McCain vs. Obama: Abortion/ Afghanistan/ & Education

For these next few blog entries I’m going to give you a quick run-down of what the candidates have proposed & then try to determine which candidate would do the great good for the greatest amount of Americans. Since the majority of Americans make between $35-74,000 a year I will assume the middle & lower classes are the majority of America. So, lets look at the first three issues:

ABORTION

Obama/ Biden:
+ Support a woman’s choice
* Roe vs. Wade Good
McCain/ Palin:
- Make Abortion Illegal

* Roe vs. Wade Needs

Both
+ Prohibit Partial Birth Abortions
+ Decisions should be w/ States

Analysis: The president gets to nominate Supreme Court Justices who (currently) have the greatest say over these decisions, BUT historically Justices rarely vote the same way as the presidents who nominated. In many cases “liberal” leaning presidents nominated some of the more conservative Justices. The president also has the power to veto bills & laws put before him about this issue, but otherwise has little say as this is still mainly a state & family-led decision. Some people are worried having an all-democratic Congress and presidency would allow very liberal-leaning laws through, but take a look at the ultimate check & balance. 4 out of 5 of the most conservative voting judges are now serving as Supreme Court Justices. The Court is more conservative now than it ever has been in history, even if congress approves up to 4 moderate Justices the court would still be on of the most conservative in history. Another key issue here is that freedom of choice is a constitutional right women hold so McCain’s proposal is unconstitutional and couldn’t be carried through. Winner here: Tie, neither side is proposing major changes that could happen. (Abortion is always a major voting issue and the irony is that the president has little control over this key debate!!)
Record of Supreme Court Justices on Conservative Voting
More On Supreme Court Justice & Voting Records

AFGHANISTAN

Obama/ Biden
* 2 Extra Brigades
*Focus on Training Afghan Security Forces
+ Offer alternative livelihoods to narcotics farmers & social Programs
McCain/ Palin
* 3 Extra Brigades
- Focus on Winning the War, Doubling Money & Troops
- Counter Insurgency Technique (8-10 yrs.)
Both
+ Center of the War on Terror

-More Troops & More Money

Analysis: As commander and chief, the president has the most influence in foreign affairs and how our military is used (with Congress's support). It is more than clear the American people are tired of war and paying for a costly war when we have serious domestic problems at home. So, additional money & troops does not win points for either candidate. Wanted to use counter insurgency techniques in Afghanistan could very feasibly win the war in Afghanistan, but the American people are not willing to be an occupying force in Afghanistan for another 8-10 years, that is if the international community is willing to let us even! On this issue, training the security forces within Afghanistan & providing social programs that give the people other alternaitves than growing poppies is the best solution with what the American people (and possibly the international community as well) are willing to take on at this point. Verdict: Abandoning the country is out of the question, but the democrats seem to have better methods for continuing to provide support and route out terrorism.
Experts Explain What Counter Insurgency Is
US & Counter Insurgency
Another View on Counter Insurgency

EDUCATION

McCain/ Palin
- Use Title II (35%) to pay only for teachers & admin pay
+ Build more virtual class rooms for on-line classes, tutors, & other course like ACT Prep. Courses
Obama/ Biden
+ More Early Childhood Education Programs
- Make Science & Math a National Priority
+ Provide College Tuition through Community Service Programs
++ Make Community Colleges FREE!!
Both
+ Reform No Child Left Behind Laws

Analysis: This is the most important issue in terms of America's long-term success. US students have fallen behind most of the other 1st & 2nd world nations in areas like science and math. The gap has been widening recently. Both candidates believe the ideas behind No Child Left Behind (NCLB) were good, but they need reform. McCain has proposed ear-marking Title II specifically to try and lure teachers in the top 25% of the class with extra money and Obama wants to make science and math top national priorities, however both these measures seek to dictate how states spend money. Education has always been run very differently for each state and if we learned anything from NCLB it was that States need that flexibility. McCain tries to bolster the use of technology in schools by proposing more virtual classrooms, but if you've ever been in a classroom recently you know these are coveted items strictly controlled by schools & the networks they are connected with. Simply having more of them would not increase access. Coming personally from a middle class family that poured a large fortune into a college education (and will continue to for the next 3 years at least), providing college tuition at the price of good patriotism or civic responsibly is the best idea since sliced bread! For those that don't feel included to plant trees or scrub graffiti, there is always community college for FREE! (For students & returning professionals alike according to Barrack Obama's plan.) The only dirty spot on this proposal is the shear cost and ability to carry out this plan. It's something Congress had talked about for years, but getting congress to agree on a measure of this magnitude might see the same problems that social security reform has seen for the last 50 years....none. In thought it's the one of the best ideas on the board. Verdict: Democrats
USA TODAY - Comparing Math Scores
Department of Education & Labor
International Education Surveys

Obama's 30 Minute Ad

We've been riddled with negative ads for the past few months, but this ad offers a breath of fresh air. Which ever candidate you vote for, the first part of this ad offers stories of Americans and reminds us who this election is really about. If you'll be voting republican this election just ignore the second half of the ad and you can still walk away with a warm fuzzy feeling. I'm kinda wishing we had more ads like this one...

