It’s that time of year again.  The time of year when we all gather together, to eat good food, spend time with family, and think about all the things we regret about our lives.  What?  That’s not Christmasy?  Well screw you, this is my blog.

I always chuckle to myself (not the amused chuckle, the “This person is stupider than me chuckle, and although I’m angry, I can revel in my intellectual superiority” chuckle – my wife says I’m arrogant) whenever I see some schmuck on MySpace send around some ridiculous questionnaire bulletin (these are why I use Facebook now) and among the hodge-podge of brain-hemhorraging questions is this one: “What do you regret most?”  To which some little twit is always apt to respond: “I DON’T REGRET ANYTHING I’VE EVER DONE!”  You little sociopathic punk . . . of course you do.  You’ve just mistaken the deep hatred you feel for yourself as apathy for what others think.  Or perhaps you live in a drunken stupor and believe all the things you’ve done in life “Totally ROCKED!!! YEAEAAAEAAAHHH!”

There are tons of things I regret.  I regret getting into debt just about as soon as I graduated High School.  I regret going to Bible College and then transferring to a regular one after dropping out complete for a year, and incurring even more debt that way.  I regret that I didn’t go to one of the several schools offering me a full-paid scholarship, and majoring in something I would’ve actually enjoyed doing.  I regret that I didn’t switch my major to Pre-Med, and become a Doctor.  I regret not making more friends in school.  I regret making fun of fat people in the mall, even though they couldn’t hear me.  I regret quitting a good job for one that only looked better, and ending up poor, and taking my family with me.  I regret not taking all those major decisions before God in prayer, to know His will about things, so that I wouldn’t end up regretting them later.

People who purport to have no regrets often use the excuse that even the bad things they’ve done have made them into the person they are today.  Seriously?  The person you are today is that great?  Sure, some good has come out of many of those things.  And learning from those bad decisions, and their repurcussions, has made me into the person I am today, which is not all that bad.  I’ve learned to take my decisions to God, and seek His will.  I’ve learned that debt is really bad.  I’ve made some good friends in places I wouldn’t have been, had I chosen some other path.  But none of that lessens the fact that I truly do regret those things.

I suppose it’s human nature to look at your circumstances and consider where you could be today, had you done things differently.  Combine this with the desire to be better, have a better job, make more money . . . all that, and it makes sense to feel that way.  The difficulty is in seeing success, and failure, how God sees them in me, and not how I see it myself.  I’ve never been too concerned with how the world / people view me.  However, there are things in my life that I consider to be success and failure, and mostly my regrets center around missed opportunities to have an easier, more comfortable life now, and a more enjoyable job.  But the things I enjoy most:  my wife, and children, are always there.  And I have the feeling that even my own conceptions of success are so far from God’s, that it’s scary.  Especially since I think I’m probably far away from anything resembling “success” in God’s book.


Obama’s Gonna GET YOU!

A few days ago I was driving my 4 year old daughter around in the car, and she was doing what 4 year olds do when they’re tired and hungry, whining and being pretty disrespectful. Trying to find the humor in the situation, I turned to her and said, “If you don’t stop acting like that, Barack Obama is gonna get you!”

She screamed at the top of her lungs and was totally inconsolable for at least 15 minutes.  I felt like a horrible father, and apologized over and over and told her I was only kidding.

Later on, I discovered that she had overheard my wife explaining to someone that Obama voted against having a doctor present to save the baby if it happened to survive a late term abortion, saying, “So Obama wants to kill babies AFTER they’re born too!”  My 4 year old became very concerned that Obama was going to come get our 11 month old baby, and my wife had to explain to her that Obama wasn’t going to mess with us.  But when I said he was going to get her, she totally flipped out…and with good reason.  Boogeyman, you gotta make way…there’s a new nightmare in town.

Out of the mouth of babes . . . huh?

News and politics, Pontifications

Financial Crises for Dummies, Part 2: Where does Money Come From?

I had considered making part 2 of this series about the Fed, and its (unconstitutional) control of interest rates, and the monetary system. However, to truly understand our economic and monetary problems, one must first understand what money is, where it comes from, and how it’s created. I’m not talking about the giant printing presses owned by the Federal Reserve, I’m talking about the intrinsic value that your paper dollar conveys when used to purchase goods and services.

