October 17, 2008 at 11:53 am
Kevin Wood (10/17/2008)
I hate to be Dr. Doom but this financial crisis has opened the door to Socialism, hyperinflation, and high unemployment. ...
Every crisis leads to people panicking, which leads to pendulum swings away from whatever was currently in vogue. I don't consider what is currently being proposed Socialism, but, instead, it is government learning from prior huge market crashes. (Yes, the latest drop in the stock market qualifies undet the term "crash".)
In the 1930s part of the problem was Hoover's laissez-faire attitude, which was to let the market self-correct. The depression didn't begin to get under control until FDR began various government programs to try to stabilize the out of control economy. True, not all of his programs worked, and some of them may not have been the optimum choice, but some of the efforts did bear fruit, and the economy finally recovered. And many right-wingers called him a Socialist because of what he was trying to do.
Latest news I heard was that inflation is down, since gas prices have fallen.
I do expect unemployment to rise. For how long and how high I have no idea, and I don't anyone can truly predict how bad things will get before they get better.
But I do expect things to get better.
[By the way, you can thank FDR for Social Security. It may not provide much, but at least it provides a small safety net.]
October 17, 2008 at 12:07 pm
Unfortunately, our "wise and omnipotent" federal government has treated Social Security as it own little piggy bank to pay for many things that the money was NOT intended to pay for and still has to repay.
😎
October 17, 2008 at 12:12 pm
As to how things are currently affecting me:
I was laid off last year just before Christmas (thank you, Mr. Scrooge!) because the company had been having a tough 2007. I was lucky enough to find a position with a new company within two months, but at about a 20% cut in pay. I defy anyone to take that big a cut in pay and not feel it.
The stock market drop has hit my 401K also, but not as bad, since I watch it pretty carefully and I moved 75% of it into money market funds when the stock portfolio dropped 5% in the first quarter of this year. That means the net drop in my portfolio is only about 8% instead of the 35% it would otherwise have experienced.
I have had a difficult year since I have a pretty high mortgage, due to some refinancing I did to consolidate bills and do a little remodeling on my house, and I still have about $19K in an auto loan. However, I have been squeaking by, and so far my position at this company appears to be secure, and my new company is doing well. Needless to say I have not been buying any big ticket items or shopping just to spread the wealth, but I have still been going out to eat at least once a week and have been out to a few movies, etc., this year.
Generally I think your outlook on the economy depends on your personal experience. To me, it felt like we were in a recession at the end of last year, since that is when things started going in the toilet at my old employer. However, the country's economic situation did not meet the classic definition (two straight quarters of decline).
I've been around long enough to survive a few economic downturns, and I'm pretty sure we won't be falling all the way into a depression, so I am trying not to panic. As someone else has said, the portfolio losses are not realized unless you panic and withdraw at the bottom of the market. I am also encouraged to read that Warren Buffet, whose economic savvy I appreciate, is actually buying stocks now. That should mean we are near the bottom and should turn around within six to nine months.
October 17, 2008 at 12:14 pm
Barry G Freeman (10/17/2008)
We have the unbelievable situation here where we pay, say £1.20 ($2 ?) for a LITRE of petrol. 80p of that is TAX. Then we get VAT (Value Added Tax at 17.5%) on top of that. Yes, that's right.. we pay TAX then get TAXED on the TAX. can you smell scam?
OH God, please do not let anyone in DC catch wind of this scam because it is without a doubt that not one of them, not a single politician on Capital Hill would be able to resist doing this, resist the thrill of a new tax concept1 This would enable them to increase taxes across the board on everything.
In all honesty I can't believe they haven't done this yet already. They'd say it was a fee to cover the over head on collecting taxes and would sell it as a way to keep from having to raise taxes. I can just hear Pollosy now at the press conference about the passage of this new tax:
"In the interest of keeping taxes as low as possible on the poor and middle class, Congress has passed a temporary tax collection overhead fee of %X to be applied to any and all tax collections. To ensure this does not cause an unecessary strain on the poor and the middle class and that the wealthy pay their far share towards this fee, we have also passed a tax collection overhead fee credit to offset the tax fee. All Americans we classify as Middle class and under will recieve a monthly check to help offset any tax collection fees. We are happy with this outcome and look forward to continuing to put the every day, average American worker at the forefront of what we do!"
What they don't tell us is that all persons registering for the tax credit (legal or illegal) will get the credit check regardless of whether they actually pay any tax collection fees during the month so long as they are not qualified as Rich. Now will they let on that those classified as the wealthy are any persons not currently collecting goverment assistance of some kind. After all if you don't need to ask the government for any hekpo then you must be rich, right?
