More than a year ago, one of our congressmen made a prediction. He said that he wouldn’t be surprised to see the national debt rise in one year by three-quarters of a trillion dollars — a $750-billion-dollar prediction. Now the bailout is a reality. The prediction is made at the 1:49 mark of the clip at the end of this article. Around the 6:45 mark he says that the situation will end badly in a worldwide economic crisis.
Many of us feel that economics is too big a topic to wrap our minds around. The financial system is “too big” and “too complicated” to understand, so we just throw up our hands and move on to the next fire that needs to be put out in our own little world. Each of us has a part to play in the financial system, and it is time that we put some emphasis on the macro in addition to the micro. Most of us have been completely focused on the microeconomics of our own lives (our retirement plans, income this year versus last year, car payments and the like) versus allocating some of our focus to macroeconomics, which is looking at the overall economy. Americans are willing to put pencil to paper to figure out if it makes economic sense for a spouse to work or stay home with the kids, but few of us pay enough attention to the economy at the aggregate level.
This congressman’s prediction shows that it is possible to see what lies ahead, in a general sense. Some people in the private sector knew what was coming too. I saw a news report about a hedge fund guy who made hundreds of millions for his fund because he bet that there was going to be trouble in the mortgage market. Americans need to demand more of themselves. We cannot leave it to other people to be financial experts. If we leave it to others to mind the store, we should not be surprised to have the inventory not match the ledger book when we return.
As Americans, we need to be more and do more. News is great, but let me ask you this: how many 30-minute news broadcasts have you watched in your lifetime? I bet plenty. Now, how many times have you read the Constitution in your lifetime? Hmmm … probably not enough. Interestingly, it only takes 30 minutes to read the Constitution — the same amount of time it takes to watch the news. Reading the Constitution isn’t just for academics and Supreme Court justices. Moreover, economics isn’t just for economists. It’s a job for you and me and every other adult American.
by Wade Young
Nice thought, but every pundit on the news has a different opinion, and if you watch it long enough, you’ll probably end up more confused than before. BTW, the hedge fund manager was John Paulson, of Paulson & Co., who made a heck of a lot for his clients (and for his hedge fund) betting short on mortgage backed securities. You can’t go wrong if you follow him (or the Yale endowment’s David Swensen) closely, but its a bit hard to know what these guys are doing, unless you’re a client.
That is not just a congressman that is Ron Paul who ran for President. He was the only one to speak the truth about our economy but sadly no one wanted to listen.
Why can we not manage to elect the one that speaks the truth about things
We all knew that this boom wouldn’t last forever. Most of us new that something like this was bound to happen sooner or later, but few of us prepared for it. Live and Learn. Lets pray that this election helps turn things around.
As usual there is a disconnect between what we may know or anticipate happening and having the where-with-all to actually prepare or do something about it. For a while we have had an “eat, drink and be merry” attitude while riding a 14,000 DOW and inflated home values. The problem was that we forgot (or didn’t want to remember) that the second part of the verse is “for tomorrow we die.” There is a reason that the vast majority of Americans who actually have some money in a 401K or other vehicle leave the handling of it up to some “expert”; they don’t have a clue how to handle it themselves. To expect them to 1) REALLY care enough to stop watching tv and take some time to learn how the market works, 2) be knowledgeable enough to understand where the market is going and 3) be wise enough to be pro-active in protecting their investment is just asking too much. That’s what our government is for! They will look out for us. They know what is best. Isn’t that what our government has been telling us and wants us to believe…and in fact we do believe? Have you been listening to the debates? Now the Fed is perched to grasp the banks to “rescue” US from THEIR failure. And in doing so, the few that are really pulling the strings are profiting wildly. NOTE: Good `ole Mr. Buffet made a cool $8B in 30 days this August/September (not that he’s the problem, God forbid) so someone is benefitting by all of this noise.
Anyway, to expect the “masses” to actually be self governing and be able to take care of themselves is to expect too much. For years we have been blanketed by the “mushroom principle,” which keeps us in the dark as dung is shoveled on us. The sad part is that we have become comfortable there.
Great post, Wade. I think a lot of knew what was happening was unsustainable, and that we were eventually going to pay the price. At the same time, I didn’t see this coming the way it did. I will take up your challenge and read the constitution for the first time since 8th grade.
I as many Americans did believe that the bubble would not last. I truly sought advice on how to deal with what I believed to be trouble on the economic horizon. I live in a moderate home, have no outstanding credit card balances, and only owe the monthly bills, and dependable taxes that always arrive on schedule. I do feel as though I am very fortunate in that I can meet the bills that come each month, and even pay the higher prices for food and energy. But I also feel as though this is only a temporary state of affairs. Leaders in political prohibitions say, ” There is plenty of room for blame” well, I believe that to be true, but I also believe that the reason that they say that is because the politicians are at the core of the problems that we now face. They speak of CEO s’ as being the problem for taking huge profits. That is in fact true, but the politicians are the ones that allowed this to continue because the lobbyist, to this day lavish large sums of money to buy political favor. Had the politicians been paying attention to what was happening laws could have been enacted to address the issues, before it became a worldwide crisis? This is only assuming that the laws did not already exist and the politicians kept turning a blind eye to what was happening.
Now it is up to the American people as a whole to suffer the consequences of inadequate representation.
I submit that the total impact of the crisis has yet to be felt. I hope that all Americans know how important the upcoming elections will be. It is not about race, it is not about experience, it is not about being a war hero, and it is about have a Commander that will lead with the intellect, and judgment to salvage a dieing way of life. Again it has been my experience that just about all politicians lie to get what they want, and the first on their list is elected. Then all promises are out the window. I hope that the voters realize what will happen if we choose wrong in the presidential election
As usual there is a disconnect between what we may know or anticipate happening and having the where-with-all to actually prepare or do something about it. For a while we have had an “eat, drink and be merry” attitude while riding a 14,000 DOW and inflated home values. The problem was that we forgot (or didn't want to remember) that the second part of the verse is “for tomorrow we die.” There is a reason that the vast majority of Americans who actually have some money in a 401K or other vehicle leave the handling of it up to some “expert”; they don't have a clue how to handle it themselves. To expect them to 1) REALLY care enough to stop watching tv and take some time to learn how the market works, 2) be knowledgeable enough to understand where the market is going and 3) be wise enough to be pro-active in protecting their investment is just asking too much. That's what our government is for! They will look out for us. They know what is best. Isn't that what our government has been telling us and wants us to believe…and in fact we do believe? Have you been listening to the debates? Now the Fed is perched to grasp the banks to “rescue” US from THEIR failure. And in doing so, the few that are really pulling the strings are profiting wildly. NOTE: Good `ole Mr. Buffet made a cool $8B in 30 days this August/September (not that he's the problem, God forbid) so someone is benefitting by all of this noise.
Anyway, to expect the “masses” to actually be self governing and be able to take care of themselves is to expect too much. For years we have been blanketed by the “mushroom principle,” which keeps us in the dark as dung is shoveled on us. The sad part is that we have become comfortable there.