In US history, we’ve had two different types of currency: the gold standard (which we departed from in 1971), and our current fiat currency.  Fiat Currency works sort of like your parents’ rules when you were a kid . . . it works because “They said so.”  With a currency that is backed by some tangible good with intrinsic value (gold, silver, etc), the dollar is set at a fixed exchange rate with the unit of the good.  For instance, when we were on the gold standard, one ounce of gold was worth $35.  What happened if the value of Gold went up like it has over the last few years?  The value of our dollar went up.  Which meant that we could buy more with the same amount of money.  If the value of gold went down . . . the same thing happened.  We could buy less with our money.

Then our world changed in 1971, and we went to a fiat currency.  The dollar had value because the government ordered that it be used in monetary transactions.  But with nothing of any real value backing it, it could fluctuate up and down, based on what the market said its value was.  Basically, if a Briton looked at America, and saw our financial systems, corporate power, and strength of our economy, and decided that it didn’t compare favorably to the past, he could say, “Yesterday, I was willing to trade 1 pound for 1 dollar.  But today, if I give you a pound, I want 1.25 dollars instead.”  So, in that way, the international money market determined the value of the currency.

But that’s only part of the equation.  In addition to market forces determining our dollar’s buying power, inflation was also at work.  Inflation is the economic force that causes things to be more expensive tomorrow, than they are today.  That’s why you used to be able to buy a candy bar for 5 cents, now it costs 69 cents.  It’s a by-product of economic growth.  Prices are based off of supply and demand.  If the supply for something is low, and the demand is high (Imagine if there was very little water), you will pay more for that good.  If the demand is low (no one wants it), and the supply is high, companies will basically give it away, just to get it off their shelves.  If you’re making more money, you have more to spend.  If everyone has more to spend, demand for goods rises.  If demand is high, as we just learned, prices go up.  So, there’s more money in the economy today, than last year, and year before . . . etc.  But where does this money come from?  What underlying value is increasing, to allow us to have more real money in our monetary system?  The answer may surprise you.

It turns out that the very thing we despise the most, debt, is what makes the world go ’round.  Money, in our economy, is created by debt.  I just want you to take a minute and let that sink in.  Ben Bernanke will tell you, somewhat obfuscating the point, that the Great Depression was caused by a lack of credit.  This was certainly a contributing factor, and was the primary cause of the length and severity of the depression.  Our monetary system was collapsing.  The banks simply didn’t have the money to give their customers when they asked for it (sound similar to Part 1’s situation?), and with no credit, there was no way to create money.  When the U.S. abandoned gold in 1933, (not to be confused with our abondonment of gold in 1971), we were able to begin recovering more rapidly, by issuing loans, and allowing the amount of money in the economy to rise.

I’m sure right now, if you’ve stuck around to this point, you’re scratching your head and saying, “huh?”  Let me invite back Jim Bob to help us demonstrate how this works.  Jim Bob needs a loan.  He’s been feeling lonely lately, and wants a nice hot new car to get himself a woman (We already know Jim Bob makes bad financial decisions).  So he goes to his local bank, and takes out a loan for $25,000.  As we discussed yesterday, that $25,000 belongs to you, the person depositing money at the bank.  Now, Jim Bob buys a convertible sports car with his money, gets himself a little hot blonde, and rides off in to the sunset.  But take a look at what happened.  Jim Bob had $25,000.  But YOU still have $25,000.  If you went to the bank to take your $25,000 out, it would be there, and you could do that.  When Jim Bob pays back his loan, he still has a car worth $25,000, the automobile company, still has his $25,000.  Let’s follow the money:

You have $25,000 —> You put $25,000 in the bank —> The bank gives $25,000 to JIm Bob —> Jim Bob gives Chevrolet $25,000.

At this point, the bank is owed $25,000, which Jim Bob repays.  At the end of this scenario, you have $25,000, and Chevrolet has $25,000.  $25,000 was created by Jim Bob’s debt.  Good boy, Jim Bob.

