The Conundrum

In most ways I love a conundrum. Webster defines a conundrum as a question or problem having only a conjectural answer or an intricate and difficult problem. We live in an economic conundrum. We are being told by the government (particularly the new administration and Pelosi Inc.) that the best way out of the crisis is to spend money. On some strange level this may be true. There are areas in which government spending will be helpful. This may include new schools (if you believe in government education, I don’t) new roads, bridges etc. Some of these things eventually create jobs and help local economies.

Yet right now we are in the midst of a macro economic crisis. This is not solved by building a new bridge on Rusty Hollow Road. This is met by a serious evaluation of how we got to this place. Many explanations can be laid forth for this. Many on the right readily point to the impulse in home buying over the last decade by those unable to afford it. At least part of this was encouraged by the government. Many on the left point to unregulated markets as the culprit. They both may be right. But they would never admit that.

What they are both most loath to admit though is that we are all guilty (most of us) in one way or another. As a nation and as a society we have created this monster which is devouring our prosperity.

For decades we succumbed to a myth of more is better. We have lead ourselves to believe that if we could have only more of something we could be happy. We have bought into the idea that everyone should own a home. This whether they can afford it or not. The cars must be the newest and most expensive and the clothes from the finest stores. The idea of class became anathema as we all sought to become upper class and anything less was unmentionable. I know of what I speak for I have at times felt the same drawing toward the cesspool of endless debt.

Throw into this desire for more and more, the greed of banks and investors who think that next million is only around the corner. Toss in a government encouraging the whole thing and you have the perfect storm we are now in. We have spent ourselves into a hole. Do not delude yourselves otherwise.

Yet the rub, the riddle, is this. We are told by the talking heads and the government that we must now spend more and more to get ourselves out of this recession. Hmmm. Did I miss something or is that what got us here in the first place?

Yet some resisted. Some lived within their means and made sensible and prudent investments. Now those with the means to sustain their reasonable lives are being called upon to sacrifice what they have in order to sustain those who made foolish decisions. In short those who built upon the rock are called on to save those who built upon the sand.

I am aware that not everyone made bad decisions. Some have been caught in circumstances beyond their control. For them I have nothing but sympathy. Yet in an economic situation there must be winners and loosers. Americans don’t like to think like that but it is the way of our broken and sinful world. There is no escaping it.

The great twist is this. Our government seeks to spend sums that are beyond comprehension to save us. Yet in the end they likely only doom us. They do so because they create a debt situation that is unpayable in the short or the long term. At some date in the future (perhaps not too far) our credit will run out. What then? What is plan B? Has anyone heard one? Has Obama, Geither, Pelosi, Reid or anyone else given an explanation of what happens after we have leveraged credit against an entire country? No. No one has dared answer the question.

How do we spend ourselves out of a pit that over spending got us into. I am a student of history and by default sometimes of economics now. Yet I cannot see how spending of this type can create a future for us. Might we see gains in some places? Yes. Will some people feel a little bump upward? Yes, perhaps. Will it create prosperity for a nation? I sincerely doubt it.

I have few words of great encouragement at this point. I share the frustration of Rick Santelli as I pointed out in the last post. Frugality may not lead to short term job growth, I know that. If we save our money right now it may not help someone find a job. I believe though that it will lead to a path back to a stable economy and a strong nation. It will be long and hard yet that is the way of everything worth gaining. That is a lesson we seem to all have forgot.

von Rum

The Flag of those who resist tyrany.

Read Full Post »

In Case You Missed This

Rick Santelli of CNBC at the Chicago Board Options Exchange is my new hero.
Here is a clip of his outrage yesterday over the mortgage bailout introduced by Comrade Obama.

Apparently the simmering rage I see around me daily is percolating up to some levels of the media. Glen Beck, Neal Cavuto, Charles McCord, Neal Boortz, Reid Buckley and many others get it. But most don’t yet. What they don’t get is that we are selling our future for a few pennies today. Spending our way to prosperity is an oxymoron. Apparently in economics and politics, as in sports, bad behavior is now to be rewarded. If our standing policy is now to prop up every failing business, leave in office every incompetent and keep people in homes they could not afford in even a good economy then why the devil should I pay my mortgage. I’ll just have you pay it for me. That is what is happening.

