It Actually IS the Economy Stupid!

As promised, it's well prior to 2 AM and the homework is done so I'm back!This blog is lonnnnnggggggggg but hang in there with me ok?

I've recently discussed with some of you the parallels between our current economy and that of the late 1920's and 1930's (in case you don't know dates that is the era of the market crash and the Great Depression. I thought I would give you a brief history lesson on the depression so that you might take some time to really think about our nation's economy and our own personal spending (and why I'm annoyed that Joe Biden doesn't know this stuff).

First I want you to brace yourself. Assuming that you were even paying attention in high school, your history teacher did not give you the whole truth about the Great Depression. The stock market crash of 1929 did not cause the depression. This may come as a surprise to you but trust me, there are plenty of things our history teachers failed to mention because they found it too complicated to explain. The crash of 29 was a symptom of an already fragile and failing economy. The average Joe in 1929 did not have tons of money invested in the stock market...just as I'm sure most of you don't (although I'm awfully worried about my retirement fund right now). So what did cause the great depression? I'm so glad you asked. Some would suggest that it was BUYING ON CREDIT! That's right, you heard me correctly, at the end of the 20's the average urban American had badly burdened themselves with debt. In the roaring 20's the industrial era was in full bloom. Ford and GM were turning out cars, GE was cranking out the first refrigerators, homes were being built from cookie cutter patterns in sprawling suburbs...and the fine citizens of this nation borrowed money to buy those things.

Now there comes a point when a person has used up all of the available credit they have and when that time arrives people stop buying things. When people stop buying things, factories and retailers have a surplus, when there is a surplus of goods, factories lay off workers to cut costs and retailers mark products down causing related stock to lose value. So, the people can't buy anymore stuff, they are in debt up to their eyeballs, they lose their job at the factory and then have no income but bills to pay and WALA we have a recession (or a slight economic downturn if you are operating on retarded George Bush logic). Sound familiar??

Now the other funny thing that was going on during the time period leading up to the 1929 market crash was a little something called "buying on margin". Here is an example of buying on margin that I found on the web that will help you understand how this works:

"Suppose you want to buy 100 shares of a stock that cost $50 per share. Normally, you would need $5,000 (plus commission) to purchase the stock. If you want to buy the stock on margin though you can borrow up to $2,500 (50%) of the purchase price and pay the remaining $2,500 yourself. If the stock goes up to $75 and you sell it, you would be able to pay the $2,500 (plus interest) and keep roughly $5,000 (a 100% gain)."

Now here comes the problem. The banks are using the liquid cash (your money) to loan out for people to buy A). all the stuff we just talked about and B). stocks on margin. As people begin to not repay their loans, the bank becomes worried that they don't have enough cash on hand and they start calling in the margin loans for payment. People make the connection that banks must be low on cash because they are calling in the loans and people then rush the bank to try to get their money out. Pretty soon the bank has no money coming in and all the money going out and they shut the doors. Sound familiar???

Don't totally freak yet, not everything is exactly the same. Buying on margin doesn't happen anymore (although who knows what kind of shady shit goes down on wall street these days). As a result of this disaster there were a number of laws put in place to try to prevent something like this from happening again. For instance, we now have FDIC which protects your money (up to $100,000) if the bank closes down. This is why if for some crazy ass reason you have more than $100,000 lying around you should not keep it all in one bank. Laws were also created that would allow one institution to buy out another in order to keep it from closing its doors. The reason the JP Morgan acquisition of Bear Stearns a few months ago was such a big deal was that it was the first time since it's inception in the 30's that this law was actually applied. It was also the first time I said "oh shit, it is not good if we are applying depression era laws drawn up to keep us from losing all of our money". A lot of the time I am just being paranoid but apparently my concerns were well founded because now we have reached a whole new level of "oh shitness".

That brings me to this buyout business. This is something that would be unlike anything ever done in the history of this country. It is so socialist that even Democrats do not want to do it (that's scary). The proposed plan would allow the Federal Government to use funds (yours and mine) through taxpayer dollars, to assume the debts of privately funded banks. So basically we are not only paying for our car, our house, and our credit cards, but we are also paying for each others car, house, and credit cards along with any other stupid investments people made because the bank is broke. THIS IS INSANE. (That's just my opinion.)

The bottom line is this: We need to stop borrowing so much god damned money. Rick Jones says that this is the fault of banks who practiced predatory lending. I say bullshit. If I offer to sell you a bridge in New York and you are stupid enough to write me a check, that's on you babe. If you want to buy a house you better be god damned sure you have enough money to make the payments and that you understand the terms of the loan. It's this crazy little thing called personal responsibility. Nuts I know. We do not need 5 big screen t.v's and 3 SUV's and a $400,000 house on $65,000 a year income. No one did this to us, we did it to ourselves in our quest for "stuff". We no longer try to earn anything in this country, we just expect to have everything because we are America, the beacon of hope and prosperity where the streets are paved with gold. Well I hate to break it to you America but if you keep going back to the golden goose...pretty soon there won't be anymore eggs. Sarah Palin said today that we could face another depression in this country and you know what? She is right. Oh my god I can't be live I had to say that.Don't kid yourself, the only things that are certain are death and taxes and everything you know to be the American way could be gone in an instant. Nations rise and fall, it is the way the world works. I'm not saying that we are all going to wake up tomorrow and be homeless, I'm just saying that people need to acknowledge the reality of the situation WE, (all of us little folk), perpetuated. I'm not suggesting that business and government hold no responsibility for this situation but I am saying that what we do in our own homes and with our own bank accounts actually does impact the greater good. As does our decision to be apathetic and turn inward instead of participating in the process and getting off our ass to go vote someone out of office who makes stupid decisions with serious economic ramifications (ahem, $556,969,770,951 war). Instead of waiting for the government to bring America back to it's former glory, perhaps we should get our heads in the game and bring America back for ourselves by raising our personal awareness level. It's that or be prepared to accept the consequences of ignorant bliss.


End of today's lecture. The beatings will continue until moral (correction MORALE) improves.