A Little More on the Economy.

September 18, 2008

This is by far the worst financial crisis since the Great Depression, not as severe as the Great Depression but second only to it.

-Nouriel Roubini (PhD in Economics, NYU Professor, former Senior Economist for International Affairs of the President’s Council of Economic Advisors, Chairman of RGE Monitor)

Nouriel Roubini has been warning of this impending crisis for two whole years. He’s not some doom and gloom lightweight political hack, he’s a bona fide economic expert who was yelling into the ears of those that chose to be deaf rather than be cautious. We need to open up our ears to what this man has been saying for the past two years, and understand what we are in for, and maybe what steps we can take to make it more bearable.

Listen, I want economic health just as much as anyone else, but we can’t kid ourselves. We’ve let insolent little brats run roughshod over our financial system, and for that we need to pay the piper. It’s going to suck. Your house that has already lost somewhere near twenty percent of it’s value? Well, get ready for it to lose more value. You think energy costs are bad now? Just wait until inflationary pressures make the percentage of your expenditure on energy rise sharply. This is not a time to panic though, it’s a time to take stock in what America is about, and trim the fat from our lives.

It’s been a nice ride, hasn’t it? If you’re like many Americans, the percentage of your debt payments every month is somewhere near 60% of your income. Many of you have debt payments of even 75%.

This is ridiculous, and utterly out of hand.

You know how much debt you should have?

Well, as Polonius from Hamlet said “Neither a borrower nor a lender be

You should have little to no debt.

“But, that’s impossible!” you cry.

No, it’s very possible. What kind of car do you drive? If it’s anything more than a base model with seating for 4, you overspent. If you took a loan to get it, you are a silly person. I know, you want to look cool, or you deserve a new car, or some other lame ass excuse. You should have bought a cheap new car, or a used one if the new ones were out of your price range. It’s your debt loads and debt maintained lifestyles that have partially driven this shit storm that is hitting us. Tighten your ship up.

How about your house?

“But the interest rates were soooo goooood!”


You can never renegotiate price, but you can always renegotiate rate.

Well, maybe not for a couple years now that the culmination of our egregious debt habits are snapping back at us like a spear gun fired on land. Anyway, tighten your shit up, and start saving like a 15 year old dreaming of their first car. This ain’t gonna be pretty.

“No regulation” they said, “The free market will fix everything” they said. Screw that, we need regulation to keep the markets efficient and clean, and screw John McCain, he was a leading voice for this foolishness that is now wreaking havoc on our economy.



  1. Who do we blame for the mortgage crisis and the resulting meltdown of Fannie Mae, Freddie Mac and banks and investment banks? Equal blame rests with lenders and borrowers.

    Lenders should NEVER promote adjustable rate mortgages as a viable alternative to fixed rate mortgages on a primary residence. ARM’s, and balloon payment mortgages for that matter, should ONLY be taken if the lendee plans on reselling the property within a couple of years.

    Lenders promoted ARM’s looking to earn more profit with careless disregard for business ethics and economic responsibility.

    Lendees should have taken fixed rate mortgages instead of listening to their fast talking lender and being sold on short term savings with their monthly payments via ARM’s. Were those people really so ignorant as to believe that an ARM interest rate would never go up?

    You cannot have an effective household budget with an ARM. Again, if you are purchasing a home for an indefinite period of time you should always, without exception, get locked in to a fixed rate mortgage. If the rate drops then you may want to refinance to take advantage of it. If the rate goes up then it doesn’t affect you.

    Also, people need to stop buying as much house they think they can afford. Bigger is not ALWAYS better. People need to start buying as much house as they NEED. The square footage of the average home in the U.S. is about twice what it was in the 1950’s. With larger homes than you actually need come higher mortgage payments, higher utility bills to heat, cool and light the home and higher property taxes.

    People need to be educated about personal fiscal responsibility.

    The government needs to impose stricter regulations on banks and corporations. Bailing out failing banks and corporations offers no consequence for failed business practices. In fact, it actually encourages their behavior. I say hold wakes for those who fail and allow them to be replaced by more ethically and economically sound institutions.

  2. Absolutely Ronald, well said.

    There are two sides to this story, and our own need for debt places more and more pressure on the industry to provide that capital for our consumption.

    Some common sense regulation would go a long way in preventing the far too fast accumulation of these heinous debt loads.

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