Showing posts from February, 2009

4% Mandatory Mortgage Rates and 40 Year Terms. Why They Won’t Work.

This post cold easily be title “just how screwed we are.” But know that I have a suggestion that would get us out of this mess. It will have to come in a later posts, but if I can figure it out, the people on the hill are much smarter then me will. Right?

One of my favorite and most quoted cliché’s is, "common sense is often common, but rarely makes sense." This is true when listening to people make wild thoughtless suggestions on how to fix the economy. The phrases that send off my B.S. detectors are things like, "It's economics 101" or "it's about supply and demand" or "you are over complicating". First there are very few "or's" in economics and accounting. Capital generally follows the laws of conservation. For every action there is an equal and opposite reaction.

Two prevailing suggestions I have seen posted in the last week or so to "help the ailing housing market" and help out home owners are about the same. O…

When You’re Stuck In Quicksand, Kicking Your Feet Only Makes You Sink Faster

When you are sinking in quicksand the natural reaction is to kick your feet and struggle. The problem is that kicking only causes you to sink faster. I know this is going to come as a blow to those who are trying to say, “The government should help us because we can’t pay for our house”, but you are mistaken. I am sorry. The only thing that this home rescue plan is going to do is cause the rest of us to go down with you. Not to mention your attempted salvation will result in the prices remaining artificially high.

Let us say that I wanted to buy a nice midsized bungalow overlooking the water with a dock where I could store my sailboat. However 4 years ago when I was looking for a house, that house was going for $300,000. About $200,000 outside my price range. At the time an autoworker who was making about $80,000 a year with overtime bought the house. At the same rate I got for my house at the time, the payment would be about $1600 a month over 30 years. That would be les…

What Is Good For The Producer Is Good For The Consumer Economies

It seems that the EU and China as well as many other economies both established and “emerging” are complaining about the US only clause in our stimulus package. I know I have been harping on this for awhile now. But, they keep complaining and there are so many lessons and insight to be gleaned from this issue. Many have been touched upon in previous posts. I would like to explore an overall depth of this issue.

If you have been with me all along, you know that I put much more merit in labor hours then actual currency. If you haven’t been with me a quick but necessary synopsis goes like this. We should not judge how much somebody is paid by the dollar figure as much as we assess how many of hours they have to put in at work to pay for needs and wants. If a man could live on bread alone, the man who only makes $1 a day but pays only a penny for bread is richer then the man who makes $100 a day but pays $3 for the exact same loaf of bread.

So with this concept of the imp…

5 Myths About Globalization, Free Trade, And Protectionism

There has been a lot of hub-bub about the stipulation that Obama has put on the stimulus money being used only by those who buy American steel for related constructions projects. While this idea merits a bonus factor because he is using taxpayers dollars to pay for these project, there is really nothing wrong with policies that cater to your own economy. Many opponents like to label it “protectionism” or “isolationism”, but their arguments are not based in another “ism” “realism”.

1) “Protectionism” or “isolationism” limits consumers to inferior products.

The statement I often hear uttered goes something like this. “It promotes bad products and drives up the price.” This is a false notion usually derive from good economics’ worst enemy “common sense”. What really happens is a country like the US develops things like autos, electronics, and other durable goods inside an economy that requires wage, environmental, and safety standards. These are things that are part of the …