(POL) Stimulus'ed out yet? You ain't seen nothin yet...

[Flasch186]

Originally Posted by DaddyTorgo

allegedly. until paulson's cronies got him to change the focus of it to be "$700bn of money that you can't track or ask for reports on" so they could funnel it away

honestly I think his undermining of the TARP was borderline criminal.

[DaddyTorgo]

Originally Posted by Mizzou B-ball fan

I'd rather the economy break itself than allow those people to expedite a process that they're obviously unequipped to fix.

what if the economy breaking itself means you end up homeless and without any job or any life-savings living in a cardboard box under an interstate?

[DaddyTorgo]

Originally Posted by Flasch186

honestly I think his undermining of the TARP was criminal.

fixed that for you (deleted borderline)

guy is fucking scum

[Surtt]

Originally Posted by DaddyTorgo

allegedly. until paulson's cronies got him to change the focus of it to be "$700bn of money that you can't track or ask for reports on" so they could funnel it away

Yeah I know it didn't happen, but that was what we were told the money was going to be used for.

[DaddyTorgo]

Originally Posted by Surtt

Yeah I know it didn't happen, but that was what we were told the money was going to be used for.

Yep. and then it wasn't because Paulson is a criminal scumbag who decided it would be better used to give his banking-buddies untraceable handouts. and they brow-beat politicians on both sides of the aisle into going along with their plan, even as all of the ordinary people in the country were like "hey wait a second we can see where this leads."

If somebody were to actually follow through on that plan, it should start making a difference.

[Flasch186]

Bear in mind that I believe the TARP worked up until that very day.

[Mizzou B-ball fan]

Originally Posted by Flasch186

AHA! And now I see where the issue is. This is a political issue for you as opposed to a fiscal one. Welp, now I know where you come from and can rationalize how nutso you seem to be in this particular thread. It's not that youre nutso, its that youre partisan (again). Thank you for clarifying.

Once again, you fail to grasp the situation in any meaningful manner. I've been highly critical of Bush and his cabinet regarding the handling of this problem in the last 6 months he was in office. When I did that, you told me I was speaking the truth. But when I similarly call out the buffoons on the other side, I'm suddenly partisan. Sorry, that's not how it works. I choose to not lump people together based on party, but rather how poorly they perform their job. All of the people I mentioned haven't shown a lick of leadership in the events surrounding this mess. I'm not going to put Obama in that group just yet.

[JPhillips]

Any thoughts on this idea from the WSJ?

First, strip out all the toxic assets and put them into a holding tank inside the Treasury. Then inject $300 billion in fresh equity for both Citi and Bank of America. Create 10 billion new shares of each of the companies to replace the old ones. The book value of each share could be $30. Very quickly, a new board of directors should be created and a new management team hired. Here's the tricky part: Who owns the shares? Politics will kill a nationalized bank. So spin them out immediately.

Some $6 trillion in income taxes were paid by individuals in 2006, 2007 and 2008. On a pro-forma basis, send out those 10 billion shares of each bank to taxpayers. They paid for the recapitalization.

Each taxpayer would get about $100 worth of stock for each $1,000 of taxes paid. Of course, each taxpayer has the ability to sell these shares on the open market, maybe at $40, maybe $20, maybe $80. It depends on management, their vision, how much additional capital they are willing to raise, the dividend they declare, etc. Meanwhile, the toxic assets sitting inside the Treasury will have residual value and the proceeds from their eventual sale, I believe, will more than offset the capital injected. That would benefit all citizens, not the managements and shareholders who blew up the banking system in the first place.

[JPhillips]

This is strange. AFSCME is running commercials against foes of the stimulus including Eric Cantor. Cantor's office was asked for a reaction and they sent out this profanity laced video. WTF?

[Flasch186]

Originally Posted by Mizzou B-ball fan

Once again, you fail to grasp the situation in any meaningful manner. I've been highly critical of Bush and his cabinet regarding the handling of this problem in the last 6 months he was in office. When I did that, you told me I was speaking the truth. But when I similarly call out the buffoons on the other side, I'm suddenly partisan. Sorry, that's not how it works. I choose to not lump people together based on party, but rather how poorly they perform their job. All of the people I mentioned haven't shown a lick of leadership in the events surrounding this mess. I'm not going to put Obama in that group just yet.

I disagree entirely, for one, I believe the initial TARP worked (until Paulson harpooned it). You are targeting the Democratic led congress and in some cases even forget that it was a GOP led congress for a long long time in your previous posts. Your argument above has no clothes.

[Flasch186]

Originally Posted by JPhillips

This is strange. AFSCME is running commercials against foes of the stimulus including Eric Cantor. Cantor's office was asked for a reaction and they sent out this profanity laced video. WTF?

whoops.

[JPhillips]

Originally Posted by Flasch186

whoops.

It's not whoops, though. When asked about it they said to take it as their response. Cantor's office meant this to be their comment. When this is the level of public dialogue of House Republican leadership I don't see any possibility of working together.

