Foreclosures….who’s to blame?

April 28, 2007

I just finished watching a CNN special on the foreclosure problems in the US.   More than a million homes went into foreclosure last year and they’re expecting another 2.2million over the next couple of years.   You can view some of the current foreclosure listings from around the country.   Or view Texas Foreclosure Listings.  Odds are you’ll find some in your neighborhood.

I admit the whole situation is pretty bad, but who’s fault is it?  Throughout the special they consistently glossed over the bad decisions made by the homeowners.   I agree that there are a lot of bad, opportunistic, unethical real estate “professionals” who prey on people who make bad decisions, but rather than addressing any personal responsibility there seems to be a huge tendency to shift any and all blame from the homeowners.

Personal responsibility is out of fashion.   Dealing with the consequences of bad decisions seems no longer to be the American way.  Instead, we want to protect people from being dumb.   We want to keep people from having to experience any setback or repercussion of their bad decisions.

How are we, as a society, suppose to learn from our mistakes if our very real individual contribution to the mistake is never acknowledged?

How are we suppose to make better future decisions….like taking the time to read and understand the documents before we sign them?

How are we going to learn that maybe we shouldn’t take out all the “equity” in our homes to temporarily erase our credit card debt?

Without penalty from bad decisions how will we ever understand the value of the unimaginable… possibly forgo the new car, vacation, or other unnecessary consumption or maybe just delaying for a while…at least until we can actually PAY for it… not “make the payments” on it?

There are specific examples of individuals that are heartbreaking, but this issue is a big issue and extends well beyond anecdotal stories.   There are a lot of bad guys in this situation (my personal favorite target is appraisers… maybe I’ll talk about that another time).   At the end of the day, though, not only do we need to accept responsibility for our actions but we need to work bring back the expectation of personal responsibility to our culture.

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How taxes really work:

April 14, 2007

Got this humorous email today. Enjoy.

Suppose that every day, ten men go out for beer and the bill for all ten comes to $100. If they paid their bill the way we pay our taxes, it would go something like this:

The first four men (the poorest) would pay nothing.
The fifth would pay $1.
The sixth would pay $3.
The seventh would pay $7.
The eighth would pay $12.
The ninth would pay $18.
The tenth man (the richest) would pay $59.

So, that’s what they decided to do.

The ten men drank in the bar every day and seemed quite happy with the arrangement, until one day, the owner threw them a curve. “Since you are all such good customers,” he said, “I’m going to reduce the cost of your daily beer by $20. “Drinks for the ten now cost just $80.

The group still wanted to pay their bill the way we pay our taxes so the first four men were unaffected. They would still drink for free. But what about the other six men – the paying customers? How could they divide the $20 windfall so that everyone would get his ‘fair share?’
They realized that $20 divided by six is $3.33.

But if they subtracted that from everybody’s share, then the fifth man and the sixth man would each end up being paid to drink his beer. So, the bar owner suggested that it would be fair to reduce each man’s bill by roughly the same amount, and he proceeded to work out the amounts each should pay.

And so:

The fifth man, like the first four, now paid nothing (100% savings).
The sixth now paid $2 instead of $3 (33%savings).
The seventh now pay $5 instead of $7 (28%savings).
The eighth now paid $9 instead of $12 (25% savings).
The ninth now paid $14 instead of $18 (22% savings).
The tenth now paid $49 instead of $59 (16% savings).
Each of the six was better off than before.
And the first four continued to drink for free.
But once outside the restaurant, the men began to compare their savings.
“I only got a dollar out of the $20,”declared the sixth man.
He pointed to the tenth man,” but he got $10!”
“Yeah, that’s right,” exclaimed the fifth man. “I only saved a dollar, too. It’s unfair that he got TEN times more than I!”
“That’s true!!” shouted the seventh man. “Why should he get $10 back when I got only two? The wealthy get all the breaks!”
“Wait a minute,” yelled the first four men in unison. “We didn’t get anything at all. The system exploits the poor!”

The nine men surrounded the tenth and beat him up.

The next night the tenth man didn’t show up for drinks, so the nine sat down and had beers without him. But when it came time to pay the bill, they discovered something important. They didn’t have enough money between all of them for even half of the bill!

And that, boys and girls, journalists and college professors, is how our tax system works. The people who pay the highest taxes get the most benefit from a tax reduction.

Tax them too much, attack them for being wealthy, and they just may not show up anymore. In fact, they might start drinking overseas where the atmosphere is somewhat friendlier.

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“mom-preneurs”

February 14, 2007

A recent report authored by the Institute for The Future talked about the growing number of “mom-preneurs”.   If you spend anytime working with entrepreneurs (especially micro-preneurs), this seems self-evident.   Some of the key findings of the report include:

As aging Baby Boomers “unretire” to leverage their lifetime of professional acumen in their own business opportunities, and as their children enter the job market, entrepreneurs will come more from the edges of the age spectrum. The younger generation, which is more adaptable to technology, views entrepreneurship as a way to maintain independence, and it might set the bar as the most entrepreneurial generation ever.

and..

With the glass ceiling blocking the corporate career paths of women, a rich talent pool has been sent to the small business sector. Among them are “mom-preneurs,” or mothers who start part-time, home-based businesses with the help of the Internet.

Download the Report Here

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Posted by Smith

America: Freedom to Fascism

February 10, 2007

Everyone should see this movie, it’s been watched more than 1,500,000 times on Google Video so far.