Kindest Regards,
Just say No to Facebook!October 17, 2008 at 1:39 pm
Steve, thanks. Yes, unfortunately 20% of the people cause 80% of the problems.:D
Jpowers, I'm glad you're doing ok, were able to keep your loses small in the stock market and you're being fiscally responsible.
However I must respectfully disagree with you about The Great Depression. In the book, "48 Liberal Lies About American History That You Probably Learned In School," in Chapter 44 the author points out that while almost all historians accept your reasoning, no economists do. And unlike historians, economists have to prove their theories. Nobel Prize winner Milton Freidman singled out the main culprit of the Depression was that the Federal Reserve Board allowed the monetary value to drop by one-third. Hoover messed up because he kept us on the gold standard and raised some taxes. There was also a farmer bailout intended to prop up agriculture. (Are you hearing the rhyming of history?) Then there was the Smoot-Hawley tariff that is the most influential single cause of the original crash in 1929.
The book also points out that modern economists agree nearly universally that New Deal programs hindered recovery. When you look at the rest of the world at that time, they had a 3 year recession. The US's went from 1933 (4 years after the crash) until 1941. FDR did one thing right when it came to the economy and that was he took us off the gold standard.
October 17, 2008 at 1:41 pm
I too work in the Financial industry, in an MIS department. We are swamped with the reporting needs for management & models being rewritten as Steve eluded to. My boss just hired two new people for our department.
Like others, I'm a single Mom, with no debt other than my lower-interest mortgage. It'll be paid off before I retire in 15 years or so.
I've been downsized four times since the mid 80's and land on my feet every time. My philosophy is things happen for a reason, what will be will be, hope for the best but expect the worst, etc.
It will be interesting what effecet this will have on my son graduating and moving on to college next year...
Recently a friend come here to WI from VA where there are no jobs in their field. It took two days, two interviews with two companies. Got here Wednesday afternoon and started work Monday morning.
My significant other recently changed jobs here in WI also.
Could be the midwest won't be hit as hard ?
It was interesting the the price of gas dropped from $3.89 to $2.89 in about a month here...
Car: My son must have a 3.0 GPA and pay for the increase in my auto insurance - - neither of which he is/can do, so therefore I do not have to pay for his driving school lessons. He will also be responsible for maintaining a car when he has one. He's a senior, so it will be interesting if & when he goes sway to college next year. I have also thought about giving him my 7 year old car when the time comes. At the rate he's going, the car will probably be too old by then!
October 17, 2008 at 1:57 pm
jpowers (10/17/2008)
Kevin Wood (10/17/2008)
I hate to be Dr. Doom but this financial crisis has opened the door to Socialism, hyperinflation, and high unemployment. ..................
[By the way, you can thank FDR for Social Security. It may not provide much, but at least it provides a small safety net.]
While SS may have provided a small safety net for some it has caused more arm then good. The introduction of Social Security has:
1) Delayed, by more then just 1 generation, the accepted practice of personal financial planning for retirement.
2) Caused the largest of any recent generation (the baby boomers) to make polictical decissions not based on what is best for them, their kids and the country but on what will help insure they get (or in some cases continue to get) their Social Security Benefits.
3) And worst of all, given the largest push towards an 'entitlement mentality' this country has ever seen.
Then again, our government has never let the bad results of a well intentioned effort prevent them from doing the same again & again.
Kindest Regards,
Just say No to Facebook!October 17, 2008 at 6:46 pm
My spouse and I just finished a major remodel on our house which doubled our mortgage debt, including a second mortgage line of credit we closed through Merrill Lynch just few weeks before the meltdown. I work in government agency where there were layoffs 3 years ago. My spouse works in healthcare industry, company being bought out 5 times over 12 years. We own 15 yr old and 6 yr old cars.
We waited and waited to do remodel, until even my father said it needed to be done. We knew that wasn't a good sign, he typically says things like, "Don't throw that out - there's nothing wrong with that, why it's perfectly good." [old used blackened oily stinky paper towel ripped to pieces].
As part of our remodel (7 months) we lived in a house open to the elements during 3 months of cold weather with 2 space heaters to save money, did demo ourselves etc. We had sold/donated all of our living room furniture (all second hand things, not nice), so planned to buy all new things, along with HD TV, built in Music system, etc etc. You get the picture. We ordered the music system early to satisfy my yearning.
Just want the rest of you to feel good about NOT choosing this crisis time to remodel!
