10 Things To Expect From The New Post-Apocalyptic Economy
Kiplinger's has put together a list of 10 things that you, fair consumer, can expect from our new post-wall-street-apocalypse economy. Should you be scared? Maybe.
Here's a quick summary of the article, which can be found here:
1. A much less leveraged economy -- Cash will be the thing to have.
2. More modest rewards -- Less risk-taking means slower growth, slower appreciation of property value, etc.
3. A feast for bottom fishers -- If you've got patience and cash, there will be a feast for you amongst the wreckage.
4. Fewer financial firms -- Big banks are swallowing the smaller ones.
5. More government oversight of financial markets. -- They're gonna be watching.
6. But a revival of private financial firms -- Kiplinger's doesn't think that investment banks are gone for good.
7. Simpler forms of securitizing debt -- Nor do they think that the secondary mortgage market is gone for good. They say it will be back, but it won't be as 'exotic'
8. Greater scrutiny of executive compensation -- Shareholders are annoyed. Very annoyed.
9. Higher taxes and/or a bigger federal deficit -- Someone has to pay to run the bilge pump.
10. Higher long-term interest rates -- You saw that one coming, didn't you?
Hey, it turns out that the new post-apocalyptic economy is pretty much just the old traditional economy -- but with a debt hangover.
10 Things That Will Change [Kiplinger's]
(Photo: Joy of the Mundane )
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Comments:
Exactly--business as usual...
Yeah might want to change that...you know some people are gonna flame the hell out of it.
Any way I got this the other day, seems like a pretty good option, although will never happen.
I'm against the $85 BILLION bailout of AIG. Instead, I'm in favor of giving $85,000,000,000 to America in a 'We Deserve It' dividend. To make the math simple, let's assume there are 200,000,000 bona fide U.S. citizens, aged
18+. Our population is about 301 million counting every man, woman and child. So, 200,000,000 might be a fair stab at adults 18 and up. Now, divide 200 million, 18+ adults into $85 billion - that equals $425,000.00 each!
Yes, my plan is to give that $425,000 to every adult as a 'We Deserve It'
dividend. Of course, it would NOT be tax free. So, let's assume a tax rate of 30%. Every would pay $127,500.00 in taxes. That sends $25.5 billion right back to Uncle Sam! It also means that every adult 18+ has $297,500.00 in their pocket. A husband and wife would have $595,000.00!
What would you do with $297,500.00 to $595,000.00?
· Pay off your mortgage - housing crisis solved
* Repay college loans - what a great boost to new grads
* Put away money for college - it'll really be there
* Save in a bank - create money to loan to entrepreneurs
* Buy a new car - create jobs
* Invest in the market - capital drives growth
* Pay for your parent's medical insurance - health care improves
* Enable Deadbeat Parents to come clean - or else
Remember this is for every adult U.S. citizen, 18 and older (including the
folks who lost their jobs at Lehmann Brothers and every other company that
is cutting back) and of course, for those serving in our Armed Forces.
If we're going to do an $85 billion bailout, let's bail out every adult U.S.
citizen!!
As for AIG - liquidate it.
* Sell off its parts.
* Let American General go back to being American General.
* Sell off the real estate.
* Let the private sector bargain hunters cut it up and clean it up.
We deserve the money and AIG doesn't. Sure it's a crazy idea, but can you
imagine the coast-to-coast block party?!
How do you spell Economic Boom? W-e D-e-s-e-r-v-e I-t d-i-v-i-d-e-n-d! I
trust my fellow adult Americans to know how to use the $85 Billion 'We
Deserve It' dividend more than I do the geniuses at AIG or in Washington,
DC.
And remember, The Birk plan only really costs $59.5 billion because $25.5
billion is returned instantly in taxes to Uncle Sam.
Me thinks it was meant to be things.
@caveman1428: Such a long post. Such bad math.
Under your plan, each taxpayer would get $425, not $425,000. I'm glad you're not running the treasury.
In general leverage = risk. If you are 1:1 leveraged you can cover your debt with cash, real banks are required to keep in the range of a 10-12:1 for fractional reserve, but these banks/investment firms were running 30+:1 leveraging. That is wild speculation and very risky behavior. The risk was minimized over the past 8 years through a systematic reduction in lending rates and scrutinization, I doubt we will ever see that kind of lending again in decades ( people never do learn ).
