They Never Saw It Comin’ August 24
When the stock market slumped last week, one of the reasons was the damaged caused by extending balloon payments and other dubious types of credit to people who had no money. In one of the most absurd claims I’ve heard lately, one commentator said industry experts never saw the collapse coming.
Huh? How could an alleged “expert” not see it coming? I saw it coming. Am I a Nostrafreakindamus?
They Never Saw it Comin’
The “unforeseen” collapse of the loan market bears many of the same fingerprints as the dot com bubble. During the bubble, venture capitalists dumped millions into anything to do with the web or with a small “e” in front of the company name. For Chrissakes, a seventh grader with an idea for FleaCollars.com could have weaseled a few million out of a gullible get-rich-quick sap with too much money and not enough sense. And when these so-called “experts” sunk someone else’s money into these crapholes, even more gullible little old ladies - whose knowledge of the Internets was equivalent to Ted Stevens’s moronic series of tubes analogy - followed suit. In the end, all that most of them got for their investments were fistfuls of penny-a-sheet paper. I’m no unrestrained capitalist, but I thought the point to investing was to sink money into something that pays off, not some harebrained idea a Stanford freshman got while soaping up with his girlfriend during his morning shower.
Apparently, these same greedy, economic morons didn’t learn that lesson in Economics 101 - not withstanding their attendance at the dubiously prestigious Harvard Business School. Instead, they repeated the ginormous mistake again. You simply can’t continue to give money to someone with no way to pay it back. One day the bill comes due and the schlub who took out the loan will be digging in his pocket only to find a hole where large sums of money used to live. When that happens - times, oh say, a million - the even bigger jughead who extended the loan is shit outta luck. Sure they can seize collateral (if it exists), but the second hand housing market gets pretty bad when the other bazillion pootie-headed lenders are all trying to sell those repo houses to the 10% of people who can actually afford them.
Take the Money or I’ll Break Your Arm
One could argue that I’m being too harsh on the lenders. After all, they didn’t twist anyone’s arm to take a loan they couldn’t pay back. Every borrower needs restraint and they deserve what they get if they can’t pay up. Them’s the rules, like it or lump it. It’s the principle I’ve always followed and I’ve been rewarded with a pretty good credit rating.
But let’s look at the flip-side. Overaggressive lending, byzantine legalese, and a voracious appetite for legalized loan sharking has produced an economy where most people have a financial IQ about the same as a chimp flinging poop. Even educated buyers rarely understand all the terms buried on Page 807 of their loan contracts. And just to ice the cake, the average household gets an Amazon rain-forest-full of “pre-approved” credit applications per day. For a family struggling to pay the bills, a loan looks like a juicy piece of porterhouse dangling just under their nose.
Credit, It’s What’s for Dinner
“Gee honey, that steak looks mighty tasty don’t it? Break out the Heinz 57 and let’s us have a party!” The lender adds, “Here sir, let me cut that up for you. Peeled grape with that perhaps?”
Nope, there’s plenty of blame to go around. If we expect the chicken-wire and bubble gum concoction we call an economy to function, everyone needs to smarten up. Lenders need to start lending money like it’s a personal loan and not as a target quota for market penetration and enough bags of cash to pay the Gucci-shoed CEOs who encourage this behavior. Loanees need to get some remedial financial education to put up a fair fight against the wolfish lenders huffing and puffing them toward idiotic loans.
Now I’m no “expert”, but fer Chrissakes where the hell is everyone’s common sense?
Tech Tags: economics credit market+slump debt omnipotent+poobah
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Janice Brown Aug 25
Poobie,
Your vacation did you a world of good. Your writing was brilliant before, but you have returned with a vengeance. It is not difficult to predict many more intelligible, acerbic, scrupulous, and strangely curious articles in the near and distant future.
And I’m not Nostrafreakindamus!! LOL
Janice
Flimsy Sanity Aug 26
I agree with Janice on your writing - but then I always thought it was good.
When Reagan’s happy times came into power and Carter’s gloom and doom was flushed down the toilet, America saw that the national debt could be doubled and nothing seemed to happen. After all the real villian was big government not those savings and loan pigs. As far as running up debt goes the Reagan message was clear: “Why wouldn’t it work on a personal basis?”
My brother, (who was given a free and clear farm), buys tons of machinery and is up to his ears in debt. His theory is that if you are deep enough, the bank would lose too much money if it foreclosed. Some insurance, huh?
daveawayfromhome Aug 26
Other People’s Money is the real ticket here. I’m quite certain that for those investing their own money, not much money was lost. It’s those firms that specialize in letting little people join in big investments that are probabaly the real money losers. After all, the guys who run those firms are largely anonymous, rake in big commissions and salaries (even as the scheme falls apart), and after the firm collapses, go and get another job doing the same thing. The risk to the guy running it? None, really, since playing the market is “always a gamble”. The risk to the sucke…, I mean investors who put their $1000 ante in is the same one always gets when trusting your money to strangers who say “trust me”. Might as well hand it to a wino, at least you know he’ll just blow it on booze, dope and convienience store hot dogs.
Blu man chu Aug 28
spittle? little girls spittle? why of course i hear you can tell the difference between a woman ’s spittle and a young girl’s spittle.
you think the focus on spittle might be a diversion?
Zaius Nation Aug 30
What a great overview of the financial situation! I actually think that you are Nostrafreakindamus. I get offers for loans and credit cards on a daily basis in the mail, and yet I don’t really have that much money. The agressiveness of this crap is scary.
Sorry I have not been around for a while, I have been really busy at work.