Returning the Favor and other Slices of Life

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Tuesday, January 22, 2008

Is CNN trying to cause a recession?

The following contains my completely uneducated and largely uninformed views of the current financial crisis facing our country.

It's mostly made up.

There are some stupid things happening financially, and people are beginning to panic, and the gubmint is considering giving some $150 billion to people in tax breaks and rebate checks for taxes that we may or may not have paid.

That doesn't seem smart to me, and someone with more financial acumen can feel free to explain it to me. I understand that a lot of people are feeling a big pinch right now, and a lot of people are in a shitload of trouble because they bought more house than they could afford on mortgages that had adjustable rates that adjusted the fuck out of them last year. So a bunch of people ended up getting their asses foreclosed upon, and they're fucked.

That sucks, no question. BUT, nobody held a gun to anyone's head forcing them to buy a big house that they couldn't afford, and nobody made them sign on for an adjustable rate mortgage that then blew up on them. I understand the appeal - we've been told forever to buy more house than we can afford, and I certainly did the same thing. It's only been in the past two years that I could really afford my house payment, and I've been in my house for over 8 years. But I struggled through it, made my house payments, and moved right along.

But the folks that couldn't, got foreclosed on, and that led to banks, who wrote thousands and thousands of these silly loans, losing billions of dollars. But listening to a bank cry about losing billions of dollars feels a lot like listening to oil companies whine about tough times while booking record profits in 2007. These companies are still profitable, maybe just not as insanely profitable as they appeared to be a year ago. But there must still be a pile of money to be made in mortgages, because Bank of America is in the process of buying Countrywide right in the middle of this mess. Not the kind of move you'd expect a company to make if there wasn't a good chance for a pile of profit, it it?

So a bunch of people lost their houses, and that sucks. But it's (at least partially) their fault for buying more house than they could afford with payments that seemed too good to be true. That led to developers building fewer houses, and that leads to less work for people who build houses for a living. Now those guys really do have a legitimate whine. They build things. That's it. When people aren't buying all the things that have already been built, there's no need to build more things. And people that have lost their homes don't typically buy a lot of other shit, so folks that build things to be sold, or sell things might not have as much to do, either.

Except people are still buying things. I haven't seen any tumbleweeds blowing around car lots lately, and the registers at Best Buy are still ringing merrily along. And there's practically nothing in that store that could be considered a necessity, with the exception of a few appliances.

So what am I saying? I'm saying that unless you own a big pile of Countrywide stock and are planning to retire this year, or are in a similar situation with another company that took it on the chin in this housing debacle, you're probably not in terrible shape. Yeah, my 401(k) took a shit the past couple of months, but that's money I'm not touching for a couple of DECADES. I think that regardless of any current issues, there will still be a lot more money in there in 25 years than there is right now.

So why the panic? Why is this issue the front page of so many newspapers and news websites? Because there's nothing more interesting going on. The race for who will be the next leader of the free fucking WORLD is taking a backseat to market hysteria, which the media is doing nothing but fueling. Joe Six-Pack doesn't know fuckall about the stock market, and only knows that it's bad that the Dow dropped below 12,000 because somebody told him it was a bad thing. If CNN and the other major news media didn't feel it necessary to pull a Chicken Little every time some big company didn't make as many bajillion dollars as they initially thought they would, most people with a little bit of money invested would just sit back and say "if I wanted safe, I'd have bought a CD."

Now I could be completely ignorant, not that that's ever stopped me before, but I really feel like the shallow ledes in most news articles on this shit is a big contributing factor in the hysteria. If they'd start off articles with something like - "Really, it sucks today, but it'll be okay in six months," then people would be less concerned. Of course, they'd sell far fewer papers and get less hits that way. It's interesting that at this point troop casualties are buried, if even reported, while the Dow dropping to 12,000 is front page news. In a year, the Dow will be over 15,000. But those kids will still be dead.

Financial markets fluctuate. As long as people are still working, and there are plenty of jobs in NC if you're willing to live here to take them, there is a decent economy. What I don't like is the idea of mortgaging our country's future to bail out the current pile of shit. $150 billion economic stimulus package is what's being touted by liars from both parties and the administration. See, I'm being all even-handed here, they're all fuckwits, not just W. I understand the concept of heading off a bigger crisis, but if they're not willing to raise taxes or cut spending somewhere to pay for that $150 billion, then it's just bad business. No, I don't want to pay any more taxes than I already do. But if you're going to spend the money, it's gotta come from somewhere. And if we want our government to spend money on 'economic stimulus,' that money has to come from somewhere.

So in typically long-winded fashion, I'm saying that I don't think there's nearly the financial crisis that the media is claiming there is, and if they'd all just shut up for a day or so, that a lot of stability would come around after a week or so. But they won't say that, because that's not interesting. I'm also saying that as much as I'd like a $1600 check from the gubmint, I'd rather they not send out $150 billion to all us folks if that's money that doesn't really exist.

