Each workday I drive about 45 minutes each way on my commute, through the back roads and verdant fields of Iowa.

It is, to say, nothing short of insanely boring.

Technology to the rescue, as I have found that an excellent way of spending my time is listening to various podcasts on my iPod Nano.   Not only does it distract me while I whiz along the same paths day-in, day-out, but I am learning an awful lot as a secondary consequence.    Who knew that a commute could be so educational?

Background on this Point:

One of the best podcasts I listen to is NPR’s Planet Money, a financial-oriented show intent on demystifying the greater market news and trends and explaining what is behind the numbers in the financial sector.    The staff clearly spends an enormous amount of time researching the topics presented and deciphering them into terms that those of us, like myself, who are not bound to the financial sector can still understand what’s going on.

And there’s nothing like a financial crisis in your country to suddenly make talk of the stock markets, mortgages, and other such subjects normally considered to be fairly dry to be rendered exciting, interesting, and downright frustrating.   I have to say I have a newfound fascination with the industry that I simply wouldn’t have without PM.

Recently PM’s correspondant Adam Davidson had the chance to sit down for an interview with Tim Geithner, the Secretary of the Treasury and arguably one of the most powerful men in the American financial system today, given how much the markets are hanging on his every word and action.   In the interview, Geithner maintained a very tight to-the-message game and didn’t reveal much, but when pressed about the possibility of nationalization, came up with the response that, “that strategy” (he wouldn’t say the word) wouldn’t work for the American economy, thus indicating that it’s not an option the are considering seriously.

The Point Itself:

After listening to all the analysis of the market status, why nationalization is good or not good,  the incredible insanity of AIG, and Geither’s zig-zag interview with Adam, I wonder — maybe they don’t have a plan at all?

I mean, I know they have a plan — clearly, they haven’t been sitting there doing nothing.    But at the same time, the system is so *incredibly* complex and diverse, what’s the chance that they’re taking a road that is both politically beneficial and one that simply is stalling to let the market take hold?

There’s a good chance that given the risky investments and investments using investment money that the bigger banks are truly insolvent (worth nothing) or pretty darn close to it.  Bolstering up banks and institutions that are probably near insolvent or completely insolvent is a bad idea because it’s a horrific waste of money on something that will ultimately never pay back the value — you are essentially dumping cash down a big drain and hoping that some of it sticks and plugs the hole eventually.   But what it DOES accomplish is that it lets these failing banks and insurance companies down S-L-O-W-L-Y.    It’s one thing to pull the rug out and let everything crash to the floor, but it’s a completely different idea to let it gently roll down a ramp to the bottom.

The thought has emerged in my head that perhaps, at the end of the day, Geithner and the others have identified this as a freight train that they cannot stop quickly, but they can apply the brakes and hope that when it plows into the cars on the track it doesn’t take them out too badly.    In the meantime, the market is sorting itself out as it always does — the stocks are dropping, companies are folding, unemployment rising, prices falling — all things that would probably happen anyway if they either nationalized or completely backed away, but in this fashion, it’s allowed to die in a controlled manner, so to speak.

At some point, we’ll hit a bottom (who knows where, of course) and when that happens, the banks may or may not still exist but there’s nowhere for the market to go but up — and Geithner & Company are probably banking on the mortgages and securities coming back to at least a high percentage of the original value.

Politically, they can say that they tried, and if the plans fail, then an excuse will suffice to cover them — the bailout monies were misappropriated or the management corrupt or they underestimated the situation — any number of reasons for going tits-up.    If it works, and the system is saved from the freefall and the markets recover, they come out as the victors.    Either way, they don’t come out too badly.

Your Thoughts?

There is obviously no clear answer to the financial crisis issue and the flailings of the government and the private sector are starting to take on qualities that would be insanely amusing if they weren’t so incredibly disturbing.    But what’s the chance that the only way out of this is simply a graceful crash?

Down She Goes!