Top Reasons to Vote for Obama/McCain

Last night I received a call from my mother, who was confused and highly disillusioned with this year’s election. Knowing my background in politics, she asked that I clarify some of the rumors she had been hearing and help her to understand the candidate’s positions. So, I'm dedicating the next few posts to that subject and as always trying to offer both sides.
There is one thing I want to clarify before starting. This year’s presidential campaign has been different than any others in history because of the amount of FEAR incited by the candidates against their opponents. John McCain has claimed that terrorists would be “dancing in the streets” if Obama was elected. Conversely Obama supporters make accusations like John McCain will bankrupt middle class Americans. (I will post again about rumors later...) These types of catch phrases are confusing and misleading at best. One of these men will be elected as the next president of the United States. When that day comes the other half of the population that didn’t elect that individual shouldn’t have to be afraid of their new president. The hatred and fear these campaigns have sparked must be put to bed. When you hear things like this consider the source and keep things in perspective.
Don't forget America has this incredible system of checks & balances. No matter which party comes out on top, there is only so much the president has control over and there is a limited amount of change that can happen over a 2 or 4 year period. Think back over the last eight years and ask yourself if anything has radically changed over that time? There are balances and counter balances at every turn in the American system. Eventually justice prevails, the American people are heard and the government continues to refine it's policies.
If you noticed, both campaigns are using the same slogan this year “CHANGE.” What type of change is the question? American's have recognized that change is needed and we need to start working together to find solutions to those problems. Regardless of who is elected those changes will be slow, they will be "balanced" over time and we as the American people will push on in our lives as we always have in the past.
Just remember that neither of these men would have been able to get this position if they were not intelligent and capable men who are willing to dedicate their lives to the betterment of America and the American people. With that in mind, my next post will be a run down of the political issues involved and each candidate’s views on them. I want to find the middle ground and discuss what the next president can/will change. In the meantime I offer the following good qualities/qualifications of each candidate. (Some of these qualities can be interchanged among candidates.) Please feel free to add to these in the comments.

Obama:
1. Strong Leadership & Character
2. Economic & Social Policy Experience
3. Served on the Senate Committees for Foreign Relations/ Health, Education, Labor & Pensions/ Homeland Security & Government Affairs/ & Veterans Affairs.
4. Sound Economic Policy for Middle Class America
5. Defense Lawyer for underprivileged citizens
6. Sticks to the truth & known facts, has not served long enough to be indoctrinated into defeatist party politics
7. Grew-up in the middle class & understands the daily battles of 90% of American’s

McCain:
1. Strong Will & Determination
2. Foreign Policy & Military Experience
3. Served on the Senate Committees for Armed Services/ Commerce, Science & Transportation
4. Sound Economic Policy for Businesses & Corporate America
5. Responsive to the American People & their opinions
6. Has served in both the House & Senate, knows how to work within each congressional body
7. Grew-up serving the American military & fighting for America, understands veterans needs & the aging population

For further reading check out: http://www.cnn.com/ELECTION/2008/issues/

Things to do during a volatile market

Not long ago I attended a fun session about financial planning put on by Ameriprise Financial. While I didn't completely agree with the economic philosophy of our speaker, the session was fun and they gave me all sorts of fun tools to evaluate my financial plan. I thought I'd share a slightly revised version of the tips they gave us for your benefit. While most of these seem straight forward, they could also be mistaken for a page right out of Warren Buffet's investment priciples. I thought they were interesting and added my own explanations to make them clearer...

Things to do in a Volatile Market:

1. Don’t let emotions drive your actions

- Buy low, sell high and know that no matter what happens the market is still your best option for long-term investments.

2. Diversify, Diversify, Diversify…

- Look for low/ undervalued stocks, in other words those that have not done well but have preformed well historically. If you invest in stocks that are doing well, then the only direction to move is down.

3. Be Disciplined

- Continue putting money in every week/month. Don’t stop just because the market is down or up. If you're not comfortable with the market right now this same principle goes for your retirement acount and savings. Make good financial habits and stick to them.

4. Avoid Market Timing

- This related back to number 1and basically means don’t sell or buy when everyone else is. Kinds reminds me of my 3rd grade teacher..."You don't have to follow what everyone else does." Take example from Warren Buffet; buy when others sell and hang on to those stocks for the long haul.

5. Get (or Review) your financial plan.

- This is by far the most important thing! Have a plan and stick to it. If you don’t have a plan, find companies like Ameriprise financial that offer free counseling sessions and investment lessons. It’s a good idea to review your plan every year and re-evaluate your plan at least every three years.

Are we chained to our spending habits?

The scoop: The latest story in LA this week is that a woman in Mira Mesa County chained herself to her house when officials came to reposes it. In an outrage she told news cameras “It’s our castle, it's every American's dream and that dream has been shattered by the banks." Is this foreclosure another victim of bad banking policies? I think not. News 9, who reported on the story, spoke with Mrs. Robert’s bank and found out that she had refinanced the home three years ago in order to take out $300,000 in cash value from her home. Mrs. Roberts said she put the money towards her failing business, which ironically is a mortgage and finance consulting business.
The Verdict: After I wiped the tears from my eyes and holding my side till the laughing subsided, I wondered if there was any validity in what Mrs. Roberts was saying. According to some other bloggers the family had refinanced multiple times to get more money out of their home. And in watching the 9 News video Mrs. Roberts said they had no idea the loan they signed was an adjustable rate mortgage. Yet, isn’t the golden rule here never to sign anything without reading it through? Shouldn’t a financial consultant know these things? No wonder her business was having problems. I would be interested in seeing her household spending over the last couple of years, but I think this is a story of women unwilling to answer life’s knock on the door. Perhaps this is life’s way of saying “time to move one”….”this isn’t working.”

