Tax Cheats and Drug Dealers
The largest part of bankings (not my) current problems is due to Alt-A (liar) loans. Basically an Alt-A loan is a loan category banks use when they want to believe that an applicant has income that the applicant does not show on their tax returns. If you have income that is not on your tax returns, you are a tax cheat. Drug Dealers, for example may have income they do not want to show on their tax returns. There is no reason I can think of that the United States Gov't (me?) should bail out banks who got in trouble for doing business with Tax Cheats. One might know that Tax Cheats are not a good risk, with them being Tax Cheats and all.
I am not indebted beyond my means and I do not depend on the banks to finance my life. It would be nice for me if I could begin to compete against people and business's who do not have access to cheap credit and easy money. I would like to see them suffer their mistakes, as their poor judgement has caused me to suffer higher prices. I am certainly unhappy that the United States of America has decided that they will aid these Tax Cheat enablers (mortgage industry) at my expense.
Most of our Senators and Representatives were receiving phone calls at ratios of 300 - 1 against bailing out the finance industry. This is because Americans, in their hearts, know that the problem is not that we cannot borrow, but that we must, in order to compete.
I would to suggest that instead of a 700 billion bailout, that the United States gov't should instead:
Never guarantee any loan whose income statements are not backed by tax returns.
Eliminate any and all tax deductions of interest payments.
Eliminate any and all tax deductions of entertainment expenses.
Not guarantee any Fannie or Freddie security, but instead consider jail for those who incorrectly implied that they were guaranteed.
Continue to guarantee Ginnie Mae backed securitys but immediately restrict those to at least 10% down, fixed interest payments and tax return documented incomes.
If it seems these suggestions are punitive and designed to cut the legs from under the finance industry it is because they are and it is well deserved. I would certainly consider more punitive measures.
Some have suggested on television that the bailout is critical and must be enacted because farmers cannot borrow to purchase fertilizer and seed. That suggestion makes me afraid of starving. I would suggest that if farmers are not buying the seed and fertilizer supply and demand would suggest the price of seed and fertilizer should come down. However, since I know that free markets only work quickly enough in the classroom, I would suggest that much less than 700 bil could be loaned or given directly to farmers to buy seed and fertilizer. It is these essential needs of our population that Gov't should restrict itself to funding until such time as industry stabilizes without a need to borrow. I would also suggest that decisions on who/what should get funded be made by people who have proven through the years that they live in the real world and cannot understand why an unproductive industry such as finance should be supported.
As I said above phone calls, faxes, emails are running 300 - 1 against bailing out the finance industry. The actions of our elected representatives are directly opposed to the will of the people they are intended to represent. Representative Gov't is what gave the United States her strength. It was the belief that the United States gov't would protect the rights of its smallest business owner as well as its largest. When a banker gets to decide whose business gets financial advantage, through lower interst rates, or a personal friendship, the banker has weakened the United States. When offering such advantage also became tax advantaged then the United States has relinquished its authority. When such banker is also an appointed decision maker in the United States gov't then the United States is no longer a Representative gov't. When an appointed decision maker times his decisions that one business fails and another is saved, we are Venezeula.
Have no doubt what is happening here. (worth reading from the NY Times).
Investing thesis for after the bailout. A happy bump upward on monday that will last at most a few weeks as the rest of the world starts slowly removing their money from US based business's, which are now clearly running on credit which can be removed at the whim of a banker. Even solvent business's will suffer as investors can no longer estimate if a business's competitor will have access to cheap money positioning themselves to out compete a solvent business short term. As the pace of removal accelerates the markets will decline for 7-12 years unless supported by printing money. The number of shirts the increased money supply can buy will be less but the dollar count per share and shirt will be higher. The debt weakened US dollar will prevent us from buying overseas goods leading to shortages of toys and extra's as we have already experienced the last few years concerning popular toys at Christmas time and how quickly seasonal fashion disappeared from shelves 3-5 years ago. We can afford less "wants" and less will be delivered to our shores as the manufacturers adjust. The prices for essentials will increase, but remain available to most of us unless you include healthcare as essential orr concern yurself with food quality as opposed to just quantity. We will still have more money than most of the world, which is also growing poorer. Possibly, (4-7 years) the Euro will replace the dollar as the worlds reserve currency, unless a new oil based currency emerges from the Middle East. Poverty and health problems in the United States will accelerate, further weakening our finances. Health insurers will only succeed if their ability to deny claims continues to strengthen. Most of us will get cancer before we die, impoverishing us before we go further weakening our ability to compete. The problems caused by putting the "fox in charge of the henhouse" in finance have also happened at the EPA and DEC and FDA. Foreign governments who have reduced their dependency on oil will be better positioned financially to grow, and their business's better positioned to compete. Higher prices and excessive debt will erode our ability to switch energy sources quickly. Government run by business will restrict our ability to do it intelligently. Business's interests will cause energy to be a drain on consumers finances as we continue to pay for energy rather than enact policys to make consumers into producers of energy.
Basically do what Deej is doing.
Interest on loans is too big a drain on the economy, macro and micro, for us to recover unless it is ended by allowing banking to collapse. Our fewer, and far more valuable dollars could then support a switch to a more productive economy with more people being productive and fewer being involved in counting the productivity of others. The pain will be less harsh than our leadership would have us imagine and certainly less enduring. The financial systems collapse is not a food industry collapse.
I would estimate that less than 1% of our population is positioned to benefit from this bailout.
In order to benefit your inflated income has to be more than your inflated expense. Since paychecks are stagnant and higher unemployment will keep them that way or lower, your investment income has to make the difference. That means if you expected your investments to increase 8% annually you now have to achieve 8% plus the increased cost of living you are experiencing so you can maintain your living standard, and not fall behind while keeping your investment hopes alive. Or this bailout costs you. Most of you have not saved as much as you earn in a year, making this hope a longshot at best.
If you choose to work longer hours, a second job or sell dope to schoolkids to increase your income your standard of living has basically decreased, and the bailout costs you, now and longterm. Not bailing out the financials only costs you today, and only until interest paid is no longer a drain on your finances or our economy. It is this interest expense that is hurting you. And interest is going up if this bailout happens. Your taxes are not what is hurting you. Your taxes are less than they were, George W promised you they would be lower in order to get elected.
And while I'm on the subject of taxes, we have all heard that this bailout will cost $2300 for every man, woman and child in the United States. Half the men, women and children in the United States do not work, (some are retired and some are Tax Cheats) and will not pay, so your expense may be doubled. If tax cuts for the "rich" are extended or increased, and capital gains taxes are reduced, someone else will have to pay this portion of the bill also. Or it can be borrowed and paid over time. Plus interest to the banker, of course. And then someone is back on the path to prosperity. Is it you?
Alstry, you are now more optomistic than I am. I have long believed a bank collapse would be the best thing for America and force us off the debt treadmill. Unfortunately our opportunity has almost left the station.