[DaddyTorgo]

Originally Posted by JPhillips

Any thoughts on this idea from the WSJ?

This is what I mentioned up higher in my response to Flash's (I think it was) longer post as one of the potential things to be done once you strip the assets out.

Essentially what this would be is a TRC, which is what Flasch was talking about up above. I'm not quite sure how I feel about the issuing the stocks out to the public idea...it's certainly got that populist feel, but I haven't thought enough about whether it'd be good or bad.

I'd almost rather the government take preferred stocks or convertible bonds of these banks and give the money gained back to the government as an entity with an ironclad law stating that they will use the proceeds to pay down some of the massive deficit we are in

[Flasch186]

Originally Posted by JPhillips

It's not whoops, though. When asked about it they said to take it as their response. Cantor's office meant this to be their comment. When this is the level of public dialogue of House Republican leadership I don't see any possibility of working together.

It'll end up being explained as a whoops I'd think.

[sterlingice]

What the heck was that video? Then again Cantor's a tool. Unfortunately, I live in his district now

SI

[Ronnie Dobbs2]

I saw that video at least a year ago, I don't think it's a Cantor original.

[MO542]

I usually lurk around here but I’d thought I’d throw in my $0.02. I do have an MBA if that matters.

Let’s look at the first tarp fund.

Government allocates $700 billion to buy up bad assets which are estimated in the 2.0-3.9 trillion range. They say they will buy the assets for pennies on the dollar. Ok I can buy that… just one issue; mark to market accounting. Once the government buys up bad assets, the market price is set and all banks need to mark down their “bad assets” based on the market price. This places some banks in a position of liabilities greater than assets and ,by definition, insolvent. Now the government suspends mark to market accounting to keep banks from declaring bankruptcy. So now the treasury changes the strategies and starts buying other assets; I will not going into that but there are issues there too. The point is that they spent taxpayer’s dollars on a plan that had some bad unintended consequences.

Put aside the fact that the government just effectively wrote a check stockholders and any entity that holds unsecured debt; the whole moral hazard argument. The government basically proved that they didn’t understand the issue and congress will vote on any bill that is supposed to help because they are being warned of an impending financial Armageddon. The intent is there but the competence to analyze the plan is not. Fast forward to news of tarp the sequel and you can see why Wall Street in reacting negatively. The government has proven that they are incompetent when it comes to solving the problems because they don’t understand the issue.

In reality, legislation does not create wealth. They can print more money and give people incentive to create wealth, but it is the people/businesses that create wealth. This is not about political affiliation, the government as a whole has proven that they don’t think about ramifications of decisions they make and only have made the issue worse to date. So any plan that passes without the details is basically based on faith if you think it is going to work. And based on past performance, I think you can understand why people are skeptical.

[DaddyTorgo]

i agree MO542, but that doesn't lead to the conclusion that the best thing to do is to do nothing. That leads to the conclusion that the best thing to do is to lay out the details and STICK TO THEM. IMO that's the key, and that's what Paulson (the sleezebag) didn't do the first time.

[Fighter of Foo]

Originally Posted by DaddyTorgo

i agree MO542, but that doesn't lead to the conclusion that the best thing to do is to do nothing. That leads to the conclusion that the best thing to do is to lay out the details and STICK TO THEM. IMO that's the key, and that's what Paulson (the sleezebag) didn't do the first time.

So if Paulson said, "This plan is designed to fleece the American taxpayers and move as much wealth as possible toward the controlling stakeholders of our country's finance and banking institutions," and then outlined exactly how that would happen, you'd be OK with it?

[sterlingice]

Originally Posted by Fighter of Foo

So if Paulson said, "This plan is designed to fleece the American taxpayers and move as much wealth as possible toward the controlling stakeholders of our country's finance and banking institutions," and then outlined exactly how that would happen, you'd be OK with it?

Wait, so that didn't happen and it was just all a bad dream?

SI

[JPhillips]

Originally Posted by Ronnie Dobbs2

I saw that video at least a year ago, I don't think it's a Cantor original.

I don't think it's a Cantor original, just that his office thought it was his best response. I hesitate to think what a shit storm there would be if Steny Hoyer sent out something simialr about the NRA or Focus on the Family.

[flere-imsaho]

Originally Posted by sterlingice

Again, my problem with this is that without fixing the root cause of the root cause- the lack of regulation that got us here- what's to keep banks from tomorrow going out and buying up more crappy short term assets?

Oh I agree, but I view re-doing the regulatory structure as a separate, though parallel, issue.

Originally Posted by Surtt

I though this is what the 1st bailout was basically going to do.

It was, until it got too complex (see MO542's post) and Paulson thought it would just be easier to inject cash directly into banks and see if they'd start lending, which was (charitably to Paulson) a measure more directed at the effects of the problem, not the cause.


