You are to blame for wallstreet’s problems, and you’re going to pay for it.

In the wake of a market meltdown, everyone’s talking about how bad it is. Silly thing, though, few people actually have any relevant domain knowledge. Even sillier, people respond in the worst possible way: they stop spending money.

Stock pricing often has little to do with a company’s balance sheet, the piece of paper that describes how good the company is at making money. In practice, most companies are over-priced based on speculation and emotion. (I love Apple! Their products are neat! Oo, Altria! What a cool name! I should buy some of it! [ed: Altria trades under MO, formally Philip Morris, the cancer-purveyors.])

But then the market starts heading south: people look at the balance sheets, start to have lukewarm feelings towards their beloved, and then — oh my god — it’s overvalued. Those golden parachute-loving bear fuckers! Sell! Sell! Sell!

I digress. Let’s talk about how this is your fault.

When the market has a correction, people flip out. With me-too attitudes, people sell their securities, move money in-between banks for FDIC protection (with a lot of hand-waving means that your deposits are protected up to $100,000 courtesy of the government), and then, worst of all, stop spending money.

In America, the vast majority are waged or salaried, and in most cases, regardless of how the market performs, take home the same pay every two weeks. While IRAs and 401ks might be going for a wild ride (which it will do through market cycles anyway), most people’s working budget remains somewhat steady. (Aren’t fixed-rate mortgages and rent contracts nice?)

However, fueled by media speculation and fear, consumers are completely reactionary. They hear “The Dow dropped 100 points on the day” (I wonder what percentage of Americans actually know what the Dow is) and think “OMG WTF the economy is hosed! I’m not going to have any money!”

Yes, you are. But, you’re not going to act like it and your not spending money is compounding the problem. When the markets’ revenues are down, it’s because companies aren’t making money. And they aren’t making money because you’re not spending money.

And as the economy crumbles, and we “need” billions — possibly trillions — of dollars in the form of a “bail out” (the terms somehow absolves certain responsible parties of responsibility) you know who pays for it? You. In the form of a loan, written by your country, to another.*

Stop trading and stop freaking out. Act as if nothing has happened; because to you, in the short term, nothing did.

–

*And don’t get me started on how I feel about the bailout. (more…)

Welcome to USA Bank of Social Capital!

We’re glad you could come in today because we have some important information about social capital (also called whuffie) that you should know. What is social capital? Roughly speaking, social capital is the value in your personal network; and like any value, it can be traded, spent, or invested.

But, unlike other asset classes, social capital has memory. More traditional classes, like cash, are relatively expendable: lose all your cash, you’ll be mad at yourself. Lose all your social capital, your capital will be mad and it will be hard to earn back. Further, if you manage to reclaim it, it will always remember you once lost it.

Boy howdy!

Inasmuch, at USA Bank of Social Capital, we treat social capital a little bit differently: we view it almost exclusively as a hedge. In a bind, your social capital can mitigate a business or personal loss, afford you access to new opportunities, and otherwise just save your ass-*cough!*… assets. ‘Scuse me– there’s a cold going around.

But don’t misunderstand: we encourage you to trade your social capital, because trade generates wealth; share your network’s value and others will share theirs. However, be weary of egregious spending: tax your network without giving back and you’ll go broke! Remember, your social capital is only as strong as your own contributions.

As a rule, we recommend that all of our clients save their social capital and invest it appropriately. Bankrupt on cash, your social capital can save you and put you back on track. Bankrupt on social capital, you’re on your own, because here at USA Bank of Social Capital, we can’t be bought. 

If you have any further questions, one of our representatives will be happy to assist you.

Thank you for choosing USA Bank of Social Capital!