"Flounder: You _______ up -- you trusted us."
-Otter in the movie Animal House.
Let's face it, we screwed up.
In the decade before 2008, the financial world was like a presidential inauguration ball.
On Inauguration day, there is a ball where only the closest insiders and Washington power players get invited.
There are also a lot of parties around town, so just about everybody in Washington feels like they were part of the event.
For a decade, Wall Street was playing funny money games. They were allowed to grant themselves multimillion dollar bonuses, and many Americans also felt like they were invited to the celebration.
Real estate prices were soaring. People were flipping houses and condos. People with lousy credit and no income were living in nice houses. Almost anyone could get a loan for anything.
Stock prices were going up and pension plans were getting fatter. State and local governments had a lot of money to throw around and could cut taxes without anyone really noticing.
We had easy money and reaped many benefits without hard work or sacrifice.
We were living in fantasy land.
The fantasy is over. We woke up to a nightmare.
A nightmare that our nation has not yet dealt with.
People with addictions go through a process called "bottoming out." They reach a point where they realize their actions are hurting themselves or others. They get help and dramatically change their lives.
Because of the Wall Street bailouts, America never got the chance to "bottom out."
Like a drunk who keeps "having a drink or two," America has not really dealt with the problems that got us in the mess.
Like an addict who keeps using, we are setting ourselves up for repeat failure.
I've been reading Maria Bartiromo's new book, The Weekend That Changed Wall Street. A better title might have been "The Weekend that Changed the World."
It was America's chance to bottom out. We didn't. To paraphrase Otter in Animal House, we screwed up. We mortgaged the future to make Wall Street happy today.
I liked Bartiromo's book. One of her insights jumped out at me.
In talking about the fall from grace that some Wall Street insiders felt, she noted "When the wealthy falter, there is a deep shame that the average person cannot grasp. In that world, you are either in or you're out."
That line explains everything. Wall Street was in. They had the right lobbyists and had an alumni association from Goldman Sachs, including Treasury Secretary Hank Paulson, doing their bidding in Washington.
Those who came from Wall Street looked out for their own. They made sure their Wall Street cronies were paid back, 100 cents on the dollar.
The rest of us were out. And we have stayed there.
Unemployment remains around 10% and underemployment is even more chronic. Sales of existing homes are at a 15-year low, despite some of the lowest mortgage rates in history. It's almost impossible for a Main Street business to get financing, and state and local government entities are looking at severe cuts in revenues and services.
We've spent trillions in bailout money and all we got was "one day older and deeper in debt."
Although it sounds gloomy, I'm not a gloomy person by nature. With focus, hard work and resilience, people can overcome any obstacle.
Including what Wall Street and Washington did to us.
People can solve problems by taking a hard look at themselves and making changes.
Washington is afraid to take that hard look or make real changes. Our political "leaders" won't do anything that cuts off the campaign contributions and lobbying money that Wall Street provides.
My next column will give a concrete plan for creating wealth without Wall Street. You can see signs of it. Concepts like Move Your Money are catching on. People are starting to pay down debt and look at creating their own businesses.
We weren't really invited to the big Wall Street party. But we sure wound up paying for it.
Now it is time to recover from the hangover.
Don McNay, CLU, ChFC, MSFS, CSSC of Richmond Kentucky is an award-winning financial columnist and Huffington Post Contributor.
You can read more about Don at www.donmcnay.com
McNay founded McNay Settlement Group, a structured settlement and consulting firm, in 1983, and Kentucky Guardianship Administrators LLC in 2000. You can read more about both at www.mcnay.com
McNay has Master's Degrees from Vanderbilt and the American College and is in the Hall of Distinguished Alumni of Eastern Kentucky University.
McNay has written two books. Most recent is Son of a Son of a Gambler: Winners, Losers and What to Do When You Win The Lottery
McNay is a lifetime member of the Million Dollar Round Table and has four professional designations in the financial services field.
15 Responses to “Mo’ Money, Mo’ Demand”
Google New: It's Google <b>News</b> About New Google Stuff In One Place
In terms of blog networks, no one ever seems to talk about Google, but they actually have one of the biggest. The search giant has well over 100 blogs devoted to everything from general company news to niche things that only webmasters ...
ASEAN <b>News</b> Summary | Live Stock Trading <b>News</b> | Equities, Forex <b>...</b>
Get the best in ASEAN News daily at www.aseanaffairs.com ASEAN Affairs. PTT drops bid for Carrefour PTT Plc of Thailand is dropping its bid to purchase.
