As winter rolls in and the season of office parties fades into the season of empty offices, it is time to pause and take stock. It is hard to imagine that we will be looking back on 2009 as the good old days any time soon, but things could certainly have been worse.
The end of 2009 also marks, more or less, the end of the first year of this blog. So it makes sense to review the year by reviewing the year in the blog. In the next few posts I will be highlighting a few general themes that emerged as the year went on. Today it is the most obvious of topics, The Great Recession.
What set off the GR was best discussed here at Bad Money Advice in a book review I wrote (in two parts) of the probably now forgotten The Wall Street Journal Guide to the End of Wall Street as We Know It. I meant to do more book reviews when I started this blog.
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Earlier this week I stumbled across a surprisingly on-target quote about what got us into this economic mess from, of all people, Treasury Secretary Timothy Geithner.
The failures that led to this financial crisis were many. Banks and investors took on large risks, risks they did not understand. Washington allowed those risks to build up unchecked. And in communities across the country, Americans borrowed too much in part because they did not understand how to save prudently, how to borrow responsibly, and they did not understand fully that pension values and house prices, equity prices will not always rise.
It’s not a perfect explanation. I wouldn’t make the general statement that banks and investors didn’t understand the risks they were taking. Some didn’t, but many understood quite well. And I think Washington was more than a passive observer of the whole mess.
But the blame laid at the feet of Wall Street and the government is mostly pro forma here. What Geithner is saying is that, as it turns out, a widespread lack of financial acumen amongst ordinary folks was at least as damaging as the foolishness amongst the bankers and bureaucrats. In the immortal words of Pogo "We have met the enemy and he is us."
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The other week WalletPop had a post Want happiness? Forget money – get therapy instead in which was explained that money can’t buy happiness, unless you spend it on psychotherapy.
This was based on a study (discussed a little more completely here but not, as far as I can tell, available on the web) done by two British professors. They found that £800 worth of therapy was the happiness equivalent of a pay rise of £25,000.
Alas, this was not experimental science. As much fun as it would have been, the researchers did not choose people at random and give them piles of cash or toss them onto the couch. All they did was find that people who themselves decided to get therapy experienced the same increase in self-reported happiness as those that got a big raise.
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It’s time for me to bring the series I’ve been doing on a a toy at CNNMoney to a close. Previous installments have covered housing payments, emergency funds, asset allocation, buying your employer’s stock, and life insurance. This final installment is on the topic of the last question in the CNNMoney "How Healthy Are Your Finances" quiz, retirement savings.
Like all the other questions, this one has you type in a number or two and gives you a red "Danger" or a blue "Congratulations" for your trouble. The question asks for monthly savings and how much you have already saved. I found that, having previously said I was a 40 year-old making $50K a year, with $10K already saved, if I put in $750 of monthly saving I get the pat on the back but at $700 I fail.
Given the number of variables, I don’t have the patience to back out what rule the toy is using to divide the ants from the grasshoppers. And it doesn’t provide that rule in the explanation of how you did, leaving a user only trial and error to find out what good is. That leaves something to be desired in the way of actionable advice.
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There is a movement amongst earnest policy wonks that might be called Nanny State Light. It’s a compromise position between full-on centrally planned we-know-what’s-best-for-you control and you’re-on-your-own-kid libertarianism.
The idea is that instead of making people do the right thing or hoping that they do what’s best on their own, you give them a little nudge and hint in the right direction. This is, I am told, the topic of a clever and popular book, Nudge, which I haven’t yet gotten around to reading. (But I bought a copy a few weeks ago. That’s something, isn’t it?)
The latest scheme along these lines to hit the media is in today’s Wall Street Journal. Apparently, all we need to do to get people to save more money is to send them a text message reminding them to save more money.
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