Who Cares About Economic Law? What's next, the repeal of the law of gravity!

Who Cares About Economic Law? What's next, the repeal of the law of gravity! 03/24/2010

Government believes they can push off anything to another day!

The Repeal Of Economic Law:

In January 1953, during his last week in office before handing over to President-elect Eisenhower,

President Harry Truman issued his final “Economic Report”. In it, he said this: “It is the purpose of the Employment Act (passed in 1946) to prevent depressions. The act stands as a pledge of the people voiced through their laws that never again shall any such sacrifice be laid on the altar of ‘natural economic forces’. Thus, ...the act rejects the idea that we are the victims of unchangeable economic law.”

This about sums up the government and the Federal Reserve beliefs that they can suspend economic law at the stroke of a pen and the push of a button on the dollar printing press.

Recovery Shenanigans:

Cash For Clunkers:

Bad for America: you don’t owe anything and have a clunker. You get a credit of $4500 and buy a new car and now are indebted again to something you can’t afford. Now you have a car payment you didn’t have before.

This was a brainchild of the Chinese Government. They are not accepting dollars for imports and demanded steal and metals. Thus the clunkers are destroyed and sent over to china for payment. Why else do you think they pour acid on the engine after you turn in your car? They are not planning on reselling the car to someone else, they just want the scrap metal to pay to China for credits for imported goods.

LOAN MODIFICATIONS:

The problem with all the government housing rescue programs, wither it’s taking over Freddie and Fannie Mae, or Loan modifications and lease for deed programs is they are just pushing the problem down the road. Piling up more and more homes which eventually will come on the market and continue the miserable economic conditions for everyone. Like giving an adrenaline shot to someone with a dying heart, keeping it beating a few more weeks versus doing what is necessary and having a damn heart replacement. But that is more effort and pain. Not the easy way out.

How it works:

What it means to these people. – Delays the inevitable, Ultimately to be kicked out at that point and they will be screwed in 5 years and they still will either bankrupt or shortsale and they have been taken out of the market place for a total of 8 to 12 years. What it means to the rest of us. Further delays the economic recovery by pushing the problem down the road and not dealing with it today. Drags it out for years and years.

The best thing to do is a short sale. Blow the house out, your credit gets hurt for a few years, but use this time to save some money, and then you’re back in action. Maybe you’re able to buy a house with a real down payment of 20%, at a fair price due to housing finally being at the bottom, and which will actually gain equity as time goes on, and thus building some net worth.

LEASE for deed:

So let's review... buy a house way over your means, with nothing out of pocket. Use the most exotic loan possible so your payments on said house are say 40% of what they should be. If the house goes up in value, flip it! Or become a serial refinancer so you can live the good life, using home equity to buy cars, upgrade that kitchen, go on vacation et al.

Now if by some chance the home value goes down... then you cry to government about how the font on your mortgage was too small and you were "tricked". Or, no one told you that home prices could actually go down. You enjoy that house and deserve it after all - even though the down payment and closing cost was rolled into the mortgage and you could never afford it.

The lease for deed program basically is trying to keep people from walking from their homes and keeping that house from ending up on the market. They are giving people who are about to be foreclosed the ability to rent their house as sub-market rents as the government subsidized the whole effort. Bottom line at the end of the day. Home goes up, you win. Home goes down you win and the "responsible neighbors " who are paying their mortgages, just watch with jaws agape from afar.

Main Problem: All these "housing rescues" do is a great job of just kicking the problem down the down another year or two and keeping inventory from pilling up higher than it already is.

Overall with almost all these government programs - if you are trying to do the right thing you are punished. Formerly "on time payers" must first begin to "strategically" miss payments and then all the King's horses (and men) will come to save you.

Moral of the story? Don't act like a responsible adult or government help machine WON’T find you.

Comments

Leave a Reply

FREE SUBSCRIPTION!Receive Emailed Articles as they are Posted. Click Below on RSS Feed!

Jason's Thoughts!

Archives

Categories