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“A portent of stormy weather ahead…”
It was the spring of 2007 when I started to notice something funny in the world. At the time I had a buddy who owned a mortgage company and we were talking about a consulting gig so I started to do dig into the industry. What I uncovered made me very nervous. I began to make ominous predictions but I could have never predicted what happened last week.
Most Americans have no clue about what happened last week. Ben Bernanke, who earlier this year was predicting an economic turnaround by now, looks like walking death. I can’t understand why. He and Hank Paulson now - unconstitutionally and with the full backing of an inept Congress and President - have full authority over the economy and can decide who will be saved by a tax payer bailout and who will fail. Now that’s power!
What happens next? Here’s my best guess:
In October the stock market will crash as the truth about what has happened comes more fully to light. My guess is that it will come in the first or second full week of the month. The effects of this crash will not be felt in full until the late winter or early spring of 2009.
What does this mean for you?
Everything is intertwined. The financial system is an ecosystem and operates much like the natural world. Whenever man tries to intervene in natural processes, as we’re seeing now, markets react violently. Think of it like this: you, your family, your neighbors, your business, etc were just thrown into a massive washing machine controlled only by Ben and Hank with an incredibly dirty load of laundry that will never get clean. Good luck getting out.
Starting this winter, unemployment will rise as the financial industries ”correction” is felt in full. Paranoid business owners and CEO’s will begin hiring freezes and layoffs (many already have). When people are unemployed they can’t pay for things like mortgages and credit card balances. They begin to default. These defaults add to the pressure on the financial system. The government begins carrying more burden it can’t afford. The Fed prints more cash. We enter an excellerated phase of stagflation. Printing more money to pay for the problems leads to further devaluing of the Peso Dollar turning us into a third world country.
Regardless of employment status, people will simply stop buying things. They just can’t afford it - most Americans don’t have disposable income to spend as it is now. America is broke and getting broker everyday. The squeeze is on all classes. As the snowball continues to roll down hill it gets bigger and bigger and harder to stop.
More industries will seek out Federal-backed bail outs. The auto industry is already in line for there’s. Where does that end? What about interest rates? Forget about it. Even if the rates dropped below 5% there aren’t a lot of people out there who could qualify for a refi or purchase because they either have bad credit or they’re underwater on their equity. Last week rates hit 5.5% for a 30 year fixed. I have a buddy in a mortgage company who says the phone is ringing off the hook. The problem: 9 out of 10 people can’t qualify. That’s today. That’s right now. Oh and we haven’t even gotten into the Alt A defaults yet. More fun on the way.
When the economy slows down so do revenues and profits. Businesses contract rather than expand. Banks fail, main street looks like a ghost town, and credit gets harder and harder to obtain. Unemployment rises with no end in sight.
A tax cut won’t stimulate the economy. Sadly, with an impending $1 TRILLION bailout we cannot afford a tax cut for all Americans. A stimulus package won’t help much either. Will China even loan us the cash? Here’s an idea: make the government smaller. Did I seriously say that? Wow, OK…go ahead and laugh. I mean how dare I suggest the government get smaller, right?
If I were McCain or Obama I would just give it to the other guy. Neither of these clowns is mentally equipped to fix this problem and its only going to get worse. John McCain won’t be able to afford his war and Obama won’t be able to afford his flood of big government social programs. There’s no money for it. So what’s the point?
The banks gambled on Joe and Jane Six-Pack’s ability to pay their bills. The banks lost. I guess that means we all lose. I say screw the banks. Screw them! They lost and we shouldn’t have to pay for it. But I’m not Hank Paulson so I don’t get to decide if I get to use tax payer money to bail out my buddies on Wall Street. I just have to sit back and take it like a man.
If you are one of those people crying “nothing to see here” or spouting off that this is no worse than 2001 then you’re either ignorant or in on the scam.
If you are one of those people using this crisis to advance a presidential candidate or party agenda then you are a scumbag and also part of the problem. If you think this is all one political parties fault then you are uneducated and don’t understand how the economy works.
You should take a look at this mess and ask yourself what your contribution has been. Did you sell someone a sub-prime mortgage in 2005? If so, you are part of the problem. Were you dumb enough to buy one? If so, you are part of the problem. Are you carrying $20,000 in credit card debt? If so, you are part of the problem. Are you short selling stocks? If so, you are part of the problem. Are you are using this crisis to push a false political agenda? If so, then you are part of the problem. Are you paying your bills? If not, then you are part of the problem.
On the flip side of that coin - if you are financially responsible, paying your bills, working hard, working toward a college degree, starting a business or running a small business, employing people, paying off your debt, teaching your children correct principles, educating yourself on our nations problems, acting to make your local community a better place, tearing up credit card offers, innovating, volunteering, etc. then you are part of the solution.
Even though you are being tossed around in Ben and Hank’s washing machine you can still fight this and be part of the solution. Frankly, that is the only way we are going to fix this problem.
Here is the single best advice you can take in the face of all we have in front of us. Its about individual responsibility:
“…the time has come to get our houses in order.
So many of our people are living on the very edge of their incomes. In fact, some are living on borrowings.
We have witnessed in recent weeks wide and fearsome swings in the markets of the world. The economy is a fragile thing. A stumble in the economy in Jakarta or Moscow can immediately affect the entire world. It can eventually reach down to each of us as individuals. There is a portent of stormy weather ahead to which we had better give heed.
