Thursday, February 26, 2009

Economix 101

I do not consider myself an economist. In fact, monetary issues usually bore me. I find them to be shallow. People who find money interesting must not be interesting people themselves; no passion for anything beautiful or riveting.

However, these days who isn't an economist?

With the entire trade world in shambles, who cannot take an interest in where his or her money is going? We constantly hear news stories with headlines like "Your congressman is getting TWO paychecks, find out how you are pay twice for this person". The news feeds us one story after another on families losing homes, people losing jobs, and the Dow Jones dropping points.

Of course, economics has all of our attention right now.

What has my attention right now is what we can possibly do to fix this. I heard today on Fox News (I'm somewhat ashamed to quote them, but they made an interesting point). The money it will take to bail out this economy if every dollar is a day, is equivalent to about 30,000 years. We might need on the up of a trillion dollars to bring our economy back to a healthy state again.

So, how did we get to this point? Weren't there various bailouts to attempt to stimulate the economy so that people would have jobs and spending money, eventually?

Sure, there were plenty of bailouts. In fact, billions of dollars were given to the banks so they wouldn't go under when lending money to those who applied. That's one of the reasons why banks exist, right? They lend money to those to apply, and in turn, the lendees pay back those loans with interest. It's a win-win situation. The lendees get the money they need to obtain things like a home, an education, a new business, etc, and the banks make a profit on what they have lent.

But things are different now. We're living in a bad economy, so banks are not as apt to give out money to every joe-schmoe applying for it. In the case that the lendee cannot pay back what the banks have loaned, the banks lose money. That's what got them in their current state.

Oh wait. But there was that bailout. Now, banks can still loan money to those who, once a credit check is done, seem fiscally responsible enough to pay it back. Silly rabbit. Don't you know? The economy is bad right now. That means that whatever money was given to the banks by the government to help stimulate the economy should not be used to loan to people, as banks are supposed to do. That money was obviously meant for banks to just sit on until the economy seems good enough to start lending money out again, risk free.

The sheer irony of the situation floors me. Let's examine this like we're back in high school English class. The government gave banks money, which came from tax dollars, to bail them out. Tax paying citizens of this country all paid into that pot from which the bailout money was taken. Some people who are having trouble keeping up with their bills, due in part by the taxes they are paying, apply for a loan, but are denied because the banks supposedly do not have the money to pay out a loan.

Interesting. It seems as though the taxpayers were giving the loan to the banks, but have yet to see any profit.

Perhaps rather than just sit on the money we have and wait for this storm to blow over, we should consider the investments we should make. Consider, an education is a timeless investment. Put unspent money toward classes toward an unfulfilled degree. That way your money is being spent on something that will pay out in the long run. In addition, you will be feeding your hard earned cash into a worthwhile facility, making it possible for that school to stay alive long enough to provide others with educations as well. If you are not big into education, consider the real estate front. Almost all home are selling for less than they are worth, meaning if you have the capital, you could make a really good deal on a new home. In this case, you are buying something you would have needed, while helping to stimulate the real estate industry, which is one of the largest issues our country is currently facing.

If we all thought good and hard about what we could afford and how it would pay out for us in the long run, I think the economy would find itself out of that large hole it seems to have fallen. Perhaps, rather than bailing out industries that won't use taxpayer money for what will help matters, we should all consider which investments seem worthwhile and which ones don't.

No comments: