Tuesday, January 13, 2009

Beatin' that dead equine-omy

So, I’m watching the economy as it crumbles. And I’m thinking some pretty deep thoughts—deep for me, at least.
"Free enterprise will work if you will."
-Ray Kroc (founder, McDonald’s restaurant)

Hmmm. Does anyone still embrace that philosophy today? It would seem that the biggest, wealthiest corporate types don’t often represent that sort of thinking in American society. I’m trying to drum up some positive examples of leadership in our country, some folks who continued to believe in working hard to succeed even when scams were running rampant at every level of business… but the only examples I can think of are the schmucks who are stammering excuses when asked to account for bailout bucks. It’s no wonder the kids are confused about right and wrong, when there’s such a paucity of moral heroes to look to for guidance.

Oddly enough, our iffy economy isn’t hurting everybody; sales of SPAM are strong. Not strong enough to float Hormel, but hey, every sale counts. (See this story.) That got me thinking about how in tough times, people go for the cheapest stuff—food and otherwise. Fast food is probably not feeling the pinch of shut wallets as much as classy, fancy (read: expensive) restaurants are. Might the same be true of goods? Are necessary purchases being made, but on tighter budgets? Perhaps the lesser-known brand, in many cases lower-quality item is the one leaving the shelf, for significantly less money… and isn’t that sort of the opposite of what capitalism is supposed to do? It seems to me that the idea of free trade would spur better products and raise them to the top. For example, cars right now: the more efficient, longer-lasting versions that people can afford are faring much better than their gas-sucking, rust-bucket competition. If what’s happening with food is happening in other sectors, I fear our capitalism is floundering.

And why is the government trying to save everyone? After all, isn't the general concept of capitalism based on the premise that not everyone will succeed? That the best will survive and others will fail, or try again and be improved by the competition? Todd and I were discussing the many annoyances of packaging around Christmas (as many of you were, I'm sure--especially those of you with small children), and it occurred to both of us that the ridiculous level of detail given to packaging today is likely thanks to our competitive market. Back in the day, you just bought your flour out of a barrel at the general store, and then maybe some hot shot started to bag his own brand with a recognizable color or image. And his brand never had weevils. And the other fellow tried that, too, but the first guy just had a better product, and he succeeded and eventually put the other guy out of the flour business--or bought him out and employed him. Who knows. The point is, better products that resulted from competition (and perhaps from flashy packaging) is what built this goofy society with all its bells and whistles. Every great invention was created because someone could do something better, or faster, or cheaper, or all three. If we get away from the very bare bones of competitive free trade, we abandon a valuable part of our history.

Additionally, the husband and I are watching home mortgage rates to see if we can swing a refinanced loan for a shorter term. Except guess what happened to the closing costs and fees in the past couple of years? Yep, they shot up. Way up. It feels as if we—the responsible borrowers who took what we could afford, paid on time, and never got a second adjustable rate mortgage—are now being punished while others who bought 3 times the house on less income are being saved from themselves with amazing deals, rates, and debt forgiveness. You think Obama’s planning to save us? Think again.

In sum? America is rewarding and furthering greed, indirectly lowering our standards on much of the stuff we purchase, discouraging the building blocks of our economy by trying to save bad businessmen, and enabling some individuals who had already proven they couldn’t handle the debt they had before they ever took on the biggest debt of their lives.

It’s a really good thing I’m not bitter about all this.


Anonymous said...


I have casually looked into refinancing, since we have temporarily given up our desire to buy a bigger house. But even with good credit, once you throw in all the closing costs and b/c we owe quite a bit less than 100k (keep that in mind), our mortgage will end up being about the same or even a little more for a 15-year rate (even though I think that is about how many years we have left on original loan). The only way to get smaller payment is to go for a 30-year, but why would I do that?

Mel said...

it's frustrating, ain't it. I figure until the rate drops further, we'll just keep sending a tiny bit extra each month to reduce the principle. that can cut years off the loan in the long run, too.

we should've tried to swing a $200,00 home--we'd be getting a handout right now.

Anonymous said...

We have also looked into refinancing. We have 6-1/2 more years on our 10-year ARM (fixed rate for those 10 years) and of course want to go for 15 years. But, still too expensive because we'd have to throw in a bunch of cash (because we owe more than $100K) AND have a higher payment every month. Maybe when the ARM is up, or if rates go down a lot more...

Mel said...

Yeah, I keep thinking that maybe, just maybe, the new admin will make things even more attainable in hopes of jump-starting the economy again. We'll see...