It could be attributed to generational changes in how we have been raised.
It could be attributed to jealousy, greed, or just human nature.
Whichever the case- we are where we are because of what we all did (do).
What I'm about to say will likely never be said by anyone who is elected to office, because it points the blame squarely at the voters.
Today's scapegoats are mortgage companies, insurance companies, banks and Wall Street, and maybe a few sacrificial politicians.
But the truth? You and me.
The average American.
Truly the average American is being redefined.
"Average" as defined in America today is well beyond the reach of most Americans.
This did not stop anyone from attempting to attain even average, but more often above average.
That's right, not just keeping up with The Joneses- more like one upping the Joneses.
Since 1995 we have seen unrealistic gains in housing prices and securities values.
Most of this financed in one way or another.
Personal and corporate debt and derivatives.
Here is what a derivative us in the mortgage-backed securities world, in layman's terms: A mortgage security is made up of many individual loans.
The loans vary in quality, and are divided in to tiers.
The quality of the tiers is measured and given a Rating by A Rating Agency (remember these agencies getting in trouble a little while back?).
The best loans- borrowers with good credit, stable income, etc.
are "A" loans.
The loans with borrowers with no so good credit, less job stability, etc.
go down to C, and D loans.
This works well.
Let's call this "Security M".
A derivative comes along when there is MORE DEMAND.
I'll come back to this.
The derivative is the creation of a new security from loans 'derived" or pulled out of another security (or pool of loans that are lumped together).
In the case of our current market, in order to satisfy INCREASED DEMAND, Wall Street pulled some of those "C" & "D" loans out and created "Security M Squared".
The Rating Agencies then rated these securities from "A" (the best of the bad) to "D" (the worst of the bad).
This is known as putting Lipstick on a Pig.
Investors bought these new securities for investment, which returned monies to the market to do more loans to satisfy INCREASED DEMAND.
It worked so well that in order to satisfy STILL INCREASING DEMAND, Wall Street pulled some of the "C" and "D" loans out of the M Squared securities, to create, or derive, another security- "M Cubed"- which rating agencies then rated from "A" (best of the worst) to "D" (worst of the worst).
This is known as putting Lipstick on a Pig in an Evening Gown.
These securities were then sold to investors and the monies were used to SATISFY DEMAND.
So here it is...
Wall Street found a way to meet demand, by creating securities that were sold for money without much new collateral to be lent to PEOPLE who bought homes with little money down and much looser qualifying criteria.
PEOPLE wanted more than they needed and Wall Street found a way to finance it.
Drug dealers sell drugs because PEOPLE are addicted to drugs and create demand.
Drug dealers are not responsible for people becoming addicted- that merely facilitate it.
The American addiction is Things (houses, cars, TV's) IN EXCESS.
American's have redefined "Need", as a synonym of "Want".
American's need to take responsibility for their actions.
The solution from government to revive the economy is for individuals and businesses to spend...
with credit.
Thus the emphasis on "unfreezing CREDIT markets".
Getting the banks LENDING again.
Any American who enters into a contract that he does not understand- whether explained poorly or with the most corrupt motivations of a sales person- is still responsible for their actions.
Not the salesperson/broker; not Wall Street; not the bank.
And it's not that the American is not smart enough.
This year the government authorized a first-time homebuyer "tax credit" of $7,500.
00.
Firstly, no licensed lender could legally advertise this program, because the lender would be guilty of misrepresentation and violation of the Real Estate Settlement Procedures Act.
The program is a loan.
The "credit" has to be paid back over time.
It's a LOAN.
This program has barely been used- because American's, without benefit of counsel, figured out that this was a LOAN.
Americans were smart enough to understand this program for what it was, despite the Government's misrepresentation.
Surely then Americans are smart enough to read loan disclosures and conclude that they either DID, OR DID NOT understand them.
We are in a tough spot.
Our economy needs for individuals and businesses to buy and sell our way out of the current downturn.
But the most critical thing Americans need to learn is this:
We can live without iPhones, Xboxes, plasma TV's and Hummers.
But we can also live with riding the bus, no TV's, no dinners out or movies or vacations or new floors or another pair of "cute shoes".
The key is a working budget and balance between today and tomorrow.
Despite the obstacles- the economy, the sales person who lied to you, Wall Street greed- it is your own ego, pride, shame and/or greed that has the most significant impact on your future.
So, take your share of the blame.
The decision is yours and the action has to be yours.
If I were to run for office my policies would reflect these opinions.
Can I count on your vote?
It could be attributed to jealousy, greed, or just human nature.
