Sure, You Say That Now…

Ron Paul on Fannie Mae and Freddie Mac:

Despite the long-term damage to the economy inflicted by the government’s interference in the housing market, the government’s policy of diverting capital to other uses creates a short-term boom in housing. Like all artificially-created bubbles, the boom in housing prices cannot last forever. When housing prices fall, homeowners will experience difficulty as their equity is wiped out. Furthermore, the holders of the mortgage debt will also have a loss. These losses will be greater than they would have otherwise been had government policy not actively encouraged over-investment in housing.

Of course, he said this in 2003.  The guy really is a kook, huh?

Gas Prices Aren’t Too High

That got your attention, huh?

As evidence I submit my venture to Sundown in the City on Thursday.  Sundown in the City is a series of outdoor concerts put on each summer in Market Square.  There’s no charge for admission, and they draw insane crowds.  I haven’t been to Sundown in the City in a couple of years, but I went on Thursday to see Robert Earl Keen.  Huge crowd, and an unbelievable amount of smokers.

Before I go any further…I don’t care if you smoke.  You have every right to do so, and I think the ban on smoking inside is a bunch of crap.  It’s your body-trash it if you want to.  If I don’t want to be around it, I can (and do) choose not to be around it.  That problem is easily solved.

But I didn’t realize that so many people still smoke.  What is this, 1978?  Maybe they were smoking so much because they aren’t allowed to do it inside anymore?  Maybe they are all nervous about the fact that gas and food prices are so high?  Maybe they spent the money they would have spent on fuel for this years family vacation on cigarettes since they wouldn’t be able to go anywhere this year?

I don’t know.  But I started thinking that, while gases prices are high, they aren’t so high that people can’t afford the luxury of cooking themselves from the inside.  I mean, this is literally just burning money, and a lot of it.  To be fair, I didn’t hear anyone complaining about gas prices in between puffs, but I’d bet dollars to donuts that some of them had complained in the last 24 hours, probably the last time they filled up and bought a pack of smokes.

So as high as prices are, I think we’ll survive–at least long enough to demand in our old age that someone give us free health care to take care of all those problems caused by smoking.

You Wanna Know Why?

I’ll tell you why.  Or I’ll let MonsterNoodle explain it:

Keep on loaning to people that can’t afford it, for things that are not worth it. Enough said.

Read the whole post.

What is a Recession?

According to Hoyle“…

Recession Two consecutive quarters of decline in real GDP is commonly taken to be a recession. The National Bureau of Economic Research, a private organization, effectively decides when recessions occur, however, and the actual dating process is determined by judgment rather than a formal rule.

So which is it? Is there a firm definition, or is it completely up to judgment? I’d say both. Examining the clinical data, according to the BEA:

  • 2007 Q4 GDP — 0.6%
  • 2007 Q3 GDP — 4.9%
  • 2007 Q2 GDP — 3.8%

That doesn’t look like the classical definition of a recession to me. It looks like growth of the GDP is slowing, but not in decline. The economy is still growing, just not as fast. It’s very interesting that you hear so much about us being in a recession, or headed for a recession, or whatever. It’s almost as though someone is trying to convince us that there is a recession, huh? I think that’s where judgment perception comes in. It seems as though we are in a recession, mostly because everyone perceives we are. And that’s probably the only thing that really matters. I just hope that no one is using that perception for something like political gain.

Nah, that would never happen.

Hillary Clinton and the Economy

I can’t believe she said this:

“It’s time for a president who is ready on day one to be the commander in chief of our economy,” the New York senator said, reframing her leadership campaign theme. “Sometimes the phone rings at 3 a.m. in the White House, and it’s an economic crisis.”

So what is the solution at 3 am? Do you get on the phone to the Chairman of the Fed and beg him to drop interest rates 0.75%? Do you decide to take away buy people’s property and pay other people to flood it? Do you log into your online account and borrow millions billions trillions from China to write out checks to the American people that are just big enough to allow them to buy some stuff from…China?

Do you then go back to sleep after one of these snap decisions, resting easy that the situation has been resolved?

To be fair, it’s not just Clinton, and the American people are encouraging them to stick their noses where they don’t belong. I can’t remember where I read this (thanks to public education), but it describes the powers and duties of the President of the United States pretty clearly.

He shall have Power, by and with the Advice and Consent of the Senate, to make Treaties, provided two thirds of the Senators present concur; and he shall nominate, and by and with the Advice and Consent of the Senate, shall appoint Ambassadors, other public Ministers and Consuls, Judges of the supreme Court, and all other Officers of the United States, whose Appointments are not herein otherwise provided for, and which shall be established by Law: but the Congress may by Law vest the Appointment of such inferior Officers, as they think proper, in the President alone, in the Courts of Law, or in the Heads of Departments.

