This holiday season, The Bee's editorial board asked several local residents this question: "What is the most important lesson Sacramento or the region should take from 2008, and how can it be applied next year?"
The following is an edited version of an item that Bruce Miller, a Folsom credit union manager, posted in response on his sacbee.com blog.
The lesson we can all take away from 2008 is that the truth stands on its own, bears scrutiny without any trouble and is what it is, regardless of how we feel about it. Furthermore, since not all truths are happy ones, if we want to deal with them, we must recognize them for what they are. Otherwise we just continue to busy ourselves with irrelevancies that do nothing to solve the problem.
An obvious case in point is the housing mess. "Values" just kept going up and up. This was swell as long as all that happened was we somehow felt "wealthier." Ah, but it didn't end there, did it? We decided to tap into this wealth and buy more stuff that depreciates much more quickly than the equity loan balance declines. Or there isn't even any stuff to show for that equity, which was squandered instead on travel or bad investments.
The karma we call economic cycles comes around and all those wealthy homeowners are transformed into people living paycheck to paycheck – and, ironically, some of those paychecks are pretty big – trying to keep up with payments on mortgages that are a whole lot bigger than the values of those homes securing them.
Many can't pay anymore. Others just won't pay. They are walking, with their otherwise perfect credit intact save a new foreclosure they'll have to live with for some time to come. And who can blame them? Well, actually the rest of us can blame them, because we will end up paying for it.
So here is the big lesson of 2008: Value is relative, and it constantly changes. More important, it can go down as well as up. Whether this value applies to stocks, or 401(k) plans, or cars or houses, the lesson we can take into 2009 is that value can change, and it can change for the worse.
In 2009, I suggest if we want to take advantage of value, do it in a way that doesn't get us into debt. That recognizes the truths about value and wealth, which we are seeing now, are not always happy ones.
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