Once Again, Stupid, It's The Economy

In many ways it always has been.  Simply put, the economy is at the root of everything we do.  For example, despite President George H.W. Bush’s success with the first Gulf War, he was unseated in 1992 by Bill Clinton’s use of  “It’s The Economy, Stupid!”

Did that phrase have any effect–other than to help elect a presidential challenger–on our doing financial business as usual?  Nope.  Sure, we were on a bull run with a roaring (we thought) economy.  Everyone who wanted a house could get one, even if they couldn’t afford it.  Never mind if that six-figure mortgage, secured frequently by a four-figure (or less) income meant that you were upside down from the get go.  Option ARMs let you have your cake and eat it, too.  One of the more creative approaches was the Stated Income Stated Assets Loan, also known as a SISA (Liar’s) loan. Yep, it was and is exactly what it sounds like.  The income listed on the mortgage loan application was accepted as exactly what you said it was without any verification whatsoever.  This particular loan is now about as rare as the passenger pigeon due to the mortgage collapse.

Property values were always going to increase from here to eternity, so all you had to do was wait a while, refinance after your salary had increased (as it always had) and your home’s market value had multiplied.  Then you would have a standard 30-year mortgage, low interest rate, high income, money in the bank, stock investments and a 401K.  Life was good and you could concentrate on your golf game every weekend.

What everyone forgot, or ignored due to the good life blinders they were wearing, was a rather trite phrase that happens to be truth in a nutshell: What goes up must come down.

Fifteen years later came the mortgage meltdown and a global financial collapse.  A year after that, we managed to infect Washington, D.C. with an administration that seems determined to reduce the U.S. to the status of a third world country, complete with nationalization of its remaining industries, tax increases that would break the back of Atlas and an infantile belief that we’re on the road to recovery.

Y’all know that that Government Motors…ahem, General Motors…has been bailed out to the tune of tens of billions of dollars, with virtually no chance that any of it will ever be recovered.  Healthcare is the latest target in the crosshairs.  Opposed by darn near every person with a brain and the ability to read even a few pages of the proposed legislation, there is still a very real chance that it will be rammed down our throats by our erstwhile elected officials who are not only supposed to act in our best interests but actually listen to our comments during town hall meetings, by reading our emails, snail mail and paying attention to phone calls.

Do we need healthcare reform in some respects?  Of course we do.  No system, public or private, is perfect.  But the word is ‘reform’ or ‘improvement’, not ‘nationalization.’

Tax increases ain’t hit us yet, at least not in any widespread manner.  But they’re coming.  In fact, they’re already here in the form of increased fees that are being instituted by everyone from utility companies to towns and cities.  And just wait till the cap & tax…sorry, I meant cap & trade… bill is passed, signed and forwarded to your checking account.  What was a relatively healthy account, or at least surviving, will shortly wind up on life support.

So how is cap & trade going to be a tax increase on every person?  Simple.  That legislation, if enacted, will focus energy production on the so-called ‘green energy.’  Any method that produces carbon will be heavily taxed.  The result will be dramatic increases in the cost of electricity and since we all use electricity in some way, shape or form…including ways that most of us don’t even think about…every person in this country will be paying an increased tax as the result of rising prices on virtually everything.

Conservation, energy efficiency and reduction of your carbon footprint will become watchwords, possibly even additions to your local ordinances.

As for trying to jawbone this country onto the road to economic recovery, President Obama wandered several miles into fantasyland with his recent speech before Congress.  While his focus was the embattled healthcare legislation, he did manage to address the economic conditions with a two paragraph opening statement in which he said:

“When I spoke here last winter, this nation was facing the worst economic crisis since the Great Depression.  We were losing an average of 700,000 jobs per month. Credit was frozen. And our financial system was on the verge of collapse.

“But thanks to the bold and decisive action we have taken since January, I can stand here with confidence and say that we have pulled this economy back from the brink.”

Does this correlate with a 9.7% – 16% (depending on whose statistics you use) unemployment, ongoing foreclosures with many more to come, businesses closing, many States dealing with multi-billion dollar budget deficits, some perilously close to default, deflation in a few areas, etc, ad infinitum?

Of course, when this country only loses 216,000 jobs in August compared to 700,000 last January, I suppose you could argue that we’re moving in the right direction.  And let’s not forget that our financial problems were over when we discovered that printing presses actually functioned 24/7, enabling us to print fiat money…or Monopoly money if you prefer…whenever we needed it.  As long as we don’t run out of ink.  Happy days are here again!

Maybe it’s not the economy, stupid.

What do you think?

Richard Marmo

September 11, 2009