Think I'm an idiot? It's entirely possible. Use the comment field to tell me so.

13 comments:

Anonymous said...

ok, i'll say it... 'you're an idiot'..

but that really has nothing to do with your views on the current financial situation..

I think your views are perfectly inline with your situation.. however consider if you were 63 and your 401k took a 25% hit (or whatever percentage yours took).. you now are looking at working a few more years possibly when you didn't plan on it.. now that would suk..

StB said...

You are not an idiot. You have some valid points. The idiot would be the 63 year old person that has a lot of exposure to the stock market and can't afford it. Stupid example briangre.

Part of it is a real issue. Yes, people are losing homes. Yes, they bought too much house. Yes, they may have lied about their assets to get such a big house. And yes, there are some predatory lenders out there. They helped fib some numbers and may have given loans that they knew were risky.

How do you deal with it? Well, first you don't give tax rebates to people that don't pay taxes. You have to let most of these people feel the pain. A good number of these mortgages ended up in the hands of people looking for high risk investments. They can afford to lose the money and they should not be bailed out. Unfortunatley, a good chunk of money that went into these products was borrowed and they tied up in more hard to understand financial instruments. Thus the volatility of the markets as the unwinding occurs and people need to sell other assets to make up the losses.

CNN steps in because they have an agenda. Iraq is boring because the news is too good. Economic downturn? Sure, it helps us their political allies. It makes good news. And if also makes the naysayers happy to pin this on somebody.

As long as that somebody isn't the goof that bought a 500k house when they could afford 300k.

ScurvyDog said...

You're not an idiot at all.

I agree with pretty much everything you say, as far as bailout plans at this stage being equivalent to pissing in the wind and that people ultimately should be held accountable for any poor investing decisions they make, whether it be in housing, stocks, 401(k)s, etc. And the media is most definitely making things worse at this stage as far as falling over themelves to out-dire one another in stories and headlines.

The only problem (and where I slightly disagree) is that we really are in a pretty tenuous situation right now, as far as the economy. Even if your average consumers buys into the fact that there's no recession or depression looming and still wants to do their part as a good consumer to keep all of the cogs oiled andmoving, that same average consumer is running out of ammo.

Personal savings are non-existent for lots of folks and debt levels keep climbing. There are also no more sources for easy money, as we've run through extra cash to spend to prop up the economy that in the past 5 years or so had been produced by refis, mondo property appreciation, and booming bull markets.

It's getting harder for average Joe consumer to step up and spend, as he's running out of bullets and gas prices keep climbing, trade gaps widening, and all that other less than fun stuff.

In the end, I dunno. I definitely agree that things aren't currently as bad as the media would have you believe, but it's also hard to pinpoint exactly what's going to stop a steadily worsening slide over the next 2-3 years.

Fuel55 said...

Scurvy said it all - The American consumer is out of bullets (all their bullets in the last 3 years came from borrowing cash or equity anyway) and so is the US government.

And yes, the media blows everything out of whack for ratings but ... the only reason US markets (housing/stocks/bonds) have scuttled along this far is the massive devalution of the US dollar in recent years.

Measure anything in the US economy against another currency and you'll realize how bad the situation really is. Granted employment and productivity are high - economic breathing space is not.

Recession is a retarded word - negative growth is unlikely but no growth or "inflation corrected" modest growth is quite likely. Is it so bad for the US economy to retrench for a while rather than continue to look for another bubble to suck money into the system? I don't think so.

Today's 3/4% cut in the overnight rate is textbook gov't panic. But it's a cork in a slowly sinking boat.

At this point you really have to ask yourself how the US gov't ever intends to pay off its massively retarded debt ... Pretty tough when it's 5 US$ to a Euro ...

So yes, I think you're an idiot - but I still like you anyway.

Special K said...

Falstaff is an idiot and if you played poker with him, you would know that. BTW, griangre is a bud from the Falstaff home game and he meant 'idiot' with man-love and affection. (Happy to help you out the Brian)
As for the encon topic, I'm not so sure. One of the best measures of impending recession in the economy is over-optimism of the consumer. Currently, the US consumer is pretty down about the economy. It is true that the current sub-prime mortgage fiasco will put a damper on things in some sectors for a while. It may even get bad as builders, laborers, people who make things that go into house construction, and the people that sell things to all of the above people have hard times.
All of this bad news also has a calming effect on the market. People will react to the bad news and not spend on some things, but that can keep economic activity to a sustainable growth rate so that recession or depression does not occur. Unemployment is not a big problem right now so most people still have income and can sustain themselves and will keep buying some things. Inflation of food and gas is hurting, but we still pay much less of a percentage of our incomes than most of the world leaving us more for optional items like poker bankrolls. The housing market is correcting and taking a big chunk of bank profits with it. Good. The deserve it.
A bigger concern to me is the effect of spending on the war. Most of the money spent on the war is spent here in the US to defense suppliers and contractors. That money is being pumped into the US economy providing buying power for those employees, those companies, their suppliers and their employees and on and on. I think the recession will follow when that money supply is cut off.
But like everyone here, I don’t really know what is going to happen. If I did, I’d already be too rich to care about the current situation.

