The economy is destroyed. While banks fail around the world as I speak, because of our own American stupidity, I feel like an Oiler saluting his shipmates as his vessel dives to its death.
I'll have a lot less time to spend writing and goofing around at hatrack when the economy catches up to me and I have to get in line for government work projects. Can't wait to move stones from one side of the road to the other and back again... better grab my orange vest.
Well, at the beginning of this, a couple of weeks ago, my retirement portfolio lost about two thousand dollars in a day. I haven't checked since, but it's probably gone down by some larger amount. (I generally check on the first and fifteenth of the month.)
But the key word is retirement. I won't be able to cash in for some time, and the losses of the past few weeks will be made good by then. Keep in mind that the economy is cyclical, and that bad times are followed by good times---and that if you sell now, at a loss, you'll lose money, but if you hang on, you won't.
(And my mortgage is paid up---as are ninety-four percent of the mortgages in the USA. There's more depth to the economy than Wall Street would indicate.)
There is an easy reason that everyone ignores. Without it, a 700,000,000,000 dollar buy out wouldn't have been painfull at all to our economy. Actually, the problem probably wouldn't have happened at all.
A 10 Trillion dollar debt
I don't know what that annually interset rate is on government bonds, but a meger 5% equals 500 billion. That's 500 billion that right out of our taxpayer pockets and into the trashcan.
Every politician (with the possible exception of Ron Paul who votes against everything) that has been in office since the second world war, is responcible for that outrageous number. We have borrowed the equilivant of a million dollars for a 100 grand home. We need to balance every budget from here on out and start paying down the princible on that debt. That means some really ugly things need to be done, like cutting Social Security and Medicare. Lets face it, regardsless how you feel about the occupation (the war ended years ago) of Iraq, we need to withdraw because we can't afford it!. The retirement age needs to be raised to 66 now and 67 three years from now because we can't afford it! All future projects must be put on hold because we can't afford it! Every item of the budget needs to frozen at the current level, at a minimum because we can't afford it!
Screw the Republicans, screw the Democrats. Protest them both and vote Libertarian, the only ones the are committed to addressing this credit card mentallity on government spending.
And thanks for the rotten tomatoes, they help the complexion.
I was estatic to see your 700 Billion dollar cop-out in the states didn't go through! how insane is it for your guys, the average american, to have to pay for the selfish mismanagement done by CEO's making 17,000 dollars an hour??
I hope more people are held accountable now that the spending didn't go through
Yeah, seriously, Zero, I thought maybe the WotF stress had gotten to you!
Seriously, this economy is scary. I very nearly got laid off. Well, my job is still tenuous at best. My bank (WaMu) got bought up, and we're paying hand over fist for health insurance. I haven't checked my retirement savings. To say they will recover in a few weeks is a bit... optimistic, in my opinion. Several years, maybe. Luckily, I don't have to retire in a good long time.
Meanwhile, my house needs a new roof, my garbage disposer is backed up, and I have some serious structural issues... ack!
So, Zero, maybe I'll see you in line at the New New Deal projects!
My husband has been without a job for a year, now, and in my area unemployment is high. In just the past few months our small town has seen 3 major production factories close down. I've heard that there are over 400 people out of work because of it.
My husband just got approved for the 13 week unemployment extention. Once that runs out, we will be paying what my paycheck won't cover with funds that were earmarked to help with our retirement. I don't know what will happen if he doesn't get a job before our money runs out. We have enough to live off of for at least through next year. Surely, something will break before then and we won't be looking at bankruptcy. We still have 5 years to go to pay off our home.
So, yes, what's going on in the American economy is scaring me to death. It's terrible when you have no idea what the future may hold.
quote:I don't know what that annually interset rate is on government bonds, but a meger 5% equals 500 billion. That's 500 billion that right out of our taxpayer pockets and into the trashcan.
From what I understand, the interest rate on those T-bonds is phenomenally low, much lower than 5%, and the majority of that debt (to this day) is owed to US citizens, however, more and more of it is being owed to investors in Canada and Asia.
So yeah the debt is a bad thing, but it's also seemingly impossible to quantify.
I feel the pains of Anne and Crystal above, and am myself just scraping by, and trying not to think of the future too much. Because, the fact is, I don't know where the money is oging to come from. But no one else does either, so we're in this together.
I wanted the bail-out because it is a push for some fiscal policy. In my opinion we're in a liquidity trap, and the way out of it is to kickstart the economy with government expenditure, kinda like the 30's. Bailing-out out these businesses would also unlock some credit and help bolster investor confidence around the world.
