Quotes To Live By

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Sunday, January 17, 2010

Recession Scapegoats

So I have to chime in on all the hoopla about the taxing of Wall Street. I have to come in from the opposite angle. Everyone keeps talking about how Wall Street caused the recession and how we deserve to be taxed on our bonuses to help rebuild America. Well…here's my 2 cents! Yes Wall Street sold loans to individuals who were trying to finance houses with high interest rates but you have to know the game. If you are a high risk, we charge higher rates. Americans need to take the fault for trying to keep up with the Jones's. Thorstein Veblen in 1899 wrote about the Theory of Conspicuous Consumption which basically talks about how people will continue to try to live above their means to try to pose as if they are on the same echelon of the wealthiest of people. Well that's what happened America. You shouldn't be trying to buy a $1,000,000 house when you work at McDonalds! Yes you had out of this world interest rates because you were a huge risk! Duh! That's how it works. All they write about is how the banks deserve to pay the tax to rebuild America because they sold the loans to people. And now banks get yelled at for not loaning money anymore. MAKE UP YOUR MIND AMERICA!

And while we're on the point of overspending Americans let's talk about savings rates (the rate at which people are saving a % of their earned/disposable income). This is important when discussing inflation. Negative and overly high savings rates is bad for the economy. Look at the US. For years we had a negative savings rate (we were spending way beyond our means) and hence the recession we are in. Look at China (whose savings rate is close to 40%), super-abundant savings from a fast-growing emerging nations such as China put downward pressure on yields and risk spread everywhere. There needs to be a balance strike (says the smartest young man I know M. Jen). If the US could maintain the 4% savings rate that it currently holds due to people being afraid of another Great Depression. We will be in good shape.

Now back to Wall Street. Now that we are in the recession the government is pumping money into the economy at the expense of Wall Street workers. I know we get paid well, but we also work ridiculous hours! A lot of us are in the office more than you could ever imagine. What you have to understand is that the US is not at risk for default problems at this point in time. Let me give you an econ lesson on how the cyclical economic pattern works. When the economy is doing poorly you pump money to stimulate the economy (which in turns builds up your national debt). That is not an immediate problem. The problem is 1-3 years down the line when the economy does not pay down the debt once we return to profitability. That's when you face inflationary problems. As long as we stop overspending (be happy with what you have and start saving your money – preferably at the 4% national rate) and once the economies bounce back government increases taxes to pay down the budget deficit we will be the good ol' US of A that we have come to know and love.

MORAL OF THE STORY: Stop placing scapegoats. Take credit for your part in the recession. Stop finger-pointing, increasing the problems, and help become a part of the solution. Be smart with your finances. Spend within your limits. If we don't reign this problem in, we will be a country owned by another country!
Meet the author: Monica

Monica is your typical guy's girl. She loves football, MMA, boxing, basketball, and every other sport. She's a Strategic Analyst for a financial services firm by day and a D3 Assistant Softball Coach by night. She loves all food and action flics

Thanks Mo!!

1 comment:

  1. I completely agree and feel that this point of view needs to be said on a larger scale. AMERICANs do not take responsibility for their own actions and it stems from a lack of sincere interest in education. A high percentage of Americans cannot calculate a gross salary from a hourly pay rate...or even calculate an 18% tip. In regards to mortgages, people pass the buck to banks to do what is right for them, not realizing that the banks interests lie with making money...instead of with fitting into a monthly budget (which many dont have). Its not the banks fault you don't know what you can afford. I say all this to say...stop relying on what others say and do ones own research. $800-1000 a week doesn't equate to a $450,000 - 1,000,000 loan....even if your credit score says your a low risk borrower...your check must hold up its end of the bargain