Where does it say the President is in charge of the economy or even has anything to do with the economy? And seriously, do we want one person to have that kind of power? Wasn’t that exact situation a major factor in that war fought a couple hundred years ago?

About Yesterday…

Newscoma has an interesting post this morning about the three big stories yesterday–the economy, Thompson exiting the Presidential race, and Heath Ledger’s death–and how they were covered by the media.

In rooting around the Internet yesterday, as I was a blogging fool for about five different websites, the most response I saw about all of the three stories was about the death of the young actor.

I have to agree that just about anything trumps Fred Thompson’s exit.  Unless you are a Tennessean, you probably didn’t even notice he was running, but I did go so far as to give it a tweet.

The economy?  I think that’s a huge story that warrants daily discussion and debate.  But it seems like unless the stock market goes up or down 5% in one day, or is at least projected to do so, no one seems to care.

And for the news industry, the other stories take the bottom fold because people want to know about the world of celebrity and watch from a safe distance. 

But why?  Why is it that the death of an actor is able to top just about any other story with such ease?  Why is so easy for us to obsess with the life of celebrities and so hard for us to concern ourselves with things that affect our own lives?  Why?

I’m not casting stones here–I do it too.

I had a boss once tell me in news that there are always three big stories. 1.) Kids, 2.) personal issues with money and 3.) the unknown/death.

I think that’s probably true.  But has it always been this way?  During the American Revolution, Civil War, and The Great Depression was this true?

Luckily, We Have The Fed

Admittedly, I am more stupider than a lot of people when it comes to finances.  So someone please tell me how the stock market really works.  See, I thought the stock market reacted to what is going on in the economy.  I didn’t realize it was the economy.  

Apparently, I was wrong, because the Federal Reserve has announced an emergency rate drop to “fix” the stock market.

The Federal Reserve, confronted with a global stock sell-off fanned by increased fears of a recession, slashed a key interest rate by three-quarters of a percentage point on Tuesday and indicated further rate cuts were likely.

This move is not an instant fix,” said Ian Shepherdson, chief U.S. economist at High Frequency Economics

“Fix” is actually the perfect word.  Markets can be “fixed” kind of like a fight or the World Series can be “fixed”. 

So let me get this straight.  We (individually and as a country) have borrowed too much money, which has us headed towards a recession.  The obvious solution?  Lower interest rates to banks, which allows them to lower interest rates to consumers, which allows them to borrow more money.  Makes sense right?  Right?

“You can’t borrow your way out of debt”–Dave Ramsey

So rest easy tonight, all of ye lower and middle income Americans.  Though the cost of milk, gasoline, and Coors Light doth drift higher whilst thou income remaineth the same, panic disturbs not the slumber of bankers, barons, and brokers.  So long as the DJIA remaineth propped by policy, politicians, and ponzi schemes, you need not be troubled by the frightful prospect of competing on a level playing field and moving forward.

Ah, what the hell!  You can just put it on your credit card, right?  Rates have never been lower!!!

Credit Card Regulation, Free Markets, and Paying Cash

The Coyote Chronicles challenges Free Marketers to defend deregulation of the credit card industry: 

You can make the argument that people who can’t pay their balances in full every month should not take out a credit card, but thats more than a little disingenuous since we would see a staggering drop in consumer spending if people only spent when they could pay cash. The restaurant and travel industries would suffer immediately. I doubt there would be a Black Friday at all. Don’t even get me started about the car business.

I’ll take a shot at this one.  First of all, Black Friday, car financing, and credit cards themselves are all fairly new concepts.  Somehow, civilization survived before they existed, and suspect it will survive long after they are gone.  The assertion that our economy is propped up by the insane amount of consumer credit that exists currently tells me that we are, as a country, living above our means.  The fact that the savings rate keeps declining while consumer debt continues to rise tells me that we are in denial of this fact.  Government regulation that enables this foolish behavior only delays the inevitable crash that must occur to correct the market and insures with each passing year that the crash will be harder.

What would happen to the economy if people stopped using credit cards and started paying cash?  One thing is for sure.  Every debt free individual would have greatly increased buying power because a higher percentage of his income would be available to purchase goods and services instead of paying interest on the Big Mac Value Meal he bought 4 months ago.

Hat tip to MCB.

How Sad Is It That This Makes Me Happy?

The KNS reports that Scott Moore would like to repeal the $30 wheel tax in Knox County.

“In times of a slow economy, we ought to be able to help our citizens and put some money back in their pockets,” Moore said this morning as commission’s Intergovernmental and Finance committees began meeting.

It is also wise to put money back in the citizens’ pockets when their county government is a mess and they have little faith in it.

Regardless, I’m can’t help but be happy when our overlords graciously offer to return money to the people who earned it.