Feb 21, 2009 1
Tap. Tap. Tap. Is this on?
So yeah, I’m still alive. I still have a job. The pay cut kicked in so I’m making less. What is gone is my discretionary dinero. So this explains why I’m not at a Coffee Bean in LA even though there was the cheapest-weekend-getaway-price-I’ve-seen-this-century deal. So I’m spending less and thus not stimulating the economy. Just like everyone else. Which is making the economy worse. Which makes people spend less. Which makes the economy worse. Which makes people spend less. Which makes the economy worse.
The big “stimulus” package isn’t going to help. The $33 a month more I’ll get in my paycheck from the bill won’t offset the loss of income from the pay cut. That money will go right to paying off debt. Which doesn’t help the economy. Sure, there are things in the stimulus that may help jobs, but it isn’t quick and it isn’t enough.
The problem is the economy is based on consumers buying shit they don’t need with money they don’t have. As long as you believe that this will keep happening there’s no problem. But now there is a problem. Some like to paint this on poor people buying houses that can’t afford. If it were only that simple. The problem is in many places because money was so easy to get housing values rose at astronomical prices. Yes, I’m talking about you Florida, California, Nevada and Arizona. Even if you are that responsible person but you bought the maximum house you could afford, you are now boned if houses in your neighborhood are worth 48% of what they were last year. Imagine owing $500K on a house that would sell for $250K. Sure, it will be worth $500K again in several years but you’re stuck there for a while. Which is fine, unless your job moves to another city. No more “house flipping” It is pretty tenuous. But it is happening everywhere. Renting is going to make a big comeback.
So there will need to be what they call a “correction” on housing values. And banks are going to have to eat a bunch of loans they shouldn’t have made in the first place. People with shitty credit who got houses they couldn’t afford will now have shittier credit and now that people are checking will find it hard to find a place to live. People with good credit will have shitty credit.
And then there’s the next shoe to drop: Credit Card debit. There aren’t assets behind that debit. When people stop paying their credit card debit it will be very painful for the banks. Already we’re seeing banks cut the credit and raise the rates on people that have good credit. We’re going to have to go back to the days when not everyone got a credit card — and when they did, it didn’t have a high limit.
That’s at the micro level. At the macro level we need to pay down our national deficit before our currency collapses. Bailing out the banks that got us into this mess will cost real money the US does not have. And it can go on printing money so long until the creditors notice. The “tax cuts” in the stimulus bill are really just a cash advance against your future taxes. Taxes will have to go up. Way up. But instead of things like universal healthcare, world class free education, and a modern transportation infrastructure that doesn’t rely on foreign oil, we get to pay off shit we don’t even remember buying. Or we could just go bankrupt and return to an agrarian society.
And with that good news, I’m going to go play with the cats.













Recent Comments