Whichever the case- we are where we are because of what we all did (do).
What I'm about to say will likely never be said by anyone who is elected to office, because it points the blame squarely at the voters.
Today's scapegoats are mortgage companies, insurance companies, banks and Wall Street, and maybe a few sacrificial politicians.
But the truth? You and me.
The average American.
Truly the average American is being redefined.
"Average" as defined in America today is well beyond the reach of most Americans.
This did not stop anyone from attempting to attain even average, but more often above average.
That's right, not just keeping up with The Joneses- more like one upping the Joneses.
Since 1995 we have seen unrealistic gains in housing prices and securities values.
Most of this financed in one way or another.
Personal and corporate debt and derivatives.
Here is what a derivative us in the mortgage-backed securities world, in layman's terms: A mortgage security is made up of many individual loans.
The loans vary in quality, and are divided in to tiers.
The quality of the tiers is measured and given a Rating by A Rating Agency (remember these agencies getting in trouble a little while back?).
The best loans- borrowers with good credit, stable income, etc.
are "A" loans.
The loans with borrowers with no so good credit, less job stability, etc.
go down to C, and D loans.
This works well.
Let's call this "Security M".
A derivative comes along when there is MORE DEMAND.
I'll come back to this.
The derivative is the creation of a new security from loans 'derived" or pulled out of another security (or pool of loans that are lumped together).
In the case of our current market, in order to satisfy INCREASED DEMAND, Wall Street pulled some of those "C" & "D" loans out and created "Security M Squared".
The Rating Agencies then rated these securities from "A" (the best of the bad) to "D" (the worst of the bad).
This is known as putting Lipstick on a Pig.
Investors bought these new securities for investment, which returned monies to the market to do more loans to satisfy INCREASED DEMAND.
It worked so well that in order to satisfy STILL INCREASING DEMAND, Wall Street pulled some of the "C" and "D" loans out of the M Squared securities, to create, or derive, another security- "M Cubed"- which rating agencies then rated from "A" (best of the worst) to "D" (worst of the worst).
This is known as putting Lipstick on a Pig in an Evening Gown.
These securities were then sold to investors and the monies were used to SATISFY DEMAND.
So here it is...
Wall Street found a way to meet demand, by creating securities that were sold for money without much new collateral to be lent to PEOPLE who bought homes with little money down and much looser qualifying criteria.
PEOPLE wanted more than they needed and Wall Street found a way to finance it.
Drug dealers sell drugs because PEOPLE are addicted to drugs and create demand.
Drug dealers are not responsible for people becoming addicted- that merely facilitate it.
The American addiction is Things (houses, cars, TV's) IN EXCESS.
American's have redefined "Need", as a synonym of "Want".
American's need to take responsibility for their actions.
The solution from government to revive the economy is for individuals and businesses to spend...
with credit.
Thus the emphasis on "unfreezing CREDIT markets".
Getting the banks LENDING again.
Any American who enters into a contract that he does not understand- whether explained poorly or with the most corrupt motivations of a sales person- is still responsible for their actions.
Not the salesperson/broker; not Wall Street; not the bank.
And it's not that the American is not smart enough.
This year the government authorized a first-time homebuyer "tax credit" of $7,500.
00.
Firstly, no licensed lender could legally advertise this program, because the lender would be guilty of misrepresentation and violation of the Real Estate Settlement Procedures Act.
The program is a loan.
The "credit" has to be paid back over time.
It's a LOAN.
This program has barely been used- because American's, without benefit of counsel, figured out that this was a LOAN.
Americans were smart enough to understand this program for what it was, despite the Government's misrepresentation.
Surely then Americans are smart enough to read loan disclosures and conclude that they either DID, OR DID NOT understand them.
We are in a tough spot.
Our economy needs for individuals and businesses to buy and sell our way out of the current downturn.
But the most critical thing Americans need to learn is this:
- Spend more than you make, and you create a liability- usually personal debt.
- Spend more than you make, and you cannot save or create any assets
- You cannot retire if you have no assets
We can live without iPhones, Xboxes, plasma TV's and Hummers.
But we can also live with riding the bus, no TV's, no dinners out or movies or vacations or new floors or another pair of "cute shoes".
The key is a working budget and balance between today and tomorrow.
Despite the obstacles- the economy, the sales person who lied to you, Wall Street greed- it is your own ego, pride, shame and/or greed that has the most significant impact on your future.
So, take your share of the blame.
The decision is yours and the action has to be yours.
If I were to run for office my policies would reflect these opinions.
Can I count on your vote?