28 November 2007

CHECK, PLEASE...

I was emailing back and forth with Robin this morning about this that and the other. The subject turned to my car break-in last week, and that's when she dropped this little nugget in my lap:

"My Mom lives in Savage, and her neighbor was robbed at gunpoint in her driveway on Thanksgiving!"

That piece of news led to the inevitable question: What in Monkey Balls is happening to our country?

I'd been chewing over that particular question since the break-in. Why had it happened? How had an "affluent" suburb like mine suddenly become an area with a dramatic increase in crime rate? Why had suburbanites around the country noticed that their crime rates in general had gone up, leaving them wondering if they'd moved to the right neighborhood after all?

I dug into it. I read all that I could. Strangely enough, by this weekend I'd reached a conclusion:

It's the economy folks.

The party of the late nineties and early 2000's is over. It's time to pay the check. Unfortunately, nobody seems to be willing to reach for the bill.

I'M NOT AN ECONOMIST, BUT AT LEAST I DON'T PLAY ONE ON TV

Bear in mind that I'm not an economist. I'm not politically active (mostly because the entire process reeks of re-arranging deck chairs on the Titanic), and I'm not a business person. I'm just a citizen with a brain, two eyes, and a gob. A really big gob.

My conclusions were based entirely on asking some basic questions ("Why do people steal? What drives a person to commit a crime? Why now? What is different today than even two years ago?") and digging around the InterWeb.

Is that the right way to address these questions? Of course not. I should speak with economists, and experts, and all manner of others who wouldn't give me the time of day. In their absence, however, I've read my resources and reached my conclusions.

THE PROBLEMS, SUCH AS THEY ARE


So, what's wrong with our country today that makes crimes more common?

There are five major problems:
  • Underreported Unemployment
  • Underreported Inflation
  • Wage Stagnation
  • Fuel Price Increase
  • Dollar Devaluation
I'll discuss each below.


1. Underreported Unemployment:

Hey, if they stop asking for money after six months, that means they have to have a job now, right?

That's nonsense, of course. It means you have "discouraged workers" trying to find a job. Not reporting it doesn't mean they're not there; it just means you're not doing your job.

Believe it or not, you don't have Bush to blame for monkeying with the unemployment figures; That honor belongs to the Clintons. Sadly, no one in government feels the need to fix this problem yet.

Given that, it's logical to conclude that there are more people out of work than is commonly acknowledged.

2. Underreported Inflation:

Thanks to both Bush (in this case G.H.W. Bush) and the Clintons, the key method of tracking inflation figures (the Consumer Price Index) is totally hosed.

See, the theory behind the CP-I is this: The government tracks a "basket of goods" that the average consumer would buy, and reports the difference in their prices over a period of time. As the price goes up, the difference is reported as inflation.

Common sense, right?

Well, it was until Bush, Sr and Alan Greenspan essentially said "That costs how much? Well, change the items in the basket so we can lower the price!"

Ironically enough, Bush, Sr couldn't get the change approved. It took -- you guessed it -- the Clintons to make that happen.

The effect is obvious: You're literally not comparing apples to apples any longer. You're comparing apples to freaking Pop-Tarts.

Thanks to the folks over at Shadow Government Statistics, we can actually get a more realistic understanding of inflation. The news is depressing: Even before fuel prices spiked, inflation in real terms had gone up between 12% and 20% from 2000 to 2007.

Now, in the interest of fair reporting, I should point out that the 20% figure was encountered via a report on National Public Radio, and I can't for the life of me find a link to that story. Fortunately, the 12% figure can be found here.

Thing is, even that level of inflation isn't insignificant when you consider...

3. Wage Stagnation:

Wages haven't kept up with the economy, folks. (Unless, of course, you're a CEO making on average five hundred times the wages of the average worker.) Even with raises, the real income of the "average American family" (Do you know one? Honestly?) is down almost five percent.

Fun, huh?

But wait! There's more!

4. Fuel Price Increase:

This is the big one, and it's going to get a lot worse before (or, frankly, if) it gets better.

Our civilization's lifeblood is oil. As scary as it sounds, we're starting to reach that oft-mentioned regime of "Peak Oil", where demand outstrips supply. Though I don't agree with the doom-and-gloomers who think that society will disintegrate into a Beyond Thunderdome-like mess, I do think it's going to change our society forever.