Neighborhood Developments or GENTRIFICATION?

Ever read something and a huge word jumps off the page, like the writer themselves didn’t know what it meant but probably looked it up just to include it in their writing? I was reading a blog on LA developments today and ran across the word gentrification. According to dictionary.com, GENTRIFICATION means “the buying and renovation of houses and stores in deteriorated urban neighborhoods by upper- or middle-income families or individuals, thus improving property values but often displacing low-income families and small businesses.” I can’t really explain what rubbed me wrong about the word. Maybe it’s that gentrification seemed to be an overly specialized word for something that happens in every facet of our consumerist & capitalist driven society. There is no written rule saying that lower income families have to move to places that are less developed, but this word assumes that. Assumes that development is linked to greater socioeconomic divides and “new” is synonymous with “rich.” That thinking is false. I’m not saying that gentrification doesn’t happen, but what I am saying is that renovations & development should be seen as good for everyone. When I’m covering LA building projects, there is about a 50/50 mix of low income housing and glossy higher-end housing.
In both cases the developers operate the same; to make the housing as cost-effective as possible for the greatest profit. In both cases the developments raise property value and usually bring new business to the area. Most apartment complexes are now mixed-use projects that have retail on the bottom floor. This provides jobs in the area and more tax revenue to highly residential neighborhoods. In the process of building any new development, builders have to meet strict recommendations by the city they are building in. Often times this means new water lines, better street lights and/or required low-income housing to be included in their project. Sure, new housing developments have down sides like increased traffic flow, but the alternatives is to let the local population outgrow an area and let public amenities decay.
Two apartments ago, I was living close to a proposed college dorm site. The surrounding neighbors petitioned the project because they were worried about traffic flow and loud weekend parties. So, the college sold the property back to the city and it sat empty for several years. The neighborhood had ignored the jobs that would have been created by higher enrollment numbers and tax revenue. In a strange twist of irony, the water main that the college had proposed replacing as part of its project burst shortly after the neighborhood petitioned the deal and it cost the city millions in emergency repairs. Not to mention the lose of water to many homes for weeks. Others may say “don’t gentrify my neighborhood,” but I welcome the changes with open arms remembering the many trips to my local gym for hot showers and eating out because my own water had been shut off. Ever try to brush your teeth without water??

Talking Politics In the Work Place

There are a myriad of dangers in bringing politics up at the office, yet does that give anyone the right to ban political discussions at office? Recently, my business sent around an e-mail asking all employees to stop sending e-mails or talking about the recent presidential election. At first I didn’t think much of the e-mail, but then I started thinking more about what such a measure means. It simply means that my office is trying to silence my first amendment rights in order to provide for peace and tranquility in the work place. I can’t blame them for trying to shut up one of my supervisors who was telling people (with a nasalized harshness and judgmental tone) it was “too bad” they were McCain supporters or stop the barrage of private e-mails pointing to voting records and political slogans. Yet, beyond my unwitting supervisor I hadn’t noticed any hostility or bad attitudes over the upcoming political debates.

If anything the topic was something of a bonding event in which democrats would find comradery with fellow voters and vice versa. Often the joking between republicans and democrats in the office were friends finding a new topic to jostle each other with other than the car they drove or their social lives. This new political banter was harmless at best. So, why then would my boss with no provocation or incident decide to ban such innocent political banter?

Despite what corporate America may wish to believe, they can not regulate the freedoms of their employees. As Americans have the right to say anything we want and anywhere we want. Of course there are limitations to this (hate crimes & criminal action), but I really don't think preemptive bans on specific topics are a solution. If anything there seems to be a sort of pressure and uncomfortableness now settling over the office about politics. Co-workers now whisper in low voices and some friendships have approached icy silence. Even though our first amendment right guarantees our freedom of speech, the majority of my co-workers seem to have fallen victim to the whims of our boss and company. As astounded and intrigued as I am by this whole process, I was wondering if any other bloggers and/or readers out there had similar experiences or thoughts to share about talking politics in the work place??

Paying Loans – Tricks & Things Lenders Don't Tell You!

There is only one standing principle to follow when paying loans…DO!
How you pay them down is up to you, but I’ve found some really nifty tricks to help lower interest rates and make the process less painful...

1. Start paying while you are still in deferment. This is the only chance you get to pay down any interest that accrued and even pay down the principle while can only help in the long run! Some lenders will even reduce your interest rate because they see you intend on paying back the loan ASAP in a responsible fashion. This may not be an option for you, but remember to at least set up repayment plans while you are in deferment. At the very least you will be able to sleep better at night.

2. Always pay on time! The loop holes lenders use to increase your interest are endless. Always pay on time and if you can’t, call your lender before hand to find other solutions. Believe it or not, they actually want you to be able to pay. One missed payment could mean a hike in interest rates, which can add up to hundreds over time so you really can't afford to be late.

