Monday, April 08, 2013

The Governments Good Intentions

Our government thinks that the American dream is home ownership, a college education for everyone. and of course, health care taxes for everyone (under the age of 65).

We just went through a housing bubble crash. Notice the people that sold their homes got cash and the people who bought them got a house they couldn’t afford. So if you paid nothing down and moved in, the term “Underwater” kind of evokes sympathy from the reader, but in most cases it didn’t cost much to move in. In fact, to rent out here, you need first and last month’s rent which is about $3,500. So for as little as $1,500 you can still buy a home out here.

I was listening to Gov. Huckabee on FOX yesterday and he question the current government policy of lowering credit requirements for new home buyers; “Weren’t low down payments the cause of the housing bubble?” Well, kind of, but the government is in a situation where selling these foreclosures to someone new, improves their balance sheet somewhat (since they already own them). The worse that can happen is that they get the house back. The real problem is the financing.

Before the crash, the banks packaged and sold this “toxic waste” (that’s what the banks called the stuff) to investors. Now that won’t happen in today’s market for two reasons, everyone knows the stuff is bad already, and you could get some jail time for selling it. Now you see why Bernanke is buying real estate paper. Once the Fed purchases the paper, Fannie and Freddie have more money to offer for home loans. Taking advantage of the American dream of home ownership, the government transfers these foreclosures to our unsuspecting kids. The average home buyer is not interested in the cost, only the monthly payments. The higher the price, the more the homeowner pays in property taxes. “Oh Goodie” says Uncle Sam.

Here is where it gets interesting. Student loans offer a method to increase the amount of debt owed by our kids. Remember the dreams we had of future success after completing college? It’s a little like buying 100K in lottery tickets. You’ll read about the winners. I’ve known people who’ve had 30K in Visa debts and that is about where the debt goes from being manageable to unmanageable. At that point they file for bankruptcy. And of course with the student loans, bankruptcy is not an option.
During tough times, the amount owed on a student loan could double in just 12 years. This is where home ownership and a wife that wants to stick around, are all part of a meaningless dream world that will fall apart. Too many debts will kill any marriage ever made. There is a way to escape this trap that Congress overlooked. Move to another country like Australia (sshhh that’s a secret).

Then on top of that I was doing my taxes and looking at what I, the wife and son pay for health care coverage combining our payments with our employers—about 20K. And this is just basic coverage. Obama care hasn’t even really kicked in yet. Why do I get the feeling that we will be paying a lot more real soon?

Let’s get rid of Fannie and Freddie. We don’t need to save homeowners who have no skin in the game. Give our kids a shot at a home that has a reasonable price tag. Modify student loans so bankruptcy is an option. Teach the lenders not to fiddle with kids right out of high school. It’s literally a license to steal from those too inexperienced to know what they are signing. As for Obama care, this law eliminates the decision many families made about what they considered necessary, like auto or health insurance. Why worry about your right to bear arms when the government can tell you what you are going to buy with your paycheck?

Do you get the feeling that all of this government help we’re getting is making things a lot worse?

We have a government that has successfully screwed up the housing market by trashing the bond market interest rates. The student loan program works for all the wrong reasons. It reminds me of those “fog a mirror“ real estate loans. The good thing, when your two years of unemployment runs out, your student loan will put food on the table for four more years--Then apply for your passport (wink wink).

Look for the work week to be shortened to 32 hours (to get more people covered by Obamacare). And of course Congress will have to raise the minimum wage by $4 per hour so workers don’t starve to death making their mandatory health care payment. On top of that, the government will probably lay off all of the people responsible for managing these programs to teach us a lesson for wanting leaner government (it gets meaner as it gets leaner). All of this lends more credence to the saying, “The road to hell is paved with good intentions.” This isn't the hike we signed up for. "We are not out of the woods yet" and Obama can't smell the smoke.


Anonymous said...

Obama is messing up the economy like a good little Marxist. Yes he is trying to take the guns, but that is a subject you don't want to get me started on, having spent 100s of hours researching the subject.
Why are you giving in to Obamacare, like it is your fate to do as you are told. Where are the brave Americans these days? 60 years ago we had no problem telling National Socialists where to go.

Jim in San Marcos said...

Hi Anon 3:01

Obama means well, but the funds are not there for this wild party to continue. I consider Congress the real culprit.

Alexis de Tocquerville's "Democracy in America" said it all 178 years ago. Here is one quote, "The American Republic will endure until the day Congress discovers that it can bribe the public with the public's money."

You're right, things have definitely changed in the last 60 years. You know something is wrong when rich people are cited as the reason for poor people being poor.

dearieme said...

Our knowledge of living in Australia is getting rather out-of-date, but I expect that Adelaide is still a gem of a city with a Mediterranean climate, and Brisbane a pleasant subtropical city with a delightful dry season (about 8 months) and a horrible wet (the rest). Sydney and Melbourne we know only from brief visits but we liked both. We have never been to the other big city, Perth, though reports had been good enough that I almost accepted a job that I was offered there. I warmly recommend Australia; come to that I recommend NZ - the standard of living is lower but the climate is kinder in most of it, the landscape more beautiful, and the people pleasanter.

AIM said...

Nobody really knows where this is all going. Not even those powers that have been doing the manipulation. Unchartered territory. The patients have taken over the asylum. God help us.

AIM said...

Jim: Have a look at this...

They've been doing this since Clinton. Obama and his administration's budget plan manages to pull off making government larger and increasing taxes by 1 trillion. Using "News Speak" (George Orwell) he has the American public thinking that budget cuts have actually occurred and we are on our way to a stable economy with these new fiscal policies. Jim Puplava breaks down the budget in layman's terms and defines the terms the government uses to obfuscate its true actions and to confuse us. Excellently done show. If only America could wake up to what is happening.

Anonymous said...

Edit suggestions:Regarding your title. i in intensions needs to be capitalized. And intensions is spelled intentions. Unless you are playing on words and injecting the concept of tension into this. If so, Intensions should be italicized or in quotes for a clearer meaning. No charge for this Jim because I like reading your blog.

Jim in San Marcos said...

Hi Anon 4:02

Spell check don't correct grammar errors. Plus Jim kan't spel to save his life eather.

I corrected the errors, thanks for pointing them out.

Jim in San Marcos said...


Thank you for the link.

I'm not sure that the patients have taken over the asylum -- just yet. It seems to me that the patients are more sane than the ones with the keys.

I have noticed that reading the daily paper now days, makes me pause to wonder if I still have all of my marbles. The real world seems to have changed a tad.

Jim in San Marcos said...

Hi dearieme

Australia is kind of like the USA 50 years ago. NZ is a place I would like to visit, but I hate air travel. I feel like a sardine in a can.

If I was drowning in student debt, I think I would move to NZ and buy a sailboat. Australia would be my second choice. Employment looks pretty good there for college grads.

Anonymous said...

what's your feeling on precious metals?

is this another early 1980's episode where we go bearish for decades or just a short correction?


Jim in San Marcos said...

Hi Anon 4:23

I'm writing my next article on this.

Stay tuned.