Crunch Times

My mum was on the phone. She's 85 and became a widow last year.

"Ooh, the shares have gone down today!" she said. "Over a hundred points."

She checks them on Teletext. Dad used to do that. Now Mum does it, and frets.

"I did tell you to sell them all," I tease her. "Squander the money! Go mad!"

"Oh no, I mustn't do that!"

She and Dad had only a small investment portfolio, but they were rather proud of it. Now Mum is anxious about it. She depends on the dividend income to make ends meet.

She said, "Do you think they'll come up again?"

"No idea," I said. Then, "Probably, but maybe not for a while."

I've no idea if that is true. She said, "What's caused this, David?"

"No idea," I said again. And that time I had nothing to add. That's because I simply don't understand. Does anyone?

The BBC's Robert Peston seems to. "The most powerful economic force in the world right now is what bankers call 'deleveraging,'" he writes.

When I first read that I felt a headache coming on. I persevered though.

"In many ways," Robert explains, "deleveraging is a good thing. It's time we learned not to borrow more than we can afford."

Now there's a sentiment my mother would agree with: one held in common with almost everyone of her generation. She may not understand why the shares are going down, any more than I do. But maybe the big players of the global economy - maybe all of us - could learn a thing or two from her.

Comments

[ejh]

Well not really, no, because if they were like her they'd never make a shedload of money really quickly and spend it all on fast cars and bottles of wine costing several thousand pounds.

Or talk loudly about it in bars.

Or be hated by absolutely everybody (except John Denham of course).

[Ario]

Hmmmmmmmm. It's a simple principle, really, isn't it? It's just a shame that the $100,000 MBAs couldn't figure that out for themselves...

[Jane Henry]

What is quite striking about this whole credit crunch thing is how surprised people seem to be about it. I appreciate for the younger generation, the housing crash in the early 90s is now a long time ago, but in the collective consciousness, surely it's not that long? The nonsense of lending people 6/7 times their income should never have been allowed to happen. Borrowing has been far too cheap, and no one has had to face up to the reality of their overspending for too long. I'm afraid a lot of people are going to come down to earth with a horrible bump. Am very lucky that I am not I hope one of them, but had a narrow escape last time around by resisting blandishments to overborrow. Had we taken out a mortgage to the size that was originally suggested to us, we would have been homeless. It was a salutary lesson, and I'm glad I learned it young. I feel immensely sorry for the huge numbers of people in their twenties and thirties who are probably going to get very badly burned by this.

[Littlebear]

What an elegant coin for your illustration. Our coins just aren't pretty.

[jameshigham]

I'd rather have her running the show.