Obviously there’s been a lot of talk lately about this whole economic stimulus package that is trying to be passed here in the United States, but other countries have now started to add in their own versions — the UK, Australia, Iceland (bad luck there, dudes), and others.   It’s all in the name of trying to get things back to “normal”, where that is indicated by more people making money and doing well than not.   And right now, most of us are either starting to falter, have stumbled, or are flat on our faces and sizing up where, exactly, we would put the KitchenAid in the cardboard box.

I’ve thought a lot about this entire idea of the stimulus, have listened religiously to NPR’s Planet Money podcasts concerning various opinions and analysis, and have thought about my own situation as well as that of others.    Despite recent polls indicating that support for the bill is falling amongst Americans, I still feel it’s a good idea, but the manner in how to go about it is the tricky part.

Tax relief?   Good.   Tax credits?   Not bad, but harder to see right away.   Infrastructure spending?   Great for the long term if done right, huge sinkhole of a money pit if done wrong.     The sides on that one are pretty slippery, too, I’m afraid.   Corporate tax cuts?   Uhm…didn’t we try that one already?  Yeah, it didn’t work.

I think the hardest part for everyone is quantifying what, exactly, is going to happen that will concern us, personally.   I mean…I’m big enough and smart enough to look at the whole picture.    I very well know that infrastructure spending, while a slow, long-haul poke in the ass of the economy, will ultimately make us a better country and we’ll be glad we did it in, say, 5 to 10 years.    But to be honest, RIGHT NOW, it doesn’t mean Jack M. Squat to me in terms of my day-to-day needs and necessities.

Giving me more money to take home is a great way to say, “Perk up!  Stimulate the economy!”    But that depends on how much it is.    $50 a paycheck isn’t going to go much farther than things do now, and I’m likely to look at that and think, “Well, I could…uh….buy another case of ramen??” whereas a significantly larger amount, say, $300, is another car payment, or mortgage boost, or a debt payment, or….there’s a lot more options for that kind of cash than a five-0h carries.

It also matters in terms of where I am versus where others are.     I still have a good, decent-paying job, and feel secure that I won’t be gone anytime soon (although nobody feels 100% secure and, rightly so).    There are tons of folks out there, however (and getting worse every day), that aren’t emloyed or at least not enough, and they’re looking at the stimulus package in a whole different light, more as a savior to impossible conditions rather than a boost.

I’m certainly not of the opinion that everyone should get a huge handout.   For one, in such a situation, you HAVE to have some people on the rocks, some business failing, and some jobs lost and so forth, otherwise nobody has motivation and the system becomes a welfare state and not an opportunistic one.    BUT, that all being said, it makes sense that we’d try to at least keep the majority of folks in good shape when possible.

What do I need?   Well, if I have to be completely selfish, here’s what MY stimulus would look like:

• More take-home money in the paycheck, of a significant amount.    Iowa, take back your silly agricultural taxes (god, state taxes here are stupid-high), and federal, ease up a bit.   I’m happy to pay for roads, but — honestly.
• Debt relief in the form of lower interest rates and longer pay periods.    Don’t know what government could do about that, but making things stretch out would sure be handy.   I’m happy enough to pay off my debts, but making it easier to buy groceries would be really kickass.
• Offer the option to have a forbearance on student loan payments for a year.    Look, I’m in it till 2021 right now;  I’m not in a hurry, so…can I just take a year off?   Charge me interest if you will, but let me forget about that one for a bit, hrm?   They’re so…annoying.
• Since I’m one of those who has a house that I can actually pay for and afford, make it easy to get monies or credits for improving our properties.   Not only will we get more efficiency, but we’ll see urban renewal, and that has to be a positive.

Really, in a nutshell, those are the things that will matter to me most, given my situation and place in life right now.     I’ll probably get a few of those things, but doubtful if I’ll get them all.

Now it’s YOUR turn — tell us what would stimulate you and why it would make a big difference in your life.    If we’re lucky, a Senator’s reading this right now.