@snowmoon:
You're completely right, though the thought of receiving over $200,000 is nice. I got more than $425 back from Uncle Sam last year on my taxes...
@snowmoon: I got this email yesterday and crunched it a bit more - there are approx. 138M taxpayers in the USA. If you took the bigger bailout of $700B and split it up equally, each taxpayer would get $5072. Not too shabby, but a far cry from the life-changing sort of cash the email talks about.
Besides...is there be a way to spread that kind of cash around without causing massive inflation? I'm not sure there is
@MonkeyMonk: I don't know about that... have you seen some of Bernake and Paulson's math lately, this might be an improvement.
@caveman1428: I've gotten this e-mail forward so many times now...and am always amazed that very few people check the simple math and see that it's off by a factor of 1,000.
Next time people, please think before hitting the FWD button.
@NotATool:
The fact that hundreds of people continue to forward and repost this 'plan' explains perfectly why America is in this position in the first place.
@MonkeyMonk: What do you expect from a caveman?
Plus if everyone has 1/2 a million is it really worth 1/2 a million?
@caveman1428: Pretending we are in your magical math land, that sounds like full on socialist/communism. No thanks.
@caveman1428: Plus, it should be mentioned that this has already been tied a couple of times except it was called a stimulus package. Don't we all feel stimulated now?
@NotATool: In other news, if you forward that email to 10 people, Pepsi will donate $10,000 to fighting hunger in Africa.
I'm disappointed that I won't get to start a biker gang driving around the desert of Wall Street: Livin' Hard, Lovin' Hard, and raiding passbys to steal their gas and food.
"A much less leveraged economy" - sounds like this meltdown is a good thing!
So wait... if I want to buy something now, I'm actually going to need to have the MONEY to pay for it? OH MY GOD! I can't live like that. What on Earth am I going to do?
Actually, I am kinda curious though: they are saying that "Cash will be the thing to have". Are they talking about physical paper money, or just the fact that I have enough "cash" in my checking account???
Why do people think only good things happen when the market functions properly?
@caveman1428: I love email forwards as much as the next guy. But check Snopes.com before you send it out. I'd say 75% of them are lies. The other 25% can be very enlightening.
I think they also should have put the words "Apocalyptic" in Quotes. Does The Consumerist really believe this is the Apocalypse??? Gimme a break.
No offence to the popular "give everybody $425,000 plan"
floating around the internet, but you really think that will work? Or will it wind up devaluing the dollor so much that a loaf of bread cost $100?
@caveman1428: Not that I'm really sure this is the place to start with this kind of email, but here goes...
Why give 425k to people only to expect them to give back 127.5k? Even if this plan didn't have the obvious flaws mentioned by the previous responders, why wouldn't you just give everyone 297.5k? It's not like the government would come out ahead because of that 25.5 bil "returned to Uncle Sam."
Even if this plan were to go into action, everyone would suddenly find themselves up a tax bracket or two and most people would have a hard time understanding their new tax burdens. My 425k check says that most people would spend their entire check, then we'd have a big mess around mid April when everyone tries to figure out how they're going to finance their tax bill.
Oh, and the three orders of magnitude thing. And the inflation issue. And the concept that we've done something to deserve this money.
What's everyone's thoughts about credit cards? I've heard stories of banks slashing credit limits, but I don't know if they can contract another huge source of income without hurting themselve pretty badly.
For some reason, I just don't see the credit cards following exactly in the mortage footsteps.
The economy needs a HUGE correction. This will happen with or without the bailout. The bailout would only make it a decade longer and a lot more painful. I'm happy to see some things that were twisted to break down. There's going to be a lot of rebuilding before this is all done.
The AIG bailout is not free money. Its a $85 billion 2-year 8.5+% loan on a company with $94-122 billion in assets they have to sell to stay afloat. I wouldn't take a $425 loan at 8.5% for any period, but I'm probably less of a credit risk than AIG.
@Applekid: It's disappointing for a lot of us. I had my "Road Warrior" post-apocolyptic fashion all picked out (football pads, leather, and spikes- no gimp mask).
