Hunkering Down

Remember back when I said something big was coming but I did not know what? Well I guess we all know what it was ... a huge economic crisis that is a once in a lifetime (we hope) event. When combined with the political campaign, I am sure that a lot of people are conflicted about what to do. I have always thought that there is some truth to history repeating itself. But more than that, I think that history informs us on how to go forward.

I have always been fascinated by economic theory. When I took my introductory course in economics we covered both macro and micro economics and I never missed a lecture. I probably would have taken more classes in economics if I had the luxury of unlimited time. But instead I have to rely on the talking heads to give me glimpses into current theories, sometimes conflicting opinons on what is happening and how to fix it. And what I have gathered from everything I have heard is that there are a lot of theories but no one really knows for sure what the real fix is. The reason is that there may be the right option embedded in all those theories but we can't agree on the path.

I have spoken with a lot of really smart and savvy people and some have really, really sharp minds and all of them say that we need to be prepared for an extended recovery period of several years. But the real question is whether the right theories are being followed by those who are trying to chart our path out of this mess. The wrong choice could extend the recovery timeline. And we are not just talking about national policy but international policy. It is possible that this is going to propel the paradym shift in international power.

So now that brings me back to politics. In the big scheme of things the economic policies of the two major political parties are far apart. Forget the people running for office and focus on the policies and try to make a judgement whether the current policy is working or whether a change in policy is needed. That is what will guide my vote in November. The individuals are both going to have a hard time their first few years in office and this crisis will resolve itself regardless of who is in office, with the benefit of reflecting favorably on the person in office if the recovery goes well. So the question I ask myself is what policy do I buy into and do I think the individual will implement it properly and can they implement it with the congress that they will have to work with. So there -- that is the big decision we all have to make. Of course there are other things that I am interested in and which also will effect my decision, but this is the big one, the deal breaker, the elephant in the room.

I have to say something about social conservatism and the Christian right. The republican party is not well served by the extremes of these philosophies. In fact the converse is also true, the democratic party is not well served by the extreme liberal philosophies. I believe that the majority of US citizens are much more moderate and tolerant in their opinions than either of these extremes. There are some things that act as lightning rods such as abortion and illegal immigration -- but on the majority of governance issues I think that there is more accord than not. What I am saying is that compromises could and should be made on the majority of goverment actions and that there should be an acceptance of agreement to disagree on the more difficult issues -- but that the majority rule needs to be honored. The problem as I see it is that there may not be a clear majority opinion, which implies that there is a real schizm in the country.

This schizm may be the warning canary of the gap developing in our society between the haves and the have-nots. I will have to think about this a little more.

I don't know the answer to how we resolve the abortion issue as a country, but I believe it is a personal choice up to a certain time in the pregnancy. I also believe that easily available abortions have changed our society -- and I have no religious issue here -- for the worse, making casual sex more acceptable because the consequences can be eliminated. This does erode our culture and our family unit. But I also believe that to totally prohibit abortions have costs both to individuals and to society, the burden of teenage pregnancies, the unwanted children, the health risks, illegal abortion clinics, etc. So as a result I believe that sex education is the absolutely right thing to do and that preventing unwanted pregnancies is important. In this role our religious institutions provide an important service. I do not agree that abortion should be legislated beyond where it is now. I also believe that we have a long way to go to reconcile the extremes on this issue and I would be alarmed if Roe v. Wade were reversed. Honestly, I want my granddaughter to have a choice and not to be trapped into a situation that was the result of immature and poor judgement on her part. Life's lessons are hard enough and the long term effect could ruin her future irrepairably.

Now the current mortgage crisis is a real problem which I am sure is very complex and will take a long time to resolve. But I was thinking that maybe it could be simplified. The big challenge is the loan workouts that need to happen. The banks did not get this done because they were so focused on their profits. They sort of bit off their nose to spite their face, don't you think?

I am sure there are a lot of solutions being considered but let me put my solution out there, it may be just too simple to take into consideration everything but here it is: Establish a nationwide mortgage interest rate and impose that rate on all mortgages made since 2005. The rate would have to be really low -- I am thinking maybe 3.5% or lower. Convert all the mortgages to this fixed rate and then base the term of the mortgage on the individual income of the mortgage holder. This means establish a standard percentage of total individual income -- say 30% --that is allocated to housing debt and this would then determine the length of the loan. Right now the conventional length is a 30 year mortgage. In this case the mortgages might actually have to be 50 year mortgages to get the payments low enough. This should stabilize the market enough to allow people to stay in their current homes. It would definitely change the real estate market - making it harder to actually sell a home because the built up equity would not be there -- so some thought should be put into that problem too. Then going forward re-confirm the lending practices -- how much of the value of a home would be financed, how much of someone's income should be available for housing debt, the term of the mortgage, limit the flexibility for a few years of the interest rates charged. Then provide assistance programs for first time home buyers to help them come up with downpayments. That is my plan with a going forward plan for tightening up on predatory lending practices.

I should also give you another opinion about how to solve this crisis. Rather than bail out all the corporations and financial institutions, my husband believes that instead of bailing out we should just give every tax paying American citizen $1 million dollars to pay on their mortgage or to buy a home.... would probably cost the same as the bailout.