And that’s where money comes from.  That’s what our economy is based on.  It’s a very large and complex system, that balances debt, risk, inflation, market pricing, supply, and demand.  Manipulating one or more of those factors, impacts the money flowing freely in the economy, and the value of that money.  If confidence in the bank industry erodes to the point where people don’t put in their money, or the banks have no more money to lend out, the system freezes up, and collapses.

Remember the $700 Billion (read $2 trillion) bailout?  Where will that money come from?  That is the wrench in this system:  The Federal Reserve.  If you manipulate any of those factors, you manipulate the value and amount of money in the economy.  If the Fed floods our system with $2 trillion dollars that it just printed up from no where, what happens?  Remember our supply and demand scenario?  If the supply of something goes up, people will pay less for it.  If the supply of Money goes up, it’s worth less.  This makes inflation sky-rocket, and screws up the balance of our economy.  But what happens if we do nothing?

Part 3 will be coming up soon, on the Fed, interest rates, and what I think will happen if we convince congress to pass on this bailout.

News and politics, Pontifications

Financial Crises for Dummies, Part 1: Wu-wu-What just happened?

Lately, one of my favorite topics to rant and rave about while at family or friendly gatherings (so much so that I typically make everyone else uncomfortable) has been the Financial Crisis.  And with Washington and policy makers playing this giant smoke and mirrors act with the facts, most people don’t really understand what has happened that has led us to this point.  Just a couple of weeks ago, people were on the news saying, “Our economy is strong!  We’re not really in a recession!”  And now we’re on the brink of total economic collapse.  “What happened?!” is a very fair question.  So…here is a laymen’s explanation:

In the Beginning

To truly understand what’s happening here…we need to look at the precipitating causes of the Great Depression.  Now Ben Bernanke will tell you all kinds of things, but what he knows as a basic truth is this: people made really really really stupid decisions with their money.  Decisions that not only do we generally hold as stupid today, but decisions that there have been laws against, ever since then.  Basically, the stock market was booming.  It was seen as a “sure thing” investment, and many people, even your average Joes, decided to start investing.  And there was the problem…Joe Blow didn’t have much money to invest…but when he did put a little into the stock market, and saw those dollar signs…there was only one thing to do:  Take out a loan, to get more money, to invest.  With interest rates low, and returns high, it was pretty much a sure bet that he was still going to make gobs of money.

Credit can be a great thing, when used properly.  But it also increases the risk of any investment.  If the stock market tanks (which we know it did), then you haven’t just lost your money that you invested, you’ve lost everything.  People mortgaged their homes, and took our unsecured lines of credit, to invest in the stock market.  When it crashed, they lost it all.  Multiply this nationwide, and you see why the economic system collapsed.  People couldn’t pay their bills, 1/3 of banks failed, businesses went under.  It was bad.

Precipitating Events

Let’s skip almost 80 years into future, to about a year ago.  We have laws governing who can borrow for investing in the stock market, and how much they can borrow, to help prevent another similar scenario.  But when the .Com Bubble burst in 2000, and stocks fell, people began looking for other places to invest their money.  Because the economy was struggling, the Fed lowered interest rates (more on why this happened in another post), to help stimulate the economy.  Low interest rates makes it really easy and cheap to buy things on credit.  With 9/11 and the economic turmoil that followed, and rates hitting their lowest points in history, it became almost free to take out a loan and buy some property to resell.  The lower the rates went, the more people bought.  The more people bought, the higher the prices went.  The more the prices go up, the more people look at real estate as a great way to make some money.

What we then saw (as evidenced by numerous TLC shows, like Property Ladder and Flip that House!), was average Joe Blows, with no investment or Real Estate experience, deciding they could make money buying and selling property.  They took on massive amounts of debt to do so, and the real estate market began cooling.  What we have then, is a repeat of 1929.  People made really stupid decisions, took on massive amounts of debt in order to invest, and got screwed when the market started falling.  Only this time it’s the real estate market, and not the stock market.  People can’t pay back their loans, so banks start losing money.  Economic collapse will be forthcoming soon enough.

How did it Happen?

