Theory of relative pain

There is nothing like being laid off of work to make one really appreciate steady income.  I had gotten too used to a budget on autopilot, one that just worked, and since my position at Nokia was eliminated I am questioning the little purchases that used to be reflex.  “Can I have a bag of donut holes, Dad?”  Depending on behavioral trend, that used to be an easy “yes”.   Now I have to consider the larger scenario: Donut holes, about $3 per bag.  Uninsured visits to the dentist: priceless.

So I am not sure if I am relieved or discouraged to read that millionaires in the United States are suffering, too.  After a few years creating more than ever, our fickle economy has now stripped many of up to one-third their worth.

On one hand it is easy to dismiss their situation– so someone’s net worth declined from a cool one million or so dollars to a cold $700,000.  Yawn.  Let me know when they lose a little more.

But then one has to question where the lost value went, and how that erosion might affect an economic recovery.  As quoted in the article,

“They may not be representative of most people, but this is a population that creates jobs in the country through small businesses and has spending power”

I suppose that is still true to an extent, or at least I hope so.  Small business is a necessary agent for change.  This is especially important when irresponsible practices of corporations are involved in the economic “correction”!  So we desperately need the vigor of new small business to jump-start a good reversal of fortune.

It may be reassuring to know that a recent report disputes the common belief that small business have been steadily impacted in the US due to the Wal-martification of America, claiming that as some are closed others open.  However I keep seeing more and more empty storefronts.  There is not necessarily a correllation, but I believe it is safe to say that it can be easier for large businesses to weather a downturn.

What I find interesting in all of this is the tendency of job loss to increasingly affect older Americans.  This trend is changing the demographics of entrepreneurship, so that more start-ups are helmed by people closer to retirement eligibility than high school graduation.  Given that such start-ups are borne of necessity in many cases, I have to wonder how many are also at least partly motivated by frustration with stifling experiences in large corporations.  After dealing with the worst practices of bureaucracy for so long, are these new small businesspeople armed with disruptive ideas for a new wave of best practices?

I sure hope so.  But start-ups can only survive as long as their funding and the economy allow.  If they do not find fiscal stability before initial funding runs out, many will go under unless loans are available.  After years of impressive growth, however, small business loans declined in 2008 (thirty percent) along with investment banking in general.  Retirement to Franchise Transfer plans may be one solution for some, but not all.

So where does this leave our former millionaires?  I am as uncertain as anyone.  Obviously they will not be investing quite as much for a while, in new small businesses or what-have-you.  The incoming Obama administration is already poised to pump some helpful stimulus into the US economy, but given our federal deficit I have to wonder where the money is originating.  Maybe from the same financial donut hole into which the assets of the wealthy have drained…

2 responses to “Theory of relative pain

  1. Pingback: Intense Conversations » Blog Archive » The Arizona Cardinals

  2. Pingback: A plea to our president: unlock the 401K « Tabula Crypticum

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