Re: What Do We Do Now? — A Column

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What personal course do we chart given the economic crisis and our current Congress.

The stimulus plan amounts to putting up gobs of money for borrowers … as opposed to the bailout plans, which put up gobs of money for people who borrowed recklessly. For postponed business investing, that sounds OK. Problem is, you need a reasonable chance of repayment before you decide to make a business loan. That’s why business plans exist. “Make it make sense to us and we’ll loan you the money.” When that works we all win, the loan gets repaid, jobs get created and the lender and businessman are rewarded with profits. When it fails we get GM, a convenient example. I’m glad I’m not a GM creditor.

It’s hard to make a case for new business lending right now. If it weren’t, BofA would be lending instead of hoarding the money they have. It still sounds good, that’s why Congress keeps trotting it out, but no one’s doing it because the crisis is going to get worse and borrowers can be unnecessary risks. Why lend if the government’s giving away free money? But there is no free money, just like there’s no free lunch.

Can you name any successful business people who gave it all up and become congresspeople? A darn short list. The really successful ones, Perot and Forbes come to mind, wouldn’t demean themselves, vainly seeking only higher office. Congress: The best of the unemployable. Would you hire Chris or Barney or Nancy or Harry to do anything important? TimmyG? Really? Nah.

We wouldn’t hire a congressman if we wanted to produce something. So why are we listening to them tell us how the American business model should run. Stop doing that. They don’t know. They gave us Enron.

Consumer lending is another matter entirely. As the stimulus is currently contemplated, that involves loaning YOU a lot of money to buy things you don’t need. Sure, some people need a new car but most people buy new cars, or name the purchase of your dreams, just because they want one. They used to do it that way. Their parents did it that way. Now we’re being asked to close our eyes and pretend that today is the same as yesterday. It’s not. I want to give the next sentence it’s own line:

Consumer borrowing shifts the crisis to you

Pile up your debt to save the economy? That idea doesn’t work for me. It shifts the focus of the crisis but it doesn’t solve it and you are definitely not too big to fail. The lenders get money and you get… stuff and debt. Do you really need more stuff… and debt?

The idea doesn’t work for lenders either, even though they want you to think otherwise. That’s why they lobbied so hard for the last couple of bankruptcy reforms and for the one coming up. They prefer your indentured servitude over your opportunity for a “fresh start”, the essence of bankruptcy laws.

What do we do?

STOP BORROWING! If you can’t afford it without borrowing… you can’t afford it. The stimulus isn’t in your best interest. I make an exception for housing but even then only if you can make a substantial down payment. Need a car but can’t afford a new one? Buy a used one you can afford and save your money for something better later on. Do what you taught your kids to do.

Save something every month and put it in the bank. If the deposit limits scare you, open another account and thank God for your good fortune. Pay cash whenever you can.

Make do with what you’ve got. Cut back. Do the things that you talked about doing when you could see $5/gallon from here. That was only last year.

Increase your marketability by getting more education and learning more about how your employer works.

Make yourself indispensable to your clients by helping them succeed.

Get a second job, even if it’s flipping burgers. There are jobs out there. Cooking and cleaning don’t define us. They’re only jobs.

Grow a Victory garden and put some flowers in with your veggies. Free beauty is good for the soul and so are home-grown tomatoes.

Refinance high mortgages. Lenders may be more sympathetic now.

Invest conservatively.

Wait it out.

Make a friend laugh.

Here’s what not to do:

1. Don’t believe in crackpot solutions that involve replacing our government with something else.

2. Don’t believe anyone who tells you that they know what you should do but they won’t tell you unless you pay them. I’ll tell you for free and I’m at least as likely to be right as they are.

3. Don’t believe that help is on the way. The crisis may be someone else’s fault but the solution for your family is up to you. Just like in the 1930s, 50s, and 80s. Get on it.

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The time to save is now. When a dog gets a bone he doesn’t go out and make a down payment on a bigger bone. He buries the one he’s got. — Will Rogers