This grew from a comment I left on Niall’s blog, but I think it really sums up my stance towards government. The metaphor is fairly general, but it can be applied to many individual issues:
“As the burden of the government’s yolk increases, we transfer more of our economic and personal freedoms to those at the reins. Those at the reins increase the load on our backs hoping that it will make the burden easier to carry. If the burden does not break us, then eventually it will become too large for ourselves and even our masters to remove.”
And like Dennis Prager always says, I prefer clarity to agreement. Anyone else want to concisely sum up their philosophy?
I filed my taxes before they passed a budget so I knew I’d be waiting around for my refund to come through. Checked on my Refund Status and it said it was processed on 3/17 and could take up to 10 days for direct deposit. Checked my checking account today and saw my refund had been deposited. Next year’s taxes won’t be so rosey, especially if you have kids. Speaking of California’s broken government, the May election is coming up so The Blarg and I will be posting on the propositions sometime soon.
Not only is there nothing Bernanke can do to prevent further meltdown in housing and erosion of the economy, but if there was he wouldn’t know what to do. From this AP article:
One of the suggestions Bernanke made was for mortgage and other financial companies to reduce the amount of the loan to provide relief to a struggling owner. “Principal reductions that restore some equity for the homeowner may be a relatively more effective means of avoiding delinquency and foreclosure,” Bernanke said.
With low or negative equity in their home, a stressed borrower has less ability — because there is no home equity to tap — and less financial incentive to try to remain in the home, he said.
You end up with low or negative equity two ways: you bought a house and then took a home equity loan based on the new appraised price or you were unlucky and bought an overvalued home before prices walked off the cliff. If home prices never went down low equity wouldn’t be a problem, but they are and they’re going down hard. As prices go down people start to owe more than the house is actually worth, still not a problem. The problem comes from not being able to afford the monthly payments on the home which means the borrower should have never gotten the loan in the first place!
So why does Bernanke want people to have equity in their homes? So they can tap it like an ATM and spend it on fancy cars and boats, pumping much needed money into the economy. But that money isn’t real and is being conjured from the perceived value of a big wooden box we call a house. Haven’t we learned anything from the past 4 years? Lenders have started returning to their senses and are requiring down payments and income documentation. Borrowers are realizing their overpriced McMansions aren’t worth holding onto and are walking away. Prices are falling, construction is slowing and inventories are going up. So where will things end up? Right where the market determines they should be. I think we’ll see the return of affordable single family homes in late 2009-2010.