So Now What re this fiscal mess

[TheScout]

There seems to be so much worrying.

 

I have faith in the magic of capitalism. It has got us out of every mess before and brought our nation to the great wealth we have today. Let it run its course.

[evmori]

What do ya give up 1st? Why do you have to give anything up. Instead of driving the vehicle you have, get one you can afford. Keeping up with the Jones is what gets people in trouble financially! People with massive credit card debt are hurting only themselves!

[packsaddle]

Me, I'm going to make money off this thing. There are some great investment bargains out there and I plan to find them and buy low so that when retirement comes along, I'll be able to sell high and then invest in 'income' securities. In some ways this timing is just great! For me, at least.

[scoutingagain]

"My husband has a pension and we will have social security"

 

Well I hate to be the bearer of bad news but your husband's pension was probably invested in the stock market. And hopefully the pension fund manager was not too heavily invested in financial stocks or any of the exotic mortgage instruments largely responsible for this mess. And as far as social security goes...if anyone believes those statements they get...well there's a bridge in brooklyn for sale. At the same time there will be something in social security, it won't be nothing. Worst case scenario is it returns to a pay as you go system where 14% of the national payroll is distributed to everyone recieving social security, but that will not likely be enough to meet the pie in the sky projections the system is promising.

 

Those folks in their 30's are probably in better shape than those of us approaching retirement in 10 years or so. They will have time for the markets to recover and will likely see a healthy return on their investments over the next 30-35 years. Over the next 10 years, those of use in our 50's and 60's will be fortunate to have our 401Ks earn back what they've lost in the last 12 months.

 

At the same time ScoutMom, you probably are in better shape than many folks.

 

Due to this mess, we will all likely have less over the next 10-15 years than we expected. Our investments will not meet the projections all those financial advisors showed us. Social Security payments will likely be less than what we've been lead to believe. Many of us may be out or work for a period of time in the near term and if we return to the workforce will likely end up with a salary reduction. That's the good news.

 

Many of us had no 401k or if we did it was woefully under funded. Most of us don't have a pension to look forward to and those that do may not get all the benefits they were promised. Many people who currently have jobs and are making their mortgage payments may lose their homes if they do lose their job. This whole thing will get worse before it get's better.

 

Some slivers of hope that I see are. Housing and energy prices are falling quickly. This will allow the housing market to recover quicker than if prices stayed high. We need to turn over the backlog of houses so new home buyers return to the Home Depots, Walmarts and furniture stores. The lower cost of energy, particulary gas, will provide those that do have jobs some extra cash to spend or at least pay down debt. Gas is down to nearly $3.25/gal here and headed lower. One wildcard in interest rates. If all the government borrowing that will need to be done competes with others in a tighter lending market, interest rates could rise signigicantly, impeding any kind of economic recovery.

 

A side note; Our perverted tax system encourages us to borrow against our homes by giving a deduction on mortgage interest. Elimination of this perversion would have the effect of lowering housing prices and encouraging people to pay off their homes. The way things are now the government encourages home owners to leverage their home equity. How sick is that.

 

And it probably doesn't matter a heck of a lot as to who wins the election. The markets will do what they do, and there really is not much the government can do to influence them, short of nationalizing the economy in the old Soviet model, and we all know how that worked out. Scarily this $700 billion bailout is a step in that direction.

 

 

Good thing we scouters, know how to live in a tent.

 

SA

 

 

[evmori]

Our perverted tax system encourages us to borrow against our homes by giving a deduction on mortgage interest. Elimination of this perversion would have the effect of lowering housing prices and encouraging people to pay off their homes. The way things are now the government encourages home owners to leverage their home equity. How sick is that.

 

I agree our tax system is perverted, but your premise is unfounded. Did the elimination of being able to deduct interest other than mortgage interest reduce people's debt? Nope!

 

By allowing people to deduct mortgage interest actually allows people to buy homes & to leverage the equity they have built up in their home. It is up to them to use it or not. If they leverage the equity in their home & can't afford the payments, how is that anyone's fault but their own?

 

Ed Mori

1 Peter 4:10

[Lisabob]

Ed the problem I have with the assumptions you, GW, and many others "out there" seem to be making is that they are only correct for a certain segment of society. There are plenty of people out there driving the $1000 clunker cars and living in smaller and smaller apartments to try to keep making ends meet. These are the folks who raise a family on $40k or less a year. There's not much left for these people to cut back on; they're already on the edge. And I see plenty of these folks at work and in scouting on a regular basis. Maybe things are different where you live but that's reality around here. In fact I've had a couple of conversations with folks recently who told me they were probably going to have to pull out of scouts because they couldn't afford it any longer. And I don't doubt them.

 

I have a lot less sympathy for people who drive fully loaded SUVs, own every "must-have" electronic gadget under the sun, have grown accustomed to eating out 5 nights a week rather than bothering to shop and cook for themselves, and bought McMansions at such ridiculously inflated prices that they could barely afford to furnish their homes. Surely these folks could have been more cautious in the boom times, and then they'd be far better off in the down times (like now). But that's only one small segment of people feeling the pain of this economy.

 

Let's not caricature those folks who are truly being hurt by this and who have no cushion to fall back upon, despite being hard working and frugal individuals.