3. Try your best to include interest in your payments. There is no worse feeling in the world than paying a large monthly sum and knowing that next month it might get bigger. If the loan was large, than interest accrued (per month or year) might actually be more than a payment. Always try to include interest in your payments that way you’re not losing ground, but starting to make real progress on paying them off!

4. Try consolidating. If you have student loans through the government (Perkins or Family Loans) your consolidated rate might actually be worse, but if you have private loans there is a good chance consolidations can help lower payments and organize all your loans. Try finding a non-profit organization that offers consolidation for student loans and you will be in good hands. This has become harder to do with the credit crunch, but not impossible. The US government also offers student loan consolidation, but make sure you use their calculator to see if consolidation is right for you.

5. Set up an automated payment. This isn’t a great idea for those of you who don’t watch your bank account, but setting up an automated payment means you won’t ever forget/miss a payment and often lenders will lower your interest rate for setting them up.

6. Asking for deferments. If you become unemployed or something major happens in your life, some loans can be deferred. There are limits and guidelines for all deferments, but they are out there, so talk to your lender if you can’t make payments for some reason.

7. Save Money! Translated this means don’t spend! If you have loans this means you just bought something really expensive; whether it’s a diploma, a car, a house, or something much smaller recognize you just spent a lot of money. Now it’s time to cut back and save money until that item is paid off. This doesn’t mean ending your social life and becoming a miser. It does mean, stop putting on more debt or buying unnecessary items. Just remember the wise words of our beloved Benjamin Franklin..."A penny saved, is a penny earned!"

8. Track your payments. This sounds silly, but if you track of your payments made every month you will start to see the progress. Allow yourself to feel the accomplishment you are making and hopefully this will keep you motivated to continue paying down those loans. Some loans take years to pay off and staying motivated can be difficult, especially if circumstances in your life change.

9. Stay motivated. Even if you are nearing the end of your loan and it’s almost paid off, that doesn’t mean it’s time to go out and spend money. See your payments through to the end. Sometimes this means recruiting help. Tell a friend to question everything you buy and keep your spending/saving expectations realistic. Recruit friends and family to be your support team if you need extra help. There is no shame in asking for help and your friends may respect you more for asking for support.

10. Take time to enjoy what you have. It’s so easy to forget why we got the loan in the first place and how it bettered us. We need to take time to appreciate the things we have, however small or trivial as they may seem. This will help keep you motivated and remind you of the things that really hold meaning in your life.

From one borrower to another, good luck and happy repayment!!

Obama Vs. McCain on the Economy

TAXES

Obama:

- Tax Cuts for the Middle Class (Anyone making $250,000 & below)

- Higher Taxes for the Wealthy

- Capital Gains Tax on the Hedge Funds & Private Equity Funds

- Extend Production Tax credits for re-newable energy facilities. (10 yrs.)

Caveat: 401k’s might fall under a new capital gains tax. Tax cuts are actually an extension of the Bush ’01 & ’03 tax cuts except Obama plans to extend those tax cuts past 2010 for lower income earners while letting the tax cuts expire for anyone making over $250,000.

McCain:

- Lower Corporate Tax

- Make Bush tax cuts of ’01 & ’03 permanent

- Otherwise keep taxes at status quo

Caveat: McCain’s reputation as a maverick was built around his unwillingness to help large corporations, which have been historically good friends with the republicans. He has bragged about going after tobacco companies & pharmaceuticals which contradicts his proposed plan. Also McCain has admitted to knowing little about the economy. He jokingly said he was reading Alan Greenspan’s book to learn more.

TRADE

Obama:

- Wants to open foreign trade markets to protect US jobs. This theory is contradictory in many aspects & propagates protectionism policies.

- Against current NAFTA arrangements

Caveat: Obama may have better domestic policies, but his foreign economic policies have yet to be explained. His campaign has largely ignored these issues & history has proven protectionism doesn’t work for the US.

McCain:

- Globalize the World Mantra

- Wants more multilateral, regional & bilateral trade agreements.

- “Level the playing field” with effective global trading rules.

Caveat: McCain has not said who would enforce those rules or even how to bring them into existence. Leveling the playing field (removing trade barriers) could also mean forcing thousands of US jobs overseas for cheaper labor costs.

ANTI-TRUST: THINK MICROSOFT MONOPOLY

Obama:

- Wants to strengthen anti-trust laws, but his rhetoric has been week in this area. He also denotes some antitrust cases as “simply big successful companies that need to be big to compete internationally.” Maybe someone should explain to him what monopolies & oligopolies actually are?

McCain:

- Has not put forth any policy options. Did comment once in a past interview that he wanted to update anti-trust laws adding that he was concerned by the large consolidations because they hurt consumers. Otherwise, I was hard pressed to find any policy implications.

Caveat: I don’t know what is worse, ignoring the problem completely or trying to redefining it to ignore certain companies?

HEALTHCARE $$

Obama:

- Pledges to make government run health care available for everyone in order to bring down the cost of health care.

- Expansion of unemployment benefits.

Caveat: Would initially bring down health care costs, but could also bring down quality of health care with government money involved.

McCain:

- Plans to give every individual (adult) a $5000 tax credit to go out and buy health care.

- Plan would tax health benefits.

Caveat: The tax on health benefits could have people clamoring for undervalued or low-quality services. The plan could also send costs spiraling as doc’s will see plan as government subsidized health care.

