Got Mongo? Feed On This!"
Become a fan of the STORE on Facebook. Click here.
Become a fan of the BLOG on Facebook. Click Here

Monday, November 24, 2008

Bailout, Bailout, Wall Street Let the Bear Out

Hey, did you hear? There is a financial crisis going on in the world. Unless you’ve been living under a rock or in an Amish community you probably know that we are smack dab in the middle of a global financial situation that is heading for FUBAR status. Now, I am by no means a financial wizard or a political genius. Funny how I always add that disclaimer before railing something, but it’s true. I do not claim to have all the answers. I just interpret what I feel is going on and twist it by the pop culture teat until it cries, "Uncle." Then I twist some more.

I’m not going to go into a complete history of what’s been going on, nor am I going to point fingers of blame at any Presidential administration. There is enough blame to go around on both sides of the coin. You know the economy must be really bad when Days of Our Lives has to fire Deidre Hall and Drake Hogestyn just to be able to stay on the air for 18 more months. Even fictional television is feeling the burden.

The reality is that we have failed to learn from history and are now forced to repeat it. In another 20 years, we’ll probably do the same thing. Look at the current economical situation in terms of a scene from The Matrix Reloaded where Neo reaches The Architect and finds out that he is the eventuality of an anomaly. The economy functions in a state being where, if it were Utopian, by nature, it would ultimately fail. If it (we) were allowed a choice in matter we would accept it, provided we were given just that, a choice. Granted, the small amount of those who chose to reject it will ultimately grow and eventually the system will crash, reboot, and start all over again. Everything is cyclical.

"Whoa! The Economy is complicated."

The fact that it takes decades at a time is unnoticed and therefore ignored. When it does happen, everybody goes nuts and declares it to bet the biggest disaster since the last time it happened. The benchmark appears to be The Great Depression. Perhaps the geniuses that came up the name for the current situation should have gone with a comparative term such as The Greater Depression instead of the more diluted and less romanticized terms, Global Financial Crisis of 2008, The Sub-Prime Mortgage Crisis, or Emergency Economic Stabilization Act of 2008.

However, what’s past is prologue. We’re not going to dissect what caused the issue. We’re here to dissect the continually prolonging of the solution. Unfortunately, we can’t go the same route as The Great Depression in terms of fixing the issue. We’re already at war in two countries. The EESA of 08 or Bailout, Rescue, whatever was supposed to purchase “toxic”(….ooh I like that word) mortgage backed securities in an effort reduce uncertainty of the solvency of financial institutions and restore confidence in the credit markets. In other words. The government takes a crap load of money and pays for the mistake supposedly in an effort to give Wall Street a chance to shore up their holdings. Let me ask you this. If you have a friend who is an addict, do you give them access to their vice? “Sure, Bob. I’m glad you admitted that you have a drinking problem. Why not join me in a glass of champagne to celebrate your first step towards sobriety?” Then Bob goes out and kills three people and a dog while driving home loaded. Oh, and Bob decided to stop at three more bars on the way home. Bob is AIG. Yeah, purportedly by the end of October, AIG spent nearly $90 billion of the $123 billion in bailout money. Almost $1 million dollars of whatever money they had was spent on lavish trips to England, Phoenix, and California for retreats of various kinds. Now, all of a sudden, they’re walking up to the front of the lunch line, bowl in hand saying, “Please, Sir, I want some more.” Apparently, AIG handles money the way a compulsive gambler handles flipping a coin. They don’t flip the coin. They put the coin on black 22 at the roulette table.

So, with major financial institutions failing, merging, failing, partying, etc. we sit idly by and wait for the problem to just go away as if we can reboot a computer. Unfortunately, the problem is the blue screen of death and attempts to reboot the economy have been unsuccessful. Now, while it is obvious that Wall Street has a problem with managing money, so do we. It's not that I don't believe that trickle up economics or other euphemisms for giving the money to the people won't work. It's just that I, like so many other people have been digging holes that need to be filled. We get money from the government in the form of stimulus checks that are supposed to be used to go out and by goods and services and yet we spend it on debt reduction. Actually, in this case, that might help. Regardless, there have been numerous chain emails and other discussions around the water cooler about giving the $700 billion to the American people. This won't work either.

If you look at the U.S. population as of 2008, it stands at roughly, 305 million. For argument's sake, let's say that 200 million people own a mortgage or have substantial debt above $50,000. If you take that $700 billion dollars and divide it by 200 million, you only get $3500 before taxes. I don't see anyone paying off a mortgage with that much, unless you are a thimble and your mortgages consist of Boardwalk and Park Place. If you slice it another way, take a $100,000 mortgage and divide that into $700 billion. You would only be able to help 7 million people before you run out of cash.As bad as Wall Street is with money, the general lynch mob is equally bad at math. They are tired of Government screwing up the country and letting us take the fall. Well, guess what? We elected them.

So, what can we do? Personally, as much as I would love to have the Government give me a slice of the bailout humble pie, I'm not in that group of people who are foreclosing on a house or been affected by job layoffs...yet. So, giving me the money to pay off my mortgage doesn't solve the issue. While a lot of folks are in foreclosures because their banks got greedy, a lot of them got there themselves. They either were duped into a deceptive mortgage arrangement or figured that with the banks just giving away money, they could buy huge, half million, dollar homes and have no trouble paying them off in thirty years. Unfortunately, the banks and the economy couldn't wait that long. There's no way to fix this by giving us the money. However, I would have taken an approach much like I would have done had we, as individuals, received the money. Instead of just writing a blank check to these companies. Give them vouchers for operating capital. Make sure they use that money and restructure their balance sheet (aka bankruptcy) so that the money still had went towards becoming solvent, like paying pensions and employee salaries.

If the government had some mythical pot of gold that could be used to give the American people the money instead, I would still expect there to be two kinds of vouchers. One goes to paying a mortgage and only a mortgage. The other would go towards economic stimulus. It could be in the form of a voucher to buy a vehicle and help the auto industry. While, I'm not going to complain when President-Elect Obama pushes through another stimulus package, I believe if their intent is to have us spend the money on goods and services then they should have issued us the checks before the end of October. That way, we would have money to be used for shopping through the end of the year. Think of it like a book of coupons you get at McDonald's or the movie theater. Within the booklet you have several coupons that are good for the purchase of different types of food and drink. If you wait until after the holidays when Obama takes office, a lot of the damage will be done. Regardless of how much they promise stimulus checks in the New Year, the stores are hurting now and people are leery of loading up a credit card now when the banks and credit institutions are hurting. If you miss a payment, the penalties can be severe.

Well, that's my thoughts in a nutshell. For a lot of us this is a scary time where we are stuck banging our heads against the wall while Wall Street tells us they're pregnant. We're just trying to do the math in our heads in hopes that we weren't the one responsible. And while we resign ourselves to having to grow and learn responsibility, Wall Street is out there drinking and smoking with a baby bump. For the rest the country, everything is just status quo. If you're really savvy you can take huge advantages of the situation in terms of buying a car and shopping. Prices will go down, gas has gone down, and auto dealers are hurting for business. If Warren Buffet can afford to play the game with millions of dollars on Wall Street, why can't Mongo the Middle Class mensch play the game on Main Street. So, hang in there, things will eventually start to look up. Just don't hope for the best, prepare yourself for the long haul. After all, "Hope, it is the quintessential human delusion, simultaneously the source of your greatest strength, and your greatest weakness. "

No comments:

Shredded Tweets