Ready for a drink yet?

von Rum

Read Full Post »

The Pope, Palin and the Purse.

There has been little good news in the last two weeks regarding the world’s economy.  As shades of 1929 rise from the grave to haunt even the most stout hearted investor or broker, we missed a prodigy.  That was the fact that two major figures made statements that make utter economic sense, yet are almost universally ignored.

The first came in an arena that is about as far removed from the ups and downs of economic cycles as can be.  It was in Pope Benedict XVI’s opening statements to a synod of bishops in the Vatican.  In his address he read from the Gospel of Mathew concerning the futility of building on sand.  He said, “He who builds only on visible and tangible things like success, career and money builds the house of his life on sand.”  Later he added that, “We are now seeing in the collapse of major banks that money vanishes, it is nothing.  All these things that appear to be real are in fact secondary.  Only God’s words are a solid reality.”

The Pope was conveying a spiritual message that has echoed true for millennia and yet is ignored even among the faithful.  That is that what we perceive to be of value in our hurried lives is most often of the least permanence and worth.  Regardless of what your personal faith is, if any, it is fair to say that no faith or creed which espouses the material or wealth as the ultimate goal has long survived the trials of human experience.

It was during the Vice Presidential debate that Governor Sarah Palin threw out an easily overlooked statement that rung just as true as those words of the Pontiff.  They are also as widely ignored.

In response to a question about the subprime mortgage meltdown and who was at fault Palin inserted the following. “Let’s do what our parents told us before we probably even got that first credit card. Don’t live outside of our means. We need to make sure that as individuals we’re taking personal responsibility through all of this.”

We have all most likely heard this same advice from family many times.  The problem is that it was about the only time I recall hearing such a sentiment from a politician throughout this whole debacle.  Remember George Bush’s statement after September 11 to go out and shop?  How about the “Ownership Society”?  The whole smorgasbord of easy credit that has been available up until now has been based on the opposite premise of what the governor is talking about.  Our system is based on living beyond our means and it is not sustainable.

We have simple statements here from two very different people with utterly different tasks.  One is spiritual, one temporal.  One from a mother of five from a frontier area in a political role.  The other from a celibate church leader in the Eternal City in a theological role.  Yet the messages are of a common theme.

From the Pope we have the everlasting wisdom that wealth is not everlasting.  The pursuit of endless gain in this world is rarely successful in the ways we think it might be.  Of course there are plenty of people who do very well, make a lot of money and keep it.  Many of them do well by their families and leave them in better conditions than they found them.  When those goals though become more for the sake of more something is lost.  A blindness to what matters most and, more importantly, what will last longest sets in for those who’s greed becomes their driving force.

On the same tone is Palin’s simple reminder of what we have all already heard.  When we attempt to gain it all right now, before we have earned it we are in more danger of loosing it than ever.  Young people are the most commented on about living beyond their means.  They are not alone however.  You do not have to look far to see individuals and families nearing retirement age that have lived beyond their means for so long, and owe so much that retirement becomes and ever fading dream.

When we make wealth the core of our world, and demand it all now so that we live on the high wire of a thin credit line, disaster looms.  For years examples of individuals or families that suffered tragedy from this mindset have abounded.  Now however, we have the phenomenon of businesses, corporations, governments, even whole societies living according to these flawed precepts of more and more now.

The results are all around us.  We live in a world that functions on what it does not yet and may never have.  Our economy is a paper empire.  Is it likely to change due to this downturn?  I doubt it.  The habits are far too ingrained and far too much is invested in keeping us all out on a limb and running just to stand still financially.  As long as we base all success on wealth and demand that wealth before we have earned it we are stuck in this cycle.  I just found it refreshing for someone to stand up and say it, even if no one was listening.

von Rum

Read Full Post »