Or would have, rather.
I was always for huge oversight and pay limits for the executives. They need to take whatever we let them have with deepest gratitude.
But for reasons purely unrelated to the fates of the bankers as people, I wanted the bailout to help us help ourselves.
But, of course, it didn't happen.
As for voting Libertarian I'm not going to. Government expenditure and government debt aren't necessarily bad things, but are always misunderstood and misrepresented by the media.
I don't like congressman Paul because I think he's like Bush in one very specific way. He's willing to charge into something with his eyes closed. Bush doesn't think about the consequences of his actions, he just acts--according to his principles, and everything else can go to hell, right?
Paul's attitude is the same way. If it's not in the constitution it's gone! Regarless of how many millions of people would be in the streets over night, to hell with social services (even the effective ones), and the military, and the FBI, etc.
Drastic and abrupt changes, made thoughtlessly, in ignorance, tend to be bad. They leave us in Iraq or with no middle class.
Also, if there is any one thing this crisis has taught us, it's that the free market cannot be trusted without regulation.
Regulation could have easily prevented the bad loans that began all this mess.
Oh well. At least the media's jobs are secure.
[This message has been edited by Zero (edited September 30, 2008).]
Does Zero represent Zero growth? The Free Market is the solution to this problem. Its because of the governments desire to spend without caring about the consquences is the reason why we are in this mess. The reason why we don't have any credit is because the government has borrowed so much money that there is not enough left to invest in worth while assests.
Banks and investors wanted some better than a 3 - 4 percent return on their investment. APR/ sub-prime mortgages seemed like a good idea becasue the value of property was rising so much it appeared to be a can't miss propersition. After all, so what if a home buyer can't pay the exceedingly high balloon payment they weren't aware was coming in year two. The bank will get the house and sell it for a higher price because prperty values were rising faster than inflation and any other investment prospect. Well, well, much like the stock market crisis, they were way over valued and the poor slobs that were suckered with an attractive monthly payment (funny how mortgage brokers neglected to tell them how large the payment is after the prime rate gets adjusted) couldn't make them anymore. Now, like those stocks of the 30's, they're not worth what they backed. Property values fell and investors lost in this risky venture, which is what this was a risky venture. The bailout helps only the fatcats a**holes that couldn't help looking a gift horse in the mouth. They didn't have a problem kicking overwhelmed home owners out in the street when they couldn't make a payment that was doubled what they thought they were paying. All this 700 billion dollars will do is allow any lender that owns a undervalued piece of property to dump it on the government and walk away with their hands clean. Their not going to hand over anything of really value, just the stuff thats worthless!. This bailout would have been the equivilant of FDR's government buying all that worthless stock and telling the American people that 'they could make money on this deal' (he didn't do that, to his credit).
It was risky, the people that made those loans must learn that on their own, it's called risky for a reason. Here's a solution I have to those lenders, renogatate with your borrowers. No one wants to be kicked out in the streets and the banks could still make money on the deal. How about offering a five year that freezes the princible and charging in a sense a renters fee for families to stay in their home? This could be done without a handout by Uncle Sam.
Let the value of the property fall. It will level out and start to rise on its own. Getting the government involved with an influx of money (which we don't have) to artificially stablize the values just sets us up for another crash. The stock market has already stablized. The bailout does nothing to help crystal stevens husband job.
Government is not the solution, its the problem. There is no way to regulate stupity in the pursuit of profits other than failure. If the banks were smart enough to get themselves in this mess than should be smart enough to get out.
MrsBrown and KDW, people get upset around here more over poetry or whether or not Heinlein's Rules should be followed than they do about this stuff. Why don't you just set a ground-rule that specific parties (the political kind) and people can't be mentioned (sorry Snapper).
I believe everybody has a fork stuck in this poisoned pie. To blame one person or party displays considerable naivette. I try to find the facts behind anything that highly matters to me, politically. Unfortunately, the facts are very convoluted. I can check to see who voted for or against a particular bill, but then I have to figure out why. Have you ever looked at one of those bills? I doubt half the people in the commitees who introduce any bill know what all's in it after it reaches the floor. I sincerely doubt very many of the congressmen actually read any of these bills; they probably get interns to read them, tell them how to vote, and then highlight for them whatever part they want to talk about for thirty minutes! Most of these bills are full of payoffs or misguided uses of power along with whatever they were originally designed for.