Olbermann On Sharron Angle Video | Fox <b>News</b> | Media Matters | Mediaite
You'll never believe this one, but it appears Keith Olbermann isn't the biggest fan of Fox News. But in case there was any doubt, on last night's Countdown he made it clear again, going after what he sees as the network blatantly ...
robert shumake
Google New: It's Google <b>News</b> About New Google Stuff In One Place
In terms of blog networks, no one ever seems to talk about Google, but they actually have one of the biggest. The search giant has well over 100 blogs devoted to everything from general company news to niche things that only webmasters ...
ASEAN <b>News</b> Summary | Live Stock Trading <b>News</b> | Equities, Forex <b>...</b>
Get the best in ASEAN News daily at www.aseanaffairs.com ASEAN Affairs. PTT drops bid for Carrefour PTT Plc of Thailand is dropping its bid to purchase.
Olbermann On Sharron Angle Video | Fox <b>News</b> | Media Matters | Mediaite
You'll never believe this one, but it appears Keith Olbermann isn't the biggest fan of Fox News. But in case there was any doubt, on last night's Countdown he made it clear again, going after what he sees as the network blatantly ...
"Flounder: You _______ up -- you trusted us."
-Otter in the movie Animal House.
Let's face it, we screwed up.
In the decade before 2008, the financial world was like a presidential inauguration ball.
On Inauguration day, there is a ball where only the closest insiders and Washington power players get invited.
There are also a lot of parties around town, so just about everybody in Washington feels like they were part of the event.
For a decade, Wall Street was playing funny money games. They were allowed to grant themselves multimillion dollar bonuses, and many Americans also felt like they were invited to the celebration.
Real estate prices were soaring. People were flipping houses and condos. People with lousy credit and no income were living in nice houses. Almost anyone could get a loan for anything.
Stock prices were going up and pension plans were getting fatter. State and local governments had a lot of money to throw around and could cut taxes without anyone really noticing.
We had easy money and reaped many benefits without hard work or sacrifice.
We were living in fantasy land.
The fantasy is over. We woke up to a nightmare.
A nightmare that our nation has not yet dealt with.
People with addictions go through a process called "bottoming out." They reach a point where they realize their actions are hurting themselves or others. They get help and dramatically change their lives.
Because of the Wall Street bailouts, America never got the chance to "bottom out."
Like a drunk who keeps "having a drink or two," America has not really dealt with the problems that got us in the mess.
Like an addict who keeps using, we are setting ourselves up for repeat failure.
I've been reading Maria Bartiromo's new book, The Weekend That Changed Wall Street. A better title might have been "The Weekend that Changed the World."
It was America's chance to bottom out. We didn't. To paraphrase Otter in Animal House, we screwed up. We mortgaged the future to make Wall Street happy today.
I liked Bartiromo's book. One of her insights jumped out at me.
In talking about the fall from grace that some Wall Street insiders felt, she noted "When the wealthy falter, there is a deep shame that the average person cannot grasp. In that world, you are either in or you're out."
That line explains everything. Wall Street was in. They had the right lobbyists and had an alumni association from Goldman Sachs, including Treasury Secretary Hank Paulson, doing their bidding in Washington.
Those who came from Wall Street looked out for their own. They made sure their Wall Street cronies were paid back, 100 cents on the dollar.
The rest of us were out. And we have stayed there.
Unemployment remains around 10% and underemployment is even more chronic. Sales of existing homes are at a 15-year low, despite some of the lowest mortgage rates in history. It's almost impossible for a Main Street business to get financing, and state and local government entities are looking at severe cuts in revenues and services.
We've spent trillions in bailout money and all we got was "one day older and deeper in debt."
Although it sounds gloomy, I'm not a gloomy person by nature. With focus, hard work and resilience, people can overcome any obstacle.
Including what Wall Street and Washington did to us.
People can solve problems by taking a hard look at themselves and making changes.
Washington is afraid to take that hard look or make real changes. Our political "leaders" won't do anything that cuts off the campaign contributions and lobbying money that Wall Street provides.
My next column will give a concrete plan for creating wealth without Wall Street. You can see signs of it. Concepts like Move Your Money are catching on. People are starting to pay down debt and look at creating their own businesses.
We weren't really invited to the big Wall Street party. But we sure wound up paying for it.
Now it is time to recover from the hangover.
Don McNay, CLU, ChFC, MSFS, CSSC of Richmond Kentucky is an award-winning financial columnist and Huffington Post Contributor.
