The Economic Crisis

Okay, I'm going to weigh in with my two cents on the current economic crisis.

Anyone who says they couldn't see this coming wasn't paying any attention. The housing market was so artificially inflated that it was silly. Houses in my mom's neighborhood were selling for $280k. These are forty-five year old, twelve hundred square feet track homes people. Now the two foreclosures next door are selling for $99K. And I don't think it's hit rock bottom yet.

Here is how I see it happened. Greed, pure and simple. Oh, everyone can tell you that it wasn't, that it was just people wanting the "American" dream, to own their own house. Just like in the 1950's. But it isn't true. People wanted BIG houses, then BIGGER houses. The average home size in the 1950's was 1,100 square feet. The average home size today is 2,342 square feet. With smaller families than there were in the 1950's. And people were determined to get the BIGGEST home they 'could afford' even if that meant an "interest only" or 'adjustable rate' mortgage, with the 'knowledge' that home prices would rise and they could re-finance and take out their equity and buy an even BIGGER house. But that's a little like taking your paycheck to the casino to bet it all on red. The house always wins. Yes, some people may come out ahead but most people are going to lose it all. But greed drove the market.

I'm not just blaming individuals. It's the fault of greedy mortgage brokers who pushed through half-million dollar loans for people who made $12.75 an hour. It's the fault of greedy real estate agents who sold houses that cost too much to people who they new darn well couldn't afford it. It's the fault of greedy Wall Street brokers who bought all those 'mortgage backed securities' and packaged them again and again, knowing full well that they were faulty to begin with.

Now the taxpayers of this country are being asked to kick in $700 BILLION dollars to bail out all of these greedy people. I'm kind of ticked off about this because I wasn't one of the greedy ones. No one in my family was. My mom could have sold her house and bought a bigger one but she didn't because she owns her home, free and clear, and she knew it was smarter to have no payments than to buy a giant house and owe hundreds of thousands of dollars. But she and I and you will be paying for that greed anyway. Not fair, but as my dad used to say, nothing in life is fair.

The reason given for this bailout is to stabilize Wall Street and keep the U.S. economy strong. There are guys much smarter than me that think this is the solution and without talking to them face-to-face, I can't really argue that they are wrong. But I do know this...if the American economy fails, the whole world falls. It is in the best interest of the entire WORLD to keep America strong. Because all of those growing economies like China and India will have no one to buy all of the goods and services they sell. America consumes eighty percent of the world's goods. Without our consumption, the rest of the world's economies fail too. Simple math. We can't support the rest of the world if we have no money.

I think there will be a lot more stability once the election is over. No matter who wins, people will be able to see who the leader of the free world will be. Housing prices will eventually bottom out and people will be able to afford houses again. Of course, it will be tougher to get a loan but that's how it was for our parents who needed things like down payments and proof of income. And maybe we will learn the lesson that wanting the dream is fine, we just need to be realistic as to what that dream should be. You don't NEED a McMansion and a gas guzzling Hummer. Buy what you can afford. Save for a rainy day. Sure, it isn't much fun, but neither is a foreclosed house and a bad credit rating.