Wednesday, September 24, 2008
Current Economic Situation
Well it's on everyone's minds so here are my thoughts. First, the US shouldn't buy the bad debt from investment banks who made poor choices. They should have to suffer for those choices. Any other company would have to, even if it meant going out of business. Could it hurt the market? Sure it might be ugly for awhile but the markets would self correct, as they should. Maybe banks will think twice about giving credit to those who shouldn't have it or giving more than the person could afford.
When I was financing to buy my house I prequalified. The bank was willing to give me about $220K for a house, even though after doing the math I knew I could only afford about $150K. Now if I knew this why would the bank have been willing to give me more than I could possibly afford? I wouldn't have had enough for food or anything else! I was then pushed to get an ARM and borrow against the equity of the house to put more down on the house. What? That never sounded good to me and I also was lucky to get sound advice telling me to get a fixed rate, even if it was a bit higher.
So today I'm not being killed by my mortgage payment and I'm not worried about foreclosure. In case there was any question, the reason I'm trying to sell our house has nothing to do with the economy or my finances but the fact that I'm tired of spending all my spare time doing house work and maintenance. Being a home owner is a pain in the ass. Sorry, that's a rant for another day.
So what if the markets crash or at least dip badly? Well jobs could be an issue because so many public companies rely on that money and most companies sell something to another business. If those businesses are closing or tightening the belts then money is tight for everyone. That is my biggest worry. That wages will dip and jobs will be lost, at the middle-class level.
I realized recently that I'm not upper-middle like I was dreaming I was. I'm square in the middle. I do reasonably well but it wouldn't take much to push me down. It wouldn't take much to push me up also. But I'd still be in the middle-class. The jump from middle to upper is huge! I could probably make $100K per year if I worked hard but that would be about it. After that you have to make huge leaps in education and social standing and investment. Frankly I don't have the stomach for that. Plain old hard-work isn't enough for most people to make it big.
I don't want to say that all rich people are lazy jerks. Many worked very hard to get their riches. But many of them also took advantage of those under them, making their money off the sweat of others. So back to the investment banks wanting this government bail-out. How much do you think their CEOs make/made? I don't need to see the data to know it's more than some people will make in their entire lives. How is that right? Because of their mistakes those in the middle-class will be screwed over one way or another. Why are they not stripped of their wealth and that money put into the market to help stabilize things? Sure it's a drop in the bucket but it would be a symbolic win for the middle-class and give other greedy SOBs something to think about before they gambled with other peoples money so loosely. Bring them back down to our level. If they are so well educated and hard working, they'll be able to rebuild. If not then perhaps they never deserved to be part of the financial upper-class to begin with.
If the markets tank I know my 401K is going to tank. I'm not very happy about that but I also know that the markets will rebound eventually. Even if I loose it all, it's not a massive amount of money and I'm yet young enough to rebuild my retirement fund.
I also know that if the job market goes south that I have a number of marketable skills aside from my computer skills. After the remodeling on the house I've realized that I could do that very easily if I needed to. It's hard back-aching work but it's work that will always be in demand regardless of the market.
I honestly don't believe the market will get that bad. There are still lots of options for the banks yet. They might not like some of them but things will work out one way or another.
Oh and a note to those making runs at their banks, You are only making things worse. Panic is not helpful in any way shape or form. Storing your money under your mattress will still loose value if the FED has to inflate the value of the dollar, so you might as well leave it where it is, where it can help keep the market functioning.