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What lessons, I wonder, will the great downturn of 2008 teach our children?

The Great Depression seared some life lessons into my parents' generation
What lessons, I wonder, will the great downturn of 2008 teach our children?
"In America, loans have gone from 'something to be repaid' to 'something to be refinanced.' "
David Ignatius, Washington Post, January 1, 2009

The Great Depression seared some life lessons into my parents' generation. My father hasn't had a mortgage in decades, even though his children keep telling him about the tax advantages. He buys store-label brands, clips the "sale" coupons out of the newspaper and wears well-mended suits he bought 50 years ago.

Frugality is a lifestyle for his generation. Their pleasure isn't in consuming, but in creating and saving. And their abiding conviction is that you have to take care of yourself, because no one else is going to bail you out.

So let's assume, first, that the bailout actually works. Under that strategy, Ben Bernanke and Henry Paulson have, in essence, offered free credit to anyone who can use it

The first precept would be that bad behavior brings a rescue. If Wall Street investment banks can get away with it, why not auto companies? And if auto companies, why not the guy who bought a house he couldn't afford, or who maxed out his credit cards without a hope of repaying the debt? What the heck? We're all living in bailout nation. As a prominent foreign investor observes: "In America, loans have gone from 'something to be repaid' to 'something to be refinanced.' "

A banker friend decided it was time to quit the business a few months ago when borrowers with enough money to cover their mortgage payments were defaulting on their loans anyway.

Full text

For decades, people had continued to pay down mortgages until their last cent was spent.
Now, increasing numbers were giving up their homes even as they continued to service other debts.
The practice has been given a name in the industry – “jingle mail” –
Financial Times, August 17, 2008

Can't pay or won't pay?
The write-downs, whether voluntary or court-ordered, could destroy the lenders’ capital.
Aggregate negative housing equity is thought to top $500 billion.
The Economist print Feb 19th 2009

The financial system is a subsidiary of the state.
A creditworthy government can and will mount a rescue.
That is both the advantage – and the drawback – of contemporary financial capitalism.
Martin Wolf, Financial Times February 26 2008