The Wrong Cure: Bailing Out the Panic

If you're wondering what that howling noise is every time you turn on your television, radio, or read your news outlet of choice, let me break the bad news: it's now a full-on financial hurricane that few of us could ever have anticipated in scope, and even fewer of us know how to collectively 'circle the wagons' about even now. If you're wondering where your hard-earned money that you invested is, get in line and be prepared to wait a good while...you might also want to consider taking up prayer. If you're wondering if your money really buys anything, or hell if it even exists in this 'illiquid' market, welcome to the club. If you feel you've been duped by Wall Street greed and lax regulations on banks, you have been, as we all have. If you can't sleep at night because you're worried about the economy and your personal stake in it, the only thing I can offer right now is a hug, a smile, one of my home brew lagers, and a positive word of encouragement. We're in this now, folks, and we're in it all the way...best to get hunkered down.

What started as a trickle in late 2006 in the occasional financial blog about the housing markets cooling as people were overextended credit-wise has become a tsunami of constant battering from all sides: employment decreasing, investment and savings institutions evaporating almost every weekend, increasing inflation, the shortage of basic goods, on and on. Not to mention the entire mortgage mess of buying far more than what we could reasonably afford, and the entire personal savings mess of holding back next to nothing 'for a rainy day'. It's the stuff that people like Barry Ritholtz in his The Big Picture blog, J.D. Roth in his blog Get Rich Slowly, and Ron Lieber in his "Your Money" column in The New York Times have been warning us about for well, years, now. I've been reading their sage words for some time now, but kept hoping we'd somehow scrape through this mess relatively intact. But like many of you recently, I've been watching this financial meltdown...and let's call it what it is, an implosion...with an increasingly troubled eye as the chances of any escape disappear into the ether.

Personally, I am very lucky as I still rent, am still employed, and I implemented a debt-free plan some time ago that has worked amazingly well...but only after I faced some very dire circumstances. But no matter as I am involved in one of the most asinine panic runs on fuel I could have ever imagined. North Carolina, Tennessee, Georgia, all up and down corridors along the Southeast now have gas shortages because our refinery pipelines were shut down and/or destroyed when Hurricane Ike came ashore. For those of you who can readily find gas and pay in the mid $3/gallon range here in the States...I salute you. For those like myself who have found gas stations repeatedly without any product, prices near the $4/gallon mark, and long lines to get the maximum of 5 gallons...I truly do feel your pain. Last week, I could only find 3 stations in the entire town with any kind of gas, each with lengthy lines around the block, and all with a hefty price per gallon just to make things amusing for my wallet. In theory, this gasoline shortage is temporary...that in short order an influx of a new supply will come flooding in, the system will be forever repaired, we'll all return to our former ways of driving and spending, and this 'minor' setback will all but be forgotten. (Sound a bit familiar? Yeah, me, too.) Thirty minutes and five all-too-quickly pumped gallons later, I sadly accepted we've finally entered the Panic Era. And it's not just gas, or milk, or credit...it's everything related to what money does for us.

There is a fine line between totally going off the deep end in a financial denial versus taking a long, deep breath, reassessing a bad situation and then making a workable plan. Trust me, people, I've done both at one time or another and I am the product of families who have done both more than they should have in hind sight. Mistakes are made, checks expected that did not come, items bought that really should have been left behind...it happens and none of us, and especially all of us collectively, are immune. For better and for worse, we Americans live in one of the most materialistically driven societies ever to see the light of day: if we have it and like it, we want more; if it's new we must be the first to try it out; if we have it and others don't yet covet ours, we will do anything on Earth to make them jealous. It hasn't been about keeping up with the mythical Jones' for ages now: instead, it's about being better and having more stuff than The Jones' and rubbing it in their faces at the same time. (Watch the 1960s advertising-based drama "Mad Men" if you need further proof as to how this has been ingrained into our psyche and spending habits.) I am convinced, sadly, that those supposedly leading us into this Bailout of the Century have long since jumped...and want to take the rest of us with them.

And while we're laying out all our cards on the table, let's toss out another one from the Honest Dealer: we are a nation with an elected leadership that will not lead if it means playing well with others from the opposing party, a President and Administration that has so over-embellished 'facts' on so many other affairs that we can no longer take them seriously now, and a Presidential campaign that seemingly has went on longer than most Roman conquests. I can't speak for everyone, of course, but for the last few months I've just been praying Dubya would quietly go off into his Crawford sunset and not start another war (or really just stay the hell off the global stage for once) before he did so. Unfortunately, bad decisions and horrible decision-makers can't be outrun forever, so in these past few days I've had to endure Dubya try on numerous occasions to teach me about a global economics situation he doesn't know a damn thing about, either. Welcome to the Reckoning. Or the Rapture. (Your choice.)

