Certainly, the disappearance of large numbers of hedge funds played a role, but mostly, this was simply a measure of how poorly the firm itself was doing. Last busy season, I was arguing to my bosses why the way they were doing things (incredibly inefficient use of resources and people, poor attention to spreading good ideas to the firm as a whole, etc.) was bringing down the firm when it had an opportunity to challenge even the Big Four in some regards.
But in terms of the Jewish community, this is going to be very messy. Perhaps more than any other segment of American society, the Jewish community is very tightly connected with the financial services industry. A somewhat connected figure in the Jewish community related to me at a sheva brachos tonight that as much as 25% of the Jewish community in Passaic is unemployed right now. Even if he means 1 in 4 households, and even if the number is inflated... that's an incredibly large number. Queens is not faring much better at the moment. Those who still have jobs are watching people around them get sent home every couple of months. The rest are looking in vain.
As a community, we need to take a lot of steps back so we can start looking at the big picture. Even in the boom years, we were a community skating on the edge, relying on the boom to keep us ahead. Now that that bubble has burst, we need to reshape how we function as individuals, as families, and as a community when it comes to our finances.
I was CCed on an e-mail exchange earlier today, and one of the people commented only somewhat jokingly that it is difficult to change attitudes, as
They'll say that we survived for centuries in Europe under dire poverty, why can't we cut back on our luxuries today and live without a car, constant electricity, new clothes, etc.I noted in response that housing in Europe was a lot cheaper than housing in Cleveland, let alone Brooklyn. They also caught their own fish, raised their own livestock, and skinned their own furs. I then noted that I saw a piece about Chassidim leading Amish around Crown Heights this week. While people like to criticize the Amish as living somewhat of a backwards life, they seem to be eons ahead of the Jewish community when it comes to communal economics. As a community, they keep costs low, they provide and create almost everything they consume, and they export at large profit (hand-crafted furniture) while importing almost nothing into the community. Meanwhile, the frum community imports far more than it exports, spends more than it produces, and as a community, drives prices up for one another, whether it be housing, tuition, food, or anything else.
Perhaps instead of hosting the Amish and teaching them about Jewish life in the city, we should visit them and learn about Amish life in the country.
I believe there is a blogger out there who has been saying that businesses need to be competitive and cannot rely on communal money alone. I believe that blogger also has been saying that more outside money needs to come into the community and that supporting frum businesses does not necessarily mean that money is coming into the community.
ReplyDeleteI don't know what to say about layoffs except to shed tears. But the tough will survive. I just hope that our community hasn't lost its grit.
I believe there have been a bunch. ;)
ReplyDeleteAnd agreed 100%.
As far as I know, the Amish don't use insurance. Couple that with their high inter-family marriage rate, and they have a big financial problem going on, due to thousands of dollars being needed for medical services for children with genetic diseases.
ReplyDeleteNot saying it's a perfect analogy...
ReplyDeleteBut there's some inter-family marriage in the frum community as well. Also, it doesn't mean we can't learn from some of the lessons.
I'm surprised at you! You seem to be confusing "New York Orthodox Jews" with "Orthodox Jews." You of all people should know better. :-)
ReplyDeleteThis is your chance to get everyone to move to Cleveland.
Anonymous commentor 11:46 am noted that the Amish don't use medical insurance, even though they are prone to certain genetic disorders due to intermarriage. This is indeed the case in many Amish communities. Instead, they "self-insure" as a group: that is, when a member of the community incurs a large medical bill, the entire community will raise money to pay it. They also negotiate with hospitals to obtain lower rates for care. Insurance companies generally pay much lower rates for procedures, tests, etc., while the uninsured are charged full price. So they often negotiate to obtain a price closer to that which the insurance companies pay. There was an interesting article in the WSJ on this topic about a year ago.
ReplyDeleteThe "self-insurance" scheme reminds me somewhat of a similar plan set up for life insurance for frum families. If a husband/ father c"v dies (I don't think this plan covers women) his family will be paid a lump sum according to how many dependent children he had. Every other family in the plan will be assessed to cover the costs, with a maximum monthly assessment (any missing amount to be made up over time).
Meanwhile, the frum community imports far more than it exports, spends more than it produces,
ReplyDeleteThis part is not true (at least perhaps not until very recently). The frum community over the last 30 years has become astoundingly wealthy (overall). The level of growth of wealth is simply amazing. So, it seems as if they've been importing lots of money (profits of one kind or another) along with importing all the good they consume. This has slowed recently, and may have even stopped or reversed.
and as a community, drives prices up for one another, whether it be housing, tuition, food, or anything else.
This is absolutely correct. I know of no other community that suffers such a terminal case of keeping up with the Joneses, or keeping up with the Cohens, as the case may be.
JA - No, not at all. I think it's a problem across the board. As for everyone moving to smaller communities, it's not a horrible idea at all - unless they don't keep in mind that the idea is to keep it affordable. (See Anon3.)
ReplyDeleteAnon2 - Very interesting. Any clue how to track down that article?
Anon3 - Let me clarify what I meant by that: While yes, the frum community has become rather wealthy, the importation of that wealth is from a very small spout. The rest is the same wealth regurgitated - think of it as internal inflation of assets and goods. In other words, we were creating our own internal bubble of "wealth", but it wasn't really wealth. We have nothing to show for it at the end of the day.