There’s plenty of issues today in the economy to be very knee-jerk about in terms of reaction and it very much bothers me to think that the country as a whole might do exactly that — reacting without thinking through the problem, exploring all angles and possibilities, and coming up with the solution that makes the most sense in the long run.  Unfortunately, many people have preconceived notions of the economy, how it works, and how to best run the country when they haven’t even really thought about the problem, but either react according to their financial station, their upbringing, their political affiliation, or all three.

“A person is smart. People are dumb, panicky, dangerous animals and you know it.”  – Kay, Men in Black

The biggest thing to remember in about 99.98% of cases dealing with the economy and government is that the correct road is the middle road, consisting of some sort of compromise between the extreme ideas being presented, with all the good aspects kept and the bad ones tossed out or at least muted to a dull roar. Unfortunately, nobody likes the “middle way” of things and people tend to fight for their team to WIN, WIN, WIN!, right or wrong. (After all, how many times have you seen a football game where they stop when they are all tied up, just for good will?)

This, I fear, will ultimately be the downturn of the situation(s) if it is allowed.

In times of great change, great stresses, or great tragedy, people start to think in extreme ways. Much like driving a car, the reaction to a sudden event (like a deer jumping onto the road) is often violent — but incorrectly so. A huge swerve at times like these means that you end up careening out of control into a completely different path that has far less chance of succeeding had you simply braked and hoped for the best. It’s very hard not to be immensely reactive — it goes against our basic instincts. A level head and a stout heart in times of trouble are certainly rare qualities.

Let’s take this housing crisis, the ensuing mortgage crisis, and all the financial hoo-hah it is causing as a result. There are a multitude of camps each shouting and waving fiery brands at each other in an effort to proponent particular solutions, and everyone has a clear path in their minds as to how to solve everything in one, fell swoop.   “Bail ‘em out!” they shout.   “Let ‘em fail!”  cries the crowd across the river.    “Where’s the pisser!?” cries the third section of folks who have just emerged from a TV-induced fog to find their country overridden by news headlines.

Some lawmakers know this and are striving to make it happen in a controlled manner. Others are taking a more extreme viewpoint and endangering the entire escapade. And then you have The Bushinator saying such obtuse things as, “The whole world is watching to see if we can act quickly.” No, you twit, they’re watching to see if we can handle it intelligently. Speed is worthless if you’re a raving idiot. Can you just keep your mouth shut until January, please?

If you really start to dig into the situation and read the reports, the analysis from both partial and independent folks, and start to see the bigger picture, you quickly realize that the situation is far more complex than, “Suzie charged too much to her credit card and now she’s going to have to eat ramen for a year.” Instead, we’re dealing with a beast that is alive and kicking as we are trying to tame it, and if we really look at the situation, it can never really be constrained fully anyway.

Noble Truths About the Economy and What Will or Won’t Fix It: (for your pleasure)

1. Some Need to Be Criminally Charged…But Not Everyone — The fact is, some lenders and investors were purposely misleading and did push the boundaries (or even break outright) the law. Those folks can and should be hunted down and strung up for being hazardous. But truth be told, not everyone was breaking the rules…in fact, most people were following them. They just had so much leeway or loopholes that it was easy enough to make it always work in their favor, so they figured, why not? After all, it’s all about making money. That’s not a crime — it’s capitalism.

2. Some Borrowers Were Suckered…But Not Everyone — There was a group of people out there who truly had the wool pulled over their eyes when it came to their investment decisions. The securities looked good, the house looked affordable, and the loan looked payable. But a good deal of folk were simply ignorant or stupid, or both, and they’re in trouble and that’s a shame, but….tough shit. Whoops.

3. You Have Two Choices, but the Third is Right — You can bet that the government, in an attempt to try to right this imbalance, will do one of two things: a) Bail out the lenders and punish the buyers or b) Bail out the buyers and punish the lenders. The choice they should make, and won’t because it involves a ton of work, is to punish the criminal lenders, punish the stupid and/or ignorant buyers, and give the rest a wave of the hand. This, however, requires a lot of digging and investigation and sweat and…well, you don’t see the government doing that, do you? I mean, Congress is on holiday half the year, for the love.

