Essentially the Only One

Every now and then - and with increasing frequency in all areas - I come across truly cogent articles elucidating in painful detail exactly why George Bush and his calamitous government has wrecked a great country. In this case, a financial analysis based on the thoughts of Robert Hormats, vice chairman of Goldman Sachs (International). A pertinent quote:

The truth is, America's leaders have already squandered "Hamilton's gift" (a policy of paying off war debt), and along with it, more than two centuries of experience, replacing it with a new "faith-based" policy: "Deficits don't matter."

No wonder Main Street Americans have a "gut instinct" that we're a disaster waiting to happen. Not only are we "transferring an inordinate burden to future generations," says Hormats, Washington's undisciplined spending and total lack of a financial repayment plan is undercutting our national security and exposing America to the worst-case scenario: Another domestic terrorist attack that would trigger a "massive disruption of our economy" and a meltdown of America's credit rating throughout the world.

Interesting and worrying news in the world of finance over the past few days. Essentially a number of financial institutions, most notably HSBC Holdings PLC, are reporting far higher losses from their US sub-prime mortgage loan business than was hitherto anticipated or expected. Indeed, as of today, no less than 21 financial institutions have collapsed since December 2006 as a result of bad house loans, as detailed on Implode-O-Meter.

Is this the beginning of a greater crash as debt overwhelms increasingly more home owners? Who knows. You can argue that the sub-prime market - those high-risk borrowers with slender means and poor credit - are a relatively small proportion of total loans. But how many current borrowers classed as prime are slipping down the debt slope?

Turbulent times ahead?

An interesting if essentially anecdotal article in today's Washington Post started me thinking about how our lives are progressively hemmed in from childhood onward. The two main factors, outside of the geographic, class and financial background of one's parents, seem to be education and debt. Both are linked, especially here in the U.S. where a student has to pay for his own education unless he or she happens to be disadvantaged enough financially or advantaged enough intellectually to win a scholarship.

Education sets on a path to a career - what you chose to learn influences the jobs you will take. Debt also influences career - the need to make a high salary to repay debt also acts to push people into well-paying but not necessarily particularly enjoyable or satsifying careers. Unfortunately, most of us have to make educational choices when we are young, sometimes very young. At that age, we have no understanding of the real world of work, of what benefits and losses such work will give us and what price we will have to pay to do it.

It really is a jump into the dark, and I am not at all surprised when I run into people in the their 40s and 50s who have become progressively embittered about the course of their working lives. On the whole I have been fortunate personally, as has my wife, but a major factor in our being able to make career choices that give satisfaction if not necessarily riches is that both of us were free of debt from the very beginning. Me, because I received a state funded college education in England and a NIH-funded graduate education in the U.S., my wife because her family paid completely for her college education and she supported her graduate education by teaching.

I would estimate that being debt-free and thus able to start saving significantly for later life and retirement early in our lives has allowed us to compensate completely for being relatively low-paid, and we have had the added pleasure of doing what we like. But stepping off the treadmill has largely been a matter of luck, family and being in the right location at the right time. Not everyone is so fortunate.