months of reserves is a reasonable amount and three is an absolute minimum? Plenty. Every single piece of financial education related to personal life has put that metric on the table. You ignored it, deliberately. Who's responsible for that?
Did you really think there were no replacement jobs? You know full well that's BS; there was never a time in the last three years where "no job available, no unemployment, no income" was on the table. Maybe not as much as you were making but again, your "monthly nut" is almost all under your control. Its easy to say "well, that $100 bottle of scotch isn't getting bought this week or next"; not so easy to say "that $3,000 mortgage payment is optional", is it? The fact is that in the first few months when people got laid off the government was handing out unemployment "boosts" and outright cash; you got it, I got it, we all got it. After the first few months, and well before any sort of "mandate" there were (and are today) a crap-ton of jobs so there was no risk of you not being able to go work and do something for money.
Have you structured your life around that which in truth you can't really afford? If you have a lifestyle that requires a six-figure income what leads you to believe you'll always have it, and in what sort of sane world would you not expect to have to fund that for at least a year without income at all? Its a basic fact that the further to the right of the median you go the fewer people there are and thus if you're making that sort of money and something happens to your job (your fault or not) there are a lot fewer people and jobs on the right side of where you are on the bell curve than to the left.
The more-extreme your income compared to the median the more conservative you have to be on reserves and spending as a percentage of said income for given things simply because you're stupid to do otherwise! There are 159 million, more or less, employed people in this country today. The median household income is just over $78,000 and median personal income is $37,500. If you make double that personal income then you're well beyond the peak of the bell curve, or if you already have some sort of disability, no matter what it is, you had better be a heck of a lot more-conservative than the "general rules" because there are far fewer replacement jobs you can do that pay more than those that pay less.
Let me put it succinctly: If you can't make it on materially less than the median personal income where the greater count of potential jobs in terms of pay if you lose your current gig is to the right of you on the curve rather than to the left -- that is, despite your outsized income you have insufficient reserves to cleanly bail out of there and decamp to a much smaller required monthly "nut" before they run out -- you have nobody to complain to when it happens. This is always a choice.
Who's responsibility is it to take care of yourself and your family? By what sort of wild-eyed crazy did you think you could buck the odds forever and not get nailed? Are you really crazy enough to believe you'll never roll a "1"?
I've lived in every economic strata except the crazy-rich where you literally don't care what things cost. Yes, I did say every and I mean it; I've literally been homeless before. Never was I under more sleep-losing stress than when I "purchased" a townhouse and vehicles (yes, married at the time) that was well into the "you can afford this but not a huge amount more" ratios that all the banks use to approve same, but didn't have the ability to fund that for at least a year and I was well beyond the median income for where I was living at the time. I knew damn well that if my firm had failed during that period due to either my own stupidity as a CEO or an act of God entirely beyond my control I was screwed and the odds I could unscrew myself by going to work for someone else before I ran out of reserves at a sufficient salary to keep my head above water approached zero.
Years earlier when I was renting a clean but rather plain and small apartment and had an old, crappy car I was earning below median personal income and thus knew that if push came to shove and I lost my job for any reason I'd be ok. I'd not be going to the bar chasing skirts on Friday night but the rent could be covered along with the power bill and food; there was basically no way I couldn't find enough employment, save nuclear holocaust (in which case I don't care, obviously) to be able to meet the monthly minimums and thus although I didn't have a big stack of cash that was ok because my income was almost-immediately replaceable save being entirely disabled or dead. I slept like a baby.
You don't want to read things like Steve Kirsh's substack if you got coerced. Really, you don't. There's almost-certainly nothing you can do now to make things better if you put yourself in that position. You're going to have to live with the insult, whatever it may be, that you imposed on yourself. But do not kid yourself; you could not have been coerced without being financially irresponsible and ignoring basic facts beforehand.
Nobody owes you a thing if you put yourself in that position. The responsibility is yours and, if you have family that depends on you, that responsibility is owed to them as well -- by you and you alone. Everyone else in society and government owes you nothing.
This will not be the last time around. It never is. Who's responsibility was it back in 2006 when people were taking out Option ARM loans to buy houses that were interest-only (or even negative amortization!) for the first couple of years and thus had tiny payments predicated on the price going up by at least 20% in those two years and thus you could refinance and do it again? Basically everyone who did that couldn't pay the full amortization at the start and the more "turns" on that you saw from the so-called price appreciation the worse it got because the principle amount increased with each twist of the crank. What could possibly lead you to believe that in two years your income would go up by more than 20% plus however much more was required to make an amortizing payment because if it didn't and for any reason you couldn't roll the loan you were going to get foreclosed on and thrown into the street!
If you didn't learn from that after seeing the carnage and foreclosure signs everywhere and didn't take the intervening 13 years to get out of that hole yourself then why are you complaining this time about being "coerced"? You weren't coerced -- you deliberately dug the hole you found yourself in, got in said hole, kept shoveling more and deeper until you were fully underground and then want people to feel sorry for you!
You had more than a decade to resolve that after you watched others get whacked over the head with a clue-by-four and didn't remedy your personal level of risk and behavior.
Learn from this folks because there will be a next time. I don't know when the next time will happen or what form it will take but it will happen. In my adult life I've lived through a bunch of them and although most did not get me personally they did get others and I saw what it did to them. The late '70s/early 80s, the early 1990 recession, the blow-up in 2000 and then the so-called "great financial crisis" in 2008.
That looks like about once every ten years doesn't it? Yeah, it does, and it holds over my entire life with the particular insult changing from event to event but the next one always comes.
If you took physical damage its yours and there is nothing you can do about it. Whatever limitations it places on your life from here forward are yours. If you boxed yourself in and then got coerced you had better figure out how to move down below the center of personal median income and be ok because given what we now know the odds are dangerously high you're going to find yourself with a serious income problem in the next five to ten years. That's what history and the odds tell you.
If this means you live well below your means and sock back that capital or get out of a high-cost area and move to a low-cost one and accept whatever lifestyle changes that means you better do it now, on your own terms. Exactly where you choose to do that is up to you of course and there are many criteria that ought to go into that decision but chief among them needs to be that you will be ok with an income below the median personal level unless you have a large capital reserve you can live off in your current lifestyle if something goes wrong at your current cost of living, plus inflation which, as you've seen, isn't going to be zero any time soon.