Changes? Worry? We won't get HD TV, not some of furniture, put off replacing oldest car again, credit cards pay off each month. I am fairly worried about our jobs, but there is really nothing I can do about it until it happens. Neither of us will change proactively to be more secure, because we don't feel we can get more secure.
8 years ago I thought I'd be able to retire sometime in my 50's. Now I believe I'll work until 60's full time and part time for up to 10 years after that.
I've worked up to three jobs at a time in the past, have no problem doing that again. Sometimes you just use the faith in yourself to make things work out instead of listening to media. Houses and cars still sell in downtimes, just fewer. Some people still get new jobs/better jobs in downtimes. etc.
And I agree with folks that say - you don't lose money on investments until you sell.
October 18, 2008 at 2:29 pm
My organization has been through hard financial times before in the 80s when farms were going under like crazy. Those almost led to the end of the other regional lending institutions like mine. So in the short term I'm not worried about my employment. Depending on the decisions made long term, that may be a different story. So I'll do like I did when I separated from the Air Force: ensure I've kept my skill sets up to date, work on my communications skills, and try to make sound decisions financially for my family in case there is a lengthy delay in finding employment. With respect to my house and personal big ticket expenses, we got a fixed rate VA loan and made sure we didn't overpay on a house. My wife's van will be paid off in a couple of years and I'm driving my first car still, which I purchased in 1995. It still runs well, so there's no reason to part with it.
But that doesn't mean I'm without concern. Smart people made the mistakes that got us where we are today finacially and it's not going to be an overnight turn around to bring about healthy economies again. So there's certain to be strains and pains we're not expecting in the coming days. Hopefully they will be mild and we won't go further into an economic downturn. I remember the stories from my wife's grandfather about the days of the Depression and that's really not something I want my kids to have to suffer through. That means smart people are going to have to make smart decisions while minimizing mistakes going forward. It also means the rest of us have to keep our heads about us and not panic.
K. Brian Kelley
@kbriankelley
October 18, 2008 at 3:18 pm
The common, running themes seem to be:
1. DON'T panic (it's just pretty useless as a strategy)
2. KEEP the spending under control
3. TAKE responsibility for yourself and your decisions, past present and future
4. ACT in a sensible manner (you don't have to be smart, just use common sense!)
It all sounds like good advice to me.
And then what's the next step? How do we, both as citizens and individuals, pull out of this mess we've gotten ourselves into?
Don't limit your ideas to "write your congress-person". What organizations might you offer your skills to so your common sense and education become available to others? Are there conversations you could have with neighbors, friends or family that might give them new insight, or cast new light on an old problem? What do you think should be done, on a small or grand scale, to change the parameters of this situation? What are YOU willing to do to change the parameters of your situation?
These are the thoughts running thru my head this weekend. Joe Biden (VP candidate) will be in our area this weekend. If you had a chance, what would you say to him; what would you ask him to do / change / consider?
Today I'm thinking about fairness. No corporation should get a tax break that isn't available to a citizen (regardless of income). And vice versa. Or subsidies. Or any other special dispensation. If I'd played games with the financial numbers like some of these banks and lending houses, the IRS would have confiscated all my assets and put me in jail, and fined me on top of it all. Let's get back to standard accounting rules - no more mumbo jumbo. We've never had a free market (and I'm not referencing regulation, here) - the government is constantly interfering by directing money to certain industries. Anyone remember the prior bailout of Chrysler? If the ground rules were the same for EVERYONE (i.e. regulations like account practices, etc were known and stable), we'd be a lot closer to a free market. To me, free market doesn't mean "free to break whatever laws you want without consequence". It means free to operate within the same set of rules and boundaries as every other business in the USA. That just seems pretty basic to me. I'm sure someone will throw out the "what about the global market", but I'm pretty sure standard accounting rules are similar all over the world (whether they're followed or not is a separate issue...)
Steph Brown
October 18, 2008 at 5:37 pm
Okay Stephanie, I'll be the first to bite. And just to be clear, I can only speak for the US.
Governmentally:
A simplified tax code, I prefer a flat income tax with a generous per person deduction. Some one smarter than I will need to figure out the details.
Smaller federal government, let's stop sending money to a HUGE bureaucracy just to have sent back to the states, keep it in a the states so it passes through fewer hands, thus hopefully less pork.
Personally/Individually:
Talk with credit counseling agencies.
If you can't afford it (cash or pay off credit card monthly) you don't need it.
Don't believe the lie that your income will grow into mortgage. Buy a house you can afford and still put something away.
