Is The Stock Market Really Going Up Or Is The Dollar Simply Worth Less?: There has been a lot in the news lately about the stock market finally reaching the heights where it once was. This is good news, unless you look at it from the perspective of the dollar. Then, all of a sudden, the rise in the stock market doesn’t look quite as bright as it did.
Can’t Afford a House? Pay for Someone Else’s!: With subprime lenders feeling the pain of homeowners defaulting and home prices looking like they will continue to fall, who will be the losers in all this? Likely the ones that have been most responsible and not purchased overpriced housing:
Of course, there are losers. Among them are irresponsible mortgage lenders who threw money at irresponsible home buyers. Wealthy homeowners not in default will also see their artificially inflated home prices fall to true market levels. (Easy come, easy go.) But the winners will be the responsible lower- and middle-income people who’ve waited patiently for the free market to provide affordable housing.
Yet just as the ants are about to reap the rewards of their patience and thrift, state governments are stepping in to bail out the grasshoppers–with the ants’ tax money–and keep home prices artificially high. Gilbert Le Gras reports for Reuters (March 27, 2007): “A growing number of state housing agencies are developing or considering issuing bonds to assist subprime mortgage holders to refinance their obligations at fixed rates.” That is, they will issue taxpayer-subsidized loans to people already proven to be a bad risk. Le Gras cites Ohio, Maryland, Rhode Island, Massachusetts and Virginia as states that already have or are developing mortgage refinancing programs. Colorado, Washington, Wisconsin and California are considering such programs.
The political pressure comes from homeowners at risk of default and from those in no such danger but who would like to keep their home prices artificially high. Helping the first group is welfare for the irresponsible. Helping the second is welfare for the rich, because market interventions to keep home prices high benefit those who “have” houses at the expense of those who “have-not” houses.
Having Debt Does Not Make You A Bad Person: just because you have debt, it doesn’t make you a bad person. As My Two Dollars says, “You must learn from your mistakes, but making the mistake in the first place does not brand you a bad person.”
Post From The Past
Let Your Children Teach You To Save Money: Want to learn how to save more money? Here’s a brilliantly simple idea. Turn over your finances to your children and watch them reorganize the way you do things and save a ton of money