Summary: With the economy being everyone’s top voting issue, both candidates will focus on their own economic spins in the coming days up to the election. Obama’s plan will help the middle class the most, while McCain’s seems to have a better handle on foreign trade issues. However, both candidates have been ignoring critical issues. To sort through all the mud-slinging and spins I suggest you check out CNN’s fact or fiction site।

Other Resources on this Topic:
International Economic Law & Policy Blog
Economists for Obama Blog
Business Week: Obama vs. McCain Taxes & Spending
The Economic Populist
Newsweek: The Vices of their Virtues
Red, Green & Blue
Forbes: Obama vs. McCain on the Economy

Saving Money (For the Holidays)

Saving Money

My husband and I decided a few months ago to start saving money. We started out small, and then got really aggressive with our savings plan. There are three basic steps we went through and hope they will be of use for you too…just in time for the holidays!

1. Create your goal(s)

List out the things you would like to buy and how much they will cost. Be realistic in their costs and do homework if you need help. List everything and include incidental money for price fluctuations and emergencies.

2. Prioritize & Find ways to save

If you are like 50% of Americans you live paycheck to paycheck. Saving money is something you will have the hardest time doing, but it can be done. Track where your money goes in one month. Itemize everything!! This means keep receipts and list everything out. How much did you pay for rent, food, bills, & other expenses?? Other expenses are where you will find the bulk of your savings plan. Cut out anything you don’t need. Need, meaning you can’t live without. This is the most difficult part for everyone. You need to cut as much spending as possible without feeling like you are strapped. Remember, this is money you are saving for something in the future. Take pride in how much you are saving so you don’t feel deprived of anything. You’re not poor, but living like you are means more money saved at the end of the day. Here is an example:

Items Cut:

Cable TV (Replaced by Internet TV) = $80 per/month

Eating Out 3x’s a Week (Replaced by going out once a week) = $40 per/week

Buying new Media & Going to Movies (Replaced with Netflix) = $25-30 per/week

Eating Out for Lunch (Replaced by packing lunch everyday) = $25-40 per/week

Cut out All Non-discretionary Spending = $100-200 per/month**

Only Running the Heater/Air While We’re Home = $50-100 per/month

Buying Smart Value store brands instead of name brand groceries = $150-200 per/month

Total Saved a Month = $840-1000

**My husband & I are not big spenders normally, most family operate on more than $200 discretionary spending a month. Keep all your receipts from one month to find out how much you (and your family) spend on discretionary items.

As you can see these things start to add up. Just imagine what you could do with an extra $1000 a month! Just prioritize your spending and cut wherever you can.

3. Stick to the plan

There will be times when you will have unexpected needs, but don’t get discouraged. For habitual spenders, saving money is like dieting. It’s really hard to fall off the wagon and continue with bad spending habits. The trick is not to lose site of your goals. Recruit others to help you or talk to a financial planner. It’s always nice to have a coach or someone to keep you honest with yourself. Also, if you plan in advance for incidental money, you will be less discouraged if something bad were to happen. Spending can be an addiction just as bad as smoking or caffeine. It’s hard to break old habits, but the trick is to recognize what you are doing and make a conscious effort to break those habits. This doesn’t mean you can’t go out shopping or out to eat with friends. It just means that you are being smarter about where your money is going. Happy Savings!!

10 Causes of Economic Recession

1. The Rate of Joblessness Assumes Disproportionate Rates.
2. Large Companies Start Giving Depressing Profit Figures.
3. Borrowers Start Defaulting.
4. Credit Card Purchases Shoot Up.
5. Prices Of Essential Commodities Shoots Up.
6. Companies Stop Filling Vacancies.
7. Prices Of Property And Stocks Come Down Drastically, But Nobody Buys Them.
8. The Country's GDP Goes Down.
9. Savings Are Used For Day-To-Day Expenses.
10. You Start Worrying About All Of The Above.

Granted number 10 is a bit silly, but 10 looked better than 9. I'm taking these 10 causes/symptoms of economic recession and fitting them with the current US climate. Since we have already covered #1, lets move on...

2. Large Companies Start Giving Depressing Profit Shares As we approach the Christmas season, the very last thing you want to see is stocks prices plummet. Somehow they always drop when approaching the holidays, but the retailers don't really see drops in their revenue. This year that has not been the case. As 3rd quarter earnings came in we saw huge companies like Nokia, GM, Banks, Marriot, Dell & major clothing retailers had lower profit shares. In fact, these stores had not even met their estimated profit after economists calculated in the dire US consumers situation. This tells us people don't have the extra income to spend and what they do have their not spending. The banking scare has caused a rippling effect through to consumers.
What can be done to fix depressing profit shares? Well, after 9-11 George Bush told people to go forth and spend. I similar scenario might help out here, but it's just not realistic and certainly not a long-term fix. The bad news is there is no short term fix for this one. There will be fluctuation in the market and retailers will have to drop prices and adjust their estimated profit earnings for a while. It would be fantastic and best if American consumers didn't fall back into the same bad spending habits that got us here, but that would require us to buy less SUV's and mic-mansion like houses which history tells us is also unrealistic. So, fasten your seat belts...this one may take a while to work itself out.

