Thursday, September 25, 2008

Financial Crisis

Grandpa was reading the newspaper when he looked around the corner of the pages directly at me. He then put the paper aside, putting his elbows on the table he leaned forward and stared directly into my eyes. Then he spoke quietly and deliberately.

"We have a financial crisis in this country now, boy. The government is attempting to come up with legislation to deal with this to the tune of at least 700 billion dollars. The problem is that everybody is too busy trying to declare blame when they should be working on solutions. From what I have read and heard, everyone is attempting to place blame everywhere but the right place.

The political parties are blaming each other in hopes of gaining the votes of the people. The presidential candidates are doing the same. Pundits are arguing over whether or not there was enough regulation or too much on the banking system that we have in place. There are even charges that it is inherent in the form of economic system we have.

Is it an inherent factor of the economic system? The answer is yes. It is inherent in any and every form of economic system. One reason being is people. Another reason is the nature of economics itself. Neither can be totally controllable.

People are to blame because they allowed greed to be the determinant of their decisions and for this they got spanked and spanked good by the nature of economics. The nature of economics is to correct itself when supply does not meet demand or when demand does not meet supply. This is historical fact.

Now, politicians can show their true stripes. The solution that they come up with will let the people know what their representative is at heart. So, watch him closely to find out if he is a socialist at heart or a true advocate of free enterprise who seeks a smaller government. It will also let you know where that representative places his trust for solutions, in the people or in government. Either solution will result in one thing. You the people will bear the brunt of the financial costs.

Moreover, remember that the people are you, the voter, and the government is your representative, himself. Do you, the voter, have the trust that your representative will make the hard decision, one that may cost him reelection, that is needed in this matter or will he make the easy one?

Who or what is to blame? It is not President Bush. His policies may have influenced the decisions that resulted in this crisis but he wasn’t the cause. Was it government? Government may have influenced the banks to make these bad loans by its regulations but it wasn’t the cause. Was it the banks? The banks may have been influenced by some factor to make those loans but they were not the cause.

Those who advocate for socialism do not tell this part. They promote the concept of socialism by telling you all the benefits it has for the people but they never tell you what the consequences of socialism are and its costs to the people. The blame lies with the people themselves. We now have a choice, hold all of people responsible as socialism would have it done or only hold those people whose signatures are on the loans responsible as free enterprise would have you do. The choice is yours my friends.

The people were not forced to take out those loans. Their own greed induced them to take out those loans. The fact that they went into that bank unprepared does not make them victims of the system. It makes them victims of their own greed. They speculated in hopes of a profit and they were caught with their fingers in the pie.

So, boy, remember this lesson as if it was your only lesson in life. Don’t ever walk through the door of a bank for a loan until you have all the facts down. With the facts you can get up and walk away from a bad loan offered. Without the facts you are depending upon that bank to give them to you and that in itself is a poor decision. This is one lesson that should be and will be stressed all of your life"

I just nodded and said, "yes, grandpa, I’ll remember."


BB-Idaho said...

1. Never buy a house as an it to live in.
2. Never accept an 'adjustable rate' loan.
3. Credit makes the world run: the bible bans it as usury. Take your pick.
4. Bundling, short-selling, leveraging and derivative swapping
produce nothing..but will get you a convenient government bailout.
(If you lost your second job and your house payments increased by
$500 a month, there is a slim chance the above bailout may be of
some assistance. Termed 'trickle down' by some.
5. The CEO of AIG refused his
golden parachute, showing there
is honor and responsibility here, as well as Japan, where it is common practice to accept responsibility for one's actions...even CEOs.
6. Economics is known as the dismal science....
...and leaves one pondering: is it
smarter to forclose and sit on an empty home going to ruin, or work out a payment plan?

The Griper said...

never expect the economy to remain on the upswing. there is a limit.

the same being true of a down swing.

pray that the former is longer than the latter.

if there be anything to show the need of sitting down and have a written out plan and budget, times like this shows it perfectly.

i admit that at the time i shoulda did this, i never did. i just happened to be one of the lucky ones in life in regards to these needs. i'm still paying for those mistakes.

Average American said...

I had an adjustable rate 2nd mortgage once. It almost cost me everything. Borrowed $30,000, paid back about $60,000 in 10 years, and at the peak(13.5%interest)came real close to bust. NEVER again!

The Griper said...

learned a costly lesson, AA. but then again all of life's lessons can be expensive. a hard teacher she be.

we can only hope to pass those lessons learned down and hope our kids never need to learn them the hard way.

Gayle said...

My house is paid for and so are our two rental properties. I'm one of the lucky ones but it doesn't hurt having married a mathematical genious - at least he is compared to me! :)

I agree, Griper, that this was caused by greed and now all Americans are going to have to pay for those who have poor judgement. It's inexusable that this happened. I'm not for a bail out. I think the government will do more harm than good. I hope I'm wrong.

Also apologize for not being around but I was out of town on business for most of last week.

The Griper said...

no apologies needed. my posts aren't going anywheres. lol i just hope that all who visit my site find my words interesting enough to read. and hope i'm off the wall enough in regards to what i write to make those who read my words think a bit.

Gayle said...

Not to worry, Griper. You cause a lot of thinking, I promise you! :)

The Griper said...

well, gayle,
if they don't like what i write they always have the option of going to my other site and listening to good music. lol

msladydeborah said...

I declined to take out a loan on a home several years ago because it seemed to me that there was a built in failure factor for me. What started out to be reasonable payments would eventually grow to the point where I would be stresse to the hilt trying to maintain.

Since I have one income and it has to take care of me, I declined. Which seemed to surprise the man who was trying his best to sell me a condo.

I believe that it is up to individuals to get some for real understanding about any long term payment commitments before signing on the dotted lines.

The Griper said...

he grins at the lady deborah. bet you left that bank feeling a whole lot better too. can just see the look on that man's face thinking he had you reeled in. lol


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