[evmori]

Lisabob,

 

I am not making any assumptions. The segment of society I am referring to is those living beyond their means. What I was referring to is the skewed assumption that the government is solely to blame for our lot in life.

 

The people who drive $1,000 clunkers and live in small apartments will always be there and yes they are affected. There is little to be done to help them and that is sad.

 

 

Ed Mori

1 Peter 4:10

 

 

 

 

[scoutingagain]

"Did the elimination of being able to deduct interest other than mortgage interest reduce people's debt? Nope! "

 

It didn't eliminate debt, but it encourged folks to transfer that debt to their homes.

 

The government should encourage people to buy and own a home, not leverage it.

 

Lisa,

 

Those folks have already taken their hit. They are not being effected as much by this "crisis". They're in the group that probably didn't have a 401K and probably didn't own their own home. In that sense they havn't lost much. I suspect many of the folks our congressman are hearing from about the so called "bailout" may fall into this category or are close enough to it they don't see much of a downside risk. They may be right.

 

This is a "crisis" because the "haves" are losing what they have. Not because the "have nots" are losing something they didn't have. As I said before, the loss of over 200,000 manufacturing jobs, over the last 8 years was not a crisis. The foreclosure of thousands of homes was not a crisis. Maybe to the individuals involved, but not to this government.

 

The loss of several thousand investment banking and mortgage broker jobs and hundreds of millions of dollars of stockholder equity apparently is.

 

SA

 

 

 

 

 

[John-in-KC]

There's a lot of good commentary in this thread

 

Lisa's right: Some people are on the ropes, and more will son be.

 

GW's right too: College used to be affordable from the perspective of post-college earnings and repayment. It's not so anymore, in many cases. I'm lucky I have some savings, and for once I'm not unhappy about my divorce years ago. I have a budgetary line item called child support: Now, it goes to help with his collegiate living expenses.

 

Yes, he has a summer job, and may soon have exception work-study as well (my FAFSA is waaaay above cutoff for anything but loans). I expect him to help earn his way, but to my parents, and to my way of thinking, education is an obligation of the parenting generation, as part of their preparation of the downline.

 

I'd expect my vacations will be structured around learning opportunities, such as PTC: That way I can deduct them off the bottom line.

 

And yes, I'm eating a lot of chicken leg quarters at $0.89 a pound. They're cheaper than hamburger.

[BulldogBlitz]

"What do ya give up 1st? Why do you have to give anything up. Instead of driving the vehicle you have, get one you can afford. Keeping up with the Jones is what gets people in trouble financially! People with massive credit card debt are hurting only themselves!"

 

bzzt.... wrong. they aren't hurting only themselves. they refinanced their home and used the same illogic that got them the credit card debt and signed off on a loan they had no realistic shot of paying for in the long run. now what... the big bad wolf is coming to take the american dream away from those poor defenseless souls. have no fear though, the might democrats will slay the wolf and lower the principle or forgive what is overdue.

 

i'm bitter. i'm bitter that i didn't buy a house last year (one that i can't afford) because it definitely looks like the taxpayers are about to reward bad debtors.

 

[evmori]

bzzt.... wrong. they aren't hurting only themselves. they refinanced their home and used the same illogic that got them the credit card debt and signed off on a loan they had no realistic shot of paying for in the long run. now what... the big bad wolf is coming to take the american dream away from those poor defenseless souls. have no fear though, the might democrats will slay the wolf and lower the principle or forgive what is overdue.

 

Poor defenseless souls??? Did someone hold a gun to their head & say "max out your credit cards"? Did someone threaten death if they didn't buy a car they couldn't afford? Did someone promise to run them through if they didn't but all the new & improved big ticket item they could? Nope!

 

i'm bitter. i'm bitter that i didn't buy a house last year (one that i can't afford) because it definitely looks like the taxpayers are about to reward bad debtors.

 

You can either be part of the problem or part of the solution. Being bitter is neither.

 

Ed Mori

1 Peter 4:10

[packsaddle]

Oh I think that people of modest means are about to take a much bigger hit. The poor may be about to learn how uncaring the market really is. But all of us collectively chose this path, just as surely if we were silent as if we voted for it. We chose the Darwinian approach and now we're whining about the selection process. Time to grow up, take responsibility, or step back and whither into oblivion. No pity, no sympathy, no forgiveness.

This, at its worst, doesn't come close to what hundreds of millions of people around the world survive every day. Tough luck for some, just deserts for others, and the good life for the remainder. Welcome to reality.

 

[ScoutMomSD]

so pack have to change the mood and give the link to the Darwin Awards - my annual fav!

 

http://www.darwinawards.com/

 

From all I have read we probably are at least a year away from the bottom.

 

Thank goodness for Student Loans. When I went to college we did not have any money and I paid off my loan over a number of years. Unfortunately with our ages and the market that is what my kids will have to do.

 

 

[TheScout]

They could join the military and go to college for free.

[packsaddle]

One of the causes of this mess is the thinking error that something of value can be acquired for free. Everyone who had (or has) that notion should be getting the Darwin award as they are selected out of the economy. But it doesn't work so cleanly and they're going to take some of the rest of us with them.

NOTHING is free. Our payment is coming due. If the bottom is still a year away, is there any suggestion for how long we will remain there? Could be a very long time.

Edited for clarity(This message has been edited by packsaddle)