In the end, businesses need to borrow money to operate, which gives us jobs, which allows us to buy things (with cash or credit), which makes money for businesses, all of which makes tax-revenue for government. Isn't it interesting how that works. Let's not be rash in our decisions; let's figure out why the bull has horns and the bear has claws; and let's not depend on any one channel, statistic, or party to convince us it represents absolute truth.
If you (the gov't) choose to buy something, expenditure, then you'll have to pay for it no matter how you do it, and that will make you poorer in a sense. (Though the service you're purhcasing might be worth the price tag, but all too often it's a war in iraq)
There are basically 2 ways to finance it.
1. Pay for it, aka raise taxes immediately.
2. Get a loan, aka defecit spending.
The argument for the former is that it leaves no debt, but the argument against it is that it shrinks the economy immediately.
The argument for the latter is that it does not shrink the economy, so it allows it to grow unrestrained. But small interest payments have to be made on a regular basis - perhaps forever.
At the end of the year, with option two, the economy will have grown moret (the same way your bank account grows with interest payments as you let your money sit there).
But if you use option two, then while you escape "debt", your economy will not generate as much "interest" as it would have otherwise, because it was shrunk early on.
[All interest is, is the value of having money immediately rather than some time later.]
So how something is financed is not the issue, because either can be the better option depending on several factors, the real problem is the expenditure in the first place. Is what you're buying worth it or not? That is a much better question to gripe about than how it ends up being financed.
For clarity I will construct a simple example. Let's say you have a bank acount with 1000 dollars, and you want to buy 100 dollars worth of clothes. Let's also assume that the interest rate for your credit card is 10%, and the interest yield on your bank account is an additional 10%. [I realize that banks give more like 2% and credit cards can exceed 10%, which is why debt is such a bad thing for an individual consumer. But the truth is, the growth of the economy is more than 10% per year, and the interest rates on t-bonds is less than 5%. But for fun we'll have the error in your favor, and see how that goes.]
Now you have two choices. You can buy the clothes outright with your debit card. Or you can purchase them on credit.
If you buy the clothes outright then you have $900 left in the bank, and over the course of the year it yields an additional 10%, which leaves you with $990 at the end of the year.
If you purchase it on credit, you set aside $100 as a fund to pay the interest. So your bank account is $900 plus an additional fund to pay off the $10 per year interest payment on the debt.
But that 100 also grows. So your bank account yields $1100 at the end of the year, but you lose $10 for the interest rate owed for taking the loan, and you then pay the $100 to remove the debt, and you're left with $990 at the end of the day.
In other words, it's a wash.
But in both cases you have less than the $1100 you would have had, had you not spent anything at all.
So it isn't so much about how you finance the expenditure, it's that you choose to make the expenditure in the first place.
[This message has been edited by Zero (edited October 01, 2008).]
There is option three, Zero. The government can live within it's means and not spend more money than it receives. How it can't operate on 30% of everyones income baffels me. One reason why we are in this mess is because a lot of people thought they could operate under that theory, go in debt and worry about the effects tomorrow. The reason why we are in a credit crunch is because 10 trillion dollars of government bonds have dried up any potential credit available. I have evidence to support my argument. The goverment shut down in Clintons adminstration didn't result in an economic collapse and chaos that a few predicted. Instead things operated smoothly and an unexpected balanced budget was the result. The debt shrunk a tiny bit for awhile but the precentage of the debt compared to the size of the gross domestic product fell substantially. Interest rates fell, the economy shot through the roof, and talks of the debt disappearing in to 2020's started to float in Congress. Then 911 happened, and all the mismanagement of W and this congress doubled that debt in a few years. Now here is my theory what will happen with option one and two.
1) the economy will choke and shrink now and we will have a smaller deficit and the problem will still be there
2) Runaway inflation will be the result of the market dealing with a debt we can't pay in the future (it happened to every third world nation that borrowed too much in the 70's)
The major problem is we elect the wrong people. Laywers, doctors, and military service. all honorable professions but maoney management is secondary to them. We need accountants in office. Not silver spooned sons of the people that set us on this path in the first place.
Interesting idea about the accountants. But technically we only have the 2 options I listed. Your third option was choosing not to make the expenditure, but I was only talkinig about options on how to finance it after the choice to make the expenditure was made.
How delightful! My shoulder angel -the one in red- is trying to convince me to skip through the forum throwing out words like 'fair tax', 'eminent domain' and 'free health care for everyone!' (because if there is one thing you can garuntee Americans won't learn from this 'crisis', it is the REAL definition of free in politics) like some instigating flower girl.