3. Borrowers Start Defaulting. When you combine higher than usual inflation (see below) with high job lose (see previous posting) then you get higher defaults. It's like a really big domino game. The US scenario has gone a step beyond this one and the lenders themselves have started defaulting. Any questions??
Possible Fixes: Individually lower interest rates, set fixed interest rates and/or let borrowers have longer repayment periods. This late in the game, its better to have people make very small payments on loans than give up and stop paying completely. If the majority of borrowers continue paying their loans, it brings a little bit of stability back to the system.

4. Credit Card Purchases Shoot Up. It is estimated that each US consumer is carrying an average of $8000 in credit card debt. I'm not sure how accurate this number really is though, because while I know some people maxed out in credit card debt, I don't think this is the norm by any standards. I found a great article by Liz Weston suggesting that average is something more like $1,900 which sounds much closer to the truth. But I was still confused about how all this relates to the bigger picture, so I dug some more and found this fantastic web site that lists all sorts of fun facts. The most relevant here was that the average American household’s credit card debt in 1990 was $2,966. In 2007 it was $9,840. Meaning that the amount of equity American's are using credit cards for has almost tripled from 1990 to 2007. If your having problems making bills and the cost of living increasing disproportionately to your salary, its understandable this number would shoot up. Possible Fixes: inflation is a natural part of every growing economy. The bad news is in order to fix the credit crunch, the US treasury has already lowed interest rates which in turns makes the dollar slightly weaker and cause more inflation. The reason the US treasury only decreased the federal interest rate by 0.5% instead of 1% is that inflation has already been a huge problem in 2008. In truth the only thing that will keep American's from going back to these spending habits is a change in all or our habits. Ever single American would need to curb their spending and credit card use for this symptom to be fixed. In the mean time, a good rule of thumb is not to buy anything you can't afford in cash.

5. Prices Of Essential Commodities Shoots Up.

When gas prices dipped to $2.99 yesterday at a local gas station, I whooped with joy then called all my husband so he could fill up too. I was able to fill up for under $50 for the first time in months. The rising gas costs are even more depressing when put into long-term perspective. In 2007 a congressional report said that the average American household was spending 85% more on gasoline than just 5 years ago. With a normal inflation rate of 3%, figures like that are alarming at best. With the rising price of gasoline, the cost to transport food rises as well and that extra cost is passed through to consumers on everything from groceries to clothing to energy bills. An acceptable inflation rate is 3%, any hiring and job markets can't keep up by raising living wages (If such things really do exist). Since November of 2007, the rate of inflation (average price of commodity goods) skyrocketed above 3% and has been thrashing it's way back and forth between 4 & 5%.
Today, inflation sits at 4.95% and year to date economists think it will be closer to 6.1%. Ouch! If you're not feeling this in your monthly budget, tell me where you're shopping!!

Possible Fixes: Tell the US treasury to hike up interest rates. Everyone will save money and prices will naturally fall because no one is buying anything. Unfortunately, prices will eventually go up again because we do have a vibrant economy. The US economy is still the biggest in the world and the best at what it does...grow! Given this rather sizable bump in the road, I'm still positive we will recover with enormous vitality, stronger than ever.

6. Companies Stop Filling Vacancies.
This is a rather hard one to judge. Suffice it to say, office space is at premium only near the beaches right now and in the job I now have, I know for a fact we aren't filling vacancies. Empty office space is a sure-tail sign of looming economic disaster. Office space was empty been sitting vacant since November of 2007 and no one is building new office space. Being involved in what little real estate and construction that I am, I can confirm this is very much the case. Check out this article on Salt Lake County as an indicator for what I can only tell you is a nation-wide trend right now.

Possible Fixes: The market is straightening itself out as we speak. Hardly any office buildings are being built and those in office space are taking advantage of the depressed market. Credit needs to be freed up expediently to let businesses run more smoothly and fill office space.

7. Prices Of Property And Stocks Come Down Drastically, But Nobody Buys Them.

It's a buyers market right now, but good luck finding a loan. Those who were invested in the stock market lost thousands and no ones knows where the bottom is, so no one is buying anymore. That is, except for Warren Buffet who seems determined that Goldman & Sacks is the nextbig ticket item and he wasn't too far off. Goldman & Sacks seemed to be first in line for the Government buy-out program annouced late last week. More on that to come...

8. The Country's GDP Goes Down.

The very definition of a economic recession is when GDP goes down for over 3 consecutive quarters. The US GDP is looking at 3 consecutive years. In 2006 GDP was 2.8%, then 2% in 2007 with a forcasted GDP of 1.9% in 2008. In spite of all this, I take solice knowing that China is also been ill-effected. Proff positive the asian giant is still swade by US happenings. It's record GDP growth of 10% has now dipped below 10% and economists have brought forth new analysis showing the giant may come into 5% and other semi-normal growth rates in the next 5 years. And all US consumers rejoyced!

9. Savings Are Used For Day-To-Day Expenses.

Wasn't able to find much here....don't really know...you tell me?

10. You Start Worrying About All Of The Above.

If you are reading this, its proof positive that these things do matter. Even if they don't keep you up at night, financial worries are effecting everyone. In light of that I suggest you make time each day to take stock of all thing in your life and all the reasons to be happy.

In Sum, many of these problems are linked and without credit flowing to businesses, these problems will only deepen over time. These compounding factors help us see why banks and lenders are so important to the overall US economy.