MO542: I see your point about what happened to Paulson, but I don't agree with it. You're basically arguing that the TARP legislation painted Treasury into a corner because of the realities of some basic accounting rules. I'm arguing that in a time of national crisis the government (in this case the Executive) can go ahead and ignore some of those rules (i.e. whether or not a bank is technically insolvent prior to being relieved of its bad debts) for other ends. In fact Treasury already did this (with different rules) when selling off various banks to JPM Chase, Citi and BofA. There's precedent.

Fact is, Paulson took a look at what he had and decided it would be easier to give the banks carte blanche money and hope for the best. Since most were his old Wall Street cronies, he had reason to trust them, or at least look out for their interests. Clearly, hoping for the best, and hoping for these guys, who had already made colossal mistakes, didn't work.


And let's be honest, while most of these banks may not be "technically" insolvent, currently, because they still don't know the extent of their bad debts (though if they're clamoring for a suspension of mark-to-market I'll bet they have a good idea), in the eyes of most everyone else they're all very close to being really insolvent. And that, my friends, is why the financial system is still in collapse - because it's still the case that no one trusts it. You have to fix that, and by any means necessary.

[Flasch186]

Originally Posted by MO542

I usually lurk around here but I’d thought I’d throw in my $0.02. I do have an MBA if that matters.

Let’s look at the first tarp fund.

Government allocates $700 billion to buy up bad assets which are estimated in the 2.0-3.9 trillion range. They say they will buy the assets for pennies on the dollar. Ok I can buy that… just one issue; mark to market accounting. Once the government buys up bad assets, the market price is set and all banks need to mark down their “bad assets” based on the market price. This places some banks in a position of liabilities greater than assets and ,by definition, insolvent. Now the government suspends mark to market accounting to keep banks from declaring bankruptcy. So now the treasury changes the strategies and starts buying other assets; I will not going into that but there are issues there too. The point is that they spent taxpayer’s dollars on a plan that had some bad unintended consequences.

Put aside the fact that the government just effectively wrote a check stockholders and any entity that holds unsecured debt; the whole moral hazard argument. The government basically proved that they didn’t understand the issue and congress will vote on any bill that is supposed to help because they are being warned of an impending financial Armageddon. The intent is there but the competence to analyze the plan is not. Fast forward to news of tarp the sequel and you can see why Wall Street in reacting negatively. The government has proven that they are incompetent when it comes to solving the problems because they don’t understand the issue.

In reality, legislation does not create wealth. They can print more money and give people incentive to create wealth, but it is the people/businesses that create wealth. This is not about political affiliation, the government as a whole has proven that they don’t think about ramifications of decisions they make and only have made the issue worse to date. So any plan that passes without the details is basically based on faith if you think it is going to work. And based on past performance, I think you can understand why people are skeptical.

somewhat agreed but I also have been arguing for a temporary suspension of MtM accounting.

[gstelmack]

Originally Posted by flere-imsaho

And that, my friends, is why the financial system is still in collapse - because it's still the case that no one trusts it. You have to fix that, and by any means necessary.

Yup, which is why all of this is such a mess. They need to restore confidence (that's what causes a run like mentioned above), and no one is making any effort. This is why I've talked about how the media has handled this in past threads: no matter what the financial news is, it's bad, and the closest you see to good news gets buried (e.g. info that household debt had decreased for the first time in forever got buried on page 3). Since that first bailout was just seen as padding the wealthy, they need to do a much better job of selling actual solutions than they are right now.

[MO542]

Originally Posted by flere-imsaho

MO542: I see your point about what happened to Paulson, but I don't agree with it. You're basically arguing that the TARP legislation painted Treasury into a corner because of the realities of some basic accounting rules. I'm arguing that in a time of national crisis the government (in this case the Executive) can go ahead and ignore some of those rules (i.e. whether or not a bank is technically insolvent prior to being relieved of its bad debts) for other ends. In fact Treasury already did this (with different rules) when selling off various banks to JPM Chase, Citi and BofA. There's precedent.

Fact is, Paulson took a look at what he had and decided it would be easier to give the banks carte blanche money and hope for the best. Since most were his old Wall Street cronies, he had reason to trust them, or at least look out for their interests. Clearly, hoping for the best, and hoping for these guys, who had already made colossal mistakes, didn't work.


And let's be honest, while most of these banks may not be "technically" insolvent, currently, because they still don't know the extent of their bad debts (though if they're clamoring for a suspension of mark-to-market I'll bet they have a good idea), in the eyes of most everyone else they're all very close to being really insolvent. And that, my friends, is why the financial system is still in collapse - because it's still the case that no one trusts it. You have to fix that, and by any means necessary.

Just to be clear, I was using the TARP legislation to point out that the plan was not thought through and succumbed to the law of unintended consequences. Thus, the reaction on Wall Street about TARP 2 and questioning of the government’s competence to resolve the issue.

[flere-imsaho]

OK, I see - thanks for the clarification.

Although I'm not sure if Wall Street is the best entity to be criticizing the government's competence.

[MO542]

Originally Posted by flere-imsaho

OK, I see - thanks for the clarification.