I recently used this example explaining things to a friend of mine.  Just to warn you, this is a very simplistic view of how the banking and monetary systems work, but it’s basically the way it goes.  Let’s say you have $100,000, your life savings.  You go put it in the bank to earn some interest.  The bank says they’ll pay you 3%.  The next day, Jim Bob walks into the bank, and requests a loan for $100,000, to buy a house.  Jim Bob has only mediocre credit.  But the housing market has been so great, the bank gets greedy and says, “Hey!  He may not be able to pay, but then we’ll just sell the house for a 25% profit!  Everybody wins!”  The bank tells Jim Bob he’ll have to pay 6% interest on the loan.  He agrees, and the bank gives him your $100,000, and he goes and buys the house.  Here’s the current situation.  Jim Bob pays 6% annually on the loan.  The bank pays you 3% on your deposit.  The bank gets the difference, 3%, as profit.  That’s how they make their money.

Now, Jim Bob was stupid, and got a variable rate mortgage…so as interest rates go back up, his payments begin to go up too.  Jim Bob can’t seem to get enough money to pay his bills, so he defaults on his loan.  The bank repossesses his home.  Poor Jim Bob.  But wait… the bank now has lost the income it was getting from Jim Bob, but they still have to pay you 3% on your money.  They try to sell the house, in order to get your money back, but the real estate prices have dropped, instead of rising, so they can’t get your full $100,000 back.  They can only get $80,000.  In the meantime, you’ve been watching the news, and decide that you don’t want to keep your money in the bank, because you’re scared it will go under . . . and you’ve got a little over the $100,000 FDIC limit in there now, so you better move quick.  The bank only has $80,000 of your money left, so they have to take $20,000 of their own money (or borrow it from another bank) in order to pay you all they owe you.  Imagine this happening nationwide, and you have what happened last Wednesday night.  The economic system freezes up . . . people won’t lend money to the banks, because they’re concerned about them collapsing, and the banks don’t have enough cash to pay out to their depositors.

And this brings us to today . . . the banks simply don’t have enough money to give their depositors their money, much less meet all the interest payments they owe, pay salaries of their employees, and stay in business.  They were greedy.  They made unbelievably poor financial decisions, and took on way too much risk, because they were betting on a booming real estate market.  They’re trying to get this bailout to happen, so they stay in business.  But this is America . . . a free market economy.  The possibility of total failure is supposed to help you make good financial decisions.  The Bailout is not the answer.  No one will get a home back, because of the bailout.  No one will be able to pay their bills, that wasn’t able to previously, because of the bailout.  The banks will basically just get to dump off the bad debt, and go back to business as usual.

I’m going to refrain from expounding on my opinions on that for now, and save it for another post.  But I hope this has helped shed just a little light on where we’re at, as a nation, and just how dire the situation is.  Make no mistakes.  We are on the precipice of a Financial Crisis.  Perhaps the worst in our history.  Bailout, or no Bailout, we are still on the precipice of a Financial Crisis.  The form it takes, and circumstances that happen because of it will be different, depending on how or if the bailout happens.  But nothing is going to stop this from happening.  Next time, I’ll be talking about what effect this bailout may have, and what effect doing nothing may have, as well.

On that note, have a nice day! 🙂


The Inertia of Productivity

I am lazy.
There, I said it.  The first step to getting over something is to admit you have a problem, right?  It’s not really that I want to sit around on my bum all day and do nothing, it’s just that that’s what I’ve been doing, and getting started seems so easily . . . procrastinated.  Well, today, I finally got started, and it seems that nothing will stop my freight train of productivity.  It would lead me to believe that inertia applies to laziness as much as physics.  My body at rest, REALLY wants to stay at rest.  Others (my wife, for one) find themselves sitting with nothing to do and simply cannot WAIT to get up and do something.  She’ll tap her foot, wring her hands, and finally get up and clean the same flipping thing she cleaned 3 times yesterday, just to have something to do.  It’s and illness, I think.  We’re at rest, dang it!  STAY AT REST!!!
And God, if only osmosis worked the same way inertia does in these instances.  I’d never have to worry again.  I would literally suck the energy out of her until we were levelized and could enjoy free time and work times.
Good thing is, I suppose, that now that I’m moving, I just can’t quit.  Maybe I’ll end up like her . . . nah.