Can you technically have a recession when the nation still produces sixty-five different kinds of cereal (that's dyed and flavored popped rice with marhmellows, we're not talking nutritional staples)just because we can and don't forget our reality TV? Notice how you never see Sudanese Idol anywhere. I think America has a little way to go before we hit the rocks at the bottom. I live in hurricaine central and after watching how effective the government buy-out in New Orleans was, I'm hard pressed not to picture more big screens, Wii's and black Ford Expeditions rolling around, just waiting for the money to run out, the school clothes to get too small and the dryer to break down so people can start whining again about the bad thing that happened five years ago. I mean, Sally Struthers isn't walking up to my neighborhood yet. I know we're bad off and all, but ... In my experience, floating a check until payday just isn't a good idea. And I'm talking about ten dollars for gas to make it to classes, not a kajillion dollars to keep us until the next buy out.
I think folks just better get strapped in, because we have an election coming up and the media is about to start spewing armageddon every time you turn it on. I'm an L-word (No! The other L-word, as in the political party we're not mentioning.) at the most basic level. There's only 4 things that really matter to me, and they all live under my roof. Every decision on a political front comes back to 'how does this affect my homefront' for me. I served my country and I'll take what I can get back from it, but the other side of that coin is: I was in the military, I'm not gonna have my family hanging on, witing on the government's follow-through, either. The more the government owns that should be held in free market, the closer we get to rations.
A local newspaper favorably reviewed a new novel that speculated on what people would go through after catastrophic global climate change. In school I read fiction about people coping after nuclear war. American Girl seems to be reviving the American Depression as a setting for children books. Where is the near-future fiction based on current American economic troubles? I would like to see the atrocities that so many say is coming if Congress doesn't throw more money at rich people who are dealing with the consequences of risk-taking. I would especially like the story to end on a positive note. Does anyone know where I could look?
Posts: 1139 | Registered: May 2008
| IP: Logged |
hmmmm... I don't think I made one, Z. I fear planting my political flag in the Hatrack, rules being what they are, but thumbs up from KDW... well, my point is old school: give a man a fish, he eats for a day, teach him how to get out of his own finacial mudslide, there won't be all of this bailing out. Are you familiar with the School-to-Work plan set in motion by such American Icons as Carnegie? There is a reason why it is The Depatment of Labor AND Education, not two individual departments. I see a bail-out as part of the plan, and the consequences of this cycle seems to be a sort of corporate socialism. The problem is everyone's, the solution is in the individual. People don't understand finance (dumbing down -- all part of the plan). That's why you had people spending their stimulus check before they even had it, and then be-yotching that the government wasn't doing anything! Stimulus, Bail-outs, free-health care -- they all have the surface appearance of a sort of mercy, but there's a price tag on the other side. And I'm afraid that the government control over billions of dollars of what should be controlled by the people will come with a severe price in terms of freedom. Have you ever borrowed money from that creepy relative and they say, Oh no, don't worry about paying me back? From that point on, they own you. It'll be like that, only the creepy relative will have a military.
Of course, the other point was not to get panties into too tight a wad. We have been through much worse as a nation and the media is just obnoxious at the moment. We need to stick together as Americans and not be so eager to turn to the easy out. Local Eccumenical action will never need a bail out, because at some level, as long as one American has an extra can of spam, nobody will starve to death. Some may just have to forego this years must-haves.
Different sources. Mainly securities -- short term IOUs the government sells with attractive *interest* rates. I think the first government bailout was done during Washington's Presidency, wasn't it? It's not all bad, there've been bailouts where the US has made money, like with the Chrysler bail-out.
I think the scare could be good for the economy. This is far from the great depression but our bail outs are increasing exponentially. We are resilliant as a people and it could be a good thing for individuals to learn the value of a dollar, save, make better decisions, and find a rational return to investment enviornment and fundamental value shift.
I'm not speaking as a completely uninvolved party, either. This started scewing with my families plans back in August. Trust me. My house is on the market!
Oh! Now I see your question. Yeah, sell loans to these guys to give to those guys who have proven their money management skill level -- and I think the current plan requires that the securities be paid back within something like 30-40 days. I say go to vegas and put it all on black! If we win -- every one gets a new Prius, if we loose, we give vegas the IOU. (that's option five)
[This message has been edited by Reagansgame (edited October 02, 2008).]
Snapper, maybe they can just print more money and drive the dollar down to the value of a Peso.