The immediate impact is this: Everything is going to get a lot more expensive. A whole lot more.

Think about it; you're hungry for lunch. Well, that food has to be grown using oil-based equipment. Then it has to be shipped via train or truck to a central area, and finally trucked to your store, where you drive to buy the product.

Lots of oil there, just for a meal.

It's not just food. Medicine, technology, energy production, you name it, oil is in it.

Bottom line: Oil prices go up, the price of everything goes up. Sucks, but there it is.

But hey! You can always get a loan, right?

5. Dollar Devaluation:

Thanks to people who actually believed the Rich Dad, Poor Dad nonsense, the entire country is mired in a real estate mess. Low interest rates led to home refinancing because -- hey! -- who needs long-term equity when you can buy useless shit like a Harley? Even better, trade in that affordable home for a McMansion and live like the king that you are!

Unfortunately, when the interest rates went up, people couldn't pay for the Mansions. This lead to defaults, which lead to the mess we're in.

Here's where it gets really ugly: The Fed, under pressure from the economy, keeps interest rates down to try to keep the mortgage crisis under control. That allows people (and businesses...lots and lots of businesses) to borrow money more easily. But now we have some much money on the market that it's devalued our currency to the point that the Canadian Dollar is stronger.

What does this mean for us?

If this feels like a quadruple punch (high inflation, wage stagnation, fuel price increases, and currency devaluation) that's because it is.

OH, THE FEELING OF BEING SCREWED

So our economy looks to be entering a recession. Big whoop. We even had a mini-recession back in 2001. What makes this so different?

Simple: Our recovery from that recession was primarily paid for by people using their houses as freaking ATMs. They cashed out their equity to buy toys they didn't need, bought themselves big fancy houses, and generally lived it up.

Now the bill is due, and they don't have the cash to pay.

Think I'm kidding? Foreclosure rates are at historic highs. Bankruptcies are up 60% over last year. People are welching on their debts, and the entire country is suffering for it.

Guess what happens when people can't pay their bills, are losing their homes, and can't make ends meet?

That's right, folks. You get crime.

IS THERE A WAY OUT?

I don't know if we can dig our way out of this mess. Citigroup just had to be bailed out by Abu Dahbi, to the tune of $7.5 Billion. The cause of their woes? The mortgage mess, which helped fuel our economy from 2001 through 2006.

Put more simply, it looks to me like our economy has been living on borrowed time, and the sands in the hourglass are nearly gone.

How can we fix this? What steps can we take to make sure it doesn't happen again?

I can't speak for this country. If I were, say, the Unquestioned Leader of the United States of Flanders (Our motto: "It's an okely-dokely day-orino!"), I'd probably start by facing the core problem:

We need to re-vamp the Real Estate market.

The Real Estate industry has been run into the ground by money-hungry party animals with questionable backgrounds and even worse business practices. It's time to fix that.

  • Make the requirements to enter the Real Estate industry tougher:
You want to sell houses? Fine. Attend business ethics classes, have a clean credit record, and, oh, yeah, maybe even get yourself a degree in economics or business management.

Strict? Maybe. But just upping the requirements to become a Real Estate Agent would elliminate the "Woo-hoo!" party-types from the field. (Lord knows, we saw waaaaay too many of them -- both professionally and socially -- between 2000 and 2005).

Make the Realtors more professional, and you'll have a better business all around.

I'm not talking about all realtors here, of course. I know a couple of good ones. But for those two that I know, I've met so many shady characters that I've found myself longing for a used car lot so I can get a taste of real integrity.

That's not merely wrong, it's shameful.

  • Question the way land is valued:
Would someone explain to me -- in a way that doesn't sound like a justification for extreme greed -- why a U.S. Government post-war track home in Silicon Valley that initially sold for $12,000 in 1947 is now worth nearly a $1 Million?

"It's the land!" is usually the reply.

"My ass," is always my answer.

Yes, some land is more valuable due to its location. I get that. But not that much more valuable!

At what point did the American consumer become a bobble-headed toady? Seriously?

Even so, the Silicon Valley example makes a tiny bit of sense. It's an affluent area. People can afford that ridiculous price (even though they should exercise some common freaking sense and say "No!") No, what I'm curious about is the completely unrealistic upward pressure on home prices.