You can read more about Don at www.donmcnay.com
McNay founded McNay Settlement Group, a structured settlement and consulting firm, in 1983, and Kentucky Guardianship Administrators LLC in 2000. You can read more about both at www.mcnay.com
McNay has Master's Degrees from Vanderbilt and the American College and is in the Hall of Distinguished Alumni of Eastern Kentucky University.
McNay has written two books. Most recent is Son of a Son of a Gambler: Winners, Losers and What to Do When You Win The Lottery
McNay is a lifetime member of the Million Dollar Round Table and has four professional designations in the financial services field.
15 Responses to “Mo’ Money, Mo’ Demand”
SON says:
September 9th, 2010 at 4:04 pm
DAD I AM HOMOSEX.
DAD says:
September 9th, 2010 at 4:04 pm
SON I AM DISAPPOINT.
Rob Mac says:
September 9th, 2010 at 4:53 pm
Or we could simply “print” money to retire some of our debt. This would reassure people who get freaked out at the size of the debt and would have the same inflationary effect of handing the money out to American citizens. The stimulative effect would likely be a bit less, but I’d take that tradeoff.
JR says:
September 9th, 2010 at 4:54 pm
Aren’t you missing the role of international trade. What you say makes sense if all goods and services are produced locally. Once you take intl. trade into account, more/printed money could simply go into buying more from other countries, who could theoretically hold that money for an indefinite time.
chris says:
September 9th, 2010 at 4:56 pm
It’s true that at some point the money-printing would spark high inflation.
Yes — specifically, after aggregate demand was boosted to the point that it exceeded aggregate supply. We’re nowhere near that point — I think literally trillions of dollars short of it — so there’s plenty of room to play around with helicopter drops. Please do, Mr. Bernanke.
timmie says:
September 9th, 2010 at 4:59 pm
Did that truly huge spike in Fed spending 2008-2009 lead to rapid economic growth? No. What evidence is there that things would be any different now? None.
The Great Reckoning that we are now experiencing was, as your cite points out, only postponed through half a decade of public and private debt increasing by 10% a year and when that became unsustainable our financial system cratered.
Does anyone think we can return to those levels of profligacy for five years or more? Does anyone doubt that even that level of new debt would prove inadequate to cure what ails us?
Our recent history has been one huge Keynesian experiment gone wrong. But to put out the fire in the dining room Matt wants to burn down the house.
chris says:
September 9th, 2010 at 5:29 pm
Did that truly huge spike in Fed spending 2008-2009 lead to rapid economic growth? No.
No, it only halted a once-in-a-century level of economic collapse in its tracks.
But I guess since the first gallon of water didn’t put the fire out, it’s time to abandon that plan and switch to gasoline.
Ape Man says:
September 9th, 2010 at 8:32 pm
“Or we could simply “print” money to retire some of our debt.”
This is incorrect. If you think it through, it will help you understand how money works on the macro scale.
A treasury note is an account at the Fed that bears interest. It has a fixed, often very short, term of maturity.
If you “print money” to “retire” that debt, all you are doing is changing those interest-bearing Fed accounts into non interest-bearing Fed accounts. The people who held those dollars want to hold them as Treasury notes. They will immediately reinvest them in… Treasury notes.
3
zyxw says:
September 9th, 2010 at 8:50 pm
Another structural problem now is income inequality. If income was spread out more fairly there would be a lot more money spent generating more jobs, etc. There’s only so much the super rich can spend–after awhile you really can’t buy that much more stuff, so instead they are hoarding it at the moment waiting for the economy to rebound so they can eventually invest in something and make even more money to hoard.
Shooter242 says:
September 9th, 2010 at 10:33 pm
* You can print all the money you want but if people don’t want to borrow, it doesn’t matter.
* As for throwing everybody a grand, it didn’t work with Bush’s $600 because you and everyone else knows it’s a one-off.
* Then there is the payroll credit for about the same amount of money, how did that work out?Do you think our problem could be related to Congress serving up legislative pigs in a poke? For all it’s wonderfulness, health insurance in Massachusetts has led to Mass Gen Hospital
to barring new primary care patients. Now imagine that over an entire country. Any chance that would lead to more saving and less spending?As for income inequality, Al Gore making millions has no effect on anyone that he doesn’t employ. Interestingly, the US is pretty far down on the property rights ladder globally. Apparently we are behind China, Gambia, and Jordan. Having yahoos here threaten to confiscate wealth by hook or crook, isn’t reassuring.