In many ways, it is a battle between Wall Street and Main Street ('the haves' and 'the have nots' if you want to go all socialist on me) now, because no one else has a set (or the legal power, yet) to settle this nonsense. In short, someday we're gonna have to suck it up and take some really nasty medicine if we have any hopes of getting any better for the long run. Instead of doing that, we're heading straight into a blossoming class warfare. The Main Street kids are looking at the Wall Street kids and want to rumble over the latter's market manipulation and greed, while the Walls want to fight the Mains because most of us don't know a damn thing about building investment portfolios, if we save anything at all. Sadly, neither camp seems to know anything for certain about the future of money or the markets and it's practically the blind leading the blind right now. Forget about the banks seizing up credit because they don't trust one another's balance sheet anymore...long term, Main Streeters don't trust Wall Street nor their Government anymore, and the Mains are the much bigger gang to worry about. I didn't vote for Dubya either of the last two elections, but I respect that a great number obviously did. Problem is, I'm pretty sure none of us voted for Hank Paulson and His Great Agenda. Even the wonderful folks at Minyanville are grappling with their bearings after Hank's recent proclamations, and that site is about as close a union of the Streets as we can ever reasonably hope. Dylan Ratigan and the Gang over on my beloved "Fast Money" have been working overtime to explain this meltdown to the average viewer, night in and night out, but with only a limited success...because even the fundamentals are no longer constant.

If what we all were taught...smart and dumb, rich and poor, city and farm, male and female, black and white and everything else in between...about how money works and circulates in this economy ceases to exist, how the hell do we fix anything going forward?

Honestly, until we fall hard and 'hit bottom', I'm not sure we can. (Hitting that financial hell was the only thing that truly worked for me, truth be told. When you have to face your problems at that level, you learn from them and are far less likely to repeat them. ) Additionally, I'm not sure we should even be considering a bailout as the be-all and end-all of this crisis. Pete DeFazio and some other leaders have actually come up with an alternative plan that makes much more sense to me, or at least gets us going on a less 'slash and burn' through the Treasury path, and it could perhaps calm some of the frenzy that's pervading so much of everyday conversation. But only the Paulson suggested $700+ billion bailout will save us from all these bad debts, the mass media say. I disagree, as evidenced by what is still included in said bailout: to lure lawmakers to vote yes on the 'rescue plan', we're also giving tax breaks left and right, covering everything from wooden practice arrows for children, to Puerto Rican rum, to auto racing track facilities. (Note to NASCAR®: you've bled your fans dry enough with the ticket prices and such, take some of those profits and help racing facilities, yours and others, maintain their own damn tracks and stop seeking right-offs.) So, we're essentially bailing ourselves out by cutting our future revenues coming in and still playing political games...yep, that outta work, look at the successful track record for it so far.

Further still, I'm not sure we even deserve a bailout until we adjust our priorities. It will be painful, but it's long, long overdue. We are addicted to living beyond our means and then creating whole segments of the economy to help us get ourselves in debt for just that purpose. Our grandparents, our great-grandparents for some of you, survived the Great Depression and it forever etched memories of thriftiness and hard work within that generation...where did those ideals go, anyway?? Just as you don't give money to a drug addict knowing it's going to be spent on something that will only fuel the addiction, giving a bailout to a society that has no idea where all of its trillions are going as it is...and who amongst us knows where our tax dollars are spent? Anyone?? Anyone?? Bueller??...you only place a band-aid over a gaping gunshot wound. The bad blood will still seep out somewhere, folks, and with this Panic-driven bailout all you've done is just moved the exit site. And I already dread the size of the mess that we'll all have to clean up.

Sacrifice seems to be the hardest word...yet it's coming, anyway

Last week, as I briefly reported, I attended the John Edwards 2008 Presidential campaign kick-off here locally. While it certainly started and sputtered at times, the delay beforehand of Edwards' arrival and then his introductory speech gave me some time to meet and talk to some other citizens...many of whom are far more informed about particular sets of issues than I will ever hope to be. About four of these people even exchanged emails and/or blog addresses (remember when one exchanged phone numbers?) and we've all sent introductory hellos these past few days. Most, with the exception of myself and another's wife (she was not in attendance at the rally, though), seem to have their minds made up and have decided they will volunteer and campaign for Edwards. I may regret this later if I do decide to volunteer again (I helped with his Senatorial campaign years ago as a student), but right now I believe signing on wholesale to one candidate before others have even announced is perhaps jumping the gun. Not to mention there is this slightly nagging feeling that I should delve a little deeper this time into what triggers me to actually vote for one person over another.

It's not that I don't understand, to a limited and troubling degree anyways, of where this fine country called the USA stands right now...I do. Or perhaps the better word to explain it all would be stumbles. Regardless of the change of power in Congress to the Democrats, regardless of a bullish economic surge on Wall Street, regardless of new changes forthcoming in Iraq ...the fact remains we are a house divided, and horribly frayed at some points. President Lincoln predicted divided houses cannot stand, and one can only pause now and wonder what drastic measures the great Abe would have done to right the foundation of his beloved home. We are a country in desperate need of leadership...and frankly, this may be blasphemy, but I don't particularly care which party as I'll vote for the best candidate regardless of affiliation...but our leaders, our future generations, even ourselves now, will not make the hard choices to help ensure this nation's continued success and survival. And I'm not hearing anything from the campaign trail, Edwards included so far, that encourages me about any of the Presidential hopefuls.

