Posted on 12/05/2008 3:31:37 AM PST by Kaslin
It's time we 'fess up: Nobody has any idea how to get us out of the economic mess we're in. The Big Three automakers were on Capitol Hill again this week begging for a bailout. Treasury Secretary Henry M. Paulson is considering direct federal intervention into the mortgage market by subsidizing new loans at very low interest rates. The stock market continues its roller coaster ride, down hundreds of points one day, up hundreds the next. Meanwhile, President-elect Obama waits on the sideline with a financial team made up mostly of old Clinton hands, well respected but with only the traditional federal spending stimulus solution in their bag of fixes. No wonder most Americans are holding onto their wallets.
I've long been an advocate that Americans should save more and spend less on stuff they don't need, especially when it's paid for on high-interest credit cards. And a Christmas shopping trip this week to my local mall suggests a lot of people are doing just that.
Spending on Black Friday was up -- 7 percent, according to early estimates -- but by the following Tuesday, the Northern Virginia mall I visited was nearly empty. In past years, I've found plenty of company, but this time the stores were nearly deserted. Clerks stood around talking to each other, and there seemed to be fewer salespeople even in the high-end stores. The guy playing the piano in Nordstrom looked lonely; the barista at Starbucks seemed bored with no customers waiting to pay several bucks for a caffeine concoction. Sure, there were big sales signs and lots of tinsel decorations, but it hardly seemed like the holiday season.
Conventional wisdom says this is a bad thing. America's economy, after all, runs on consumer spending. If people aren't buying cars and washing machines, or even new cell phones and Blu-ray players, workers will lose jobs; we'll suffer a longer recession; and life will be more difficult for everyone.
But what if this short-term medicine, bitter though it may be, actually makes people behave more responsibly? Maybe those missing shoppers will pay down their credit card or home equity debt if they spend less on gifts this year. Maybe parents will decide that putting away money for college is better than buying their children that Wii set they've been begging for.
Maybe kids will discover that the newest electronic gadget isn't half as much fun as the real thing. Maybe they'll even decide that throwing a real football in the park is better than watching some digitized Tony Romo complete a pass on their game screen. Who knows, a little financial belt-tightening could result in real-life belt-tightening as kids get off the couch and play off those extra pounds they've put on in the digital age.
I know elected officials -- especially the new Democratic crew about to flood Washington -- want Americans to get out there and spend. But we may be smarter than our politicians. It is not such a bad thing that everyone is looking to pare back their lifestyles. The path we were on was simply unsustainable in the long run.
Those bigger houses most of us couldn't really afford required more energy to heat and cool, and many of the lots they were built on were farther away from where we worked, requiring longer commutes and more gasoline. We had fewer hours to enjoy our homes because we worked and commuted more hours to pay for them. Worse, we spent less time with our kids and spouses. Do we really want to continue this vicious cycle, buying more but having less time to enjoy what we have?
I don't claim to know what will happen to the economy over the next year -- and surely the news right now doesn't look promising. But I do think that if we take better control of our own lives and redirect our individual priorities, we'll be better off in the future. Who knows, scaled-back holiday spending could remind us what the season is all about. Giving of ourselves is more important than handing out store-bought goodies. Time spent with loved ones may be the best gift of all.
Here's a start. Federal and State governments drastically cut spending. Abolish corporate income taxes and cap. gains taxes. Reduce the marginal rates of personal income taxes.
Hint hint. Lower taxes on corporations, on capital gains, let the market handle health care without gov. intervention.
Lower the rates on income tax.
Trouble is, the sheeple voted for the One.
None of this is about to happen so we will suffer and suffer mightily.
LOL.....sorry about that. Posting before reading is not such a great idea.
You were there first.
Well, that's not true. If the government issued an across the board spending freeze, eliminated bailouts and sold off its hard assets without strings attached, we would have a recovery.
I see this economic “crisis” in very simplistic terms, and lay the blame - and the cure - on our media, but, my degree was in Sociology and not Economics.