Re-evaluate what you really need. Do you need that $100/month cable bill? The cell phone for every member of the family? The $40,000 Lexus instead of the $20,000 Toyota? The 60 inch wide-screen HD TV with surround sound?
I realize we all want the nice stuff and that it is unrealistic to expect to buy a house without a loan and in most cases a car, but everything else you can save up for and even make some interest while saving instead of paying interest.
Remember the old saying "neither a borrower nor a lender be".
Jack Corbett
Consultant - Straight Path Solutions
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October 18, 2008 at 6:28 pm
Heh... I pretty much agree with what Loner said. I'll go a step further... although I feel bad for some of the "Joe Bag-o-Donuts" guys that lost a good portion of their retirment, what did they actually lose? 8-9 years ago, the stock market finally edged over the 10,000 mark. It only took 8-9 years to go up to 14,000. People just [font="Arial Black"]HAD [/font]to know that, like oil prices, it was all based on speculation (and that's been proven by the crash) and that it wouldn't last.
I'm actually kind of glad to see this long overdue correction happen... gas and other energy prices have started to come down as a result. House prices have come down to within reach (if you can get a loan). The price of processing metals like Steel and Aluminum will come down. The cost of living will follow... food will become cheaper because it won't cost as much to cultivate it or ship it. And, jobs are going to come back quite nicely... people are going to be able to afford "stuff" again. For those poor souls who got caught up in this *&^&R%! mess that the "big boys" caused and have lost their job, hang in there... do whatever it takes to ride this storm out, 'cause it's going to be a beautiful day on the other side. And, next time, have some "liquid" money stashed away so you can survive for 12 or 18 months with no income. Yeah I know... you've got bills... fix it!
I'm sorry if you bought a mega house with a mega payment that you couldn't afford to begin with and THAT's why you thought the subprime ARM's were such a good deal. Didn't you know that you had to pay for it SOMEDAY. Why ya whining now? Today is that SOMEDAY!
People need to learn to live within their means... or stop whining when beyond-their-means comes due. If you think "saving" is for losers, look who's laughing now. I drive the same fine vehicle I have for the last 9 years... cost me less to maintain it than to buy new or lease. I have a very modest house of only 1140 square feet... it's not in the best of shape, but I'm working on it. And, except for the mortgage and a couple of home improvements, I'm basically dept free. Jack said in a post above that if you can't afford to pay for something, don't buy it. The only people that are in real trouble right now, are the ones that did. 😉
--Jeff Moden
Change is inevitable... Change for the better is not.
October 19, 2008 at 8:05 am
The average annual salary in the UK is around 24K. Some of the bankers in the city get bonuses that mean Mr average would have to work for 100 years to get the same money. We are talking about bonuses here not salary!
Apparently these bonuses are paid on profit. So why do they need a bailout if they are still paying these bonuses?
Apparently we need to keep paying these bozos because otherwise we would lose their talent.:w00t: Its a global economy and its all up the creek. Where are we going to lose these guys too?
You can bet that the guys on 6/7 figure salaries are going to have all sorts of clever schemes to legally avoid paying tax. This means that some poor sod on average wages is going to be paying a far higher proportion of their income in taxes than the super rich.
In the UK we have different sorts of companies for legal reasons. A limited company is something where directors have limited liability where as partnerships and sole traders are wholly liable.
I think the banks should fall into the wholly liable categorisation. If you want to earn megabucks then you personally have to accept the megarisk.
There was a report that the banks took a 37billion bailout and paid their executives a 17billion bonus. If that is true then someone needs shooting.
As someone on a salary I can work around any short term problems but my parents generation are retired on fixed incomes and cannot do anything about their situation.
October 19, 2008 at 9:32 am
One thing I like, and I'd urge those in the US to support is http://bailoutsleuth.com/ from Mark Cuban. Write your representatives, state and federal, and let them know they have to disclose where the money goes.
Interesting advice, and I agree with it, but there are problems. We have cultural issues that need to change and perhaps that is part of the problem.
1) Delayed, by more then just 1 generation, the accepted practice of personal financial planning for retirement.
I think this happened, but I'd caveat it with the fact that so many people do not know how to make these decisions. Plenty of doctors and other smart people cannot manage money. The idea government providing some assistance for retirement is good. There is always a small, small percentage of this country that cannot care for themselves. There is also a large percentage of this company that tries, but is un-qualified. And either companies must be forced to live up to their obligations or we should have something like SS.
Note that I haven't seen a lot of people complaining when various companies stop paying out their pensions or letting go their obligations. That's a free market that really bothers me.
