I’ve just really been getting fed up with domestic and world markets the last couple of days, what with headlines such as this one in the WSJ this morning:
Markets Swoon on Fears
Stocks Pummeled on Signs of Global Slowdown; Money Flees to Dollar and Yen
Investors around the world scrambled for safe havens as fears of a global economic slowdown grew.
The yen briefly touched a 15-year high against the U.S. dollar, the euro suffered its worst selloff in nearly two years, and global stock markets tumbled.
A day after briefly cheering the Federal Reserve’s announcement it would buy Treasury debt to bolster the U.S. economy, investors Wednesday began fretting about the negative implications of the move: The world’s biggest economy still needs extraordinary government help…
And then there’s stuff like the stories I just put on my virtual front page about the three-day market slide, and the sharp upswing in foreclosures in SC in July.
Enough! No more bad news on the economic front!
Here’s the thing: I firmly believe that this whole business of the economy being up or down is all in our heads. Or if not our heads, in whatever parts of our bodies are extremely emotional and easily frightened about the future. (Yes, there can be conditions that are not in our heads — like a pestilence that wipes out our food supply. But I haven’t noticed anything like that happening. We just panicked back in September 2008, and we’ve been panicking ever since.)
If we have confidence, we will act in a way that justifies confidence. We’ll take risks, make investments, spend money; people will be hired and will in turn take risks, invest, and spend, and things will just be booming.
But if we’re all nervous as a long-tailed cat in a room full of rocking chairs, everything freezes up. There’s no commerce, no jobs, no hope.
So enough with the swooning. The last two years have been more than enough for me.
I can’t afford it, but I think I’m gonna run out and buy something. Of course, you other several billion people need to do the same thing. So let’s get on the stick.
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I want to read that the markets got the vapors sometime.
It is sad that lowering our debt and saving more is hurting our economy. Another problem is people with higher incomes are defaulting on mortgages and home equity loans at a higher rate than people with more moderate incomes. There is just something VERY WRONG with those facts and makes me wonder how our system is broken.
People with higher incomes seemed to be better risks, so lenders lent them a lot more money relative to their ability to pay it back. Furthermore, the most expensive houses have been the hardest to sell, and lost the most value. A rich person didn’t become that way by being sentimental about money. When the loan-to-value ratio goes bad, a smart rich person walks.
@Kathryn – rich people ARE sentimental about money, they like to hold onto it. It is the source or object of the liability that is draining their money they are not sentimental about and are more than willing to shed it in order to keep their money. Just ask the banker who actually has millions he or she can loan but refuse to do so in fear of losing it. Ask the business owner who lets most of his staff go in order to save on salaries and then, hires them back on a contract basis at a reduced rate of pay, without the overhead expenses associated with direct employment, and now, won’t have to worry about health insurance either.
Go out and spend money just for the sake of stimulating the economy when unemployment is still on the rise and salaries are dropping? Spend money when the uncertainty of our economic recovery is still in serious doubt by so-called economists? Spend money when we are told the recovery is a jobless one? Where the hell did that come from? Jobless recovery? An idiotic and oxymoron statement if ever one was made. But, incredibly, one fomented and used as propaganda by the current administration in a vain attempt to soothe the nerves of an electorate who are not as gullible as they were in 2008 and are not prone to repeating the same mistake.
The one place where the economy is actually in good shape is the metropolitan area around Washington, DC. and no wonder. It has an almost endless supply of funding, produces nothing, manufactures nothing, creates no jobs in private industry outside the Beltway except for jobs directly dependent upon the government, has no vested interest in outside localities other than vote buying, and left to its own devices without collecting taxes to pass around in its sheltered environment, would be bankrupt in about one week. Republicans and Democrats alike, no difference, all feeding at the same trough.
There, in the Utopia surrounding Washington, DC, unemployment is very low, salaries are well above the national average, high priced homes do not stay on the market very long, and if you were to judge the nation by the lifestyle around the capitol, one would think everyone across the country was enjoying the same level of prosperity.
Corporations are relocating headquarters to Arlington, Chevy Chase, Fairfax, McLean, Falls Church, Tysons Corner, and other towns and cities surrounding DC, because that is where the money and future business opportunities are located since most of the business being conducted today is the business interest of the government. Corporations leaving behind massive unemployment and adding more and more strain on their formerly local economy is becoming an all too common occurrence.
Gee, that in itself makes me want to run out and spend money I don’t have just to continue supporting the Beltway contingent.
Sorry about the spacing.
Front page of the Blythewood Country Chronicle has a story about the ACE Hardward store closing. In an interview with the owner, he cites two primary causes: the economy in general and the overall tax burden on his business increasing significantly over the past two years. He blamed business license fee increases, the Richland District 2 school bonds, the sales tax increase and other taxes and fees as a key factor in his inability to keep the business afloat.
I can agree wholeheartedly with him on the school bond issue. A half a BILLION has been put into brick-and-mortar over the past decade or so. We have really beautiful new schools with fantastic football stadiums (Blythewood’s JV football field is better than many high school varsity fields). In the classroom, however, performance has seen no improvement.
You think this business owner is going to vote for Sheheen or Haley?
How about the half dozen people out of work because the tax burden closed the business?
Yowsa, Bart–I didn’t mean any disrespect for rich people. The fact is the lenders write the docs. Few people get to negotiate their loan docs. If the deal is heads, the bank gets repaid with interest and tails the bank gets the house, there is no moral failing in walking away from a house that is seriously underwater. A lot of unrich people don’t get that.
Rich people are used to treating their personal assets like business assets, and they usually understand that contracts are morally neutral. There is no bad in breaching a contract–you just pay damages. There is no bad in walking away from a no-recourse loan.
It’s the folks who think they’re in It’s a Wonderful Life that get stuck.
Okay, henceforce, everybody will be “Shiny, Happy People” http://www.youtube.com/watch?v=iCQ0vDAbF7s (R.E.M. with Kate Pierson of the B’52s collaborating).
Then for the other “doom and gloom” side:
“It’s The End Of The World As We Know It (And I Feel Fine)” http://www.youtube.com/watch?v=Bmxyj6iInMc
Another for the “Gloom and Doom”
“We Didn’t Start the Fire” Billy Joel
Just a small aside — in South Carolina, at least, walking away from a residential mortgage note is not quite as easy a decision for the well-to-do, since we are a recourse state. Meaning that one is on the hook for the entire amount of the note, and the property is not the only collateral — all one’s income and assets are on the line as well. So it’s more like when you have to give a personal guarantee on your business’ line of credit — you are on the hook until that loan is repaid, or you go personally bankrupt! And I think for 2010, you may have to pay taxes on any “gain” you made — since the forgiven debt looks like income to the IRS. (This was modified for 2007/8/9, but I don’t think the change is still in effect for 2010 and beyond).
However, in California, for instance, that is a truly non-recourse state, it is exactly that easy. Just send in the keys.
Kind of an aside, but it would be interesting to see a comparison of behavior in recourse vs non-recourse states….
Forcing bars to close at 2 am will seriously hurt Columbia’s economic growth.
Hawaii, New York and California have higher average home prices. SC is about the middle. DC is 4th.
RE: unemployment, CNN.com shows it to be 5th from the bottom. Virginia is 11th, Maryland is 15th. The best states to be in are the Mountain West.
@Herbie—are you serious? Why would the inability to drink after 2AM in a bar dissuade anyone who runs a day time business from locating or expanding here?