CC said...

Not sure whether the post has anything to do with whether you're an idiot or not, so I'll leave that for another day.

The stimulus package is meant to give some quick cash to the American consumer, the same consumer that has kept the US economy humming along with the downturn in US manufacturing over the last couple years. My brother, an economist, believes it will help alot. I'm not as sure, probably more in your camp.

I don't watch CNN or televised news, so I can't say whether they are exaggerating the state of the US economy or not. I do think we are in a recession and that it will be worse than previous ones, primarily due to the impact of the housing markets (still haven't gotten this flushed through), overall tightening of credit, and inflation.

The one thing you don't address regarding the impact of housing is on consumer spending. Put aside whether folks bought homes they couldn't afford. There was relatively cheap credit in the forms of home equity loans, less down, ARM's, and generally more credit to everyone. This will now be tightened up, meaning less people will qualify for less credit. Which means less will be spent.

btw, need more evidence on whether you are an idiot, an imbecile or a moron.

Anonymous said...

I don't think anyone said that Falstaff didn't have valid points..

My 'example', regardless of whether you think it's stupid or not, is a very real situation regardless of how it came about..my point was that it would suk to be in that position, which is different than the Falstaff position.

My comment about Falstaff being an idiot -- as stated -- had nothing to do with his views on the current financial situation of the nation.

Jim The Knife said...

I'm retired, drawing Soc. Sec AND have income from my annuity which is doing fine.
I would like to know "how many" or at least what percentage of home owners got screwed by the mortgage fiasco?
I feel that the entire situation is OVER BLOWN by the media, just like immigration, Alberto Gonzalez, Katrina.... etc. etc.

PS: I am a fellow "Idiot" from Falstaff's home game.

Anonymous said...

OK, as a player at Falstaff's home game, I can verify that the posters here claiming to be from his home game are correct, and Falstaff is in fact, an idiot. Or at least he plays one at the poker table..... If you were to watch the play and listen to the conversation you'd see that for yourself. And, he asked for it, by telling folks to let him know.......he knew that this crew would not pass up a chance like that.

As to the mortgage situation, I've talked to several realtors and mortgage adjusters recently, and there is a big problem. It's not jus tthe high end houses, and it's not everywhere, but there is a problem. The worst-case scenarios are making big press, but many smaller situations are out there.

I also agree that the press can exacerbate the situation. If you claim it's happening, over and over again, in big letters and very loudly, then it will become a self-fulfilling prophecy. It may not be affecting YOU, but it's out there.

shamanalix said...

You hit it on the nose, Kilt Man. The ones really suffering are the rich zillionaires (and spcualtive leveraged wannabes) who bought 6 or 60 houses and expected to make oodles off other people -- and now find themselves a little stretched. Wah wah wah. Mr. and Mrs. Main Street know how to tough it out, and they will do so well enough. Time for the too-rich idiots to learn, and pay the price a little. Unfortunately, the pocket politicians will vote p.r. "tax rebates" the country can't afford just to help out themselves and their rich puppetmasters. As Al (C. Hang, not Gore) once said, "To heck with glasses, just pass me them bottles!"

Starfighter Girl said...

I think you're right on but they are trying to do more than cause a recession. I mean really - way more. CNN would have you believe we live in the most horrible country ever despite that we haven't had a terror attack since 9/11, despite the fact that Americans are the most giving country around the world, despite the fact that we are the ONLY country not living under the threat of socialism and other isms that destroy democracy. CNN - the most watched name in news is trying to shake the very foundations of this country. You only have to look at their internet headlines and see that.

The NL Wife said...

Again, I'm just impressed that you're posting about the economy, and I'm spending money on luxury sedans and posting pictures of the supermodels I work with . . .

Are you sure we didn't switch places? And yes, things are blown a bit out of proportion . . . I stopped shopping for cars long enough to notice that.

:)

Blinders said...

Adjustable rates are down in the last few years, so these are not people who are loosing houses becuase adjustable rates are up. These are people who could only afford the teaser rate, and could not afford the fully adjusted adjustable rate. These pople also put no money down. They are loosing a house they never owned and could never afford. They are loosing nothing. The banks had the loose lending practices, and they deserve to, and are paying the price for these mistakes.