I hope with all my heart that we shall never slip into a depression. I am a child of the Great Depression of the thirties. I finished the university in 1932, when unemployment in this area exceeded 33 percent.
My father was then president of the largest stake in the Church in this valley. It was before our present welfare program was established. He walked the floor worrying about his people. He and his associates established a great wood-chopping project designed to keep the home furnaces and stoves going and the people warm in the winter. They had no money with which to buy coal. Men who had been affluent were among those who chopped wood.
I repeat, I hope we will never again see such a depression. But I am troubled by the huge consumer installment debt which hangs over the people of the nation, including our own people. In March 1997 that debt totaled $1.2 trillion, which represented a 7 percent increase over the previous year.
In December of 1997, 55 to 60 million households in the United States carried credit card balances. These balances averaged more than $7,000 and cost $1,000 per year in interest and fees. Consumer debt as a percentage of disposable income rose from 16.3 percent in 1993 to 19.3 percent in 1996.
Everyone knows that every dollar borrowed carries with it the penalty of paying interest. When money cannot be repaid, then bankruptcy follows. There were 1,350,118 bankruptcies in the United States last year. This represented a 50 percent increase from 1992. In the second quarter of this year, nearly 362,000 persons filed for bankruptcy, a record number for a three-month period.
We are beguiled by seductive advertising. Television carries the enticing invitation to borrow up to 125 percent of the value of one’s home. But no mention is made of interest.
President J. Reuben Clark Jr., in the April 1938 general conference, said from this pulpit: “Once in debt, interest is your companion every minute of the day and night; you cannot shun it or slip away from it; you cannot dismiss it; it yields neither to entreaties, demands, or orders; and whenever you get in its way or cross its course or fail to meet its demands, it crushes you” (in Conference Report, Apr. 1938, 103).
I recognize that it may be necessary to borrow to get a home, of course. But let us buy a home that we can afford and thus ease the payments which will constantly hang over our heads without mercy or respite for as long as 30 years.
No one knows when emergencies will strike. I am somewhat familiar with the case of a man who was highly successful in his profession. He lived in comfort. He built a large home. Then one day he was suddenly involved in a serious accident. Instantly, without warning, he almost lost his life. He was left a cripple. Destroyed was his earning power. He faced huge medical bills. He had other payments to make. He was helpless before his creditors. One moment he was rich, the next he was broke.
Since the beginnings of the Church, the Lord has spoken on this matter of debt. To Martin Harris through revelation He said: “Pay the debt thou hast contracted with the printer. Release thyself from bondage” (D&C 19:35).
President Heber J. Grant spoke repeatedly on this matter from this pulpit. He said: “If there is any one thing that will bring peace and contentment into the human heart, and into the family, it is to live within our means. And if there is any one thing that is grinding and discouraging and disheartening, it is to have debts and obligations that one cannot meet” (Gospel Standards, comp. G. Homer Durham [1941], 111).
We are carrying a message of self-reliance throughout the Church. Self-reliance cannot obtain when there is serious debt hanging over a household. One has neither independence nor freedom from bondage when he is obligated to others.
In managing the affairs of the Church, we have tried to set an example. We have, as a matter of policy, stringently followed the practice of setting aside each year a percentage of the income of the Church against a possible day of need.
I am grateful to be able to say that the Church in all its operations, in all its undertakings, in all of its departments, is able to function without borrowed money. If we cannot get along, we will curtail our programs. We will shrink expenditures to fit the income. We will not borrow.
One of the happiest days in the life of President Joseph F. Smith was the day the Church paid off its long-standing indebtedness.
What a wonderful feeling it is to be free of debt, to have a little money against a day of emergency put away where it can be retrieved when necessary.
President Faust would not tell you this himself. Perhaps I can tell it, and he can take it out on me afterward. He had a mortgage on his home drawing 4 percent interest. Many people would have told him he was foolish to pay off that mortgage when it carried so low a rate of interest. But the first opportunity he had to acquire some means, he and his wife determined they would pay off their mortgage. He has been free of debt since that day. That’s why he wears a smile on his face, and that’s why he whistles while he works.
I urge you, brethren, to look to the condition of your finances. I urge you to be modest in your expenditures; discipline yourselves in your purchases to avoid debt to the extent possible. Pay off debt as quickly as you can, and free yourselves from bondage.
This is a part of the temporal gospel in which we believe. May the Lord bless you, my beloved brethren, to set your houses in order. If you have paid your debts, if you have a reserve, even though it be small, then should storms howl about your head, you will have shelter for your wives and children and peace in your hearts. That’s all I have to say about it, but I wish to say it with all the emphasis of which I am capable.”
That was Gordon B. Hinckley in 1998. LDS or not, those are words we can all live by.
Best of luck…
“If I were McCain or Obama I would just give it to the other guy. Neither of these clowns is mentally equipped to fix this problem and its only going to get worse. John McCain won’t be able to afford his war and Obama won’t be able to afford his flood of big government social programs. There’s no money for it. So what’s the point?”
So true. There is no such thing as a two party system in America. We are seemingly becoming the USSA. I’m so ashamed of our federal government. If congress passes that $700 billion bailout, I will have lost nearly all my faith in both the executive and legislative branches.
Left by Blake on 09/22/2008Amen!!!
Left by StevieRayG on 10/08/2008Right on the mark! Amen again.
Left by David S, TN on 10/14/2008