LET'S DRINK TO THE HARD-TRADING PEOPLE
I don't want to get into a lengthy response to the Bloomberg article about Wall Streeters whose reduced bonuses mean they have to limit the three-bedroom vacation rental to one month rather than four, or who can't ski Aspen this winter. Nor do I want to go point by point through Megan McArdle's reply ("Are the Rich Completely Undeserving of Sympathy?"). I just want to talk about this comment from an attorney that's appended to McArdle's post:
Another factor I've noticed with my bankruptcy clients is that a very rich person whose income takes a sudden precipitous drop to a still-pretty-good income can actually wind up in more financial trouble, faster, than a very poor person whose income drops to zero. If you were making $300k a year and spending $200k of it on fixed expenses, and your household income drops to $125k a year, unless you have substantial liquid savings or are able to sell your house and your car and your boat yank your kids out of private school REALLY fast, you're going to wind up in bankruptcy in a fairly short space of time....
I guess what I want to ask is: why don't these people have "substantial liquid savings"? Why don't they have a plan for a possible calamitous economic downturn? Isn't understanding the volatile nature of financial markets their freaking job?
Aren't they supposed to comprehend this kind of risk much, much better than the rest of us? And, by the way, isn't risk the reason they and their Masters of the Universe superiors supposedly deserve the big bucks in the first place? Isn't that the heroic myth of big-time capitalism -- that, unlike us paper-pushing, ditch-digging, wage-slave drones, they accept the potential for tremendous harm to their own economic well-being in order to be the Randian heroes who keep our economic engine chugging along?
I'm not even getting into the fact that they and their bosses and colleagues actually caused the damn downturn in the first place. That's reason enough to withhold sympathy. But even those not directly involved should know they're in a risky business. Instead, just the same way they want profits privatized and losses socialized, they want to corner the market on praise and then demand a socialist redistribution of sympathy.
(X-posted at Booman Tribune.)
I guess if military families can contend with intermittent moves, the rich will just have to learn how. Or enlist.
ReplyDeleteYes. But you underestimate the power of experience and expectations. If you were raised in a comfortable, even rich family, went to prep school and ivy league college and then b-school or law school, and have made six figure salaries or more since your late twenties, you have never had to confront the concept of facing economic trouble. I was an attorney for many years, and know lots of people who made big money and basically spent it all as they went along. They never even imagined they might get fired and have to rely on savings. On the other hand, everyone I know who grew up with financial trouble or parents who lost jobs, struggled, etc. saves obsessively and contemplates possible financial ruin on a daily basis. Even if they are doing well.
ReplyDeletePeople are very much a product of their youth and early adult experiences. Don't underestimate that.
I don't know Megan McArdle, but I will always picture her now as Keith Richards' doppelganger. Thanks a lot Steve.
ReplyDeleteHa! Beat me to it, Danp. Nice muso reference, Steve... one o'my childhood lullabies.
ReplyDeleteI've had similar thoughts about "liquid savings" and what these guys purport to do for a living. It's far more important than the wanking they're doing about this year's income. It's also a reflection of the short-term thinking Wall St and corporations have adopted over the past decade or two.
ReplyDeleteI rate for the title too. Great one.
ReplyDeleteThanks.
ReplyDeleteMegan cites with apparent approval a commentator who observes "A person who was making $18k a year and suddenly finds themselves making nothing, as a practical matter, can often break their lease and move in with mom and get on food stamps until a new job materializes and wind up with only a couple thousand dollars in debt."
ReplyDeleteLucky ducky!
I think that people tend to forget this basic fact: most of these traders and bankers got their jobs through connections (family or otherwise), rather than their competence. The claim that they 'earn' their pay is a lie they perpetuate to avoid scrutiny/guilt, and given a pass by the rest of us because usually we don't care. At least part of how this economic mess occurred is that they bought into their lies, and they acted beyond their competence. So I am not surprised at all that they have do a bad job managing their own finances, I actually expect it.
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