More importantly, whatever wealth that was coming in was not coming from any*thing* we produced but from incomes in certain professions, whether medicine or financial services. Because we're not creating any value, just sharing skills in exchange for money, once that skill is less valuable (down economy) we have nothing coming in.
I did word the sentence poorly - we don't export any *goods* of value while importing incredible amount of goods. Even if we could offset that with bringing in ("importing") wealth through the sharing ("exporting") of skills and ideas, once we hit a down economy such as this one our reliance on other institutions and markets creates a huge hole in our community, as we're still bringing in all of those goods, but we're not able to import the wealth to pay for it nor export goods to trade for it.
That was an excellent comment and perhaps I will write about this in greater detail - thank you.
Just a by the way. The Amish have a very difficult time keeping their kids "frum". The are doing way way worse than us if that's any indicator of success.
ReplyDeleteJerk - a) Totally separate issue.
ReplyDeleteb) Actually not sure it's true. After rumpsringa it seems most return. (I wrote a post on it a couple of years ago - do a search for it in the top left box.)
Ezzie, Anonymous 01:19:00 AM was me (Mark), I forgot to sign it. Sorry about that.
ReplyDeleteAnon3 - Let me clarify what I meant by that: While yes, the frum community has become rather wealthy, the importation of that wealth is from a very small spout. The rest is the same wealth regurgitated - think of it as internal inflation of assets and goods. In other words, we were creating our own internal bubble of "wealth", but it wasn't really wealth. We have nothing to show for it at the end of the day.
No, this is absolutely NOT true. Perhaps those living in Brooklyn or Queens don't see it, but those living in the periphery where the vast majority of the wealthy have moved see it everyday. I, a modest engineer that has worked (and continues to work) for companies, for a regular modest wage, my entire working life, personally know of at least 7 very wealthy families that have created their wealth via business and have imported hundreds of millions, no billions at this point, into the frum community. One is (was?) an electrical contractor that did extremely well working large construction projects. One is a real estate magnate. One formed a medical products distribution company and sold it to a large company a few years ago. One is in the import/export business. Another is an eye doctor that expanded and has many doctors working for him now. One started a hedge fund. One is in the jewelery business on 47'th street. What is interesting is that all these people, except for the real estate magnate, started out pretty much like the rest of us - with almost nothing.
More importantly, whatever wealth that was coming in was not coming from any*thing* we produced but from incomes in certain professions, whether medicine or financial services. Because we're not creating any value, just sharing skills in exchange for money, once that skill is less valuable (down economy) we have nothing coming in.
Haven't you ever heard that the rich may have a large income, but the truly wealthy don't need an income (they live off their wealth instead). Some of the real estate folks are salivating at the excellent deals and low interest rates that are available today, or that they anticipate will become available shortly.
But I agree that the suffering includes the financial professionals, the engineers, and the other professionals right now. Next to be hit will be the medical professionals when single payer healthcare is instituted (a single payer will decide exactly what to pay you, and it will repeatedly decline as budgets get tight[er]).
I also worry about possible impending inflation. Stagnation with inflation is one of the worst possible combinations for an economy.
I did word the sentence poorly - we don't export any *goods* of value while importing incredible amount of goods. Even if we could offset that with bringing in ("importing") wealth through the sharing ("exporting") of skills and ideas, once we hit a down economy such as this one our reliance on other institutions and markets creates a huge hole in our community, as we're still bringing in all of those goods, but we're not able to import the wealth to pay for it nor export goods to trade for it.
This is true. The growth of that wealth is severely slowing and may even decline if things don't pick up real soon. My gut tells me that it will probably get worse before it gets better, but I've been wrong before. Nevertheless, today in my 401(k), I transferred 7% out of the S&P500 fund and into the cash fund.
Shabbat Shalom everyone!
Mark
Hey Mark! :)
ReplyDeleteI think your experience (perhaps because you are an engineer?) is not typical. Interesting that you mentioned jewelery - I was going to say that a rare exception are the diamond dealers, though they suffer in a downturn as well of course.
But most of the wealth in the frum community simply is not coming from places like that. Most of the wealthy people are doctors, lawyers, and financial services people. We are far too reliant on such people.
I grew up in Cleveland, where it's a much different story: Irving Stone created American Greetings, and (despite not even being Orthodox) helped support the HAC and other institutions tremendously. Other wealthy people were also big producers - whether a guy who developed and sold an idea to a major tire company, a fruit and vegetable wholesaler, etc. But that's certainly not the case in other cities, especially NYC and its environs where large chunks of the OJC live, and it's not even as true in Cleveland anymore.
What is interesting is that all these people, except for the real estate magnate, started out pretty much like the rest of us - with almost nothing.
The Millionaire Next Door purports that 80% (?) of millionaires are first-generation? Something like that.
Haven't you ever heard that the rich may have a large income, but the truly wealthy don't need an income (they live off their wealth instead).
Exactly my point! We had high incomes, little wealth. (And a nice chunk of that was with Madoff.) Now that the incomes are gone, we're in trouble.
I also worry about possible impending inflation. Stagnation with inflation is one of the worst possible combinations for an economy.
I think we discussed this on Orthonomics. Agreed 100%.
This is true. The growth of that wealth is severely slowing and may even decline if things don't pick up real soon. My gut tells me that it will probably get worse before it gets better, but I've been wrong before. Nevertheless, today in my 401(k), I transferred 7% out of the S&P500 fund and into the cash fund.
I agree. And good move. I think this 2-week rally is over.