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"Be Prepared" for an Economic Meltdown
http://realclearpolitics.com/Commentary/com-9_21_05_FH.html ^ | September 21, 2005 | Froma Harrop

Posted on 09/21/2005 6:35:44 AM PDT by Maria S

"Be prepared" is the Boy Scout motto.

"Be prepared for what?" someone once asked the Scouts' founder, Robert Baden-Powell.

"Why, for any old thing," he replied.

For a people raised on that motto, Americans do remarkably little preparation. This is a nation of grasshoppers, not ants.

As the fable goes: All summer, the ants worked hard, busily storing grain. The grasshopper just played. Come winter, the grasshopper begged the ants for some of their corn. The ants asked him why he hadn't gotten ready for winter. He responded, "I was so busy singing that I hadn't the time."

When it comes to money, many Americans routinely don't think past the next paycheck. They're unprepared for things that are utterly predictable, much less the bolts from the blue.

Recent headline: "Consumer spending rises, savings rate dips." The U.S. personal-savings rate in June was the lowest on record. In fact, it was minus 0.6 percent. That means people are not only failing to save, they're dipping into their reserves to spend money -- or just borrowing more. Which brings us to the next headline:

"Debt load makes Americans vulnerable." Outstanding balances on credit cards now average $7,200 per household. That's more than double the level of a decade ago. And that doesn't include car loans, or mortgages.

For the past year, you couldn't pick up a newspaper without reading about the absurd housing prices in much of the country. Ignoring the alerts about a bubble soon to break, people continue to buy in risky markets. And to pay these high house prices, they are taking out risky mortgages.

Over a third of new or refinanced mortgages are the adjustable-rate type. The monthly payments in such mortgages are tied to changes in various interest rates. They are exactly the kind of mortgage you don't want when interest rates rise, which they will surely do.

As a come-on, lenders offer very low initial rates on these mortgages. The temporary low rates let people borrow more money than they ordinarily could or should. What will happen when their mortgage costs go up and housing values go down? Let's just say that it won't be pretty.

The banks pushing these mortgages are also not prepared. Mortgage-related loans now account for 61 percent of bank credit. Banks are in the bubble big-time. Despite these rising risks, banks are setting aside little money to protect themselves against a tide of bum loans. In 1992, their reserves against losses from bad loans were nearly 3 percent. Now, they're 1.2 percent.

A personal finance rule of thumb is to save six months' worth of wages. The object is to protect the family against the loss of a job. How many of you out there have six months' worth of savings? Don't all raise your hands at once.

President Bush inherited a handsome budget surplus. It could have served as a cushion for the near future, when retiring baby boomers put extra strain on the Treasury. But as the swingers say, "Cash is trash." Our so-called conservatives slashed taxes and spent wildly, turning the surplus into a deep deficit.

Bush apologists like to blame "unforeseen events" for the spending: 9-11, the war in Iraq and now New Orleans. How could Bush have known about any of this?

Of course, he didn't know -- but doesn't "stuff happen"? When in history hasn't it?

The Bush administration may be Bible-friendly, but it learns not from the Good Book. It certainly didn't take anything from the story of Joseph -- the government adviser who urged setting aside grain during the seven fat years to feed people in the seven lean ones.

Frankly, the "events beyond our control" excuse doesn't float. "Even after excluding spending on defense and homeland security," a Cato Institute report says, "Bush is still the biggest-spending president in 30 years."

The report adds, "Since Bush took office, domestic spending has shot up by 36 percent." And that doesn't include the enormously expensive new Medicare drug benefit that will kick in next year.

Be prepared for an economic meltdown -- as rising interest rates sink a people floating on debt. This grasshopper mentality is a plague upon the nation.


TOPICS: Culture/Society; Government; Miscellaneous; News/Current Events; Politics/Elections
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To: Huck

Good you can focus. PROVE GWB's annual deficits are calculated using the same accounting methods used to reflect surpluses in the late 90s. Post 75 proves there was no surplus! It was a lie and an accounting gimmick!


121 posted on 09/21/2005 2:13:03 PM PDT by Bommer
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To: Bommer

http://slate.msn.com/id/2093707/


122 posted on 09/21/2005 2:20:06 PM PDT by Huck (There's nothing you can hold for very long.)
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To: television is just wrong

are you in Palo Alto perchance?


123 posted on 09/21/2005 2:25:09 PM PDT by rahbert
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To: Maria S
President Bush inherited a handsome budget surplus. It could have served as a cushion for the near future

This woman is an imbicile. The so-called "surplus" evaporated as soon as the stock markwet tanked in 2000-01. Meanwhile, despite massive deficit spending and huge tax cuts, Bush budget deficit has fallen for 5 straight months and taxes into the Treasury has spiked higher. These leftwing morons just dont understand how capitalism works.

Is she Paul Craig Roberts' girlfriend? He is another Bush hater who lies about the economy.

124 posted on 09/21/2005 2:31:08 PM PDT by montag813
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To: BlueMondaySkipper
Well, it's not as nice as your ride (pictured below):


125 posted on 09/21/2005 2:37:37 PM PDT by Huck (There's nothing you can hold for very long.)
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To: rahbert

no, Burbank, Ca.


126 posted on 09/21/2005 2:45:31 PM PDT by television is just wrong (http://hehttp://print.google.com/print/doc?articleidisblogs.blogspot.com/ (visit blogs, visit ads).)
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To: Maria S
I just posted this article to annoy the crap out of those much smarter than I.

Sorry if I misunderstood your post.

My point is that for all the griping about federal budgets, I have yet to find anyone who can credibly tell me how the federal deficit has harmed them or their family in any way.

I suppose one could claim that interest rates are somehow affected, but with rates climbing just above 3 percent, that argument is pretty weak.

Bottom line: deficits are not the be-all or end-all of economic prosperity that many claim, and it really gets my gaul when people continue to bash President Bush ad naseum for "big gub'mnt, big gub'mnt" when I dont even know what that means, and I don't think anyone else does either.

127 posted on 09/21/2005 2:49:56 PM PDT by Edit35
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To: Huck

SLATE? LOL! Why not use The Nation and New York Times for more credible sources BWWWAAAAAA! Your S.O.S!


128 posted on 09/21/2005 3:07:46 PM PDT by Bommer
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To: Maria S
No mention of the 4.9% Unemployment rate?

More Americans are working now than at any other time in our nations history. 95.1% Employment is full employment, and it's been steady for the last three months (5.0%, 5.0% and 4.9% respectivly).

129 posted on 09/21/2005 3:12:44 PM PDT by ChadGore (VISUALIZE 62,041,268 Bush fans.)
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