Let me say first, that I have a 401K, IRA’s, college funds, a home building up equity, so like you, this downturn doesn’t feel good. But it is good and here’s why.
· First, the media has been itching for a “recession” and now they can get on with the doom and gloom. They will get it out of their system, blame George Bush, get bored and move on. (Just watch the glee as they start the newscast) We the producers will go about our business and restart the economy.
· For too long banks have been giving away money with little interest in the borrower’s ability to pay it back. This availability of money drove housing prices right through the roof.
· Although the equity growth looked good on paper, we all knew that a one bedroom ranch should not cost a million bucks; anywhere in the country. (Well maybe waterfront)
· People that didn’t have the money, were given money, to become real estate “tycoons”, flipping properties and taking the profits right to the bank. Hooray for them.
· People that didn’t have the money, were given money, to become real estate “tycoons”, flipping properties and losing their shirts because their timing was bad, losing everything. Too bad for them.
· Home prices needed adjusting because it was becoming more and more difficult to enter the market once the “easy” money dried up.
· The banks and risk takers needed to learn the lesson that there is an end to every cycle, and just like musical chairs, someone is bound to lose.
· If the market is left alone, banks will lend money again to people that can afford to pay it back. People that don’t have the money to take huge risks will not be tempted with the lure of easy money. We will return to “normal” growth on sound principals and fundamentals.
· A lot of people got rich, and now a lot of people are upside down in their investments. That is the market, that is the lesson.
The biggest danger we face is the meddling of politicians in the market. Hillary “I have no practical experience” Clinton, has proposed a 90 day moratorium on adjustable mortgage rate increases. Like that will do anything but delay the inevitable. It may sound good to people that placed a bet and lost, but we don’t pay back people when they lose their life savings in a Vegas casino, we shouldn’t pay people that made bad financial decisions in the crazy housing market of the last seven years.
So let’s let all the people that made mistakes learn from them by allowing the consequences to unfold. It is not easy to see anyone suffer, but if we don’t allow the lesson to be learned, this is guaranteed to happen again.
It will not be tomorrow, but we are well on a way to a recovery but only if the politicians let the market teach its natural lesson. If the politicians want to do anything, lower our tax rates; period…
2 comments:
You have it right. The glee emanating from the newscasters is so apparent. The politicians are reacting by reacting to what they have no clue, but it looks good. All too often, politicians worsen the problem. APH
Rich,
I agree 1000% percent!
Kenny
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