Wait. I Thought Bankruptcy Was Not An Option…
By R.J. Fee
During his recent campaign for his party's presidential nomination, Mitt Romney stated that the best option for the failing car companies was a controlled bankruptcy. This notion was of course scoffed at by those who felt loaning billions of taxpayer money to failing companies with deeply flawed business models would fix the problem. Of course, these companies had no viable way of altering their business model in any appreciable way (without bankruptcy that is), thus insuring that the taxpayer money would be a very short lived benefit to the companies. Today, we find out that after wasting $1.5 billion in taxpayers’ loans, Chrysler is declaring Chapter 11 bankruptcy. Now those who claimed that the $1.5 billion loan was necessary, because “bankruptcy is not an option” are now trying to spin the story again. As if you would just forget that the same could have been done $1.5 billion ago.
Here is the bottom line. No person, company, municipality, state or nation is too big to fail. We must get past those who try to claim that a situation is different because of some nuances that create a unique situation. The ancient Greeks promoted the concept of the macrocosm and microcosm (seeing the same patterns reproduced in all levels of the world around them from the largest scale all the way down to the smallest scale). The world is not difficult to comprehend when you approach it from this angle. When our politicians use complicated and technical terms in an attempt to confuse and deceive the public, simply break it down to a scale that matches your experience. Whether it is loaning money to irresponsible companies, homeowners, cites, or states the concept does not change. They are throwing your good money after bad.
Use the method of the macrocosm and microcosm to cut through the continuous onslaught of garbage spewed by our politicians in an attempt at deception.
Thursday, April 30, 2009
Tuesday, April 28, 2009
Those Facing Foreclosure DID NOT "play by the rules"
Those Facing Foreclosure DID NOT “play by the rules”
By R.J. Fee
I have grown increasingly tired of hearing how taxpayer dollars need to be distributed to those who are in danger of foreclosure despite having “played by the rules”. This is an entirely contradictory statement. Allow me to explain by clearly stating what the historically accepted rules are, and why if one had indeed “played by the rules” they would not be in danger of foreclosure. .
Let me ask the following questions of those who are in danger of foreclosure.
1) Did you purchase the property with at least a 20% down payment?
2) Was the total of the mortgage payment’s Principal, Interest, Taxes and Insurance less than 28% of your gross income?
3) Was the total of all of your debt (including the mortgage) less than 36% of your gross Income?
4) After your home purchase, did you maintain the equivalent of 3 – 6 months of expenses in some form of liquid account for emergency purposes?
If the answer to any of the above questions is no, then you have not played by the most basic rules of the financially responsible. If you were never aware of these generally accepted rules, then you have not “played by the rules”, because playing by the rules means that you understood the rules before investing.
Another important point is that we must accept the fact that purchasing property (even as a primary residence) is by its very nature an investment. By purchasing a property, you have invested in the real estate market. Markets experience both gains and losses. Otherwise it would not be a market. Using leverage (i.e. a mortgage) to purchase property is no different than buying anything else with borrowed money. Shares of stock, vehicles and an endless list of other things are routinely purchased on borrowed funds. The property purchased is security against the loan and the interest rate on the loan should reflect your risk as a borrower. The buyer enters the transaction stating that they fully understand the commitment they are making.
Why do we make exceptions to contract LAW when related to the purchase of a home? Emotions make us all want to help those in trouble. I don’t have a problem with this. I have provided what I can for me and my family, and lives within my means in the process. I have a problem with a government that seizes money from my family to subsidize those who have been irresponsible so that they can continue to live beyond their means. Often those I am subsidizing have a higher standard of living that I will now be subsidizing. But then again they “played by the rules”. I must ask the question: What rules did they play by?
Requiring financially responsible individuals to subsidize the irresponsible, with no chance of return, is inherently wrong.
By R.J. Fee
I have grown increasingly tired of hearing how taxpayer dollars need to be distributed to those who are in danger of foreclosure despite having “played by the rules”. This is an entirely contradictory statement. Allow me to explain by clearly stating what the historically accepted rules are, and why if one had indeed “played by the rules” they would not be in danger of foreclosure. .
Let me ask the following questions of those who are in danger of foreclosure.
1) Did you purchase the property with at least a 20% down payment?
2) Was the total of the mortgage payment’s Principal, Interest, Taxes and Insurance less than 28% of your gross income?
3) Was the total of all of your debt (including the mortgage) less than 36% of your gross Income?
4) After your home purchase, did you maintain the equivalent of 3 – 6 months of expenses in some form of liquid account for emergency purposes?
If the answer to any of the above questions is no, then you have not played by the most basic rules of the financially responsible. If you were never aware of these generally accepted rules, then you have not “played by the rules”, because playing by the rules means that you understood the rules before investing.