So there you have my thinking today. It may change next week or next month. And yes I am thinking that I will vote for Obama.

A Nation of Debtors

We have become accepting of debt as if it were nothing to be concerned about. But I remember when I was young and the goal of every adult I knew was to get out of debt. To pay off the mortgage and the car loan and to eliminate debt from their lives. This was the time when getting a loan required collateral and there were limits on how much you could borrow on just your signature. It was a time when you bought a house not for an investment but for shelter and to raise your family. It was a time when credit cards were limited and every department store had its own credit card. Do you remember Sears Roebuck where America bought their appliances, tractors, lawn mowers, fabric to make their own clothes, and shopped the catalog?

We now have credit cards being sent in the mail to college students, credit limits increasing on cards you have without asking, and people don't have just one or two credit cards -- they have 10 0r more! Translate this into the national mentality and you will know why the federal debt is so huge.

We need to get back to the idea that you save for something you want not borrow, that you sacrifice for the luxuries of life. This sense of entitlement and desire to have it all is out of control. We need to live within our means and not try to speed up the attainment of our aspirations. We have become a society requiring instant gratification, planned obsolescence and the easy road to success.

What does this have to do with politics? Think about it, we just bailed out Fannie Mae and Freddie Mac and AIG. Saved by the goverment, not left to deal with problems of their own making, too big to let fail. No wonder there is no sense of doom that the country is in debt in the amount of $9,636,985,481,135.92 as of today. (http://www.brillig.com/debt_clock/)

If these companies do not self regulate (lets face it greed wins out over self control everytime) then it is up to the government to establish parameters and strict oversight. Companies this large loose the moral character needed to impose reasonable restrictions on themselves. While it is leadership, leaders can only do so much in a large stockholder driven conglomerate. Then again leaders can also do a lot to establish a corporate culture that in a limted way can balance the greed and profit driven pressures.

Now reality is that stockholders are you and me. We are invested in our retirement funds, our bank accounts and our homes. It is natural to want to see returns and profits but again I get back to balance, the yen and yang of our market driven, capitalist society. Dont' get me wrong, I LOVE capitalism. It is what gives us opportunity and hope for a better life, but what I don't love is the separation we have from our own lives and the investments we make. We are not invested in our local bank, that we visit everyday and whose customers are our neighbors. The closest I can get to this is my experience with credit unions. The board is elected by the members, you have to be a member to use the services and if you want a loan you have to give details on your financial situation to a credit committee made up of your neighbors, co-workers or friends. This was debt creation up close and personal. Your friends were not going to give you a loan you could not afford. And if they did not give you the loan they told you why and also what you could do to get a loan in the amount you wanted - collateral or a co-signer or a bigger down payment to lower the amount of the loan. Pretty straightforward and that is where responsible lending and borrowing should start, with people that know the community and the people in it.

How have we reached this very sad state? Well we have raised our children to expect more. Though our own hard work and sacrifice, we gave them the opportunities and extras that we did not have. When was the last time you were in a home without a dishwasher. Would you rent an apartment without one now? It is expected and has moved from a luxury to a necessity. Ka-ching, ka-ching -- all these things add up and it is no wonder that our children go into debt for all the material comforts they had growing up. New not handed down clothes, new cars not old reliable transportation, the latest and greatest toy or gadget -- all these things are must haves for our younger generation. And we did it folks.

Now I predict that unless we figure out how to impose moderation on ourselves, this country is going to weaken and lose critical world standing. We need to stop trying to be the saviour of the world and focus on our own needs. Too many countries rely on us for aid, we are fighting a war that is costing us is more ways than money, we are not taking care of our own -- we need to focus on education at all levels, we need to participate in the world economy in ways that support our population -- creating jobs, training, social policies and programs that solve problems in proactive ways with long term goals to improve our country and its citizens.

We need responsible and enforceable immigration laws. Our laws and policies need a major overhaul. But we need to stop building fences and start creating positive ways to supplement our work force and solve the illegal immigrant issues by creating avenues that deal with the issue in humane and intelligent ways -- not with hate, anger and failing to get to the root of the problem - our restrictive immigration policies. Don't make illegal immigrants legal but provide a special temporary work permit which allows them to work while paying taxes and social security into a system that needs this to support the services that we are providing anyway. Embrace them and tax them don't shuffle them off from place to place, spend money catching, housing and deporting them. Right now they are successfully avoiding the system, bring them into the system so you can control them. The path of least resistence is often the solution. Create the day labor sites, provide temporary work permits and tax id numbers, collect taxes and social security, enforce the minimum wage laws and the worker rights, remove the black market and create the brown market that we control. And streamline the process for immigrants who contribute to our societal fabric to become contributing members -- make it easier to get the green card or to become a citizen. If social security is going to collapse because of slowing population growth and the retirement of baby boomers, lets beef up the ranks of contributors. Doesn't this make sense? And there seems to be a little justice to it also, my retirement being supported by new immigrants paying into our social system.

Well I guess I will have to get off my soapbox now and hope that this makes sense to someone out there.