Although I'm not sure if Wall Street is the best entity to be criticizing the government's competence.

Oh I think that Wall Street is very competent, they are just greedy and influential too.

[Fighter of Foo]

Originally Posted by MO542

Just to be clear, I was using the TARP legislation to point out that the plan was not thought through and succumbed to the law of unintended consequences. Thus, the reaction on Wall Street about TARP 2 and questioning of the government’s competence to resolve the issue.

Oh, the consequences were intended alright. Only for us, not them.

[Arles]

Originally Posted by sterlingice

This is why the flu analogy doesn't work:



If 1990 was a cold and 2001 was a flu- what's this?

SI

I'm sure we had the same number of jobs in 1990 that we did in 2001 and that we do now. This needs to be a % to have any value.

[Big Fo]

Well there's clearly some difference. The population hasn't doubled since 1990 ffs.

[Flasch186]

hmmm, not a bad question for Arles to pose.

[JPhillips]

Originally Posted by Arles

I'm sure we had the same number of jobs in 1990 that we did in 2001 and that we do now. This needs to be a % to have any value.

This better be worth equipment upgrades in GLB!

[Flasch186]

ouch, i hope that drop turns around faster rather than tapering off {eek}

[JonInMiddleGA]

Kind of tough to decide which thread to pose this semi-rhetorical question in, there's several where it could have gone I guess since the key phrase has made multiple appearances. I'll throw it in this one since it probably lies along the lines of a dead horse, which is what this thread sort of started from anyway.

I've seen the phrase "in shambles" used more than once to describe the stock market in particular lately. I haven't yet looked up the exact definition of the phrase but to me I feel like "in a state of disrepair" would be a pretty good explanation of what it implies. What crossed my mind was this at least partially rhetorical question: if the market is actually correcting inflated prices or even just moving toward current realistic values for various stocks then wouldn't that be more like a "case of repair" than disrepair?

In the end, isn't stock supposed to be an investment in a company with the hope of recouping the investment + a portion of the profit you anticipate the company making? And if you either don't believe there's a profit forthcoming or that there's better ROI available elsewhere or that the risk outweighs the likely benefits, then isn't collapsing prices pretty much what should happen?

I guess what I'm driving at here is that, for all the flurry of concern, it seems to me that the stock market is behaving in a fairly logical fashion and largely as it was primarily designed to do. More of a "harsh reality check" than "a shambles" is kind of where I'm heading with that.

Okay experts, 'splain to me why that isn't accurate. But please try not to base everything on side effects or unintended consequences or how much more complex the market has become than the simple individuals buying shares of companies. I know plenty of that already and I'm not arguing that any of those things aren't involved here or that they aren't at least worthy of concern. I'm posting this notion in a much narrower context & was mostly interested in how it stands up in that light alone for the time being.

Hopefully I at least managed to articulate it well enough so you can understand what the heck I'm trying to say, never mind agreeing or disagreeing. I hate it when I'm not quite satisfied with getting what's in my head across to the intended audience the way I meant it.

[Flasch186]

yes however, like MBBF's critical mistake, you cant take one market and draw a huge conclusion from it although the news would like to make you think so. There are a ton of markets that need to be put together on a pallet to figure out what is going on. When you do this things get more muddy but also more clear IMO.

[BishopMVP]

Originally Posted by JPhillips

Any thoughts on this idea from the WSJ?

Originally Posted by WSJ

First, strip out all the toxic assets and put them into a holding tank inside the Treasury. Then inject $300 billion in fresh equity for both Citi and Bank of America. Create 10 billion new shares of each of the companies to replace the old ones. The book value of each share could be $30. Very quickly, a new board of directors should be created and a new management team hired. Here's the tricky part: Who owns the shares? Politics will kill a nationalized bank. So spin them out immediately.

Some $6 trillion in income taxes were paid by individuals in 2006, 2007 and 2008. On a pro-forma basis, send out those 10 billion shares of each bank to taxpayers. They paid for the recapitalization.

Each taxpayer would get about $100 worth of stock for each $1,000 of taxes paid. Of course, each taxpayer has the ability to sell these shares on the open market, maybe at $40, maybe $20, maybe $80. It depends on management, their vision, how much additional capital they are willing to raise, the dividend they declare, etc. Meanwhile, the toxic assets sitting inside the Treasury will have residual value and the proceeds from their eventual sale, I believe, will more than offset the capital injected. That would benefit all citizens, not the managements and shareholders who blew up the banking system in the first place.