In short, we need someone who is willing to 'take one for the team' to get us back on course and we can only hope that he/she will implement enough changes in their first term to somehow get re-elected for a second. In truth, though, the actual person who did such courageous acts would be committing political suicide...which begs the question, which is worse: political suicide for an individual who makes the hard choices or national suicide for a country unable to maintain itself? Truly, what Dubya et al has got us involved in so far will require many, many years to get us back 'close' to where he assumed office in 2000. Some things, like a trust in the government to protect, look after, and work for its citizens, have been lost forever in certain classes, neighbourhoods, and cities. And so many of these things have not a damn thing to do with Sept. 11 or Osama bin Laden or that all-encompassing 'war on terror'. Widescale mismanagement of both international and national problems, though, have shaken the basic guarantees of what we Americans expect from our leaders, our country's plentiful resources, even from our fellow taxpayers.

I may not have been in New Orleans and in Hurricane Katrina to know now that I shouldn't depend on any kind of help...financial, food, shelter...should another such emergency (even minor) hit here. I may not have to follow the political news shows every day to know the separation between the two major parties here is only widening...and leaving most moderates like myself dissatisfied and unrepresented...and also know the work I'm paying these same people to do on my behalf is not being done. I may not be fighting the war against terror in so many international hotspots to know our military are overstretched, exhausted at the separation from friends and family, and woefully underpaid (we should be ashamed so many military families have to survive on government food and housing subsidies just to survive). And that list now goes on and on. In short, so many don't care anymore because the previous sacrifices we did make went for absolutely nothing. Yet, we don't have the 'political power' to change the status quo on a daily basis. Good money is perpetually chasing after bad, as are our intentions.

Yet sacrifice is exactly what we need to be encouraged to do, and, no, I don't mean Iraq. We need to be educated, and plan, and prepare for a new retirement system as Social Security in its current form will die in a short time...taking its contributions with it. We need to redefine what our work base will be...are we service-based or industrial...and then plan educational and immigration goals from that starting point. (If so many Americans won't 'do' low level labour jobs anymore as widely reported but we still have so many businesses that need that type of labour, then of course we may need to redefine what kind of immigrant workers we need.) Depending on what our job needs are will determine our immigration and border control policies. We need to understand...on a massive, across-the-board scale...why borrowing on massive amounts of credit, both as a country and as individuals, can be disastrous to our future endeavours. We need to recognize and acknowledge the homeless, the poor, and the uninsured in this country...the millions of them...and readdress the whole process of 'helping' them. We need to rework a health care system so that treatment can be given to anyone who needs it, without a credit check and without bankrupting them. We need to withdraw our dependence on foreign oil and start paying farmers to make our fuel...diesel engines were designed to run on vegetable oil, folks, not petrol...helping save our checkbooks and farming industry in one program. We need to set a series of goals...and not just markers on the goals that make us 'feel good' and we want to meet, but all...and implement plans to meet them, or at least constantly reevaluate why not if we failed. We need to respect and adhere to the Constitution and the Bill of Rights again (something I'm ashamed to even be writing about here). And here comes the kicker...we need to analyze what our national identity should be in the generations to come, and whether we want to be a strong nation with shared global duties or a strong international entity that originated from a sovereign country. We clearly...financially, physically, philosophically, spiritually...cannot be both a great independent nation and a great international police force and arbitrator. This next election is going to start us, hopefully, on a path where we have to make some hard choices.

I guess I'm waiting...and I acknowledge that I could be waiting indefinitely...for the candidate to come up to the podium and say we have some hard choices to make and not be talking about one party or another, but instead some of the issues above. I guess I want to hear that someone 'gets' that our issues are far bigger than the Iraq war or what Bush's infamous legacy will be. I don't need the candidate to be glamourous, or fabulously wealthy, or even well-connected within the cultural elite...but to get elected these days, I guess I'll get that package nonetheless. I'm wanting to hear someone say we're in a swamp right now, and all he/she wants is 4 years to try and get us back on solid ground...and has a sensible plan to do it. I'm willing to meet them halfway (hell, more than halfway) if the plans have some merit.

Even though I may never have a family of my own, I'm willing to make the sacrifice so many others are willing to, too, for the sake of their children and the children to come...and for the sake of this country surviving as the glory we acknowledge it can still be. But an economic and political sacrifice is going to be necessary soon, folks, in some ways similar to that of "The Greatest Generation" of the WWII era. It could be Edwards that leads the way, it could be Giuliani, who knows. But in the meantime I'm sadly thinking as an individual and not as a community citizen with my own plans for the future, expecting the sad status quo in Washington to continue.

And I'm waiting for Abe's triumphant reincarnation.