Yes, the over inflated housing bubble burst. Houses went into foreclosure. Financial institutions that had conned people into sub prime variable rate mortgages were seriously hurt. It should have stopped there, but our “esteemed” media had to push it on. For them bad news is good news. Every TV news program, every talk show, every late night show had to talk about the crisis and the failing economy. “Hard economic times” became their mantra. Every drop in the stock market was heralded, when it rose again the next day it was barely mentioned.
Consumers and investors took their words to heart. We sold stock in a panic, smart investors bought low. We quit buying because we were worried about “Hard economic times” and the concern we might lose our jobs. When we stopped buying production had to be reduced - no buyers. With decreased production people had to lose their jobs. It became a vicious cycle.
Yes, I feel sorry for people who lost their homes. I am sorry they didn’t read what they signed or believed the line they were fed by the finance companies. I feel sorry that those making $Millions in the real estate business couldn’t see that the housing bubble would eventually burst just like the dot com bubble.
It comes down to consumer confidence - as is mentioned by the news media just before they again launch into another “Hard economic times” rant. If our media would start emphasizing the positive and quit screaming “Hard economic times!” consumer confidence would return.
If our media would start emphasizing the positive and quit screaming “Hard economic times!” consumer confidence would return.
But it is an election year, and panic must prevail in order to further their agenda.
That report was total BS, they now are saving that spending in November was the lowest since some time in the sixties.
Maybe you should have stopped there. The housing boom fuel by cheep money and the ability of wall street to create fake sales instruments and claim there was no risk. Gave us monster house price inflation and massive overbuilding. The mortgage stuff is the cover story, the twenty to forty percent drop in the real estate market, is giving a reduction of value to all the fake paper. About 44 trillion, is the big problem. Current figure is 10++ million new overprice home are on the market and there are no qualified buyers. Actually the peak of foreclosures for the ARM's put out by countrywide and others was almost two years ago.
“But what if this short-term medicine, bitter though it may be, actually makes people behave more responsibly?”
We are in a period of serious deflation-cutting taxes would probably not help but would not hurt. However, in order to get out of this, we need spending or happy depression days are here again. This situation is not like the 80’s where we worried about inflation-whole different ball game.
I left out the cutting spending part. Not a chance.
Reading the local papers this morning and there they are, all kinds of freebe stuff, including free curly bulbs for everyone. Free money for recreation programs, etc. Free money for heating bills.
It’s disgusting.
If they are looking for genuine educational value, stick with the Wii. ;)
After Jan 20, the media will scream how great the economy is....
Yep. Then the buying opportunities begin to gather steam.
Everyone will think they are making money as it masks the inflation from the trillions in bailout cash filtering into the system.
I agree. Where will the spending come from? Thanks to income tax provisions, personal savings are nil. After several decades of over spending, can future obscene federal deficits/debt do the trick without guaranteeing future inflation?
We are in a heck of a fix, compliments of 535 clowns in our Congress.
Gave us monster house price inflation and massive overbuilding.
That's what started it. I don’t view economics as an entity separate from the population. It is a product of how the people think and act.
When I mentioned the real estate business I meant that to include all involved, not just realtors and lenders. It included the businesses who invested in bundled mortgages, state and local governments that expected real estate tax revenues to keep rising - and spent on that assumption. Real estate developers and contractors kept building because they “knew” the bubble would expand forever, after all - it’s been known for a long time that real estate was always the safest investment. The bubble began to burst some time ago, but the effects take time to appear- like a line of falling dominos.
Of course there are a surplus of houses on the market now - lenders have tightened up their requirements for a mortgage. They’re no longer willing to lend to bad credit risks. The cost of the average house here in Newport News was $198, 238 this past October. Two years ago it was $66,000 - a 300% increase. Today a 20% down payment on a house would be $39,647.60, add to that closing costs and expected expenses and it’s a lot of money for a young couple to come with. According to government data, the average salary for jobs in Newport News is $33,214 and the median income of households in Newport News was $46,641. A couple would have to save up a year’s income just for the down payment.
Is it any wonder that a lot of housing is on the market?
When I think of Winchester I think of the aroma of apples and a very pleasant community - but it’s been a long time since I’ve been there.
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