That sounds exactly like the voucher system that was tried to transition the Soviet Union/Russian state-controlled industries to capitalist models. Between a majority of the public being both unaware of how their vouchers could be accurately valued, little trust they would ever see money and impatience to rectify short-term situations they ended up being bought up by a bunch of ruthless and/or previously monied interests. Then, combined with allegations of political corruption in the eventual auctioning off of the companies and arguments that many of the "impartial" Harvard-based economists were in fact deeply connected to and invested in many of the asset classes they were supposed to give impartial advice on, you ended up with a small class of oligarchs who were either politically connected, previously wealthy or connected to organized crime and Chechen mobsters, the only common thread being ruthlessness. Your Berezovsky's, Abramovich's, Gusinsky's and Khodorkovsky's all came out of this controlling a much larger percentage of private wealth than anyone had before. Of course, who were the economists in charge of the program? While Shleifer gets most the blame, Larry Summers played a large role as well. Brad Delong, another favorite economist of the Keynesian side, and one of the strongest proponents of the stimuli packages, also collaborated on most of their papers.

[Swaggs]

Originally Posted by JonInMiddleGA

Kind of tough to decide which thread to pose this semi-rhetorical question in, there's several where it could have gone I guess since the key phrase has made multiple appearances. I'll throw it in this one since it probably lies along the lines of a dead horse, which is what this thread sort of started from anyway.

I've seen the phrase "in shambles" used more than once to describe the stock market in particular lately. I haven't yet looked up the exact definition of the phrase but to me I feel like "in a state of disrepair" would be a pretty good explanation of what it implies. What crossed my mind was this at least partially rhetorical question: if the market is actually correcting inflated prices or even just moving toward current realistic values for various stocks then wouldn't that be more like a "case of repair" than disrepair?

In the end, isn't stock supposed to be an investment in a company with the hope of recouping the investment + a portion of the profit you anticipate the company making? And if you either don't believe there's a profit forthcoming or that there's better ROI available elsewhere or that the risk outweighs the likely benefits, then isn't collapsing prices pretty much what should happen?

I guess what I'm driving at here is that, for all the flurry of concern, it seems to me that the stock market is behaving in a fairly logical fashion and largely as it was primarily designed to do. More of a "harsh reality check" than "a shambles" is kind of where I'm heading with that.

Okay experts, 'splain to me why that isn't accurate. But please try not to base everything on side effects or unintended consequences or how much more complex the market has become than the simple individuals buying shares of companies. I know plenty of that already and I'm not arguing that any of those things aren't involved here or that they aren't at least worthy of concern. I'm posting this notion in a much narrower context & was mostly interested in how it stands up in that light alone for the time being.

Hopefully I at least managed to articulate it well enough so you can understand what the heck I'm trying to say, never mind agreeing or disagreeing. I hate it when I'm not quite satisfied with getting what's in my head across to the intended audience the way I meant it.

I had this discussion/argument with my Dad earlier today.

People play the stock market, knowing that it is a risk/reward-type of investment, but with the thought that it has geniuinely provides a 6-10% growth. If you do not want risk, you can open a savings account or buy bonds or CDs at ~.5%-3% that are FDIC insured. Smaller reward, but essentially no risk.

While I am sympathetic to folks that have lost a lot like the lifetime Enron employees and folks nearing retirement whose 401Ks have taken a dive, I don't feel terribly bad for folks that gave their money to investors who boasted ~20% growth, enjoyed it while it was paying, and are now upset that they lost it all.

[SteveMax58]

@ JiMGa (in the interest of not having a page of quotes)

I used the phrase "in shambles" in another thread to describe the stock market. But I really only mean that in the sense that...at some point there was enough capital investment in companies to garner a 1400+ DJIA at some point. The vast majority of the 1400 to ~8000 that we're hovering around was pulled from the market within a very short period of time. The "hope" would be that some degree of that investment capital would come back to the market and allow companies to feel compelled to invest, hire, etc.

Now...I'm no economist nor anybody worth listening to on such matters...but that is what I mean by shambles. While I realize that stock prices and the DJIA are indicators of many things, the overall DJIA also indicates the amount of investment capital that is in the market. When that drops significantly in a few weeks...it doesnt just vanish, it is moved somewhere else(somewhere less useful to business as a whole). Or at least that's my "little kid" theory.

[Buccaneer]

Let me ask a dumb question. For many of us (that are gainfully employed), what has really changed? I understand the value of 401k and stock options (or the lack thereof), but were those really short-term assets or will they recover given time? I also understand about home equity going down or needing to sell your home, but one shouldn't have been living off an equity LOC, I don't think. I also understand about job uncertainties, but I think job security had been a quaint concept.

My question is the difference between now and, say, 18 months ago. I don't think taxes are higher, gas prices certainly have come down, credit card interest rates seems to about the same, food prices are a little higher, incomes probably froze but don't think they took a cut, what else about everyday life?

It just seems that we are just in a bad mood and don't feel like doing shit? As I said before, part of me do like the conservation efforts related to being less of a consumer. 18 months ago I got both of our cars paid off and no interest in buying new ones (same thing for upgrading electronics and stuff). Still don't but somehow I'm being blamed for not being doing my part? I look at my credit card statement and my credit limit is still there, they haven't taken that away. I think I could go to my credit union and take out a loan, if I needed to. So I guess I could still spend but really don't need to. So what's the difference with others that are gainfully employed that's causing such problems that appear to be obvious?

