The Economy: Marmalade or Jam?

Well, for everyone who has not been hiding behind a rock in the last 10 days, (and man that is a place that might feel a lot more comfortable than facing what we do now face) we all now know that we are going through a lot more than a rough patch in the economy. For most of us, the big resolution is out of our hands, as the Treasury Secretary – Henry (Hank) Paulson, Federal Reserve Chairman, Ben Bernanke, Securities and Exchange Comissioner, Christopher (Chris) Cox, and Federal Housing Finance Agency Director, James Lockhart, volley with the Congress to find a palatable solution for our economic hit in the jugular.

Of course, most of us are wondering how we got here. We hear that this started with the sub-prime mortgage market and the bad lending practices of financial institutions. Bank made “no-paper” or “liar” loans to people who showed absolutely no ability to repay this loan. Why? Greed, on the parts of both the borrowers and the lenders. Banks and financial institution took a gamble that with the way that loans are packaged and sold, there would be little or no trail back to the institution that made the risky loan. The risk would be exported. The chief motivator in this financial plan, was making as much money as possible, and pushing the risk as far away from you as possible.

But we all as a culture also have to absorb a piece of blame, First, folk who could not afford the homes that they insisted on buying, were doing this because they have come to believe that having as big a home as possible is what the “American Dream” is all about. Main streeters wanted to be in their own piece of the “American dream” and Wall Streeters wanted to make sure that they had the biggest estate among their peers – their “American dream.” Folks who allowed the institutions to document their loans with false information were obviously complicit in the deed. Second, folks who live on credit again want more than they can afford, and will charge or borrow ad infinitum to get it, and third, the culture of this country has for many years chosen to motivate people to be creditors or negative savers.

So without delving into the details which abound on the web, we got to the point where the drag of these poorly made mortgages on the American economy started to take a toll on financial institutions, and their liquidity. Of course this simply made a bad situation worse, because the financial sector had already been playing darts with their holdings, by using a model that did not maintain adequate liquidity for the loans they made.

As we speak, home prices continue to deteriorate, and credit markets are at a stand still. If the credit markets are not working, more houses will be lost, and the economy will have a harder time in recovering, if it will be able to recover at all. It has been estimated that to get out of this mess, each and every man woman and child in these here Unites States will basically be in hock for approximately $2300. Most of us would gladly pony up our $2300, if that would really fix everything, but will it? Only time will tell.

But let’s see what we can do about stabilizing our own lives. It's really just going back to the basics.

For starters, we have to stop believing that the adults that are in charge, really know what they are talking about, and start taking a real interest in our own finances so we can do the safe and right things for our lives. Next, we all have to start living within our means. Yes, starting right now we will have to tighten our belts and stick to an austerity program. Much of the rest of the world goes through this on a regular basis. Although this is a foreign concept in America, we as individuals have to do just that, as does our government. It will be difficult times ahead, very difficult times indeed. To start the process, if you aren’t already living on a workable budget, you need to immediately create a working budget for your own life. We also have to start saving for a rainy day, if you haven’t noticed, its pouring down torrentially right now. Maybe that will be a start to a situation where if Ben Bernanke chooses to repeat the statement below, that he means it this time.

Comments made by Ben Bernanke on Milton Friedman’s 90th birthday (Novemebr 8th, 2002) – “Let me end my talk by abusing slightly my status as an official representative of the Federal Reserve. I would like to say to Milton and Anna: Regarding the Great Depression. You're right, we did it. We're very sorry. But thanks to you, we won't do it again.” (1)

(1) See the entire speech here.

NOTE: Vast Bailout by U.S. Proposed in Bed to Stem Financial Crisis - NY Times.

Do not "CLICK HERE"

Hello again...


As you probably noticed I have been gone for awhile, had to deal with some medical and surgical issues. While I am not yet 100%, I am now able to focus on reading instead of pain, so, today I came across an article that suggested that folks are still falling prey to email and "phishing" scams. Here's how they work. These scammers are now impersonating the IRS and yes, guess what they are after, no, not just your stimulus payment, but also the account you might deposit your funds into. There intent is to clean you out, and once they have your personal information, it spreads exponentially as they may then be able to get to your investment accounts and other financial accounts.


Most of us are accustomed to clicking on a link to access various pieces of information at other sites, it has become so second nature, that we no longer even have to think about it, and that is one way that our financial privacy gets invaded and usurped, that simple click on a link that you make, may allow "the enemy" at your invitation, into your computer to search and find additional information, your information that they will now use against you.


Another way is they simply pretend to be one of your financial vendors, and ask for detailed personal information. Generally it comes with a sense of urgency, e.g. if you dont send this information, you'll lose out on something; we'll have to close your account; you'll be charged a fee, and so on, and of course if caught off guard, we might succumb, after all we think its our vendor, and so we may go ahead and key in the information. NO credible financial vendor will ask for your information via email, or ask you to key in your information after clicking on a link. You will generally be asked to go to the authentic website and make your changes through a secure website - where you will see a "locked padlock" symbol. An additional word of caution here - you should also watch out for oddities in the websites that you visit, e.g. if you see words that are spelt incorrectly, it could also mean you are not on the authentic website of your financial institution. Use the tools in your internet security package to check whether the site is known as a "phishing" site.

Regular check-ups of your financial accounts should also clue you into whether or not someone has gotten hold of your information.


Here is some information from the IRS , they have seen a sharp increase in the number of scams being perpetrated in their name.

Lastly, adults, please inform your kids, young adults, please inform your friends - its not cool to CLICK on phishing sites, or on links in emails you receive.