If the economy is really bad?

I always wondered why the difference for the past couple of years the answer to the polling questions as to your own personal economic reality, and your perception of your neighbor's economic reality. It gets brought up cyclically in the media. I have no idea what college or group funds the poll, or even how to find the latest one. But they have been asking it for decades.

That said, the last time I heard about it was during the election. In short when asked how their own personal economy was going 90% said they were fine. When asked how they thought their neighbors were doing, the same respondents declared that 90% of their neighbors are having problems.

Think about it. 90% of people think that they are doing fine- but- 90% of their neighbors are doing badly. Which leads to an interesting conclusion. The current economic crisis may indeed be a media driven perception of events. In my own circle of people, those who watch MSNBC or CNN have been bemoaning the state of the economy for almost five years. Declaring how bad it is for every person, without ever taking into account that they themselves and everyone they know is neither better off or worse off in any substantial measure. I personally think that this perception has indeed become reality. And I have seen it first hand and watched the results.

Now mind you, in my particular circumstance it has been of some benefit because were builders and subcontractors not running scared, I would have been unable to rebuild my house as quickly as I did, or even at the cost I eventually had to spend through the process. People are simply holding off buying or purchasing anything or entering into any risk venture. I think it is mostly due to media.

Compared with the Carter years, the events of today don't even come close. You aren't seeing unionized industries collapsing wholesale. Partly because the union collapse of Carter's watch were ultimately permanent. Shipping, transport, automobiles, shipbuilding, steel, and unionized skilled trades all got swamped by better and generally more efficient free labor models. So today, we aren't seeing whole industries collapse both in terms of job loss and the permanent disappearance of jobs. Those loses happened 20 years ago. We are not seeing credit markets for even people with good credit collapse as they did back then either. If you have a credit card with a 20% interest rate attached to it currently, it isn't because that is the lowest rate as it was during Carter. Rather, if you have a 20% interest rate today, it is because you are incompetent with money.

People with even average scores can get, and are getting interest rates on 30 year fixed conforming loans of under 6% right now. Back during Carter, people with 760-840 credit scores were getting 13% interest rate loans only after paying 20% down and 3 to 5 points for 30 year conforming mortgages. If you think gas and food are expensive now, you might want to reconsider. Using adjusted Dollars to compare today to then, your loaf of bread cost you $6 then compared to $3 tops now. Your gas cost you $4 then compared to $2.50 now.

The thing is it is perception that statistics like "largest job number loss in 18 years" sounds scary. But it is scary only if you don't understand that in the past 25 years the size of the employment job market has skyrocketed. In percentage points of actual loss it doesn't even compare. Compare today's 6% unemployment rate to the double digit rates of the Carter years. Then take it a step further and consider that most economists historically viewed a rate of 5% as being essentially the closest our economy could come to "FULL EMPLOYMENT". Think about that. We are historically just one percentage point away from full employment nirvana, yet you have elected officials stating that we are just a step away from a Depression?

You mean the Depression where we had 15% and over average unemployment? We are not even in the same ballpark right now. Do many people remember how happy we were with interest rates at 10% and 8% unemployment under Reagan?

It was recalled as a boom time for the entire economy. Remember the 1980's? The time when all levels of the economy miraculously improved? Well, it wasn't miraculous all we did was cut taxes. Yet, that level attained by that improvement doesn't even begin to approach today's numbers of Prime 3.25% and unemployment of 6.1%. Under Carter we had a prime of 21.5% and 11.3% unemployment.

Did we need a bailout? No we didn't. Did we loan some industries money? Yes- and made a profit for the taxpayer when they were paid off. Did we spend billions in infrastructure and pork programs? No- we solved the crisis by dropping the marginal tax rates to a more sane level. How did companies respond? They cut their staffs, retooled production, began investing in technology, and spun off dozens of inhouse entities to become independent corporations. Small business also got lean and mean, dumped staff and improved their products and services- not to mention improving productivity.

So really, if you believe their is an economic crisis, you have probably fallen into a media perception trap. You probably are a person who has made some bad economic choices that influence how you see the overall economy. You probably can't get a home or auto loan due to past credit issues. Your employment skill set is probably antiquated or specialized to contracting industries. You probably don't remember the Carter Administration, Ford's WIN program, or the Oil Embargoes on a personal level, resultantly leaving you without reference to evaluate current claims that we are one step away from a Depression. In short, your personal reality is that you represent the 10% of Americans who, for whatever reason, are simply not successful compared to everyone else.

Therefore you see reporting on how bad everything is- and identify with it personally because it is what you are experiencing. The reality is that real estate in isolated markets, California, Washington, New York, etc. were over valued and had minor corrections of 10% average which left less capable people upside down in short term mortgages. You had a federal policy of risky loans dropped into the mix, as well as a war, and a retraction in technology services all combining to create a situation where reasonable people became cautious. And by being cautious, people and companies pay less, look at budgets more closely, and keep liquid assets consolidated and available.

What this means to those who live beyond their means, and companies who operate with lose fiscal control is the economy that enables such activity has ceased. People living within their means are not effected right now and are even benefitting from lower costs towards purchases and credit.

Unfortunately we are all getting a nice $1,000,000,000,000.00 debt increase intended to insulate those among us who tend not to live with a personal budget & those companies who operated with lose fiscal controls.

If we are on the verge of a Depression, then what we experienced under Carter was a full blown Depression. And that would make the Depression of the 1930's totally unimaginable by anyone in terms of actual economic impacts.

McCain was right. The economy is sound and is operating normally. And the expectation that unless something was done before Obama took office, the Depression was going to hit by January has proven ultimately false. There isn't a crisis. There never was one. However, we have now sown the seed that will bare fruit during our children's lives. For ever dollar spent by the government, the economy gets back a 60 cent return. For every dollar the government borrows it costs the tax payer and addition 50 cents. So the real costs associated with the $700 billion of Bush and $800 billion of Obama are ultimately going to clock in at around $3 Trillion in true costs.

Our children should expect a real Depression in the next 30 years.

I'd pay off your credit cards and pay off your mortgage if I were you.