Check this article out:
http://www.cnn.com/2008/POLITICS/09/29/miron.bailout/index.html
This gets into what my previous post was about. The government created the problem and so they are trying to create more government to fix it. At this point they may not have a choice ...
Monday, September 29, 2008
Economic Mess
Here is my fairly uneducated and unresearched, relatively simple explanation for the financial mess our country is in.
1. Government decides it is a good idea to encourage home ownership for the middle class and creates regulations and incentives to support it including Fannie and Freddie.
2. As a result of the incentives, banks begin making loans they should not make. Housing prices continue to climb so the loans don't look so risky.
3. We can all buy a house that is unaffordable for us, pay no money down, and pay a ridiculously low monthly payment. Most of us did it ... admit it.
4. Mortgage brokers and banks 'securitize' the loans by packaging them into investments like bonds. These bonds are rated/regulated by various agencies, but it is difficult to rate the risk of them because no one really knows what type of loans are in them.
5. The securities are rated 'very safe' by regulators because no one understands them, and housing prices always go up anyway, right? Investors trust the regulators and buy up the securities. This investment increases the amount of money available for institutions to lend, and so they do ... often with even more risky loans.
6. Global demand for oil and food, crazy government spending, and a weak dollar cause inflation. Things begin to cost more. Hello $4 gasoline!
7. The Federal Reserve raises interest rates to curb inflation. Economics 101. Higher interest rates give you less incentive to borrow money, and more incentive to save money. So you buy less which lowers demand and thereby lowers prices.
8. Uh-oh. All of those adjustable rate mortgages go up with the Fed's interest rate increase.
9. People can't pay their mortgage on the 'house they couldn't afford' and they tell the bank they can have their home back - foreclosure.
10. The monthly checks being sent to banks for mortgages each week decrease, and the banks instead get a bunch of homes they don't want. They now have less cash coming in, and a pile of homes that may or may not be worth what the people owed on them.
11. The banks need cash in order to give you money when you want to withdrawal it from your checking account so they try to get rid of their homes as soon as possible.
12. The housing market is affected by the huge number of foreclosed houses being sold on the cheap. Housing prices go down. Oh ya - and people generally don't have money to buy a home because everything costs so stinkin' much.
13. Now the bank situation worsens. The homes they own are worth less. People also see that their homes are worth less which leads to more foreclosures.
14. The banks run out of money. Too many homes, not enough money coming in the door. The banks have to sell all their assets (open loans, and homes) unless they are bailed out by the good old government. Coincidentally, banks also don't have money to lend to small or large business in other areas like technology, construction, etc.. The money is gone. This hurts everyone.
15. Those securities that were really just packaged home loans aren't looking so good. Their value plummets. Investment companies are hosed because they own way too many of them and no one wants them now. (Except the government ... haha)
16. The government has no choice but to save the day. Otherwise we would be in a really, really bad situation. They blame Wall Street of course, not themselves. We all cross our fingers and hope it works.
Interesting thought ... it was both excess regulation (the government going way too far to encourage home ownership) and not enough regulation (the government not being smart enough to know these investments were not accurately rated) that caused this problem.
Democrats charge that we did not have enough regulation and that government needs to be more involved. Which is fine, except that it was largely regulations to encourage home ownership that started everything in the first place. It was not long ago that politicians were touting the availability of 0% down, low interest home loans to the poor as a success story. Fannie and Freddie were largely Democratic party (for regulation) ideas.
Interesting thought #2 ... Everybody is mad that executives of failed companies make so much money, and they should be. But be honest, it didn't contribute to this problem. When you're counting in trillions, millions don't matter. To put it in perspective comparing 1 million to 1 trillion, is the same as comparing 1 dollar to 1 million. It is nothing.
OK, that was fun. Now off to work.
1. Government decides it is a good idea to encourage home ownership for the middle class and creates regulations and incentives to support it including Fannie and Freddie.
2. As a result of the incentives, banks begin making loans they should not make. Housing prices continue to climb so the loans don't look so risky.
3. We can all buy a house that is unaffordable for us, pay no money down, and pay a ridiculously low monthly payment. Most of us did it ... admit it.
4. Mortgage brokers and banks 'securitize' the loans by packaging them into investments like bonds. These bonds are rated/regulated by various agencies, but it is difficult to rate the risk of them because no one really knows what type of loans are in them.
5. The securities are rated 'very safe' by regulators because no one understands them, and housing prices always go up anyway, right? Investors trust the regulators and buy up the securities. This investment increases the amount of money available for institutions to lend, and so they do ... often with even more risky loans.
6. Global demand for oil and food, crazy government spending, and a weak dollar cause inflation. Things begin to cost more. Hello $4 gasoline!