4. Not All Bail-outs Are Bad — I hear a lot of shouting by folks going, “HELL NO!” to the government hands that are extending to pick up the likes of Lehmann, Merrill, etc. I appreciate your enthusiasm, but you’re mostly wrong. Here’s the facts of the picture — these are huge, huge companies. Gigantic. They represent not only thousands of employees but millions of bonds, trusts, insurance policies, 401(k) accounts, etc. What if that all went *POOF!*? That is not a good thing and you’d probably have people running down the street screaming in agony.  Yes, I’d like to see some of them tank (see my next point), but they have their finger on TOO MUCH of the economy to just cut the strings. That is, unless you LIKE economic depressions? We’re not in one…yet…keep that in mind the next time you buy Ben & Jerry’s with spare cash, because you won’t have any if we get that far.

5. Some Companies Should Tank — That being said, some companies should absolutely tank out. And it should scare the begeezus out of some folks, because it’s a Very Big Dealâ„¢.   Some controlled crashes of both companies and the stock market are necessary to really get the economy out of this and people out of the mindset that, “Everything will be just fine in the morning,” because it’s not, folks. We’re screwed for a good long bit now, and it’s about time folks start taking it seriously.

6. Many, Many Investors Should Tank — You’re going to continue to see homeowners lose their houses and go into financial ruin, companies that bet too much money in mortgage securities go belly up, and businesses close their doors over this. This is all good, if you can believe it. Why? It’s because of a little something called Capitalism, which runs our economy, and states that the more risk, the more potential for more return, but the more chances of dying a screaming, horrible death. If you cancel out any one of those factors, the system breaks down. We can do a lot to prevent the economy from kicking the bucket outright, but it’s going to slump, and people are going to be in serious trouble for a long, long time. That’s unavoidable.

7. Do Not Forget that Capitalism Has No Morals — None of what has happened in this entire issue has been the “fault” of the economy. Rather, the system is running as it should — allowing people to take great risk and reap wonderful reward, then grabbing the nearest 2×4 and smacking them down to a pulp for being pompous assholes. The fact is, capitalism does not have a set of morals, feelings, ethics, or otherwise — it’s just based upon an economic “king of the hill” theory.  That’s not to say that the dollar-chasers were completely wrong — they were using the system, too. But again, with great risk comes great reward — or punishment.

And for all of you who are sitting there, going, “But….I didn’t take any risk, and someone else is fucking my economy!” I have no sympathy.   This is the system, folks — take it or leave it.   You’re a part of the system whether or not you partake in the feeding frenzy of the markets or if you lie low and hibernate.   The economy goes up or down as a whole, not just in one place or via one person.   Maybe if you had invested more, we wouldn’t be here — or maybe it would have been much worse.    Inaction, however safe it might be, is still action.

8. Rash Decisions and Regulations Do Not an Economy Make — Trying to throw laws and edicts at this problem is not going to solve it.   Flailing about in random directions, without any real directions or background intelligence, hoping that this or that will stimulate the economy back into a decent heartbeat will not help us in the long term.   We tried this idea with 9/11 and the Afghan/Iraq wars, and look where that got us. We need to prop up the economy as best we can and THEN do our research and investigations into the best long-term solutions. Right now, Congress is trying to pass a whole slew of laws that include not only provisions for now, but for long-term, and that’s wrong. They’re two different beasts, and we can take care of it better once we have time to step back and evaluate.

En Conclusio:

As you can see, all of these points take a middle-of-the-road approach to the entire problem. Why? Because that is going to be the best way to handle this in the long run to ensure the relative stability of the country and economy without fighting the system as it is supposed to operate.

Life is going to change, whether or not you like it. But we can have a role in deciding how those changes happen and how fast, and it’s important to do that correctly — for my sake, for your sake, and everyone else’s sake.    Fight for sanity, choose level-headed leaders and policymakers, and keep your wits about you — we’ll all make it together somehow.