Where Thinkers Are
Did the middle class just get suckered into slavery?
As most Americans, I have been following the latest economic news with great interest. For the first time in history, many of us have watched the value of our homes fall in combination with declines in the worth of our longterm investment vehicles like 401k accounts. The majority of the "solutions" being offered by our elected leadership seem to be based around the notion of doing whatever is necessary to make sure that everybody who is on the hook for some type of debt is able to pay that debt back in full. In other words, if you bought a $400,000 home that is now worth $270,000 on the open market, the standard measure of success for that home purchase (at least in the Government's eyes) will be in making sure that you're still able to pay the approximately $1,200,000 in mortgage payments over the next 30 years.
In the short-term, there's little to no indication that the increase in the value of the home will keep pace with the amount of money being paid to service the mortgage. As such, the entire "investment" is going to make sure that the bank not only makes a profit on the money it loaned, but makes the same profit they would have made despite the fact that the economics surrounding the collateral have changed significantly.
It doesn't stop there. If we say that the average retirement account has lost 40% in the last year, the standard of retirement savings has been changed as well. How long is it going to take to recoup that money? Add to that the fact that gains in the underlying stocks will (at best) be in the low single-digit percentages until something kickstarts the market again. In other words, for the foreseeable future, every dollar deposited in your 401K will simply be to replace money you've already lost.
In the short-term, there's little to no indication that the increase in the value of the home will keep pace with the amount of money being paid to service the mortgage. As such, the entire "investment" is going to make sure that the bank not only makes a profit on the money it loaned, but makes the same profit they would have made despite the fact that the economics surrounding the collateral have changed significantly.
It doesn't stop there. If we say that the average retirement account has lost 40% in the last year, the standard of retirement savings has been changed as well. How long is it going to take to recoup that money? Add to that the fact that gains in the underlying stocks will (at best) be in the low single-digit percentages until something kickstarts the market again. In other words, for the foreseeable future, every dollar deposited in your 401K will simply be to replace money you've already lost.
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