A Life Lesson In Uncertainty

I’ve been thinking about the Great Depression lately.  Not because I think we’re heading toward another one, but because it is one of those historical events that left an obvious, lasting mark on the people who experienced it.

dustbowl_unemployed_men_queued_outside_a_depression_soup_kitchen_1931_-_nara.jpg__2000x1457_q85_crop_subsampling-2_upscaleIf you knew somebody who lived through the Great Depression as an adult — and not as a kid who probably wasn’t fully aware of what was going on — you know what I mean.  The adults who lived through the Depression clearly had a world view that was forever, unalterably affected by that difficult time.  After the Depression ended, they generally lived frugally and saved money.  They wanted to avoid debt at all costs.  They tended not to trust newfangled ideas and were as cautious and conservative in their investments as you could possibly be.  And they generally did not  have the sunny faith that things were necessarily going to get better.  There was a hard edge, a Depression-inflicted scar, that was lurking just beneath the surface that tended to influence and affect, in some way or another, just about everything they did.  My grandfather, for example, always wanted to have plenty of cash on hand — just in case everything went to hell tomorrow and he needed it.

Later generations of Americans didn’t share that same worldview.  They lived when times were flush, and they expected that the high times they had always known would inevitably continue.  Sure, there were some bumps in the road, but for the most part we lived lives and developed plans and made decisions about buying cars and houses, determining whether we could afford a particular college for our kids, and planning for retirement on the assumption that life as we always knew it would be pretty much the same in a month, or a year, or five years.  There was a kind of presumed certainty about the future that served as the unconscious basis for all of those kinds of decisions.

Now we’ve had the fates throw an enormous wrench into the works.  We’ve learned in a brutal, stunning, totally unexpected way that we can’t presume to know for sure what will happen in the future.  How is that going to affect people’s decisions going forward?

I wonder if this coronavirus experience, too, is going to also have a lifelong effect in terms of where people choose to live and how they choose to live.  At minimum, when we are trying to make a decision about a course of action, will we always be thinking:  “what if another global pandemic occurs?”

Here We Go Again

You’d think that, after the crash of the housing market, the failure of banks, the stock market plunge, and the Great Recession of 2008-2009 that still is affecting the economy in many parts of the country, modern Americans would have learned a painful but lasting lesson about taking on too much debt.

It looks like you’d be wrong.

The Federal Reserve Bank of New York report on household debt says that Americans are collectively approaching the record level of debt that we had accumulated in 2008, and probably will break through that record this year.  According to the report, by the end of 2016 our collective household debt, which includes everything from mortgages to credit cards to student loans to car loans, had risen to $12.58 trillion, which is just below the 2008 record of $12.68 trillion.  Even worse, last year our debt load increased by a whopping $460 billion, which is the largest increase in a decade.  Mortgage loan balances are now $8.48 trillion, which accounts for about 67 percent of the total debt load.  And the total amount of debt increased in every category being measured.

The experts say there’s reason to think that 2017 is different, because there are fewer delinquencies being reported now — about half as many as was the case in 2008 — and fewer consumer bankruptcies, too.  Who knows?  Maybe the banks that are extending all of that credit are a lot more judicious in their loan decisions than they were in 2006, 2007, and 2008, and maybe Americans have become much more capable of juggling enormous amounts of personal debt.

And maybe we’ll all live happily ever after in the Land of Narn.

It’s a good illustration of how people have changed.  Anyone who lived through the Great Depression was permanently scarred by the experience; they became forever frugal, suspicious of any kind of debt, and relentlessly focused on building up their savings and paying off that mortgage so they and their friends could hold a “burn the mortgage” party.  The lessons they learned during the Great Depression were still motivating their decisions decades later.

The “Great Recession” clearly hasn’t had the same kind of lasting impact.  It seems that modern Americans just never learn.

Truly Supreme (III)

IMG_3059The Ohio Departments Building was built in 1933, during the depths of the Great Depression.  Many public buildings — typically referred to as WPA (for Works Progress Administration) buildings, whether they in fact were built by the WPA or by one of the other alphabet agencies of the New Deal — were constructed during that time period.  They all have a certain charm and beauty that modern office buildings don’t even try to equal.

I don’t know if this is true about the Ohio Departments Building (later renamed the Ohio Judicial Center) where the Ohio Supreme Court now sits, but I’ve always thought that the WPA buildings were beautiful because countless masons, artists, woodworkers, and other skilled craftsmen were thrown out of work by the Great Depression and were eager to do just about anything that would bring them a paycheck.  Whether my theory is true or not, the Ohio Departments Building is a collection of excellent paintings, splendid wood work, detailed metal fabrication, and colorful tile creations that certainly look like they were the work of masters.  The rear doorway of the Ohio Supreme Court courtroom, shown above, brings many of those art forms together, with the lovely painting of a colonial scene, a fabulous carved wooden wooden clock about the doorway, and fine, gleaming, metal inlaid into the woodwork.  (The Latin phrase below the clock and above the doorway is dum loquor, hora fugit — roughly translated as “while I am speaking, time is fleeing.”  It’s a good reminder for loquacious lawyers.)

The outside of the building, with its clean, bright lines, includes some carved cats and the quasi-Egyptian figure shown below, as well as the customary tribute to the value of labor — a common feature in Depression-era buildings.

IMG_3065

From Grandpa’s Bookshelf: Optimism Amidst The Great Depression

1939 was not a great year.  The Great Depression had lingered for 10 years, with no end in sight.  In Europe, the growth of Nazi Germany and then the invasion of Poland brought on World War II.  Aggressive totalitarian regimes were found across the globe.  You would not have blamed someone of that time for feeling deeply pessimistic about the course of human history.