7. The Federal Reserve raises interest rates to curb inflation. Economics 101. Higher interest rates give you less incentive to borrow money, and more incentive to save money. So you buy less which lowers demand and thereby lowers prices.
8. Uh-oh. All of those adjustable rate mortgages go up with the Fed's interest rate increase.
9. People can't pay their mortgage on the 'house they couldn't afford' and they tell the bank they can have their home back - foreclosure.
10. The monthly checks being sent to banks for mortgages each week decrease, and the banks instead get a bunch of homes they don't want. They now have less cash coming in, and a pile of homes that may or may not be worth what the people owed on them.
11. The banks need cash in order to give you money when you want to withdrawal it from your checking account so they try to get rid of their homes as soon as possible.
12. The housing market is affected by the huge number of foreclosed houses being sold on the cheap. Housing prices go down. Oh ya - and people generally don't have money to buy a home because everything costs so stinkin' much.
13. Now the bank situation worsens. The homes they own are worth less. People also see that their homes are worth less which leads to more foreclosures.
14. The banks run out of money. Too many homes, not enough money coming in the door. The banks have to sell all their assets (open loans, and homes) unless they are bailed out by the good old government. Coincidentally, banks also don't have money to lend to small or large business in other areas like technology, construction, etc.. The money is gone. This hurts everyone.
15. Those securities that were really just packaged home loans aren't looking so good. Their value plummets. Investment companies are hosed because they own way too many of them and no one wants them now. (Except the government ... haha)
16. The government has no choice but to save the day. Otherwise we would be in a really, really bad situation. They blame Wall Street of course, not themselves. We all cross our fingers and hope it works.
Interesting thought ... it was both excess regulation (the government going way too far to encourage home ownership) and not enough regulation (the government not being smart enough to know these investments were not accurately rated) that caused this problem.
Democrats charge that we did not have enough regulation and that government needs to be more involved. Which is fine, except that it was largely regulations to encourage home ownership that started everything in the first place. It was not long ago that politicians were touting the availability of 0% down, low interest home loans to the poor as a success story. Fannie and Freddie were largely Democratic party (for regulation) ideas.
Interesting thought #2 ... Everybody is mad that executives of failed companies make so much money, and they should be. But be honest, it didn't contribute to this problem. When you're counting in trillions, millions don't matter. To put it in perspective comparing 1 million to 1 trillion, is the same as comparing 1 dollar to 1 million. It is nothing.
OK, that was fun. Now off to work.
Thursday, September 18, 2008
Busy, Busy, Busy
Ok, so I've been busy lately and haven't had time to blog. Apparently, it's not high on my priority list. Here's a rundown on what's going on with me right now.
I'm working on a term paper entitled "An Integer Linear Programming Model for Optimizing the Staffing of Cell-site Subleasing Tasks". Now, that sounds interesting!! Please don't overwhelm me with requests for a copy. :)
I'm working on preparing for a 'Power over Porn' event at Westside. It will be on Saturday September 27th from 9-11 in the morning. I'll share my story and hopefully provide helpful insights to men regarding the problem of pornography. 47% of Christian families report it is a major problem in their home. That means you or the person sitting next to you in church on Sunday is struggling with it. It is ridiculous that we don't talk about it!! If you're interested, register online at Westsidefamilychurch.com.
I've been following politics. This race for the Presidency is incredibly intriguing to me. It's been a lot of fun following it and trying to understand all the issues.
I've been following Kstate football (not so good last night), and the Chiefs (really, really not so good last week). Well, so much for my taste in sports teams!
I hope everyone is doing well. Maybe one day, I'll give more consistent updates. I want to say something about taxes and politics, but I think I'll start another post for that.
I'm working on a term paper entitled "An Integer Linear Programming Model for Optimizing the Staffing of Cell-site Subleasing Tasks". Now, that sounds interesting!! Please don't overwhelm me with requests for a copy. :)
I'm working on preparing for a 'Power over Porn' event at Westside. It will be on Saturday September 27th from 9-11 in the morning. I'll share my story and hopefully provide helpful insights to men regarding the problem of pornography. 47% of Christian families report it is a major problem in their home. That means you or the person sitting next to you in church on Sunday is struggling with it. It is ridiculous that we don't talk about it!! If you're interested, register online at Westsidefamilychurch.com.
I've been following politics. This race for the Presidency is incredibly intriguing to me. It's been a lot of fun following it and trying to understand all the issues.
I've been following Kstate football (not so good last night), and the Chiefs (really, really not so good last week). Well, so much for my taste in sports teams!
