Where's the panic?

I've been listening to a lot of news radio lately (go NPR!) and guest after guest after guest have nothing but bad news and bad feelings about this latest crash on Wall St. Most financial analysts are thinking that the clouds may part sometime in 2010-2011 before we start to see some type of recovery.

But the NYSE hasn't really collapsed (it's been kicked down, but it's far from doomsday) as they thought they would even with AIG on the ropes and WaMu barely keeping it's head above water. Maybe it's because the FDIC has done it's job by keeping people comfortable with their actual liquid assets (i.e. checking accounts) accessible. And maybe that even though the first line of the general public's notion with all of this financial crisis is that it's so far above the heads of the average person that no one really knows what to think and/or do.

The thing that will affect people directly is in their long term retirement savings. Portfolios of all types are being hit by the downturn in the markets which means that pension funds and mutual funds that Americans have their retirement savings in are diminishing and investments that fund philanthropy such as scholarships for colleges and trusts that donate their proceeds to charitable causes will start to see less and less available monies.

And maybe the general public just doesn't care if a bunch of Wall St. tycoons are losing their collective asses.

My gut is telling me that this will start to pinch us in the next 90 days. When companies start to slow down work and people start losing their jobs right before Christmas. I believe that by the first of the year the repercussions of this shake up will finally reach John and Jane Q. Public.

But that's just a guess. As with all things that are incredibly complicated - such as mortgage backed securities - you literally need to have a PhD to navigate the complexity of it all. In a nut shell (and this is just what I've gathered - I'm no expert), credit was extended in mass amounts to companies based on the collective collateral of the value of homes - kind of like a massive home equity loan. When mortgage prices fell due to the housing peak and subsequent decline, the collateral that the finance companies used to sell/loan out to others collapsed as well - leaving loans with nothing to back them. Financial institutions were 'upside down' in their loans and were defaulting en masse.

The thing is that the investors that are losing is the entire planet. Countries invest in other countries and with the US being as big as it is, we're the place to put a good share of your cash. If our system collapses/recedes, then all nations do as well.

I think why there isn't really a panic is that there isn't another nation looming to take advantage of this financial shortfall. China, as old as it is, is not in a position to take the lead as a superpower. The US is still sitting in the #1 spot with no apparent heirs.

And that is what I really think is at the core problem of this. In our growth patterns in the 50's and 60's, we had the Soviet Union as our chief rival and collectively worked against that threat (real or perceived). We don't have that chief 'threat' at this time to inspire competition. We became fat and lazy by being the biggest dog on the block.

I'm curious to see what plays out. Especially with AIG in trouble (they sold the insurance against those mortgage backed securities so now with everyone defaulting, they don't have enough cash to cover all of the claims). My hope is that the government will choose NOT to bail out AIG as painful as it may be. We have to let people feel the full extent of the pain for real change to happen. My wish is that with the inevitable regulations that will come up with the next administration that the lawmakers don't go too far.