2) Caused the largest of any recent generation (the baby boomers) to make polictical decissions not based on what is best for them, their kids and the country but on what will help insure they get (or in some cases continue to get) their Social Security Benefits.
Not sure that's true. I think many of the recent generations (baby boomers and gen x) just stopped caring about politics, which is a problem.
3) And worst of all, given the largest push towards an 'entitlement mentality' this country has ever seen.
I struggle with this because while I believe it's true, people are way, way too entitled, I think businesses are here as well. They believe that anything that increases profit is good and anything they want is good. The quote sounds leftists, but I think every right wing group is just as guilty of this as the left. We have lost the ability to compromise, people use litmus tests here and there, and most everyone, of every race, of every class in the US wants to "get theirs," a sad state of affairs.
what did they actually lose?
Who knows. There is no "they." People that are 60+ might not be able to retire. Is that sad, yes, but you have to take some responsibility.
People 70+ might not be able to survive, might lose their house, etc. That's unconscionable. These are the people that built this country around WWII and after the Great Depression. We have an obligation here.
People 50+, hard to tell, depends on where you are. Some work longer, some made poor choices, some didn't.
Those of us younger, we can probably ride things out and hopefully learn lessons. Those in their 20s should hopefully stop the unchecked consumerism.
The bottom line in my mind, is that most of us in IT will be OK. We get paid well, we have good skills, we tend to adapt well. However making the decision to do so can be hard.
For many other people, life is changing, industries need to retool, not just finance, but automotive industries and more. That can be hard. It can mean cultural changes, which are what we're all talking about. Not buying everything on credit or new, but that means a huge part of our economy, which can mean many of our jobs, change. Someone has to buy new cars at some point or the industry dies. Those cultural changes, while something I think we need, mean that lots changes in the US (and the globe), not just that we're smarted. Being more conservative fiscally, which banks and people need to be, means a slowing global economy, and that means lower returns, which cycles into lower pay and income from investment. The trick is to slow things without spiraling downwards (or speed them without spiraling upwards).
Life is going to get hard before it gets better. We all have to be a part of making better choices, as Stephanie mentioned. Jack has good ideas, but many of those will never change until we put an effort into things.
My vote? Vote everyone out of office, Republican, Democrat, don't care. You're in DC, you're gone. We're smart people, we can figure things out. Don't give me the experience crap. Each of us has been thrown into a job and figured it out with some success, other professions do it, let politicians do it.
Then do it again in two years and again in 4. That will send some messages. Get more people through the government that are fresh, that have ideas, that don't feel entitled they're in government, and we should see less pork, and hopefully less government.
A few more:
- Expire laws, give them 20, 30, something years, then they're gone.
- Zero based lawmaking. You want a new law, repeal an old one (Andy Warren's idea)
- Balanced budget - I'm not sure government at the state/local level can function like this since they need capital improvements, but national governments have shown they cannot handle this. Across the board percentage cuts to make things work. It his defense as well as welfare, that's the price we pay.
- Term limits, don't care what they are, just get them in there.
- Fundamental credit laws for everything. A house loan is the same as one for an iPod from Best Buy. No slick packaging, simple rates, simple financing. I think the "creativity" that has been employed is responsible for a lot of our problems.
- Respect for each other. No idea how to implement this, but I see less and less of this from the Dems and GOP.
How do we get there from here? No idea. Vote everyone out and elect the top 535 posters from SQLServerCentral. That might help 🙂
October 19, 2008 at 11:27 am
Jeff Moden (10/18/2008)
People need to learn to live within their means... or stop whining when beyond-their-means comes due.
Agreed. The only thing I owe money on is my house, and that's almost 1/4 paid off after just 3 years. (20-year loan). I make a point of paying cash as much as possible, using the credit card (singular) for larger purchases. Credit card gets fully paid off every month.
Steve Jones (10/18/2008)
- Respect for each other. No idea how to implement this, but I see less and less of this from the Dems and GOP.
I see less and less of that everywhere. Not just from politicians. It sometimes seems like respect is out of fashion and it's acceptable now to insult and belittle people.
How do we get there from here? No idea. Vote everyone out and elect the top 535 posters from SQLServerCentral. That might help
<shudder> No thanks. Besides, my skin's the wrong colour to go into politics in my country. 😉
Gail Shaw
Microsoft Certified Master: SQL Server, MVP, M.Sc (Comp Sci)
SQL In The Wild: Discussions on DB performance with occasional diversions into recoverability
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