BB says:
September 9th, 2010 at 11:23 pm
So, why do we even keep track of the deficit? I accept the fact that we have a sovereign currency, not on a gold standard, etc., which means that we don’t have to go in debt (i.e. sell bonds) for every dollar we print/create. Thus taxation is merely an anti-inflationary measure. So…shouldn’t we just keep track of inflation and adjust our federal spending accordingly, since the deficit doesn’t actually mean anything?
urgs says:
September 10th, 2010 at 2:23 am
Defraud small savers (thats allright, since so many of them are foreigners nowadays – evil Chinese, many of them living from less than 1$ a day), shovel some windfall gains to big business ===> ?????????? =====> Jobs!
aelkejeellekeleljklejlelje
Evil Twin says:
September 10th, 2010 at 2:35 am
You can print all the money you want but if people don’t want to borrow, it doesn’t matter.
And here we see the return of the invisible bear riding phantom bond vigilantes. Yes, the modifiers are a bit unclear. That’s because Shooter is a fucking moron whose knowledge of financial matters is roughly the same as a four month old.
Hey, dumbfuck, do you know what you do when people don’t want to borrow money from you? You raise the stakes, you promise them more in return for loaning you the money. Do you know what interest rates look like right this moment you dimwitted clod?
Come back when you have something to say that isn’t discredited talking points.
Lewis says:
September 10th, 2010 at 7:45 pm
At the risk of confirming Matt’s views, I think Prof Keen explains it well : http://www.debtdeflation.com/blogs/2010/09/05/back-to-the-future/
Superior Excellence Better Flavor-Organic Kona Coffee | Toilet Safety Rail says:
September 11th, 2010 at 5:50 am
Matthew Yglesias » Mo’ Money, Mo’ Demand
robert shumake
Google New: It's Google <b>News</b> About New Google Stuff In One Place
In terms of blog networks, no one ever seems to talk about Google, but they actually have one of the biggest. The search giant has well over 100 blogs devoted to everything from general company news to niche things that only webmasters ...
ASEAN <b>News</b> Summary | Live Stock Trading <b>News</b> | Equities, Forex <b>...</b>
Get the best in ASEAN News daily at www.aseanaffairs.com ASEAN Affairs. PTT drops bid for Carrefour PTT Plc of Thailand is dropping its bid to purchase.
Olbermann On Sharron Angle Video | Fox <b>News</b> | Media Matters | Mediaite
You'll never believe this one, but it appears Keith Olbermann isn't the biggest fan of Fox News. But in case there was any doubt, on last night's Countdown he made it clear again, going after what he sees as the network blatantly ...
robert shumake
Google New: It's Google <b>News</b> About New Google Stuff In One Place
In terms of blog networks, no one ever seems to talk about Google, but they actually have one of the biggest. The search giant has well over 100 blogs devoted to everything from general company news to niche things that only webmasters ...
ASEAN <b>News</b> Summary | Live Stock Trading <b>News</b> | Equities, Forex <b>...</b>
Get the best in ASEAN News daily at www.aseanaffairs.com ASEAN Affairs. PTT drops bid for Carrefour PTT Plc of Thailand is dropping its bid to purchase.
Olbermann On Sharron Angle Video | Fox <b>News</b> | Media Matters | Mediaite
You'll never believe this one, but it appears Keith Olbermann isn't the biggest fan of Fox News. But in case there was any doubt, on last night's Countdown he made it clear again, going after what he sees as the network blatantly ...
SON says:
September 9th, 2010 at 4:04 pm
DAD I AM HOMOSEX.
DAD says:
September 9th, 2010 at 4:04 pm
SON I AM DISAPPOINT.
Rob Mac says:
September 9th, 2010 at 4:53 pm
Or we could simply “print” money to retire some of our debt. This would reassure people who get freaked out at the size of the debt and would have the same inflationary effect of handing the money out to American citizens. The stimulative effect would likely be a bit less, but I’d take that tradeoff.
JR says:
September 9th, 2010 at 4:54 pm
Aren’t you missing the role of international trade. What you say makes sense if all goods and services are produced locally. Once you take intl. trade into account, more/printed money could simply go into buying more from other countries, who could theoretically hold that money for an indefinite time.
chris says:
September 9th, 2010 at 4:56 pm
It’s true that at some point the money-printing would spark high inflation.
