Monday, March 3, 2008


Buffet calls it a recession.
Like so much in politics these days, it's hard for the average citizen to sort through the data on the economy.
Unfortunately the credibility of the government on this important area, like so many, is low right now. There's reason to suspect, for example, that the reported inflation numbers are too low. For one thing, the government focuses on the so-called "core inflation" figure, excluding food and fuel because they are "too volatile."
The problem is that for actual families, food and fuel are major expenses and when they go up it has a definite impact on their bottom line. They get less of a benefit when those prices go down, because the downside never seems to be as dramatic. Prices are "sticky" as they say, and the downward pressure is less than upward, especially at the family budget level.
Because the government isn't addressing the costs appropriately, it's not capturing peoples' anxieties about those costs.
Frankly, so far the government seems to be behind the curve on these things. Things are getting worse faster than the government seems able to react to.
Another good example is the housing crisis. So far the solutions proffered have been worse than useless. For example, Clinton proposes a 30-day foreclosure delay to give time for workouts. Well, this is too short a time to make any difference at all. It takes more time than that under good circumstances, and these are not good circumstances. Even if lenders wanted to be more flexible on loans they wouldn't have the staff available to do it. Not that there's any real evidence lenders are motivated to make any adjustments.
Likewise there've been aid plans put out that are completely inadequate. Here in Connecticut the state offered a plan to help distressed mortageholders and in the first couple of months only four or five people were eligible to take advantage of the program. Not good enough.
Some of these proposals are simply stupid. They require, for example, that people be in distress solely because their rates reset. They require people not be late on any other bills. These kinds of requirements do not recognize how real life works. People normally juggle their bills when they are late as they struggle to get by. Most people are, perhaps, too optimistic about how soon they'll "get out from under." If they knew how things were going to end they might do thing s differently.
It might be the smart strategy to stay current in all your bills except for a couple and just let those get real late. But that's not how people think. You got the bill collectors calling you, so you send a little to one and a little to another. You end up being somewhat late with everybody. Most people would consider it more responsible to attempt to pay everybody you owe at least some of what you owe them.
But the way the credit system works it's better for you to just blow one or two big creditors completely off and pay everybody else on time.
Given that these plans seem to be drawn up by people who have never struggled to pay their bills, they seem doomed to be inadequate to address the problems. If the objective is to keep people in their homes, then there will have to be a lot less worrying about how people got in the hole and more concern payed to how they might climb out of it.

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