Brad DeLong's Semi-Daily Journal (2004)

Besides. If a bank forecloses on a home, it's another opportunity for a rich person to profit off the misery of a poor portion. And some consulting companies make money off of financial restructuring. Isn't that what GOP economics is all about - creating new business opportunities for shifting income? Why bother with creating value when you can simply take it?

Fantastic! As you repeatedly say, "I'll stop calling this administration Orwellian when the stop using 1984 as an operations manual."

The outrage meter busted a long time ago.

Sounds like the same method the WH staff must use when they digest the economic news they present to the president.

Akaka --here's a guy with credentials and experience and a record that puts almost anyone to shame. How is this resource treated? Well, like any other Dem.

I've ceased being stunned and gave up on surprise a long time ago. I provide fee-only, annual retainer finanical planning to families and individuals and can state from my (albeit small) client base that most individuals resist understanding their financial decisions. Understanding would require behavior modification and, in a land of prime -1% home equity loans; 0% teaser rates on credit card lines exceeding $20,000 offered by mass mailing; stock market run ups that make every gambler "know" it will happen on the up side for them again; and an unquenchable appetite for spending (rather than, say, spending time with your disaffected teenager), well, even the "rich" have become poor models of financial propriety.

I cannot say the obvious to my clients often enough: if you want personal freedom and control SPEND LESS:SAVE MORE. I can provide the tools, I can help invest the savings, I can help to craft less expensive debt . . . but I cannot restrain another individual's urge to spend-spend-spend.

Truly, the hours and manic effort input to work/career to make money--energy, ambition, positioning and sheer productivity--are unmatched on the personal spending/investing side with virtually no thought given to anything but impulsive-driven indulgence and managing the resulting intra-family rage at the red ink.

Every family needs to maintain a net worth statement. Every individual needs financial literacy. And all Americans (aside from that top 1%) need to see how close they may be to joining those in the statistics you cite (and which are so inconvenient to the administration). Yes, Virginia, good people can make bad decisions and get caught by bankrupcy. But before that dire outcome, there is a lot of sheer misery, fear and family tension.

And now Alan Greenspan tells my clients to indulge by, literally, mortgaging their future--and at an adjustable rate because otherwise you're a sucker (which, in any specific analysis may be the smartest course, but just put the loaded gun in the hands of the suicidal, Alan!).

But, hey, don't worry, be happy!

Aha! As per my last comment in the thread about tax cuts (well, maybe it wasn't about tax cuts, but since I don't understand even a smidgen of what is talked about here, I decided to talk about tax cuts), where I suggested that the tax cuts weren't being used to stimulate the economy, but instead were going to pay off credit card debt (and for me there is no other kind of debt -- because I have never even considered the possibility of owning a house or even a new car or even an old one in reasonably good shape -- except for debt to friends and other persons who might sell me, um, uh, "stuff", on the corner, but those folks are not good to be in debt to, though I think Welles Fargo might be a bit worse as far as penalties for non-payment). It was suggested that I was completely and totally wrong, and that tax cuts were indeed being used to stimulate the economy, as this post affirms. So, instead of doing what any sane, rational person would do: use tax cut money to pay off a credit card debt, or make a payment on one's mortgage, or something like that. They are, instead, running out like drunken sailors spending their $300 on the expensive ice cream, instead of the cheap stuff that consists mostly of "guar gum" and some sort of artificial flavor. And maybe some steaks, maybe even filet mignot. Heck, it's free money, why not buy meat you can't pronounce?

So, instead of paying off those bills, which $300 wouldn't even make a dent in, so really, it's not worth bothering, because they know they are going to have to go bankrupt at some point in the future anyway, so any spare money is just wasted by giving it to the bank, they are indeed using it to stimulate the economy. This is the inescapable logic behind this group of forecasters -- who are much like weather forecasters, in that you can't trust them, and anyway, nobody remembers today that it was supposed to be sunny yesterday and instead it rained buckets all day, especially if it's sunny today and it's the weekend and you're happily grilling your meat that you can't pronounce and using the good steak sauce. "Oh god, what a wonderful weekend this is going to be," you say to yourself as you pound down another of the expensive beers you used to be able to afford sometimes when you were in college and no matter how broke you were, there was always enough money to buy beer. Especially right after you got a check from your parents for "books". Here's to good things, tonight is something special.

Whereas Americans are having tons of trouble managing their money and whereas we're not going to entertain notions that structural solutions would be the proper approach to such a large scale failing we heartily recommend finincial planning classes as a band aid on the aorta.

It's a start, but we can't even get that through honestly. Horrifying

Another example of Deficit Attention Disorder.

The NY Times today has "Enron Overtaken as Bush's Top Financial Supporter." (http://www.nytimes.com/2004/02/26/politics/trail/26TRAIL-ENRON.html)

"Enron fell to second place in January behind the MBNA, a leading issuer of credit cards. MBNA took the top spot, with its employees giving more than $603,000 to Mr. Bush.

"Campaign finance experts say the change symbolizes a continuing shift in the president's financial support, moving away from his usual backers like oil and gas companies and toward financial-services companies that have become increasingly supportive."

So of course we don't want to be talking about bankruptcies--not until we've got those loose bankruptcy laws really tightened up around the necks of the consumers.