I hope everyone is doing well. Maybe one day, I'll give more consistent updates. I want to say something about taxes and politics, but I think I'll start another post for that.
Obama, McCain, and Taxes
I am seriously leaning towards voting for McCain/Palin. I'm 95% sure that's the way I will go, but I am very frustrated with the misinformation out there about Obama's tax plan. I encourage anyone to go read about the plans to get the real information.
If you make less than $250,000 as a couple ($200,000 as an individual), your personal tax burden will go down more with Obama's plan than with McCain's. If you make more than that, you will be hosed with Obama's plan, but that's not my point ... because most of you don't. :)
I've heard from multiple people who are worried about Obama's tax ideas. There are legitimate concerns, but they are not related to an average person's personal income tax rising. Even if you are worried about capital gains, the capital gains increase Obama suggests doesn't apply unless you make over $250,000 as a couple. Most people's capital gains are in their retirement in which case they are taxed as personal income anyway.
Concerns about Obama's corporate tax plans, concerns about the economical effects of taxing the investments of the rich, and concerns about adding more complexity to the tax system are all valid. Arguments can be made that all of these will negatively affect the economy. But concern about your individual taxes going up is not valid! (Unless you are 'rich')
I have other concerns with Obama: mostly that he does not have a single actual important decision that he has made with specific positive results on his resume. He's voted a lot (sometimes 'present' ;) ), and helped write some laws, but mostly he has just run for President ... and done that well. I can't find any evidence showing that anything would be substantially different if Obama hadn't been around the last few years. He's never made a truly difficult decision impacting a city, state, or country. That is troubling to me.
On a side note: The 'no experience' thing is handy for him when running for President because no one can not criticize his decisions, just his ideas (which he can change rapidly if necessary - see NAFTA in the democratic primaries). He hasn't made any decisions so there are no decisions to criticize!
That's enough politics for now. I'm going to finish my lunch.
If you make less than $250,000 as a couple ($200,000 as an individual), your personal tax burden will go down more with Obama's plan than with McCain's. If you make more than that, you will be hosed with Obama's plan, but that's not my point ... because most of you don't. :)
I've heard from multiple people who are worried about Obama's tax ideas. There are legitimate concerns, but they are not related to an average person's personal income tax rising. Even if you are worried about capital gains, the capital gains increase Obama suggests doesn't apply unless you make over $250,000 as a couple. Most people's capital gains are in their retirement in which case they are taxed as personal income anyway.
Concerns about Obama's corporate tax plans, concerns about the economical effects of taxing the investments of the rich, and concerns about adding more complexity to the tax system are all valid. Arguments can be made that all of these will negatively affect the economy. But concern about your individual taxes going up is not valid! (Unless you are 'rich')
I have other concerns with Obama: mostly that he does not have a single actual important decision that he has made with specific positive results on his resume. He's voted a lot (sometimes 'present' ;) ), and helped write some laws, but mostly he has just run for President ... and done that well. I can't find any evidence showing that anything would be substantially different if Obama hadn't been around the last few years. He's never made a truly difficult decision impacting a city, state, or country. That is troubling to me.
On a side note: The 'no experience' thing is handy for him when running for President because no one can not criticize his decisions, just his ideas (which he can change rapidly if necessary - see NAFTA in the democratic primaries). He hasn't made any decisions so there are no decisions to criticize!
That's enough politics for now. I'm going to finish my lunch.
Tuesday, September 2, 2008
Pray for India
Several stories have been in the news recently that bring the plight of the Dalits or ‘untouchables’ to light. Dalit is the term for the peoples of India that fall outside of and below the caste system. Discrimination against Dalits has been outlawed for more than 50 years but continues in the day to day life of these peoples.
One story I read this morning concerns the flooding in northern India. Multiple other articles have described the fighting that is ongoing in the State of Orissa between Dalit Christians and Upper Caste Hindus. Many have been killed on both sides and in the process multiple orphanages and churches have been ransacked and burned. Orissa is one State up from where the OneLife orphange is located.
Pray for all the castes of India that they would find what it means to follow Jesus in their culture, and love their neighbor regardless of caste. Pray that the Dalit Christians would be examples of love in the midst of suffering.
Thanks for praying!
One story I read this morning concerns the flooding in northern India. Multiple other articles have described the fighting that is ongoing in the State of Orissa between Dalit Christians and Upper Caste Hindus. Many have been killed on both sides and in the process multiple orphanages and churches have been ransacked and burned. Orissa is one State up from where the OneLife orphange is located.
Pray for all the castes of India that they would find what it means to follow Jesus in their culture, and love their neighbor regardless of caste. Pray that the Dalit Christians would be examples of love in the midst of suffering.
Thanks for praying!
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