For Other References & Fun pundits on the US Economy:
Renaming The US GDP

Signs of an Economic Recession

I found some fun news articles where economic experts like Alan Greenspan were warning of an economic recession as early as February of 2007!! And the vast majority of other experts seem to be pointing to mid 2008. What's so surprising is that when these major thinkers set off warning bells, nothing changed. The US government is literally buying up stocks in private companies (hopefully they will remain a unbiased shareholder), yet I can't help wondering why the US government didn't do something about this sooner?? I've taken an article about 10 causes of an economic recession and outlined what the government could have done and should do today. To any readers out there...I would love comments, suggestions and discussion!!

1. The Rate Of Joblessness Assumes Disturbing Proportions.
It's not surprising to learn that the acceptable rate of unemployment, like debt and everything else in the US, has been raising in the US over the last decade. I remember while growing up, we would listen to the morning news on the radio while sitting around the breakfast table and when unemployment hit 4% my father was amazed saying "Do you know how many Americans that is? Just imagine all those people without jobs." Well in 5th grade I didn't have a grasp on it, but 4% didn't sound that bad. When taking an economic course later in college, I learned that 2-3% was healthy (when not counting seasonal turn-over) while anything above that could be symptomatic of more problems. So when we're looking at more than 6% now, that number is wholly disturbing clocking in at 18 million! 18,325,598 people to be exact and that's not taking into consideration seasonal layoffs. That is according to the US Census Bureau's Population Clock.

Why didn't the government do something about this sooner? Good question! I think the best short answer I can give to this is because we were involved in too many other things to focus on this issue. We were engaged in two wars overseas(Iraq & Afghanistan), a ton of regional disputes and hot spots(Ossetia, Sudan, the Chinese Olympics, etc.), the media hurricane during the ongoing presidential debates, and now the largest economic crisis since the great depression. These things have been happening one thing after another, there hasn't been time for anyone to gain their bearings. Hows the saying go? When it rains, it poors?

What can we do about it now? I'm just going to put a couple of ideas forward here.
1. Throw money at energy sustainability, at health care, at education, infrstructer...at anything that needs improving...just let Americans improve it.
2. Provide incentives for businesses to keep jobs in the US. This doesn't mean giving them free tax breaks to practice in the US, but instead give the tax breaks as incentives to do business like America wants. For example, give tax breaks to employers when they provide healthcare, insurance benefits, or child care assistance.
3. Provide indirect support by removing protectionist policies in the US. For example, the reason it's so costly to keep car manufacturing plants in the US is the cost of steele. The cost of steele is dictated by steele tarriffs because US steele makers can't compete with the cheap cost of steele from other countries. So, the steele unions acorss the country are indirectly hurting the cost of automanufacturers. If US steele manufactors were forced to compete in the global market you would see prices drop and the market would play towards competitive advantages. (Something the US has many off, but has done itself an injustice by using protectionist policies that force business elsewhere.)
4. Insist on a global living wage or competitive tax. If companies want to base themselves in foreign countries to avoid taxes thats fine, but then we insist in order to opperate in the US they must prove they are paying their employees a standard living wage or pay a tax for opperating in the US. If they are going to take advantage of our markets, we tax them them not through tarriffs but through a fair competition tax. This would encourage jobs back in the US and allow to tax those businesses avoiding taxes by basing themselves in foreign countries. The message is clear, it doesn't matter where you opperate from...if you want to opperate in the US, then you pay taxes in the US.

Mattress Savings vs. Banks & the Stock Market

Since my last posting, we have learned a great deal more about the mattress savings account. My coworker, who will hence be called Applepapa by request, actually kept this cash under his mattress for 2 & ½ years!! Not to belabor the point, but let’s crunch some numbers and see what that money could have done if at the bank. From what we know Applepapa added about $2000 (averaging $800 a year) to the mattress savings over the course of the 2 & ½ yrs. Let’s assume the following interest rates; 3% CD’s & Low Risk Mutual Funds, 7% for IRA’s & Moderate Money Markets, and 12% for Aggressive Stocks & Bonds. Now, show me the money…

The numbers show us that if Applepapa had kept the money in a CD or low risk mutual fund for the 2 ½ yrs he would have earned an additional $720 in interest (CD’s usually earn 4-6% interest, but for our purposes we aimed low). With that extra money Applepapa could have bought an additional 55 cases (30packs @ $13) of Pabst Beer at the local liquor store or 288 beers ($2.50 each) from his favorite bars (Pabst was his drink of choice). Now, if he could have waited another 6 months to withdraw the money from a mix of aggressive growth stocks & bonds (which usually earn 12-20%) he could have savored an additional 327 case (9810 beers in total) or 1,705 beers while chilling with friends at his favorite bars. I guess the plus side of mattress savings is that he won’t be able to afford being an alcoholic, but I’m going to go out on a limb and say he might have been happier with more beer. (Even if it is Pabst) However, poor Applepapa pulled the money out of the mattress savings at $10,000 after the 2 ½ years.

Long case short, your money is always better off in the bank. Plus there is the added benefit of good sleep without lumps of cash under your mattress. Cheers!!

