Tuesday 1 August 2000

Pic of the day: "The good times will just go on and go on." Summer flowers at the height of their beauty.

Borrowing and spending

I read in the newspapers today that the average Norwegian family has borrowed another kr 35000 during the last year (that would be ca $4000). I'm not sure exactly how impressive that is - it would only be ca 10% of their gross income, I should suppose. Still, it is hardly a sustainable trend. After all, they will have to pay interest on this until they eventually pay it back. And being families, rather than corporations, chances are they have just used the money, not invested it.

It's not like I have not predicted this. I have also predicted a crash in the economy around the year 2001, perhaps as early as this year. I hope I am wrong in that. Or at least I hope it will only be a small crash, not a spectacular history-book writing crash. The fact remains that shares as a group are severely over-valued and have lost contact with their original function, namely to act as tools of ownership. And with the broad spread of shares in the middle class (through funds, mostly) this means that "everybody" is feeling rich, and can afford more. In the same way, however, "everybody" stands to get a shock when the share prices fall to their normal level. This seems to have started for the most extreme part of the stock market, the Internet shares.

The one thing that surprises me in all this, is that I have not borrowed $4000 during the last year. In fact, it would seem that I have less debt now than last year, and it was not horribly much even then. (There is no reason why I should have debt at all, except wild spending sprees. These are usually fairly limited - a new computer will do the trick, though.)

***

During the previous economic boom, in the 1980es, I was a pretty good indicator of the zeitgeist. I borrowed money to have fun; not a whole lot, but since I did not earn much (and I still don't do) it was still too much. And to top it all, I decided to quit my job and go freelance a few weeks before the stockmarket crashed. And needless to say, the yuppie companies I was working with fell like dead birds from the sky and I was immediately without paid work, which lasted for ca 13 months. Actually I liked to not work, but the pay was rather miserable, as you may guess.

I'm still not economical in any normal sense of the word. For instance, I am likely to just buy some yoghurt and fast food for my daytime food, while most of my coworkers (and indeed most Norwegians) butter up some slices of bread and take those with them to work, typically with cheese on. It is sort of baffling to see a boss, who is earning more than I can remember, eating dry bread with butter and cheese. Evidently people have different priorities. One of the nice things about eventually having a decent wage is that I can eat a warm slice of pizza every day, or a burger or some instant pasta. And yoghurt, lots of yoghurt. But I digress. Better stop before I come to the chocolate, or this thing will lose direction completely...

Anyway, as I said, I'm not the thrifty type. I take no joy in seeing money grow, in putting aside something for some future goal. My personal sense of the future is hazy at best. While I may be trying to chart the world economy, I have only the vaguest of notions of what I plan to do this fall. I typically have no vacation in the summer because I have no idea of when spesifically I would want to have a vacation. We are supposed to write on a list the weeks we want to have a vacation. I am unable to think that far ahead and so I don't get any vacation until late in the year, when I and the boss both find out that there is three weeks of vacation left. (I use one or two days occasionally, sneaking off if someone calls.) It's unlikely that I will ever plan a trip abroad, for instance. Much less save up money for it.

***

So, what has happened in the last 15 years, except for the recent discovery that I am wallowing in luxury while children starve etc? Well, for one thing I earn a bit more. I am still in the lower middle class. Or as my best friend put it, if I hadn't been single I would have been working class. But my requirements have not really increased, while my wage has increased slightly. I used to eat fast food already by then, and I still do. I basically live in the same place, and I still haven't bought a car again ... except for more expensive clothes, I am basically the same.

This is not so for the people. With more money comes more ideas to spend it. Since the 80es, for instance, vacations have changed. People were already going abroad then, typically to Spain. Now it is completely normal to go to Thailand or Venezuela for a few weeks. And people upgrade in other subtle ways too. The cars are better, the houses are better. It's not so much that people get something new, they just upgrade. People already had two cars in the family, now they have two better cars. Stuff like that. I do that too, but with computers. And I don't buy "cutting edge" anymore. I buy the reasonable yesteryear's model.

***

After the "yuppie time" as we still call the mid-80es, the Norwegian people got a swat on the snout. We had been spending more than we earned, imagining that the good times would just go on getting better. Then came the crash, and many were jobless, and others found that their job could no longer feed both them and the mortgage on their large house. Some had to sell their homes and buy something cheaper - but since people were reluctant to borrow for buying, the sellers found that they not only were selling at a loss. They actually risked not getting enough to pay out the entire loan, and so would continue to pay on a loan for something they no longer had. A dreadful prospect. Mostly the sale of homes stopped up, as did the sale of new cars. People dug in, asking their banks to postpone the occasional payment. The banks did not do too well, either, and the state eventually bought out a few of the worst. Nobody lost their bank savings, though entire companies's shares were wiped out. People hung tight, and eventually things brightened.

I guess not everybody can have their genes from genius parents, and fifteen years is a long time. People must be excused for forgetting the lessons of a century now celebrated out of existence. I suppose that is what does it. Most people think (once again) that this time it is different, this time the good times will just go on and on. While I button the oily coat and wait for the storm to hit.

But not so much that I might not buy a few practical clothes to a poor (and cute) student, if they flatter me enough. No straps, uh, strings attached! :)