Another important point is that we must accept the fact that purchasing property (even as a primary residence) is by its very nature an investment. By purchasing a property, you have invested in the real estate market. Markets experience both gains and losses. Otherwise it would not be a market. Using leverage (i.e. a mortgage) to purchase property is no different than buying anything else with borrowed money. Shares of stock, vehicles and an endless list of other things are routinely purchased on borrowed funds. The property purchased is security against the loan and the interest rate on the loan should reflect your risk as a borrower. The buyer enters the transaction stating that they fully understand the commitment they are making.
Why do we make exceptions to contract LAW when related to the purchase of a home? Emotions make us all want to help those in trouble. I don’t have a problem with this. I have provided what I can for me and my family, and lives within my means in the process. I have a problem with a government that seizes money from my family to subsidize those who have been irresponsible so that they can continue to live beyond their means. Often those I am subsidizing have a higher standard of living that I will now be subsidizing. But then again they “played by the rules”. I must ask the question: What rules did they play by?
Requiring financially responsible individuals to subsidize the irresponsible, with no chance of return, is inherently wrong.
Wednesday, April 22, 2009
Government Can Not “Create” Jobs
By R.J. Fee
April 22, 2009
Once again, our illustrious political leaders have demonstrated their ignorance of basic economics by perpetuating this fallacy that a government program can “create” a job. A job exists when a demand for a certain good or service is met by the willing laborer that provides that good or service. This demand and supply occur naturally in society and they are in a constant state of flux due to a variety of influencing factors. A government program can only change that which is already in existence in the private sector and make the market for that good or service much more inefficient due to the many layers of bureaucratic administrative costs.
In order to accept the notion that the government can appropriate tax dollars to “create” jobs, one would have to accept that a market for this good or service does not currently exist and therefore must be artificially created. This would also mean that in order for these jobs to continue, a continuous subsidy of tax dollars must be appropriated for this artificial supply and demand to continue to exist. Hence we arrive at the true reason for this plan of government job creation. The true reason for these programs is to increase the leverage government has over the work force and increase the populous’ overall dependence on government
Is a certain level of industry regulation necessary? Absolutely, from a pure law enforcement standpoint, anarchy would occur without a certain amount of regulation. Are there instances when industry self regulation is not sufficient to provide this regulation? Most assuredly, this is also the case. However, the concept of regulation is just that. The regulating body, be it an industry self regulating body (i.e. The American Medical Association) or a government agency (i.e. the National Highway Traffic Safety Administration), is not in existence to create a market. Doing so would distract the organization from its true job of regulation, which we have found to be the case with organizations such as the Securities and Exchange Commission, as well as Congress and the last several Presidential Administrations.
The only thing more ridiculous than buying into the notion that the government can “create” jobs is the notion that the government is going to spend your money to “save” jobs. As mentioned in a previous blog, it is a brilliant marketing strategy to waste taxpayer money. You will achieve nothing, but yet claim that you have saved jobs knowing that something that never occurs can neither be proven nor disproven.
At its core, the purpose of law and government is to protect the life, liberty and property of each and every individual. Anything more or less than that is a perversion of power.
April 22, 2009
Once again, our illustrious political leaders have demonstrated their ignorance of basic economics by perpetuating this fallacy that a government program can “create” a job. A job exists when a demand for a certain good or service is met by the willing laborer that provides that good or service. This demand and supply occur naturally in society and they are in a constant state of flux due to a variety of influencing factors. A government program can only change that which is already in existence in the private sector and make the market for that good or service much more inefficient due to the many layers of bureaucratic administrative costs.
In order to accept the notion that the government can appropriate tax dollars to “create” jobs, one would have to accept that a market for this good or service does not currently exist and therefore must be artificially created. This would also mean that in order for these jobs to continue, a continuous subsidy of tax dollars must be appropriated for this artificial supply and demand to continue to exist. Hence we arrive at the true reason for this plan of government job creation. The true reason for these programs is to increase the leverage government has over the work force and increase the populous’ overall dependence on government
Is a certain level of industry regulation necessary? Absolutely, from a pure law enforcement standpoint, anarchy would occur without a certain amount of regulation. Are there instances when industry self regulation is not sufficient to provide this regulation? Most assuredly, this is also the case. However, the concept of regulation is just that. The regulating body, be it an industry self regulating body (i.e. The American Medical Association) or a government agency (i.e. the National Highway Traffic Safety Administration), is not in existence to create a market. Doing so would distract the organization from its true job of regulation, which we have found to be the case with organizations such as the Securities and Exchange Commission, as well as Congress and the last several Presidential Administrations.
The only thing more ridiculous than buying into the notion that the government can “create” jobs is the notion that the government is going to spend your money to “save” jobs. As mentioned in a previous blog, it is a brilliant marketing strategy to waste taxpayer money. You will achieve nothing, but yet claim that you have saved jobs knowing that something that never occurs can neither be proven nor disproven.
At its core, the purpose of law and government is to protect the life, liberty and property of each and every individual. Anything more or less than that is a perversion of power.
Subscribe to:
Comments (Atom)