Yes — specifically, after aggregate demand was boosted to the point that it exceeded aggregate supply. We’re nowhere near that point — I think literally trillions of dollars short of it — so there’s plenty of room to play around with helicopter drops. Please do, Mr. Bernanke.
timmie says:
September 9th, 2010 at 4:59 pm
Did that truly huge spike in Fed spending 2008-2009 lead to rapid economic growth? No. What evidence is there that things would be any different now? None.
The Great Reckoning that we are now experiencing was, as your cite points out, only postponed through half a decade of public and private debt increasing by 10% a year and when that became unsustainable our financial system cratered.
Does anyone think we can return to those levels of profligacy for five years or more? Does anyone doubt that even that level of new debt would prove inadequate to cure what ails us?
Our recent history has been one huge Keynesian experiment gone wrong. But to put out the fire in the dining room Matt wants to burn down the house.
chris says:
September 9th, 2010 at 5:29 pm
Did that truly huge spike in Fed spending 2008-2009 lead to rapid economic growth? No.
No, it only halted a once-in-a-century level of economic collapse in its tracks.
But I guess since the first gallon of water didn’t put the fire out, it’s time to abandon that plan and switch to gasoline.
Ape Man says:
September 9th, 2010 at 8:32 pm
“Or we could simply “print” money to retire some of our debt.”
This is incorrect. If you think it through, it will help you understand how money works on the macro scale.
A treasury note is an account at the Fed that bears interest. It has a fixed, often very short, term of maturity.
If you “print money” to “retire” that debt, all you are doing is changing those interest-bearing Fed accounts into non interest-bearing Fed accounts. The people who held those dollars want to hold them as Treasury notes. They will immediately reinvest them in… Treasury notes.
3
zyxw says:
September 9th, 2010 at 8:50 pm
Another structural problem now is income inequality. If income was spread out more fairly there would be a lot more money spent generating more jobs, etc. There’s only so much the super rich can spend–after awhile you really can’t buy that much more stuff, so instead they are hoarding it at the moment waiting for the economy to rebound so they can eventually invest in something and make even more money to hoard.
Shooter242 says:
September 9th, 2010 at 10:33 pm
* You can print all the money you want but if people don’t want to borrow, it doesn’t matter.
* As for throwing everybody a grand, it didn’t work with Bush’s $600 because you and everyone else knows it’s a one-off.
* Then there is the payroll credit for about the same amount of money, how did that work out?
Do you think our problem could be related to Congress serving up legislative pigs in a poke? For all it’s wonderfulness, health insurance in Massachusetts has led to Mass Gen Hospital
to barring new primary care patients. Now imagine that over an entire country. Any chance that would lead to more saving and less spending?
As for income inequality, Al Gore making millions has no effect on anyone that he doesn’t employ. Interestingly, the US is pretty far down on the property rights ladder globally. Apparently we are behind China, Gambia, and Jordan. Having yahoos here threaten to confiscate wealth by hook or crook, isn’t reassuring.
BB says:
September 9th, 2010 at 11:23 pm
So, why do we even keep track of the deficit? I accept the fact that we have a sovereign currency, not on a gold standard, etc., which means that we don’t have to go in debt (i.e. sell bonds) for every dollar we print/create. Thus taxation is merely an anti-inflationary measure. So…shouldn’t we just keep track of inflation and adjust our federal spending accordingly, since the deficit doesn’t actually mean anything?
urgs says:
September 10th, 2010 at 2:23 am
Defraud small savers (thats allright, since so many of them are foreigners nowadays – evil Chinese, many of them living from less than 1$ a day), shovel some windfall gains to big business ===> ?????????? =====> Jobs!
aelkejeellekeleljklejlelje
Evil Twin says:
September 10th, 2010 at 2:35 am
You can print all the money you want but if people don’t want to borrow, it doesn’t matter.
And here we see the return of the invisible bear riding phantom bond vigilantes. Yes, the modifiers are a bit unclear. That’s because Shooter is a fucking moron whose knowledge of financial matters is roughly the same as a four month old.
Hey, dumbfuck, do you know what you do when people don’t want to borrow money from you? You raise the stakes, you promise them more in return for loaning you the money. Do you know what interest rates look like right this moment you dimwitted clod?
Come back when you have something to say that isn’t discredited talking points.
Lewis says:
September 10th, 2010 at 7:45 pm
At the risk of confirming Matt’s views, I think Prof Keen explains it well : http://www.debtdeflation.com/blogs/2010/09/05/back-to-the-future/
Superior Excellence Better Flavor-Organic Kona Coffee | Toilet Safety Rail says:
September 11th, 2010 at 5:50 am
Matthew Yglesias » Mo’ Money, Mo’ Demand