(10-27-2008, 12:12 PM)peaches link Wrote: [ -> ]Ruining your Average Joe by punishing him for shaky borrowing isn't going to help the economy; yes, they're going to learn their lesson, but they're going to learn it at great cost to themselves, their families, and the nation as a whole. Punishment is the simple way out. Positive reinforcement takes substantially more effort to do, but the reward is much greater. We can save punishment or reinforcement for later, even: we need a fix, and we need it immediately. The whip-and-no-carrot logic doesn't serve to improve our position in the short term whatsoever.
I support this plan, Surf, but it does need some tweaking. Mostly in the way it's pitched, because it just sounds slapdash at the moment and I think with some careful, psychological wording it would sound just like you want it to. I will gladly send this in to my district's congressman, though.
Actually the letter is a mix of long and short term stuff
Short Term:
- Interest Only On Loans
Some loans are already this way and people still have problems paying them, live within your means, if that means leaving your current home and renting or buying a smaller home, so be it. People buying everything on credit and not being happy with what they had is part of what led to this problem in the first place.
I just look at all the large homes they built around my neighborhood during the 90s and wondered how the fuck people afforded them, well they didn't, it was all based on the home's value increasing then selling it later and reaping the profit, or paying interest only on a loan instead of actually building equity. Many of these homes were also empty, as in they could afford the box, but not the stuff that goes into it, either that or they only bought really cheap stuff.
- Gov't Insurance on Mortgage Losses
Please no, we've spent enough already, this only works if the vast majority of losses don't happen. If things continue to spiral you will be left with an enormous liability for the government, and the debt is already ballooning as it is
- Credit Ceiling
Consumers now have this option under the recently passed credit card bill of rights, you can keep a card from letting you go over its limit.
Long Term:
- Finance Education
Some stuff is already in place, but it needs to be expanded. Might want to publish a short PDF or something for the short term, but this wouldn't see any benefit for several years. I know at least in my highschool you had to take a personal financing class before graduating.
- Credit Management Cooperation
Some provisions for this are contained in the recently passed credit card bill of rights.
- College Loans
Most government backed loans are already very very low interest rates, to the point where they make no money, just maintain at the rate of inflation. Problem here IMO is too many people go to college, pushes costs up too much. You can not have a country or an economy where everyone sits in white collar office jobs and produces absolutely nothing in factories.
Skilled non-college trades need to be more more viable again, such as welding, machining, manufacturing, ect.
I'm a firm believer in the free market, as in letting the economy run its course. I do favor some more regulation to prevent what amounts to lying and highway robbery in the market, but as far as relief goes, let the bad companies die, new ones will rise to take their place. If any money needs to be loaned out by the government it should be toward rebuilding the nation's industrial base, the trade deficit has gotten absolutely ridiculous, and no nation, or economy that spends everything yet produces nothing, its just not sustainable.
Not only does the US need to realize this, but the rest of the world as well, the entire world economy is based on 'the US spends, we produce' (to put it in very simple terms) and its all going to come tumbling down eventually. As long as average joe shcmo can keep some sort of job he can at least rent some place, I don't think unemployment will get near as bad as it did during the depression (upwards of 35%).