Sorry for not making this clear, I'm trying to ask a question that I don't know how to phrase. I think it comes down to a perception that the economy depended upon all of us to spend beyond our means in order to survive?

[sterlingice]

Originally Posted by JonInMiddleGA

(massive snip)
I guess what I'm driving at here is that, for all the flurry of concern, it seems to me that the stock market is behaving in a fairly logical fashion and largely as it was primarily designed to do. More of a "harsh reality check" than "a shambles" is kind of where I'm heading with that.

I don't care about what the stock market is doing. I mean, I do a little as my future retirement has gone from not much to a meager pittance. But, realistically, I'm more than young enough to not really have to worry about that. Hell, so many people (wrongly) don't even start thinking about it until 40 or later and I'm already working on it at 29 and have been for a few years.

I've even decried it on a couple of instances, going so far as to say it looks a lot like a giant ponzi scheme where those who can game it continue to get rich off of those of us who are just in it for the long haul and the (in theory) intended goal of staying ahead of inflation when saving for retirement. In short, I don't really care what the stock market is doing (for the most part).

I think you're dead on that this is a correction where those who gamed the system made money by artificially inflating prices and now are making money on the way down by shorting it, siphoning off money from everyone else's retirement money and the dolts who we or our companies pay to invest it. My big concern about this situation is job loss and, in a broader sense, continued separation of the rich and poor as I think that's bad for our country on the whole.

SI

[SteveMax58]

Originally Posted by Buccaneer

Sorry for not making this clear, I'm trying to ask a question that I don't know how to phrase. I think it comes down to a perception that the economy depended upon all of us to spend beyond our means in order to survive?

I'm in a similar boat, well sort of anyway. I havent necessarily cut back on a lot of things, especially prior to the rash of job losses. But I also wasnt highly leveraged with CC debt, car loans, etc. I suspect too many people overextended themselves and now we are at the point of finding real "value" for many products and services.

[JonInMiddleGA]

Originally Posted by SteveMax58

I used the phrase "in shambles" in another thread to describe the stock market.

FTR, just to be clear, I don't really have a problem with the phrase insomuch as it just caused me to really think about the situation in a particular way. I'm not even sure off the top of my head whether it was your usage I saw or not, it was just a word that I felt like I had either read or heard several times in recent weeks.

[sterlingice]

Originally Posted by Buccaneer

Let me ask a dumb question. For many of us (that are gainfully employed), what has really changed? I understand the value of 401k and stock options (or the lack thereof), but were those really short-term assets or will they recover given time? I also understand about home equity going down or needing to sell your home, but one shouldn't have been living off an equity LOC, I don't think. I also understand about job uncertainties, but I think job security had been a quaint concept.

My question is the difference between now and, say, 18 months ago. I don't think taxes are higher, gas prices certainly have come down, credit card interest rates seems to about the same, food prices are a little higher, incomes probably froze but don't think they took a cut, what else about everyday life?

It just seems that we are just in a bad mood and don't feel like doing shit? As I said before, part of me do like the conservation efforts related to being less of a consumer. 18 months ago I got both of our cars paid off and no interest in buying new ones (same thing for upgrading electronics and stuff). Still don't but somehow I'm being blamed for not being doing my part? I look at my credit card statement and my credit limit is still there, they haven't taken that away. I think I could go to my credit union and take out a loan, if I needed to. So I guess I could still spend but really don't need to. So what's the difference with others that are gainfully employed that's causing such problems that appear to be obvious?

Sorry for not making this clear, I'm trying to ask a question that I don't know how to phrase. I think it comes down to a perception that the economy depended upon all of us to spend beyond our means in order to survive?

(Quick question as I don't have the data at my fingertips: are gas prices really that much lower than, say 24- I pick 24 as 18 would be in the middle of summer- months ago? I would say they are on par with 2 February's ago, give or take maybe 20 cents.)

I think the bottom paragraph of yours is huge, but we'll get back to that.

If you've done "everything right", you've probably lost a year or two's paycheck in the value of your home. If you're the median person, your income hasn't gone up- it's actually gone down, never mind adjusted for inflation, which, admittedly is low but still there. If you wanted to buy a new car, for instance, you might or might not be able to get financing unless you're the cream of the crop, but you could just make yours last another year with a decent outlay of cash that would have been better spent on a new car.

So, in the end, you've lost about a third of your retirement and a third of the value of your home. So that means you'll be working an extra few years before retirement. Sucks, but not the end of the world. Problem is- that's the people who have done everything right and have been lucky.

I'm with you on this Bucc with how I personally live. My wife and I lived in a pretty crappy place for the last 8 years (well, she was there 5)- I paid between $420 and $460 a month rent for a 2 bedroom so you can imagine how it is. I had $60K in debt about 5 years ago between student loans, a car loan, and some credit card debt- that's down to a paid ahead $6K in student loan debt (next payment due sometime in 2014). That would even be gone except we've been wanting to stash away some money in case things get really ugly. But even if we did that, we'd still have around $20K to put towards a down payment on a house, which we've been considering, and we wouldn't be trying to go for something outside our means because we're just not like that. Both of our cars are paid off and the only credit card I've had issues with is one that was cancelled due to "lack of activity".

