"Five billion years and it still comes down to money." - The Doctor, Doctor Who
An early Texan flag, wherein they indicate that if the Mexican Army wants the cannon, they should come and take it. Which was the Mexican plan anyway, right? Am I missing something?
Sorry I was away last week – I seem to have discovered the only place on Earth where there is no Internet. Sadly, there was no beer there, either. As Heaven above is my witness, a man can live without beer for a couple of weeks, and can live without Internet.
I was actually joking about the 401k conversation at the end of the last post in the attempt at a cheap joke, but, what the heck. Nero fiddled while Rome burned, so I guess I can guffaw and poke fun at the ongoing destruction of billions of dollars daily. It’s a target-rich environment.
I was thinking that it might actually work, the Fed and the Treasury Department showering the financial firms with billions of dollars to make sure that the party didn’t end on a sour note when Lindsey Lohan went face first into the punch bowl.
Yeouch. Not so much.
The first question you might have is: what’s the big deal?
Good question. Glad I asked it. If you live in California, you can already see that the price of a house has dropped. This is not uncommon when you remove hordes of borrowers from the market by, for instance, taking the drastic and intemperate step of making sure that they can repay you. Oh, sure, if you or I owned a bank we’d like to lend $1.2 million to an unemployed lettuce picker so he could buy a cozy two-bedroom condo, but after getting burned several hundred thousand times on this sure fire transaction, they’re getting a bit skittish.
So, to cover the horrible irresponsibility of lending money out like it were somehow radioactive (“C’mon Harry, let’s make a few more loans today, or else my genes will mutate enough that I grow a fourth arm”) Congress has decided that unsound banks that did stupid things should fail.
No, just kidding. Congress is rewarding their utter lack of financial prowess by giving them laundry baskets full of cash so that they can bathe in it and laugh maniacally.
Is the pain over?
Sadly, no. These same banks that would lend $2.1 million so that former members of “New Kids on the Block” could buy a clubhouse and hang together are now scared to death to lend money to anyone, especially each other. If you owned a bank, would you trust another bank? See. They’re getting smarter.
The downside to this is that literally dozens of businesses depend upon loans for thing like keeping their inventories of Pez® and pantyhose. Down the street, we have a little, independent guitar store. I’m pretty sure that the owner has borrowed money to keep his inventory stocked, and soon enough the bank will say, “Were we drunk? We loaned money to a musician?” and their credit will disappear. Not to mention that all the parents of budding young Angus Youngs will be saving their shekels so that they can pay for gas to get down to the bread line. This business? Toast.
This will happen with big companies, too. The major problem isn’t that there isn’t enough money. There’s plenty of money, piles and piles of it. It’s just that it’s not moving anywhere. If you do the math, the air pressure in a balloon is determined in part by the temperature of the air. Increase the temperature, increase the pressure, since those air molecules go zinging around ever faster. Decrease the temperature? Decrease the pressure. Same with money. We’re watching our economy implode right now because the money isn’t moving.
The Pez® farmer is saving money because he’s worried that no one will buy his Pez©, so he doesn’t go and buy pantyhose, figuring he can use those old ones that have the little tiny run up the side instead.
The pantyhose brewer isn’t buying Pez™, because he’s worried that nobody will buy his pantyhose, and chews on a bit of broken glass instead.
Investment ideas? Hmm. My ammo didn’t decrease 20% in value last week. Neither did my beer. I think those steaks I have in the freezer actually jumped 20%.
Me? I’ll keep enjoying this ice-cold Natty Light while I fiddle.
So, if I’m going to talk about the economy and such, I should probably end with the disclaimer. “The writer of this blog is not aware of owning any stocks, though there may be some dwindling amounts in mutual funds in his 401k that he tried to get out of several weeks ago with the Dow at 10,000 if the transactions didn’t go through. Oh, and there’s that whole “attempting to move the 401k” thing that may or may not have worked. The writer of this blog is not a financial advisor, nor licensed to give financial advice, and if you act on the financial advice of a blog writer on the Internet, you get what you deserve.”