On the duty of spending
It takes considerable mental subluxation to get a screenshot of how bailing out Citibank will help homeowners.
I noticed some figures indicating that 38% of the homeowners in my city owe more on their homes than their homes are worth. The leading reason for their situation is the happenstance that they purchased their homes since 2005.
So many homes have been built since 2005 that homes became more affordable, especially with the bizarre and frequently predatory lending tactics that made it look easy.
We can hardly blame the homeowners for dutifully trying to do what the government and the stiff rental market actively encouraged them to do.
Trying to track this is like snowshoeing in deep slush. Citibank doesn’t just get to take its $20 billion in bailout loot and go off and buy candy. The behemoth is under orders to lend about 70% of its plunder so people can buy houses.
Okay, this is where you find out I’m dumb. I don’t get how borrowing bailout money helps anyone. The guy who can’t afford his house, can’t afford his house. He can sell it to someone who can afford to borrow bailout money, but then he still has a deficiency. He still has to pay the difference between what he gets for his house and what he owes on it. He’s worse off than he was four years ago. Four years ago, he was treading water. Now he’s floundering, if not sinking. But we need to help Citibank, not the guy who lost his house.
The problem at the lower tier is worse than ever, and this is the tier at which our ever-saving government is aiming the so-called stimulus. Spend, people, spend. Spend, spend spend. See Jack spend. Where will Jack put the stuff Jack buys with what Jack spends? Not in his house. Jack has no house.
Jack bought, for the most part, what he could afford, and he was encouraged to buy more than he could afford with easy lending, because easy lending encouraged growth and spending. Not a friendly cycle. So Jack gets $1,200 or so and is encouraged to spend it on something else. Paying down his bottomless debt is not the patriotic choice; spending is. What am I missing?
Of course: the paradox of thrift. Saving money and paying down debt is undesirable in an economy that needs stimulating. You get your Monopoly money and you have to spend it. This is Grandpa Keynes’s recipe for baloney noodle soup.
Here, I’ll make it simple: If I SPEND I’m deemed not responsible. If I DON’T spend, I’m deemed irresponsible. If I have nothing TO spend, I’m deemed responsible.