I was reading an article on market analysis on the Fox News site today. The gist of it was that there is no real threat to the markets or economy from the sub-prime meltdown. The default of sub-prime mortgages, they say, is manageable. The problem is psychological. Earnings are high, as is employment. Corporate balance sheets are flush. They are missing something, I think. They aren't looking at the way people are living. They aren't listening to what they are saying.
A lot of people say they are worse off than previously. Even though employment is high and income is up, a lot of people say the economy is already in a recession. What's going on? Are they dim?
The truth is, people can't afford their lives. Even though they have income and benefits, they can't afford the things they need. They need a car, so they go into debt to buy it. They need a house, so they go into debt to buy it. The house and car note, as well as the attendant costs of operation and ownership, eat up most of their income. To obtain the other necessities of life, they use their credit cards. When the credit card debt becomes unmanageable, they refinance their home and pull out equity to defray costs. Their already unmanageable mortgage becomes more unmanageable. They get promotions and raises at work, they moonlight. These people don't golf, don't dine out, take vacations, buy nice clothes, or send their children to private schools.
Fast forward 20 years. They are making more than twice what they used to make but the house that they paid $150,000 for is now in hock for $500,000. Something went wrong with the last car before the 72 month payment schedule was over and now they owe $20,000 on a car that cost $14,000 and is worth $6,000, maybe, at 13%. The credit card debt is worse than ever. What can you do? The money always runs out before the end of the pay period, way before. The oldest boy is married now, with two kids and lives in an apartment. He's a good boy. He and his wife live like church mice but it's soccer season. The kids need shin guards, shoes and uniforms. They also need dental work. What are you going to do?
What's going on here is a lot more than psychological. George Bush and his rich friends are driving along in the beautiful, barge-like, SUV of State. The stereo is playing some sweet sounds. The cell phones are out. The air conditioning is blasting. There's a case of cold ones in the cooler. The engine is running sweet and the fuel line is still full but the tank is empty.
Someone is in for a surprise, soon.
1 comment:
You're correct in your assessment of the situation we're in today. However, you can't blame just Bush - all of this was set into motion long before he even went into politics. There are lots of rich liberals, too, celebrities and politicians mainly, who tell us how we should live frugally, yet they themselves live in luxury.
The main reason we are in this mess is because of socialistic economic and financial policies. They are made by those who hold wealth and can wield power to make governments pass these kind of policies into law.
GW has certainly contributed to the problem, but so did his predecessor, and his predecessor before him, and so on.
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