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Posted by Smith

America: Freedom to Fascism…Aaron Russo Interview

November 3, 2006

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Savings? Not now, I need a flat screen TV

August 7, 2006

Ian McDonald wrote an “chilling” article titled, “Benefits of Saving Wasted on Youth” published in today’s WSJ. In it, Ian talks about the US savings rate. It’s pretty common knowledge that the savings rate is super low in the US. This year the savings rate is negative 1%.

That’s bad news, but what’s worse is the generational relationship to savings. Ian discusses how those under the age of 42 have a NEGATIVE 18% savings rate. That’s shocking, but not surprising.

My Opinion (although I think it’s self-evident) is that the consumer culture is completely out of hand and younger people are willing to go to great lengths to acquire the social indicators of success. Luxury cars, plasma TV’s, bigger and bigger houses. To hell with the future, it’s about showing everyone today that I’ve made it!

Check out Ian’s article on WSJ

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Posted by Smith

The Real Enron: United States Government

August 3, 2006

Another scary article was published today discussing gross (and if it were anyone but the Federal Government, the criminal) negligence. This article, published by the USA Today reveals that the real U.S. deficit FAR exceeds the “official” numbers released by the Government.

Which is worse the “cooking the books” by the Federal Government or that of Enron?

Who’s misrepresentation of financial health will have a bigger impact… Kenneth Lay’s or our Elected Official’s?

Everyone (the press especially) cheers the demise of rich executives who skirt the law and mislead the public and yet where’s the outrage here when we’re talking about the continued fiscal health of every man, woman and child in America now and for generations to come….

Thanks USA Today for your reporting on this issue. If only the American people would begin to give a shit…

What’s the real federal deficit?

How many billions (or trillions) of dollars depends on how you do the accounting

By Dennis Cauchon
USA TODAY

The federal government keeps two sets of books.

The set the government promotes to the public has a healthier bottom line: a $318 billion deficit in 2005.

The set the government doesn’t talk about is the audited financial statement produced by the government’s accountants following standard accounting rules. It reports a more ominous financial picture: a $760 billion deficit for 2005. If Social Security and Medicare were included — as the board that sets accounting rules is considering — the federal deficit would have been $3.5 trillion.

Congress has written its own accounting rules — which would be illegal for a corporation to use because they ignore important costs such as the growing expense of retirement benefits for civil servants and military personnel.

Last year, the audited statement produced by the accountants said the government ran a deficit equal to $6,700 for every American household. The number given to the public put the deficit at $2,800 per household.

A growing number of Congress members and accounting experts say it’s time for Congress to start using the audited financial statement when it makes budget decisions. They say accurate accounting would force Congress to show more restraint before approving popular measures to boost spending or cut taxes.

“We’re a bottom-line culture, and we’ve been hiding the bottom line from the American people,” says Rep. Jim Cooper, D-Tenn., a former investment banker. “It’s not fair to them, and it’s delusional on our part.”

The House of Representatives supported Cooper’s proposal this year to ask the president to include the audited numbers in his budgets, but the Senate did not consider the measure.

Good accounting is crucial at a time when the government faces long-term challenges in paying benefits to tens of millions of Americans for Medicare, Social Security and government pensions, say advocates of stricter accounting rules in federal budgeting.

“Accounting matters,” says Harvard University law professor Howell Jackson, who specializes in business law. “The deficit number affects how politicians act. We need a good number so politicians can have a target worth looking at.”

The audited financial statement — prepared by the Treasury Department — reveals a federal government in far worse financial shape than official budget reports indicate, a USA TODAY analysis found. The government has run a deficit of $2.9 trillion since 1997, according to the audited number. The official deficit since then is just $729 billion. The difference is equal to an entire year’s worth of federal spending.

READ the rest of this important article here: USAToday.com

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Posted by Smith

US ‘could be going bankrupt’

July 17, 2006

I came across this great article on the future of the US economy. Oddly enough, I didn’t find it in the US press, but the UK press. It’s quite enlightening and more than a little scary. The irresponsible “who cares about tomorrow” decisions of our government are compounding and will eventually reach a tipping point….

By Edmund Conway, Economics Editor

(Filed: 14/07/2006)

The United States is heading for bankruptcy, according to an extraordinary paper published by one of the key members of the country’s central bank.

A ballooning budget deficit and a pensions and welfare timebomb could send the economic superpower into insolvency, according to research by Professor Laurence Kotlikoff for the Federal Reserve Bank of St Louis, a leading constituent of the US Federal Reserve.

Prof Kotlikoff said that, by some measures, the US is already bankrupt. “To paraphrase the Oxford English Dictionary, is the United States at the end of its resources, exhausted, stripped bare, destitute, bereft, wanting in property, or wrecked in consequence of failure to pay its creditors,” he asked.

According to his central analysis, “the US government is, indeed, bankrupt, insofar as it will be unable to pay its creditors, who, in this context, are current and future generations to whom it has explicitly or implicitly promised future net payments of various kinds”.

The budget deficit in the US is not massive. The Bush administration this week cut its forecasts for the fiscal shortfall this year by almost a third, saying it will come in at 2.3pc of gross domestic product. This is smaller than most European countries – including the UK – which have deficits north of 3pc of GDP.

READ the full article here

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Posted by Smith

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