photo credit: Bast

I bet some of you have been in situations, work and otherwise, where the hard questions weren’t asked.   Where, out of fear of reprisal, consequences or even simply not wanting to appear dumb or the odd person out, no one spoke up or asked frank questions.   The elephant in the room – perceived or not- continued to munch away contentedly, unreferenced.  Here’s how this can play out:

Today the US Federal reserve had to bail out yet another financial company – AIG – to prevent an shattering impact not only on the US economy, but the global economy.  This means the American public is now an 80% shareholder of AIG (how ironic!  The US may become socialist, yet!).

This isn’t hyperbole:  we are at real risk of an economic shakedown the likes of which none of us have seen.   Follow the path:

1.  Lenders offer mortgages to people who did not have the means to keep up the mortgages.

2. Those lousy mortgages got bundled up with other financial  products and sold to investment firms/banks as packages.

3. The truth will out, and the mortgages started to default.

4. Because the mortgages were bundled, it took a while for anyone to realize they had a lousy package.

5. When  the horrible truth started to dawn,  and banks/firms realized they held a lot of lousy mortgages, they were unwilling to continue lending money to anyone but super-stars (if even them) with top-tier credit.

6.  This means your average decent joe can’t get a loan … to buy a home … to invest in a business … and the economy starts to slow.

7.  The US gov’t tries to encourage spending by giving away cash to everyone.   Central banks cut interest rates to encourage people to at least TRY to borrow.

8.  And meanwhile, stalwart companies like Fannie Mae, Freddie Mac, Merrill Lynch, Lehman Brothers and AIG get sucked under.

And as people are starting to bitterly remark, it’s your average person who is stuck holding the bag.

What does this have to do with Asking Hard Questions?

Well, a lot of people didn’t ask hard questions in the process above.

• Which product managers did not ask whether 40-year, 0% interest etc. mortgages should be given?
• Which mortgage brokers did not ask whether they should approve a mortgage to people clearly incapable of handling the payments?
• Which investment dealers did not ask exactly what was inside the bundles they bought?
• Which investment advisors also did not ask, before selling them to investors?
•  Which governments, happy with laissez-faire did not intervene?

Well, the ones who didn’t were the ones probably happy to take the commissions and fatten their wallets.

It’s easy to be judgmental.  The fact is, we, in our little lives in our little spheres, don’t ask questions either.

I vote we start asking.  We start pressing even when it feels awkward.  Who knows — we might just save the world.

First, here are some cold facts.  Next, we’ll go into the implications.  REMEMBER, I am NOT A FINANCIAL PLANNER.  I’m simply speaking here as your average joe-ette Cdn making sense of things on her own.

The facts:

Lehman Brothers, a pillar investment firm in the US, declared bankruptsy yesterday. The filing is for $639 Billion.  The firm has been in business since 1840.  (Not 1940.   1840.)

Merrill Lynch was also in such dire financial straights that they hastily put together a plan over the weekend, allowing Bank of America to buy them out for $50,000,000,000.00.

And last, AIG (some of you may recognize the name from your mutual funds)  which started the year with a share price of $56.45  has been steadily falling, and took a nose-dive over the weekend to end up in the $5 range. Why did AIG tumble?  Well if I’m understanding this correctly (and I’m open to correction here!), they tumbled because they insured – and may themselves been tangled up in? – companies like the ones above who invested in those nasty mortgages — the ones people are defaulting on.

So.  What does this mean to you fellow Canadians?

Well for one thing, if you have a mutual fund/stock portfolio containing shares in the Big Banks, you may take a hit depending on how much the bank was exposed to this (ie. had invested in the above companies in any way).  Similarly, SunLife Financial is going to be forced to write down $334Million.  (“Write Down” essentially means, declare on the books that their worth has dropped by that much.   Sort of like, if your house price plummeted, your net worth would also go down).

For another thing, interest rates may get cut again (this keeps money moving in the economy) at a time we might be tempted to hunker down.

Beyond that, hard to say. But here’s something interesting:  Royal Bank of Scotland predicted this very thing would happen, pretty much right now.

If ever there were a time to read the financial pages, it’s now.  These are absolutely fascinating days, even for someone who’s a money coach, not an economist or a financial planner.

Frankly, not a lot about money.   Per se.

One of the most aesthetically pleasing, and intellectually stimulating blogs in Vancouver, hackd,  posted this.   I repost in its entire perfection (heads up:  a bit of cussing):

People are taking the piss out of you everyday. They butt into your life, take a cheap shot at you and then disappear. They leer at you from tall buildings and make you feel small. They make flippant comments from buses that imply you’re not sexy enough and that all the fun is happening somewhere else. They are on TV making your girlfriend feel inadequate. They have access to the most sophisticated technology the world has ever seen and they bully you with it. They are The Advertisers and they are laughing at you.

You, however, are forbidden to touch them. Trademarks, intellectual property rights and copyright law mean advertisers can say what they like wherever they like with total impunity.

Fuck that. Any advert in a public space that gives you no choice whether you see it or not is yours. It’s yours to take, re-arrange and re-use. You can do whatever you like with it. Asking for permission is like asking to keep a rock someone just threw at your head.

You owe the companies nothing. Less than nothing, you especially don’t owe them any courtesy. They owe you. They have re-arranged the world to put themselves in front of you. They never asked for your permission, don’t even start asking for theirs.

update:  thanks, ineaquitas, for pointing out that this is a quote from grafitti artist banksy.

Last spring I listened to Nobel Peace Prize winner Muhammad Yunus describe how micro-credit lending is helping to eradicate poverty in Bangladesh.  You may have heard of Grameen Bank.  I think there was not a dry eye in the room by the time he had finished.

Well, Vancity did it again:  took a great idea and brought it home to Canada.  Not only that, but they’ve created a community site where people can share resources and ideas: www.microfinance.ca

There are so many creative, life-giving ways we can structure ourselves economically. Props to Vancity for this.