Allow me a personal annecdote: Back in 1997, right after the Red River Flood hit Grand Forks, ND, SpousalGoddess and I were looking to buy a home in the city. I'd graduated, she had a good state job, and together we made a whopping $55,000.00 / year. With our credit improving with each month, and our eyes on a nice home for our kids, we went shopping...

...only to find that the average home in Grand Forks, ND -- after a flood that wiped out the center of the city, mind you -- ran over $175,000.00.

HUH?!

Who in Grand Forks could afford homes like that? Sure, there was a hospital there, so there was some medical staffers. The University had jobs, but they paid crap. Yeah, there were the lawyers to support all three organizations, but beyond that, who in that third world economy could afford those homes?

Worse, not ten years earlier, these same homes were available for roughly $65,000.00. I know because my father dragged Raven and I around house hunting with him.

Now, explain to me in a way that doesn't sound like some Realtor saying "I can ask sixty percent more for this house because I'd like to go to Cancun for a few weeks!" why the value increased that much?

We couldn't buy there, of course. Instead, we moved to the "more expensive" Minneapolis area, and ended up buying a home in an expensive suburb for less money.

Again, HUH!?

There's zero logic there. Instead, the entire industry strikes me as a scam hidden behind a red blazer and a too-wide smile. Sadly, it now seems like our economy has been forced to agree.

WRAPPING IT UP

Like I said, I'm not an economist. I'm just a guy with a brain, some opinions, and a pretty good instinct. The bottom line -- to me, anyway -- is that our country was taken to the cleaners by an unethical industry, and we're all suffering because of it.

Of course, we can't expect these things to change themselves. If you want the change, demand it. No matter how you might feel today, this is a free country. Speak your mind. Make a difference. Believe me, your kids will thank you for it.

12 comments:

marie said...

A very truthful, yet utterly, utterly depressing answer to so many questions. It's very hard for me to type right now because I slit my wrists and I'm applying pressure to the cuts, while at the same time, trying to keep blood off the keyboard.

No, you're exactly right. Especially about the housing market. It's sucking the country into an abysmal recession. The foreclosure rate is staggering, and in many cases, we have greedy realtors to blame.

In 1999, when I bought my house (a 1-br condo), I wasn't even making half of what I make now. I was paying $700/month for rent and that was tough. I wasn't looking to increase that figure with a mortgage so I wanted to stay in the $85,000 price range.

My idiot realtor, in all her infinite wisdom, was trying to push me into a larger place, with the rationalization that the extra $150/month I would pay on the mortgage could come from spending less money on clothes, eating out 3 fewer times a month, seeing 6 fewer movies a month, buying generic brands instead of namebrands.

I told her that I didn't do any of that stuff anyway because I coudln't afford to. She paused, whipped out her stupid calculator and tried to sell me on getting an ARM.

She said, "See? It's doable. Your monthly payment is only going to be $400/month!!"

Yeah, it is. For the first month, bitch!! Then it will steadily go up $50/month until I'm paying $2,000/month!!"

But she wanted me to buy the bigger place because her commission would be bigger. She didn't care, or listen, that when I said I wanted a place in the $85,000 price range, I fucking meant it!

Anyway, I fired her ass and bought a place for $85,000. I got a fixed rate, and an affordable mortgage, with no thanks to that whore!

But everytime I open the paper or listen to the news, I see what might have been for me if I had been swayed by a greedy whore of a realtor.

Avindair said...

She sounds like the Realtor who sold our townhome and got us into our current house.

Now don't get me wrong; I love my home. At nearly 2,000 square feet, it's a really comfortable size for a family of four. Sure, it's off of a major thoroughfare, but it even looks like the freaking Brady House. (If you've seen any of the "Cassie Banning" movies, you saw the outside, and what the inside used to look like.)

Pity it's been a maintenance nightmare since day one.

See, when we bought our first townhome, our Realtor then (one of the two good ones I referenced) got us an outstanding home inspector. He went top-to-bottom on the place, and left us with an owner's manual -- no kidding -- for our place. Gave us rough calculations of what the place should cost us in maintenance per year, and offered his services should we need help.

By contrast, the Party Realtor who got us into this home hired a guy who looked like he was eighteen, had a fondness for dressing like a male stripper, and answered every question starting with the words, "Uh, yeah...huh?" Then, when he would walk away the Realtor would point at his ass and say "Doesn't he have a fancy style?"

