Let's now listen to what Minyan Michelle has to say.
Dear Professor:Dear "Ant" Michelle
I had the good fortune to be raised by a father who graduated from high school during the Depression and passed his wisdom on to me.
My father always told me that there were two ways to make money--work and save. Already you can already tell I'm out of touch with most Americans. That said, I keep reading articles and listening to programs on economics in hope of better educating myself on where to put my money.
Frankly, I'm worried, and here's why:
When I spoke to three women older than myself on 'The Ant and the Grasshopper' while waiting in line at the grocery store, they'd never heard of that fable. I then attempted to use the Biblical reference of the story of Joseph storing up goods in years of plenty to be prepared for famine with the same results.
Now we have a government rushing in to bail out banks who showed poor judgment deciding every citizen 'deserved' a $500,000 house when they had an income of $30,000 and never saved a dime. I was instructed by my father to look at a house as a place to live, not as an investment or a place that would always rise in value.
I'm still not sure Wall Street or our government gets our current situation. We are paying for years of "I want it" rather than "I need it." We are paying for a lack of education on credit. Consider my dad's adage of: "If you have to charge a stove which will far outlast your payment in the long run then you do so paying off more than your payment as fast as you are able. You never charge clothes, meals, holiday gifts, etc. as that would mean you were running a tab on non-essentials."
I wish I felt hopeful about the current status of our nation's money supply. Heaven knows I've tried to save as much as possible, but I wish I'd done even more. My husband received 2 days notice before losing his job and found out his company had not paid our hospitalization for over 90 days. This left us unable to buy insurance covering preexisting conditions as you only have 60 days to do so by law.
Luckily, we found a decent human being who 'allowed' us to pay ALL our back insurance (over five thousand dollars) so we could then pay close to a thousand dollars a month to have hospitalization for the nine months he was out of work. Had I not listened to my father and saved, we would have been up the proverbial creek.
Losing a job at age 60 leaves you with few open doors.
While I have some money in the market and am suffering along with the rest of the country, I'm not as exposed as some as my father always believed that if you bought treasury notes you could use the interest to help supplement your income without touching the principle. Course, that was before the dollar slid and I began receiving such great interest as one and three quarter per cent. With no pension, however, I can't afford to gamble in Vegas or Wall Street.
I have to admit that right now I'm one grumpy ant. I missed the party. I never charged up my credit cards to play. My husband and I pay our bills, pay the IRS, and owe no one. He's now reduced to working at a retail home improvement store and limping home at night happy that he even found a job.
The government is burning me to save all the grasshoppers. They continue to print money to satisfy the air-blowing braggarts in Washington who pass inflated programs to satisfy this cry-baby generation who 'want it all.' This group will walk away from their McMansions and cry into their coach handbags blaming everyone but themselves and I will have to pay for them.
What we need in this country is accountability and responsibility for Wall Street and Main Street. I doubt we'll get it because we'd have to grow up and accept that we made this mess and it 'd going to be painful getting out of it.
Good luck trying to keep posting about these ideas within your articles. I, for one, enjoy reading them. I fear, however, that the grasshoppers you are attempting to reach won't or don't want to hear from you.
Regards,
Michele an old crone in South Jersey...home of high taxes and a state that has practiced the "I want it now" mentality for years.
I know of what you speak. And the problem is the Fed. I truly wish Bernanke could read your email. Maybe it would matter, but most likely not. You see Bernanke has a stated desire for "inflation targeting". In other words, Bernanke has a stated positive rate of "price" inflation.
I have to state "price" inflation for two reasons.
1) Inflation is not about prices. Inflation is about expansion of money supply and credit. The fed does not want anyone to know what inflation really is, as that allows the Fed to talk about capacity utilization, jobs, productivity, the CPI and a whole bunch of other nonsense instead of the one thing that matters: expansion of money supply and credit. For more on this please read Inflation: What the heck is it?
2) Inflation benefits those with first access to money (credit). In other words, inflation benefits the banks and the wealthy. Is it any wonder that bonuses at Merrill Lynch, Goldman Sachs, Lehman, Citigroup, and even Countrywide Financial soared as the credit bubble inflated in its last stages to suck in those who had no business buying a house but ended up buying them anyway? That bonus money was extracted even though the profits were a mirage. Mozillo, CEO of Countrywide Financial actually managed to execute $1 billion (yes that is billion) in stock options over the years. Were it not for a bailout by Bank of America, shares of Countrywide would be worthless. What a racket!
Positive Inflation Is Positively Theft
Bernanke has a stated goal of theft. He disguises theft under a policy of favoring a 2% rate of inflation. Two percent sounds innocuous until you chart it out.
Inflation Targeting at 2% a Year
click on chart for sharper image.
The above chart was discussed in Fallacy of Inflation Targeting.
Making matters far worse is the Fed's reaction to prices. The Fed ignored huge asset bubble in the dot com era, then again in the housing bubble. You see, asset prices do not factor into the CPI at all, and therefore into anything the Fed openly talks about.
Houses soaring from $200,000 to $600,000 was not any part of their CPI calculation. Nor was the Nasdaq soaring to over 5000, a number that is still miles above.
I feel the Fed conveniently ignores what it wants to ignore while discussing total nonsense like productive capacity. And if that was not bad enough, the Fed has stripped out the only things that can be measured with any degree of accuracy (food and energy prices), while concentrating on "core inflation" which in my opinion is so manipulated by hedonics that it defies all reality.
So now, as a result of past (yes, past) inflationary policies, the asymmetrical policies of the Fed are in the spotlight. Those policies are to ignore bubbles but deal with the aftermath.
The aftermath is not a pretty picture. The housing bubble was the bubble of last resort. There are no more bubbles to inflate except perhaps food, energy, and gold, and those are the last bubbles the Fed wants to ignite.
The Ants Win
Michelle, do not regret your decision to be an ant. Instead, be thankful that you were not one of the last minute grasshoppers now about to be foreclosed on. Because the Fed cannot reignite that housing bubble, millions will lose their home. You have your house, your husband (for better or for worse), and most importantly your sanity.
Good luck to you Minyan "Ant". You deserve it.
Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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