Monday, October 13, 2008

Roots and Rants

[Note: In containg filmi terms, this is sort of inspired by this post. I've been as original as possible, but if you see parallels, well that's how they are]

"Sub" and "prime" have become the scariest things you could put at the ends of a hyphen. It's no longer recession that the US is worried about, but a Depression (note the Capital letter; also note this is ripped off the NYT somewhat). "Thraahi-Thraahi" is "mach"ing everywhere in the US, to use a phrase last encountered in Class X Katha Kunj.

The politicos, the Wall Street-wallahs, the newsmen, the financial analysts, the pundits, the comedians and the bloggers have all had things to say about the crisis. How the nation got into it, who got greedy, whose fault all this is and so on and so forth. Fingers everywhere are pointing to greedy child-eating Wall Street Geckos, and their corrupt bitches in the Parliament and the White House. The status of the financiers and politicos are, put simply, the same as of the lecherous Sethji's who collect on loans by raping sisters and the corrupt cops who lock up the hero for it.

A question has however escaped everyone. How did all these loans and mortgages accumulate? Why did so many thousands of people decide to risk their houses as well as having their sisters raped (metaphorically)? I'm willing to grant that several people (say 10-20%) were in of money for a specific business investment (lacking Maa's Zhaveraath, they decided to stake their houses) and that several others needed to take out such loans for college or medical expenses (say another 20% to be very charitable) which in this country are insanely high. That still leaves 70% (at least) who risked their homes and financial futures for an infusion of cash. The question is did they NEED it, in the strictest Maa ki ilaaj ke liye chaahiye sense?

My view, and you are entirely welcome to disagree and/or criticize me for it, is they didn't. People didn't need the cash, but wanted it. They wanted an infusion of so many thousand dollars to spend. To purchase a new car, a new house, a new TV, new bikes or to get out of existing debt.
And these, by the way, are people with less-than-solid financial status to begin with. So why'd they do it?

Two reasons, which I see as the real roots of this meltdown. The first is the tendency to buy things on credit, something I see widely prevalent in the United States. This system extends to just about everything. Cars and houses are one thing, but people here actually buy computers on installment plans (Check this link out if you don't believe me). When you have real estate as potential collateral, why the hell not take up higher interest rates for that mortgage plan? You do it anyway for everything else under the sun. Unlike say our parents back home, who (smartly) remain deeply wary of being in debt, people here subscribe wholly to the buy-now-pay-later mentality. This is reason 2. And it arises from reason 1.

Consumerism. This is what drives people to take out loans to buy things they could do without if they tried. The bling mentality is now deeply entrenched in the US, and oddly, amongst the very people who can't afford it. People may need money for education or for healthcare. But they NEED the latest cell phones, jewellery, car models, automobile accessories and televisions. And consumer manufacturers have exploited this scenario very smartly, with their financial options for everything from a cell phone to a car. When a person who is uncertain of whether he/she can afford healthcare is willing to take up "easy financing options" for the new LG Chocolate which comes with Rihanna tunes and an 8 Mpixel camera, why should they not exploit him/her? Thus do you have people with bad credit history who nevertheless go into further debt. Thus do you have people who exploit bad financial behaviour and thereby encourage it. And thus do you have a circle which needs only the collapse of real estate prices to bring about a financial apocalypse. The bling mentality, in short, is what will ensure, that irrespective of today's bailout, there will be a new financial crisis tomorrow.

[Feel free to comment on said matter]

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