A new book, Busted: Life Inside the Great Mortgage Meltdown, tells the story of Edmund Andrews and how he got into ruinous debt. It has evoked a variety of reactions, from scorn to high praise, the latter bestowed in particular by Michelle Singletary, the Washington Post's consumer financial affairs columnist, who has reviewed it and made it the focus of her book club. (That ought to help Andrews make good on his plan for getting out of debt by writing a book about his experience.)
Andrews isn't your ordinary financially ignorant schmuck; he is (was?) an economics reporter for the New York Times. Perhaps that's why some reactions have been scornful -- after all, he should have known better. And he admits that; he made dumb decisions, effectively gambling, against his better instincts, that they would work for him.
But as Singletary correctly observes, that's also what is instructional about this tale. Here's an "expert" who got stuck with a hugh mortgage he couldn't afford. When even a financially savvy person can get caught up in speculation or fail to heed basic principles of sound financial management, what hope is there for the Average Joe? Not much, in my opinion.
That's what has always bugged me about proposals that Social Security accounts should be "privatized," leaving to individuals to decide how their money should be invested. That might work fine for the "experts" (or as Andrews's case demonstrates, it might not) but no one can convince me that privatization wouldn't just result in a huge expenditure of an average individual's time trying to work out an investment strategy with little or no guarantee of success. Further, it would breed an entire industry of shady investment companies seeking to bilk retirees of their nest eggs.
The nation owes its retirees a secure retirement stipend. Secure means that principle is preserved; it also means, for most people, that they can "set and forget" -- not need to worry every day about changing values, reshuffling their portfolios, and similar chores that they're ill-equipped to handle. People should have other savings (admittedly, many do not) which they could invest as they want for their retirement; but the nation's safety net should be set in bedrock, not on the shifting sands of market fluctuations.
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