Seriously though, every billionaire with an opinion has come out against the bailout. Now if they love Wall Street, and they do, then why are they so against this? It's because IT WON'T SOLVE THE PROBLEM!
This banking fiasco is ultimately the fault of the banks. Sure, a bunch of ignorent (and I do mean "lacking sufficient knowledge") people signed loans that were destined to default based on fluctuating rates and property values that inflated like a 90's tech stock, but the banks made the deals. They fought against the limits in congress, and got what they wanted (by apparently padding various congressmen's back pockets). We should let them take the hit.
I promise you that "there is always a bigger fish" to swallow a failed bank. If congress does anything, they should increase FDIC insurance on banks, so there isn't a bank run. Hopefully, it would be money they'd never have to spend.
Regarding the deficit, we often do not realize what our country's budget is (much like some people don't know what their own personal budget is). In 2007, our country's revenue was $2.568 trillion with expenditures of $2.73 trillion. If my math is right that puts us about $162 billion in the hole. Of course then we have our national deficit that is around $10 trillion.
Now imagine you made $25 thousand a year, and you bought a $100 thousand home. You paid your house bill each month, but you racked up a little over $2 thousand in extra bills each month. That's where we are.
FYI, we have a $847 billion trade deficit, much of which is oil (13.15 million bbl/day = times how ever much oil is that day).
All of this in consideration, it would make sense to me to decrease dependence on foreign oil and cut spending ASAP, instead of further destroying our economy by raising taxes on businesses that supply JOBS, so we don't end up FUBAR.
[This message has been edited by philocinemas (edited October 03, 2008).]
So glad to see folks who debate politely. My take? I know pratically nothing useful about finances at the national/global level, so I just have to hope that THEY are making the right choices (who are the political leaders listening to versus who should they listen to? I dunno!). Besides, whose hand am I in? Guess its all who you believe in... but that's a different topic.
[This message has been edited by MrsBrown (edited October 03, 2008).]
Well, the money being flung around in the banking industry suggest the banking end of WaMu and Wachovia are worth throwing good money after bad---it's the mortgage and debt end of it that weighs these organizations down.
JPMorgan, Citigroup, and Wells Fargo are willing to assume billions in obligations (the depositors cash assets) if they're free of these other obligations (the mortgage / debt end). It would suggest that end of the banking business is fine and the problem is all at the bad debt end.
(I'm with Wachovia myself. It's not something I went to---they inherited me when they bought out my local bank. Not the first time this has happened to me, too---one checking account that I used to have, long closed out now, went through four names before winding up with Bank of America. I always find these mergers unsettling, especially when I get stuck with old checks with the old bank name...when I get back from vacation, I may look for a local bank to start a new account with.)
I think that the idea the bailout is rescuing rich folks who made big mistakes, is itself a mistake. The "rich people" who made all the bad decisions have already exited the market, and now the banks have inhereted that bad debt.
In other words, the individuals who pushed the wall street banks into risky investments have already taken their cut and moved on, so to speak, while the institutions themselves are crumbling apart. So failing to assist them does nothing to "punish" those responsible for the mistakes, it only allows the institutions themselves to be crippled and fall into extremely dangerous disrepair.
We should wait until it gets a little colder for that, I live in a snow state and it can be hellishly cold at times. But not this early in the year.
Posts: 2195 | Registered: Aug 2006
| IP: Logged |
Incidentally it's hard to make a case to stop global warming in the winter. I could probably get a pretty long petition of signatures stating we should subsidize it.
Posts: 2195 | Registered: Aug 2006
| IP: Logged |
I'll start passing out the farming implements.
800 point drop. (Shaking my head) Well, at least we have the pharmacueticals and liquor sales to balance that out. See you guys on the other side of 45 days, when we have to bail out for the bail out.
Was the extra 150 billion really necessary? I mean how can you add that kinda cheese in just a few days? Not doing much for my confidence. Oh well, I'm really glad I have my armegeddon roster in the works already.
I'm off to watch The Village again, take a few notes. Plenty of openings if there are any takers.
First the economy, now me. I'm sick. Got a full blown cold. Hope your virus software is current. Funny how it saps everything out of you. I doubt I could write a Suess short at the moment. To make matters worse, I'm in a foreign country. Montreal, if your looking to pin me down. Why does everything need to be in french? Hey Skadder, what the hell is my car doing in your garage? And why isn't my wife answering her cell?
[This message has been edited by snapper (edited October 08, 2008).]