Just a side note: If the 2008 credit crunch and stock decline had hit Applepapa when his money was at it’s peak and he lost 30% (like many devastated people out there have), he still would have $9984.03 at a grand lose of $15.97 (6 beers). And if the history of bear markets tells us anything, he would make that back with an additional 20% if he kept the money in the market for another 12 months (average bear markets make returns of 32% after 12 months according to Ameriprise Financial).

Mattress Savings

We are not in a depression! We are in fact very far off being in a depression and it’s important not to panic. Even though you’re hearing Wall Street is in frenzy, stuffing all your cash in your mattress will not help anything. It will actually make things worse. (If you think you can link today’s economic climate to depression indicators...I wholly welcome the debate and comments.) Otherwise, take my word for it…squirrel soup is a long way off yet.
About two weeks ago a co-worker of mine was bragging about how he had actually stashed all his cash under his mattress!! Yes, it might have been really cool that he had a mafioso-like amount of cash hidden under his mattress, but it doesn’t validate the kink he probably had in his neck or the kink he helped put in the banking system.
In my last post I gave the example of Washington Mutual who had given bad loans to people who couldn’t afford them. Well, in the 6 days that WaMu went from troubled to failed many a mattresses were filled. As WaMu was struggling to keep its books balanced, news on the street was causing panicky depositors (i.e. customers) to pull their money from WaMu, depleting what little capital was keeping them afloat. In the last few weeks of WaMu, depositors pulled out $16 billion just to throw it under their mattress or invest it into other banks like JP Morgan who eventually bought the failing giant from the FDIC. The irony in all of this was probably that the $16 billion was safer left in the bank at Washington Mutual then anywhere else and furthermore that $16 billion was almost 10% of the banks assets that quarter. Now, had those depositors all kept their money in the bank there is a possibility the bank might have been able save its self. Without looking at the books it’s hard to really know, but when WaMu CEO’s started speculating over the straw that broke the camels back…they publicly blamed the market while pointing fingers towards deserting depositors. Meanwhile, those who left their money in the FDIC insured WaMu lost nothing because every cent up to $250,000 (for every individual account) & $500,000 (per joint account) was guaranteed by the FDIC & US government (a company that has never minded running in the red). Not only did these savvy savers save themselves the time & trouble of transferring money, but most of them also got upgrades in services with JP Morgan’s free workplace checking and on-line banking. What a deal!
So, even if three banks you had money in failed you wouldn’t lose a cent as long as you weren’t letting any more than $250,000 or $500,000 sit in any one bank account. (If you have any more than that in one bank you should seriously consider spreading out your money or investing in IRAs, trust funds, and/or my student loans.)
In conclusion, feel free to pull your money out of the bank, but don’t expect to sleep any better at night on a lumpy mattress.

Causes of the 2008 Credit Crunch

In essence, we the American people did with the help of overzealous bankers and credit lenders. Here is how it played out…the late 90’s saw what was a boom in the American economy. Stocks were soaring; home prices were rising swiftly and recovering well from the mid 80’s; and American’s were just beginning to realize that company’s like Visa held the answers to all their material affluent dreams. Meanwhile, in Washington, a republican led congress saw the need to give large corporate businesses tax breaks as incentives to keep jobs and business in the US. (There were some major loop holes that allowed them to go offshore anyway, but let’s not loose sight of the intent of the congress less I am accused of any political party affinity.)

Round after round of tax breaks, regulation cuts, and corporate loop holes later and you create large corporations that have the ability to operate on their speculated earnings. Not a new concept by any means, but there was some newer regulations cuts that allowed this to happen at unprecedented new levels. In many ways, this allows free capitol to flow and large investments/development possible. At the same time, however, housing prices were being wildly over-speculated as we saw housing prices almost double in a ten year period. When the housing bubble hit it’s peak towards the end of 2007 and home prices feel, suddenly banks speculative holdings/assets where diminished. (Face it, you don't own your home until it's paid in full to your bank.) Across the board, homes were worth less but the mortgages on them remained the same leaving banks with a lot less assets and more debt than their checkbooks were meant to handle. Washington Mutual was a perfect example of a bank who lent out (bad) mortgages with variable interest rates.

(From here I’m still a bid fuzzy as to how to tie in the entire world market/economic outlook, but from what I’ve learned I think I can explain what is happening in the US market.)

As mortgage interest rates rose, many homeowners couldn’t afford to continue paying (a compounded result from a 4+% (6% in some regions) unemployment rate, wage stagnation and the rising cost of living). So, bad loans were dumped bank into the laps of the banks thereby further burdening the banking sector. Banks, finding it hard to balance their books, had a increasingly hard time lending money to individuals or business alike which caused an almost cyclical effect where more individuals and businesses ran out of money and defaulted on more mortgages/loans. Wall Street, being the reactionary force it is, realized the imploding problem and not surprisingly stock prices dropped. This in turn has caused even greater lending fears and what we now understand is the credit crunch.

So while the $700 Billion aimed at the banking industry seems like an unfair bailout strategy, it’s only fair to keep in mind we (the American people) have been operating on speculated earnings ourselves rather than relying on what we actually have in the bank. According to a resent survey by Career builder, more than half of Americans live paycheck to paycheck. That means half of us operate purely on speculative earnings. A fair point to remember when blaming Wall Street & banks for supporting bad credit habits like your own mortgage, visa, store credit cards, auto loans, school loans, and other private debt.