to understand their own financial dealings.
It's sad, but the mathematical reasoning ability just isn't there.
That is the only explanation for the older woman who lies to get a loan on her house. She does not understand that she will have to go through the misery of a house foreclosure and bankruptcy and real personal disaster if she overextends herself. It explains why we are seeing homeless women in my neighborhood in California.
Our experts, real estate agents and loan managers are supposed to verify things like loan applications. But, of course, the companies were corrupt. The employees who saw the problem as it was developing were most likely fired early on.
Because of the fraud in the financial sector, we must keep Social Security as a system managed by the government. We cannot make helpless, elderly people who worked hard and contributed all their lives rely on Morgan Stanley's Wall Street in order to survive when they can no longer get jobs.
I have dealt with lots of people, looked at their financial statements, at the contracts they have signed, at their dealings. It is incredible. People make shocking mistakes because they just do not understand what the words mean in the documents they sign and because they are unrealistic about money and value. Most people cannot figure out a budget, much less stick to it, not even if they write it all down on a piece of paper. A minority of people, the lucky few, can figure in their heads whether they can afford a purchase or not. And this minority of people does not understand how hard it is for everyone else. I just think it is a matter of how the brain functions from early childhood if not birth. But the disparity between those who understand 2 plus 2 and those who don't is really striking when you deal with people about these things.
People actually think that 3 ozs. for 99 cents is a better buy than 1 oz. for 33 cents. Or vice versa depending on their mood.
Take the supermarket. Here in California, the per ounce price must be printed on the price tag in the shelf. You really have to look at those things if you want to avoid being taken by the grocer and the corporation that produces the product you want to buy. You can not tell from the packaging what is the best deal -- the large size or the small one. But people ignore the signs and buy the showiest package. The amount you save by shopping wisely isn't much, but it takes a couple of seconds to check the real price per ounce -- and doing that keeps corporations honest.
Why is this small detail important? Because it illustrates that people just cannot think rationally. They want to save money but just can't think clearly and steadily enough to do it.
And that is what is wrong with the whole Chicago school economics theory -- it supposes a rational market. But a rational market would have to be frequented by rational people and most people do not have the ability to set aside their emotions and think rationally. And unfortunately too many of the few who think rationally have no compassion or empathy.
It's a sad reality.
= new reply since forum marked as read