The premise behind this is wrong. It's a bailout of AIG in the sense that it saved AIG from bankruptcy and saved the markets from more turmoil, but the government didn't just *give* AIG $85 billion. It's a loan with pretty bad terms that AIG has to pay back. AIG had to pay a $1.7b upfront fee to get the loan. They're paying 11.5% interest on the amount they're actually using. They also have to pay 8.5% on the *unused* portion of the loan. The government also got an 80% stake in AIG that they get to keep even after the loan is repaid. In a liquidation that stake is potentially worth $100+ billion. I'm sure Americans would be much happier if the govt took that money and offered everyone a $425 loan at 11.5% interest and also got 80% ownership of your home to prevent "moral hazard".
WAIT, BUSINESS AS USUAL!?!?!?! Fox News, MSNBC, CNN, My local news all say the end is nigh! Are these just fear tactics?
@Fist-o: One of the definitions of apocalypse: n- any universal or widespread destruction or disaster.
Think about it this way, what is the name of the small planetary satellite that orbits Earth? The Moon. The Moon is it's name, but that's also what it is. Titan is a moon, but it's not The Moon. The story is referencing a post-apocalyptic economy (after widespread destruction economy), not a post-Apocalyptic economy (after destruction of the world and the salvation of the righteous economy).
Touché Caveman
Caveman, I love your plan, and the sense it makes - I'm emailing it to my congressman!
.
Shouldnt it be pre and not post?
@ChrisC1234: Exactly what I want to know? Does this mean I need to empty my savings account and keep the case under the pillow?
So.....the Bears-Sterns bailout will fix everything.
And then those stimulus checks will fix everything.
And then we have to bailout AIG to prevent an economic collapse.
And then we have to pony up $700 billion (a number they made up) to prevent the apocalypse. But hey, if you're in a tough election contest, don't vote for it. It's okay. You just worry about getting re-elected.
Is there any question why the public at large doesn't trust ANYONE in Washington? I mean this is Bush's plan. He's solved everything else, right? That Iraq thing worked out so well.
People need to seriously calm down about all of this. Nothing gets people excited quite like the prospect of some catastrophe, be it $5 gas, a stock market dive, a natural disaster, or whatever. The financial world is not crumbling, just as it failed to do during the '81 recession, the S&L crisis, the dot-com bust, etc, no matter how much that may excite those who like to board up their windows and stockpile canned goods (metaphorically). If one soberly thinks about exactly how the financial failures of the last few months will actually, materially impact one's life, instead of being caught up in this sensational doom and gloom news of late, the picture is far less bleak. Sure, some of us will put off a house purchase, have to work a few years longer than we thought, or cut down on discretionary expenditures for a while. Some will lose their jobs. But the country will be fine, and our lives will most likely exceed their current economic status in a few years, as has been the historic pattern. To believe otherwise is to create a self-fulfilling prophecy born of a lack of confidence in the ability of the American system to recover (which it always has) and to become part of the problem, not the solution.
I think it's a little optimistic. The bloodsuckers will STILL find a way around any new rules. Everyone else will still be screwed.
@K J: Let's not over exagerate here. First off, I hate when politicians say that this is Bush's fault. Politicians use the tactic of deamonizing one person to have someone to blame. The problem isn't Bush or anyone else. It was the collective decisions of banks and customers making bad decisions. It's like I blame you for the fact that my apples aren't ripe.
The problem that I have with this whole bail-out thing is that people have come to now expect the government to get involved. This evidence by the fact that markets react when the bail-out bill was about to pass and then failed. If there wasn't an expectation, it shouldn't have made that much of an effect.
As distasteful as it is, we should allow the banks fail. Because of this rescue mentality, people keep waiting for the government to do something. Think of it this way: the wild fires in CA are a yearly occurance; but people still live there! And they still get money from the government. Every year!
I'll get off my soap box here but bailing out all these companies is a bad idea.
@LankanDude:
I think they mean liquid cash. Not physical cash. Remember, each bank account you have is insured by the govt. Don't go stuffing your mattresses....yet...
@donnie5:
Somehow your post conjured up the image of that old SNL skit with Will Ferrell as a newscaster who goes Lord of the Flies when the Teleprompter goes down.
@JoshMac: ^ What he said. ^