Stunned as I watched this past week a wall street scramble, plunging to record lows since 2003; I kept thinking about poor folks who bet their retirement, (and then some) invested in the stock market. Coupled with a few other factors that have contributed to our current crises; it's apparent we're in deep doo-doo.
Customary in my lifetime is to run businesses, households and personal affairs on revolving credit. I refer back to something I said a few posts ago...'Heck, I could've lived with a whole lot more, high on the hog, if I died with my all debts paid off.' The point is, we've grown accustomed to using the tool of credit day-to-day so as to have a bit more for a buck than a budget would allow. And I might suggest too, because credit consumption is generally inflationary on the economy; even those who want to be more prudent in their stewardship have become ensnared in debt due to rising costs of living.
King Solomon would warn us in Proverbs 22:26; 'Do not be a man who strikes hands in a pledge or puts up security for debts; if you lack the means to pay, your very bed will be snatched from under you.' Pretty scary stuff and it seems apparent for many, we may be seeing the latter happening.
I have had on my own initiative to get out of debt over the past few years and have sought out the most efficient way to pay it down. One voice suggested that I run my household like a business. I would borrow a fair amount of money, a secured low/no interest equity loan, pay off high interest cards as much as possible and leave room enough to pay all my bills with it each month. Then put all my income each month toward that equity line of credit - making sure that my income surpassed the outflow. The more significant the income, the faster the initial debt would be paid down because the interest applied each month would be accessed on less principal (depending on the values, it could be half the real debt). I confess my personal concern quivering in my own heart, risking the equity in my house to do this. But in theory, it's possible and businesses do this all the time. Borrow for all the expenses - payroll , inventory and all else and then as the income flows in; it's applied to that line of credit. No wonder then, if there's gridlock in provision of credit; everything comes to a slowdown - or more dreadfully put, a standstill. And this is what we're experiencing, folks.
Add to that a lack of confidence by those who risk capital in the market and we get what we're seeing, a panic on wall street. Sell, sell, sell. Aggravated in recent weeks by polls that predict a victory for the presidential candidate who wants to raise the capital gains tax; those rich investors are waiting in the wings, taking the gains hit now - before it goes up.
The ugly truth is that for years, we have enjoyed global markets that have potential profits of astronomical figures and it's all connected with big consequences too. Like a string of buoys in the ocean and then, some huge bolder of great density and pressure drives it down to the bottom - the others tied to it will follow. Global markets will be effected negatively by our problems here in the US and vise-versa.
So, it is complex, to be sure. Recovery will be complicated too, depending on policies adopted. Foreign markets, as I write this, look like they're shoring up with usury tactics, making it implausible for borrowers to have flow. Given a change in the White House, that too, will spell influencing policies yet unknown. And with the housing market in the dregs; (that being the equity underpinning much of it) many may see our beds snatched out from under us! Heaven forbid - let's hope not.
This week in books 7/14/17
6 years ago