And yet, there were optimists, even in 1939 — and I think Grandpa Neal was one of them.  His bookshelf included a small book called Thought Starters published in 1939 by the Imperial Electric Company of Akron, Ohio.  It has an unabashed motivational message, with chapters with titles like “Success Road is Wide Open,” “The Will to Win,” “The Go-Getter’s Way,” and “Ideas Are Worth More Than Cash.”  The book’s theme is that an optimistic approach, where opportunities are recognized and pursued, will lead to success.  The hopeful bullishness of the book is captured in this passage from the “Opportunities Galore!” chapter:  “You are living in a wonderful age.  Just think!  The greatest developments in the world have occurred during the past century.  And the years ahead will make current progress look like child’s play!”

Grandpa’s copy of Thought Starters is personally signed by John Hearty, the president of the Imperial Electric Company. I found myself wondering what happened to the positive-thinking Mr. Hearty and his company.  It turns out that the Imperial Electric Company survived the Great Depression and recently celebrated its 100th anniversary.  Mr. Hearty turned the company over to his son, who ran it until it was sold in 1983.  No doubt the optimistic, opportunity-driven attitude reflected in Thought Starters helped the company to be successful.

If people in 1939 could be optimistic about the future, we should be able to muster some optimism now.  Rather than wringing our hands about our current predicament, our country and our leaders be well served by adopting some of the can-do, positive attitude reflected in this little book.

From Grandpa’s Bookshelf:  Grandma’s Book of Sayings

Bank Failures And A Salutary Example Of Federal Regulation

Yesterday the FDIC announced the failure of three more banks, bringing the total number of bank failures this year to 123.  The 123 failures this year compare to 25 failures last year and three failures in 2007; there have been more bank failures this year than in any year since 1992.  The cost to the FDIC fund for the failures this year has exceeded $28 billion, and is one of the reasons the FDIC is looking to banks to prepay fees to help cover bank failure costs over the next few years.

The FDIC website has lots of information about the bank failures, including a list of all the institutions that failed this year and a guide for depositors who wake up to find that their bank has failed.  If you review the list of bank failures, you will note that they occur in week-long intervals.  That is because the FDIC typically announces bank failures on a Friday, after determining whether a healthy bank will assume some or all of the assets and liabilities of the failed institution.  The weekend then allows the FDIC to sort things out, so that commerce can proceed and accurate information can be made available to all affected parties the following Monday.  This weekend no doubt will see hectic activity at the offices of all three failed banks.

Conservatives often complain about government regulation, but I think the FDIC, its role, and the calming effect of federal insurance of bank deposits should be regarded as an inspired example of the salutary role federal regulations can play under the right circumstances.  Messy bank failures are, for the most part, handled quickly and discreetly.  As the story about funding linked above indicates, the regulated banks that benefit from the FDIC’s guarantees pay fees to defray the costs of the regulatory regime to the government.  And, the reality of federal support and insurance has had a calming influence on depositors that has avoided the panicky runs on banks that were seen during the Great Depression (and memorably depicted in It’s A Wonderful Life).  Without such insurance and depositor confidence, how would consumers react to alarming news stories about a dramatic spike in bank failures throughout the nation?

Of course, the fact that banks are failing says something negative about our economy, but it mostly says something negative about the bankers who ran the banks.  The traditional stereotype of the conservative, cautious, boring banker has long since been overtaken by extraordinarily aggressive practices by banks in their residential and commercial lending areas, in their issuance of credit cards and other forms of consumer credit, and in their general business operations, growth plans, and mergers.

Grampa Neal, who epitomized the traditional conservative model of a hard-headed banker who wanted collateral and protection before he made a loan, would no doubt cringe in horror at the lax practices of modern banks.  If the current crisis causes banks to return, even slightly, to more conservative lending practices that reject hyper-risky loans, that would be a good thing.

The Sandwich Story

Gramma Neal was a pretty rock-ribbed conservative. For reasons lost in the mists of time, she despised Franklin Roosevelt and loved Wendell Willkie. At some long-ago family get-together, she and my Great-Uncle Grover — who was married to one of Grampa Neal’s sisters — got into an argument about politics, and she became so angry that she refused to ever speak to him again. Family lore holds that, from that day forward until the day of Grover’s death, she never spoke directly to him, and instead asked that messages be conveyed to him by third party family members. Gramma obviously knew how to holds a grudge!

My grandmother’s political views may have been strongly shaped by an incident that she loved to retell whenever family talks turned to political issues. During the Great Depression, after The Firestone Bank was permitted to reopen, Gramma and Grampa Neal and their family were financially comfortable. Other people, obviously, were not so lucky. Occasionally a passing stranger would stop at their door and ask for help. On one occasion, an apparently able-bodied man asked for help in getting a meal. Gramma went back to the kitchen, prepared a sandwich, and put it in a paper bag with an apple and a napkin. She then gave it to the man and watched unnoticed from the window as the man looked in the bag, saw with a look of evident disappointment that there was no money, and then crumpled up the bag — sandwich, apple, and all — and threw it in the bushes in front of the house. This deeply offended Gramma, and I think it forever colored her views. Even during the Great Depression, when an economic catastrophe caused thousands of businesses to fail and threw millions of people out of work, she tended to be suspicious of people who were out of a job and thought they were freeloaders just looking for a handout.

I took a different lesson away from The Sandwich Story. It seemed to me that Gramma was viewing an enormous problem from the narrow perspective of her own experience, without considering the fact that her own experience was necessarily very limited. As we move forward into a time of economic dislocation that lesson is worth remembering.