Anne,

I'm sure you'll like this prescription from Stephen Roach -- an immediate hike to 3%.

http://www.morganstanley.com/GEFdata/digests/latest-digest.html

The evident incapacity of average Americans to look ahead in their best interests is so general as to constitute a 'national' characteristic worth hard study. Think of the way people eat till they are obese and diabetic; think of the way they refused to contemplate the logic of the intertemporal government budget constraint. What is it about our history and environment that produces such high (most likely hyperbolic) time preference? Are there any good studies on this? Were we always this way? Or is it just since the ride on the great income escalator of the 1950s and 1960s?

Move along folks, nothing to see here.

On another point -- great post by Billmon of Whiskey Bar: "The Two Faces of Alan Greenspan" (who knew he was an Ayn Rand follower?)

Move along folks, nothing to see here. C'mon buddy, keep walking, this ain't some sideshow.
On another note, great post by Billmon of Whiskey Bar this a.m.: "The Two Faces of Alan Greenspan".
Who knew big Al was an Ayn Rand devotee?

Here is my favorite part. The MBNA crowd, and its friends in the auto industry, have been pushing bankruptcy reform (using the term in the usual bushian sense). The Democrats have been able to stop it with a wide variety of crafty legislative moves for years. One of the best of these was the Shumer amendment: abortion protesters who get dinged for large judgments for illegal activities were prohibited from getting rid of the debt in Bankruptcy. This so offended the lunatic fringe in the House, led by the insufferable Chris Smith of New Jersey, that they voted against their moneyed allies and killed the bill.

Now the bill has come back under another guise, and could possibly pass. If it does, expect a huge rush to Chapter 7 as people try to protect the scraps of equity in their houses and cars from their creditors.

tegwar -- thanks for the point on financial planning classes being unlikely to be effective. Could you be a bit more specific about structural solutions, though? The only ones I can think of are either increasing government saving by balancing the budget or some form of consumption tax that, even if progressive, is likely to be more regressive than the current system. What do you have in mind? I'm quite interested.

To me, the second viewpoint piece following Roach's was equally of interest and germane to the issue of household finance. It discussed why Morgan Stanley is raising its forecast price for crude oil. As this translates into higher gasoline, natural gas, and fuel oil prices there will be additional pressure on the finances of many families. Why general measures of inflation are quiet, there are some specific price increases that are pretty noticeable to the average family budget. Blame who you want, but the last four years have been squandered in terms of developing a comprehensive national energy policy.

>>Who knew big Al was an Ayn Rand devotee?

More or less everyone ... and to be honest, he split with the Rand cult at about the same time Murray Rothbard did, so it's a little below the belt anyway.

In related news, perhaps sir would care to take a look at the statistics relating to basic numeracy and the ability to calculate percentages before sir gets wildly excited about education in "financial literacy" as a solution to anything.

Given the fact that when something that happened on the other side of the globe yesterday impacts the price you pay for something today, and given the fact that even so called experts can have opposing views on what the outcome of a given action will be, and given the fact that husband and wife are both working 50 hours a week while trying to maintain a houshold and raise the kids, it's little wonder that people are disaffected when it comes to trying to understand how the forces at work around them are going to shape their lives and their futures. Abdicating this responsibility, unfortunately, is an unwise decision when the goverment, whom many trust to act in their best interest, has a different agenda entirely.

And these numbers are happening with interest rates at extremely low levels. Just wait until they start back up sometime over the next year or so. We will be in for big trouble.

monte carlo: Here is the permanent Roach link. The "latest digests" one changes daily.

http://www.morganstanley.com/GEFdata/digests/20040227-fri.html

Wouldn't Enron going under have something to do with it dropping from the number one spot?

I'm suprised that a firm that essentially no longer exist is still the number 2 contributor.

ARe they paying for presidential pardons?

Automotive News had the following story in the February 16 issue. I would link but you must be a subscriber.

Upside down, and sinking fast: More trade-ins these days are worth less than the amount buyers still owe. The result: A growing debt load that many experts see as an indusrty time bomb.

The story gives as an example a customer at a Texas dealership that signed to a $46,911 loan over 96 months, $18,136 over invoice price of a Chevrolet Suburban. The customer was upside down - that is, she owed thousands more on her trade-in than it was worth.

The story goes on to say that 30% of customers were upside down in 2003, an increase from 24% in 2002. It says buyers on average are rolling $3700 in old debt into their next purchase. That loan terms have reached an average of 63 months and downpayments have shrunk from 15% to 5% over the last decade

Nelson
The auto stats you cite are interesting, esp the 30% figure for 'under-water' ( the term I've read regarding the re-financing of the previous car) deals. The recent GM lottery also speaks volumes about how desperate the situation is. At some point it will be cheaper to close the plant, but apparently we have not reached that level yet. Somehow the marvels of Finance make this work. Somehow GMAC still does well enough that GM can post a profit. But for how long?
AG on the box about the bargains in ARMs is trying hard to draw reluctant mortgagers to some funds they may have overlooked. Some of these funds could be used to help buy that new car I guess.
It seems so out of character for him to do this. The urgency -why? He seems a tad scared, as though we won't have enough funds to get us through the next dry spell.
This is the person who, above all, has a calming influence, no? I find this pro-ARMs talk from him most unnerving.
And then there is the SR open letter asking for a rise in the interest rates to 3%...AG is definitely not heading in that direction.