So, in short- yeah, I've done things the right way- I turned a bunch of post-school debt into savings by living well within my means and, in general, not being stupid with my money even as my wife and I don't exactly have high paying jobs. And we're doing just fine. That said, if one of us lost our job- we'd have a cushion for a while- but how long is a while? If both of us lost our jobs- well... then a while becomes much shorter. And there's a reasonable danger of that with pretty much anyone in this economy now.

The problem is that we've built our economy on that excess spending so a lot of those jobs are evaporating now. That would be acceptable except for the rate at which its happening. Because at this rate, with those jobs go a lot of other jobs. Hell, I think a lot of companies are using this year as an excuse to get "leaner" and cutting jobs even when they don't really need to just to make the bottom line look better. I know that who I work for is laying off large numbers and we had record profits last year, even Q4.

We've already had quite a few "I lost my job" posts on the message board and we aren't there yet. How many of us would be on great financial ground if we lost our job? How many of us would be rehired when you hear stories about 1000 people showing up for 35 firefighter jobs. Or the story a coworker, who just got his job in October after working at a local grocery store for nearly a year to make ends meet. He was telling some of us about a time in August, before things really fell apart- he knew a guy who was in HR for a company and he applied for an IT job (he's in networking with over 20 years of IT experience) advertised at $35 an hour but over 50 people were applying for it and it ended up going to someone overly qualified for $19 an hour.

So, in short- it all comes down to jobs in my mind, once again. If you're one of the lucky ones who isn't asked for a pay cut or given a pink slip, it's probably in your benefit right now as we've run into a spot of deflation. However, I do mean lucky because no matter how good you are, if someone higher up wants to reorg your department or cut 25% of the workforce or cut down on management staff and replace yours with a non-favorable one, your're gone no matter how good you are at your job and/or how well liked. And getting one back right now is almost impossible as no one is hiring- either frozen or going the other way.

EDIT: And this doesn't even scratch the surface of people who over leveraged themselves. So, for instance, after they declare bankruptcy or just stop paying- reasonable companies and places expecting payment (say, utilities, landlords, etc)- all of those people who also "did things the right way" in providing a reasonable service for a "reasonable" price (I use the quotes for anyone who wants to complain about how much electricity or cable or whatever cost) and expecting payment- those people and companies suffer and are subsequently unable to make their payments and we get a vicious cycle from that.

SI

[JonInMiddleGA]

Originally Posted by Buccaneer

Let me ask a dumb question. For many of us (that are gainfully employed), what has really changed?

Maybe I can shed some light, or add an in between perspective on that or something.

We've watched as "gainful employment" became a very loose description of what we're doing. As businesses dry up & the economy in general tanks so, traditionally, does the willingness of many businesses to advertise either at all or at even previous reasonable levels.

Our CC debt is pretty minimal, our two major debts are in mortgages (that damnable house that doesn't seem like it'll ever sell being the second besides our primary residence). Our retirement is pretty much wiped out at this point, same for our savings which were pretty substantial

I think job security had been a quaint concept.

"Job" maybe, but for us it's more like "industry" security. The amount of cutbacks in the agency business and in advertising in general is about (not quite) the worst I've seen in 20+ years. And I'm not knocking that, most of those cuts are sound business decisions IMO, but it doesn't change the volume of the cutbacks either. I'm a pessimist by nature, very much so, but I'd have been hard pressed to imagine it getting quite as bad as it seems to be right now, certainly not as quickly as it fell apart.

My question is the difference between now and, say, 18 months ago. I don't think taxes are higher, gas prices certainly have come down, credit card interest rates seems to about the same, food prices are a little higher, incomes probably froze but don't think they took a cut, what else about everyday life?

Our income definitely hasn't frozen, it's close to zeroing out. Taxes here are on track to rising, from additional sales taxes to the prospective loss of an ongoing property tax rollback from the state (may get saved for another year).

Food prices are quite a bit higher locally from two years ago, that's anecdotal but it's my personal situation.

Sorry for not making this clear, I'm trying to ask a question that I don't know how to phrase. I think it comes down to a perception that the economy depended upon all of us to spend beyond our means in order to survive?

I think I kind of get what you're thinking about here, and I'd say that you're not far from wrong in simplest terms. If available consumer credit crashes then an insufficient number of consumer goods are being purchased to maintain the means of a lot of people. And that seems to be a nasty spiral to get into it. I'm of the general opinion that it was a scenario that had to crash eventually, I'm just sorry I lived long enough to have to live through it.

