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RSSBurn Baby, Burn! (the economy)
Sep 26
Illinois, Legislation, Mount Vernon, Politics bailout, business, car, CNN, company, congress, credit, debt, depression, economy, fed, groceries, Home, house, money, mortgage, pity, recession, States, Street, United, Wall 3 Comments
There is a lot of hype over the economy these days. Some confirm that it’s horrible, some say it isn’t too bad (incorrect and in the minority).
Fortunately, the government seems to be thinking twice about propping-up the financial markets. Good for them, although I have faith that dollars will win and a bailout will happen. It really ticks me off that the government is willing to go into more debt to salvage private business. Sounds dangerously close to communism to me, but I’m only a high school graduate, what do I know.
I was going to avoid this discussion altogether until I came across this quote from CNN.com:
“Credit is the mother’s milk of the modern economy. The tighter the credit spigot closes, the worse the economy is going to be,” said Mark Zandi, chief economist of Moody’s Economy.com. “Businesses operate on credit. If they can’t raise money, then very soon they won’t be making payroll.”
I take issue with the whole bit, but especially ‘Businesses operate on credit.‘ If that is truly the case, then they are in far worse shape than anyone realizes. A company should not be depending on credit to make payroll.
Some small amount of debt/credit is usually unavoidable in our personal lives – house, car (perhaps), however too many people today put groceries and other essential items on credit. When essential items like payroll (business) and groceries (personal) are met with credit, you essentially point out that you do not have capital to meet your costs and are living (personal) or operating (business) beyond your means.
Living or operating beyond your means will only last for so long, then you will run out of credit and/or some event will occur that causes everything to crash down around you. Credit is based on the amount of money that you will earn. Eventually you will reach a cap of what lenders think you will earn, or perhaps your monthly house payment will go up.
My point is that extending yourself, in business or your personal life, with credit only serves to jail you into that debt for your future. Businesses and people alike are now facing this reality.
My hope is that things do not make it to depression-era levels, but if they do so be it. Em and I strive to stay out of debt unlike so many our age. It may not be fun, but we can and will survive as we have very little debt. I have little more than pity for those who lived over and above what they should have and are now paying the price.
Hopefully the government will feel the same way and let businesses fall flat on their faces. The companies made bad decisions. Now they must live with them. Our government is not present to meddle with capitalism, only to lightly regulate it.
Sep 26, 2008 @ 19:18:12
Very well said, I agree completely. However, here’s the rub… one of our political parties wants the tax payers to pay the tab for everyone’s housing. You see, over the last 40yrs one party has made it their cause to add several amendments to our Bill of Rights.
These include:
11) The right to a job
12) The right to own a house
13) The right to marry whomever you want, same sex is OK
14) The right to kill a fetus because it doesn’t fit your lifestyle
I could go on, but you get the idea. This whole mortgage mess started in 1977 with the CRA bill, signed by Carter. Then came Clinton and his push to ease lending laws to those near poverty. In every case, Democrats eased the lending laws and block all efforts for oversite.
And now they want to put themselves in charge of the oversite for a $1Trillion tax dollar bonanza to solve a mess they created.
Don’t think so, Sherlock….
Sep 30, 2008 @ 09:47:17
From AP, via MSNBC: In brief remarks at the White House, Bush warned that, “if our nation continues on this course, the economic damage will be painful and lasting.”
Maybe we need some pain to bring us out of this dreamworld so many live in today. Wake up from your Prozac coma and realize that everything isn’t always rosy and cheery.
You don’t need that iPod, you WANT it. Quit overextending yourself and I bet your life will be better. Maybe then you wouldn’t have to worry so much about how you are going to pay your monthly bills.
Feb 15, 2009 @ 16:14:09
Just to be very clear, Sir, the entire economy does run on credit – that's how money becomes money. That's right, when you go to get a loan for a car at your bank of choice they “create” the money. They don't have $7000 in capital sitting in their bank – they may have as little as a few hundred dollars. By writing your note they have written money into existance. You don't have to think about the implications very long before an “oh shit” moment hits you. For example: If all debts were paid in full then there would be no money in circulation. What this means is that the economy must continue to grow or it collapses – this is obviously not 'sustainable' – to use a buzzword. It appears as if this system has an automatic collapse mechanism built right in!