A values correction

Arkansas Business, Nov 17, 2008 by Gwen Moritz

ON THE LAST PERFECT SATURday of the fall, the extended Moritz family spent the day on Greers Ferry Lake. After the boating and the hiking and the grilling, the conversation turned to politics and economics.

Like most families, the Moritzes are all over the political map. The presidential election was still three days away, but the outcome was so obvious that there was no point arguing. Even my father-in-law, a staunch admirer and financial supporter of John McCain, was starting to talk about the pros of an Obama presidency, something I couldn't have imagined a few months earlier.

The passion was reserved for the economy. My brother-in-law railed about the "bailout," while my father-in-law and I corrected him by saying "workout." He's of the opinion that the banks and brokerages and insurance companies and all the other idiots, corporate and individual, who chose short-term gain over long-term financial health should be allowed to fail. Even a 10- or 20-year depression, he argued, would be worth the pain if it instilled a new "Depression mentality" for the 21st century.

I understand his frustration. There is a "nanny state" quality to the bailout/ workout, but, in this case, the nanny watched approvingly as its charge climbed to more and more dangerous heights. Could the government that failed to regulate then refuse to rescue? And what about all the innocents who would be crushed by the collapse?

I do share my brother-in-law's hope that this recession, painful as it is, can effect a transformation of the American consumer as well as the American economy. In this week's front-page story about cutting expenses, Little Rock financial planners Cindy Conger, Micah Brown and Rick Adkins talk about clients who are suddenly thinking before spending. What a concept.

Last week, The New York Times reported on Mountain House, Calif., 60 miles east of San Francisco, where 90 percent of the residents owe more on their houses than the houses are now worth--under water, as it were, by an average of $122,000.

One of those underwater residents described his hard times. He'd had to cut his DVD-buying habit "from 50 a month to perhaps one, and is waiting until the Christmas sales to buy a high-definition television." The true Depression mentality clearly hasn't sunk in yet, even in the most mortgaged city in America.

I first learned the word "retrench" from Jane Austen's "Persuasion," in which a vain and silly baronet and his family are forced to cut expenses after years of over-indulgence. The hardest part of retrenchment for Sir Walter was giving up the "ancient dignity" of manor life--"Journeys, London, servants, horses, table." Two hundred years later, one might add home entertainment options.

Micah Brown, of Ifrah Financial Services Inc., expressed hope for a long-term correction in the American economy, in which more families return to the old-fashioned notion of living within their means. After the short-term pain caused by slackening consumer demand for stuff they can't really afford, Brown said, the economy will resume real, sustainable growth. From his lips to God's ears.

The last perfect Saturday of the fall has given way to gloomy, rainy weekdays in which a 400-point drop in the Dow is just another day on Wall Street. The price of gasoline has dropped in half since the summer peak, but even that good news feels like some kind of trick.

Retailers, who were never quite satisfied with the record holiday seasons of recent years, are retrenching and bracing for what one TV commentator called a "potluck and Secret Santa Christmas." There's nothing like hard times to remind us of those old-fashioned values--thinking before spending, living within one's means, simple holiday celebrations.

So while the Moritzes were enjoying one last day on the lake, we also talked about the many bargains to be had on slightly used boats. "Yes," my father-in-law said, reminding us all of one more old-fashioned concept. "Cash is king."

Gwen Moritz is editor of Arkansas Business. E-mail her at gmoritz@abpg.com.