No shit.

I could forgive this nonsense if the guy was competent. He wasn't. He was dead wrong about everything he inspected. Everything.

I don't regret buying the place. My kids have made life-long friends. We have GREAT neighbors. We're close to both the kid's schools, to medical and dental clinics, to shopping, you name it. It's our home now.

None of this is thanks to the Realtor. All she cared about was closing the deal, no matter what it took.

Fortunately, that woman is no longer a Realtor. The market tanking cost her that job.

Good riddance.

Honestly, though, it's too easy to blame just her for what we went through. She was only one of what we know were many Realtors of her ilk. These were people who would brag about working fifteen hours per week so they could party all the time on someone else's life's savings and future debt. She was a product of a business culture that knew better, but didn't care.

That's why I'm so hard-assed about wanting the requirements to become a Realtor raised. We're not talking about selling used cars here. We're talking about life-long investments. Why in the hell should we not, as consumers, demand a higher standard?

It's about frigging time that we stand up, en masse, and collectively cry "I'm tired of this shit. Give me competence or bugger off."

GeekGoddess said...

"greedy whore of a realtor"

Seen too many of those.

I've only met one realtor who told me that she'd turned clients away who wouldn't listen to her. They wanted to take out two mortgages or do an ARM loan to keep up with the Joneses. She refused to be the one to put them into that kind of debt. One realtor.

My only hope now is that all of those realtors, realty companies, lending officers, etc. that filled their pockets with their astounding lack of business ethics, will find themselves out on the street.

In the words of one realtor we knew, while trying to convince a potential buyer to take the plunge into a mortgage they really couldn't afford, "Well, if the economy tanks then we'll all be warming our hands together over a fire barrel in the street anyway." I shit you not.

Avindair said...

This, of course, would be the same Realtor that sold us our house.

marie said...

That greedy whore of a realtor!

Avindair said...

Oh, the stories we could tell, 'rie...

Dracut said...

Realtors are only enabled by the overspending, must have it now, McMansion desiring population with no discipline for savings.

I bet the vast majority of the people wanted or ever demanded to look at houses outside of their means and wouldn't settle for anything less. We're in our current house because the previous owners were almost a forclosure statistic. I also suspsect the people who purchased our old house will be looking at that possibility in a year. They had to have a large, newly renovated house. Period. And when they didn't have ANY downpayment, begged the realtor to find a program for them.

So they'll get just what they demanded, even if it's not what they intended.

People need to grow a backbone and take some personal responsibilty.

GeekGoddess said...

"People need to grow a backbone and take some personal responsibilty."

I agree 100%. Unfortunately, "Personal responsibility" has become a dirty word in the American lexicon over the past 10-15 years.

Don't get me on THAT rant right now! I'd be typing all afternoon!

dracut said...

We license people to drive with the hope that they will have learned enough to be responsible. I wouldn't mind seeing a requirement to take a short course and pass an exam on personal finance/mortgages etc in order to qualify for certain types of mortgages, first time buyers etc.

I've repeatedly read (elsewhere) that "ARMs are bad". They certainly can put people into bad financial positions if they plan poorly or their situation changes. But our last house was on an ARM, we liked it that way, and it worked out just as we were expecting (hold for a few years, fix-up, sell, and move on).

I get really steamed when people complain about the tools in the box when no one had bothered to ask if the user has even read the manual...

That's not to say that people who didn't read the manual weren't coached to make bad decisions for bad reasons. The problem is how or should you even regulate the presentation of financing and housing options to people. As a critical consumer of professional advice, I'd say no. I don't want my choices limited to the lowest common demoninator.

End of rant.

GeekGoddess said...

Valid points, all, dracut. Worthy of a rant! Thanks for that point of view.

Teresa said...

About the crime thing:

I think that the price of gold going up, and the sudden demand for "gold scrap" might be driving some of the more home-invasion-y crime.

Used to be, stolen jewlelry was practically worthless. Not so anymore.

Lucky for us, I don't have a lot of jewelry.

GeekGoddess said...

Trees,

You've probably got something there. Very similar to the problems they had earlier this year with people stealing the copper pipes out of vacant houses and construction sites with the high price of copper.

Unfortunately, they don't know you don't have a lot of jewelry until they've broken in and done their damage. :-/

Bugger.