[Buccaneer]

Thanks SI, that makes a lot of sense to me. I do know that I am fortunate, working essentially in a somewhat recession-proof industry (utilities, not IT) and that my retirement fund is still fully intact. Also, wouldn't the housing value depreciation depend upon where you live? For example, our area did not experience the ridiculous housing value escalation that we saw in Florida and other parts of the country. So I don't think our value went down that much (I did read about 5-10%) but according to my recent property tax statement, it actually went up a little from last year (go figure).

I believe this would be a terrible time to lose ones job or to be forced to sell a house, and I can fully understand how that would cause anxiety and to prepare for the worst (i.e., not buy things). Maybe I was just reacting to the 80% of us that are not working minimum wage jobs and a good percentage of those that did not go crazy on debts. I think maybe we are all being catious and that caused the bubble to burst.

[Buccaneer]

Thanks to Jon as well. I think "nasty spiral" is a good term, along with a domino effect.

The other side to the question is how all that crap the federal govt wants to do will effect me? I mean, I don't think they'll make part of my debt disappear, will they? Will they be reducing my FICA amount? They will probably make it easier for first-time home buyers or to buy a car but neither applies to me. Perhaps it's the trickle down effect of making my job or industry (and PERA) a little more healthier? It got to be something tangible since it's such a big deal.

[sterlingice]

Originally Posted by Buccaneer

Thanks SI, that makes a lot of sense to me. I do know that I am fortunate, working essentially in a somewhat recession-proof industry (utilities, not IT) and that my retirement fund is still fully intact. Also, wouldn't the housing value depreciation depend upon where you live? For example, our area did not experience the ridiculous housing value escalation that we saw in Florida and other parts of the country. So I don't think our value went down that much (I did read about 5-10%) but according to my recent property tax statement, it actually went up a little from last year (go figure).

With regards to real estate- that was mostly true in Kansas as well. Mostly the same in Richmond, too, from what I can gather. Most homes lost 10-15% but the ones that lost more were the ones in the richer neighborhoods.

I believe this would be a terrible time to lose ones job or to be forced to sell a house, and I can fully understand how that would cause anxiety and to prepare for the worst (i.e., not buy things). Maybe I was just reacting to the 80% of us that are not working minimum wage jobs and a good percentage of those that did not go crazy on debts. I think maybe we are all being catious and that caused the bubble to burst.

I think the problem is that we're mostly a group of people who are fairly responsible (exceptions, of course) so maybe we're mostly isolated. Also, the cautious people didn't cause the bubble to burst. The inability of the irresponsible to no longer get credit from irresponsible lenders was probably the biggest thing that caused the bubble to burst.

The problem is that the rest of us are all on the same damn ship so even if we were all sleeping, reading, or playing shuffleboard like we were supposed to- the idiots playing with the power drill at the bottom of the boat can still screw it up for us all.

SI

[Anthony]

we paid off our car sometime last year. unfortunately its time for us to get a bigger car (or to be precise, an SUV). i don't want to, but i sorta have to. i only wish we would've just opted for a bigger car when we made our purchase so that way we would've had a fully paid off and bigger car. we just don't feel safe driving around in a Hyundai Elantra with a baby in the backseat, and our current arrangements call for us to drive A LOT. we simply need a bigger car. this is not the time to add another $300 to our monthly bills, although it is a great time to be buying an SUV. just when i felt we were getting on top of our bills we decide we need a new car. our only saving grace is our income tax return will be sufficient enough to provide a good 2-3 months of security to us in the event that one of us loses our jobs. you may say "2-3 months isn't enough", but that's better than the pittance we currently have. some security is better than no security. we're fortunate that we're both valued in our respective companies so if heads have to roll ours are not likely to be the first ones or even the 3rd ones.

i wish this nonsense would've happened while i was in high school or even college, when i was living at home with no expenses. the fact that this happened now as i'm an adult with a mortgage and a baby angers me immensely. i missed out on the roaring '90's and have experienced nothing but roadblocks thanks to the recession in both the early and later part of this decade. i can't wait for 2010 to come along. this decade will be written off as one to quickly forget.

[Buccaneer]

playing shuffleboard like we were supposed to

I saw that.

i missed out on the roaring '90

Except for the early (recession) and later part (dot bust).

[sterlingice]

Originally Posted by Anthony

i wish this nonsense would've happened while i was in high school or even college, when i was living at home with no expenses. the fact that this happened now as i'm an adult with a mortgage and a baby angers me immensely. i missed out on the roaring '90's and have experienced nothing but roadblocks thanks to the recession in both the early and later part of this decade. i can't wait for 2010 to come along. this decade will be written off as one to quickly forget.

Man, I hear that. When I was going to college in the late 90s, it seemed like they were tossing jobs at people left and right. I showed up my freshman year and I know a couple of sophomores who didn't even bother to finish school and went off and got 80-150K per year jobs in Silicon Valley. The next year, my sophomore, lots of paid internships for Junions. Junior year- they were still hiring seniors but only unpaid internships for the rest of us. Then the bubble burst in IT and it was all over and it's still never recovered entirely as there are still a lot of nitwits who want to get into this field for the mythical money that's not really there.

SI