Everyone has their opinion.

I know everyone has an opinion on this topic, but hey.. it's my blog, so I get to write what I want, right? :)

Since high school, one of my passions has been Economics. So much so that I minored in it in college and have considered many times going back to get a Master's degree in it. So, the last few weeks in the US economy has certainly peaked my interest. This past week in particular has been pretty fascinating. Banks failing, goverment bailing company's out, huge gains and losses in the stock market, and a $700 billion plan announced by the government on Friday to try to salvage the economy. Even the most level headed of us have got to be at least wondering what in the world is going on.

The root cause of all of this chaos is basically debt. The definition of debt is: "something owed, the state of owing". Beginning about 5-7 years ago, people became delirious with the notion of owning a home. And lenders became delirious with the notion of big time profits. Not having the cash on hand to purchase these homes, people took out mortgages. Prior to this big housing boom, banks were typically careful about who they lent to by doing a lot of research on their income, their outflow, and their debts, many times done by what's called manual underwriting of a loan. But, banks and Wall Street began seeing an opportunity to make big time money by making these loans to basically anyone who walked in off the street regardless of their income. Most of these now failed loans were Adjustable Rate Mortgages, Interest only, and Sub Prime (high interest rate) for a period of 3-5 years. To increase the profit, banks began packaging and reselling these mortgages to other companies for a profit basically causing more and more layers of institutions to become caked onto these mortgages. About 1-2 years ago, a lot of these sub prime loans came up for intrest rate adjustments. And the people who were lent more money than they could afford began defaulting. And the rest has been a domino effect throughout many of the layers of financial institions entangled in these loans.

In the end, we'll all get through this. A basic economic principal is "what goes up, must come down". We experienced a huge "up" over the past several 5-7 years, which means we should have been expecting a big "down" as well. I'm still not sure how I feel about the govenment taking part in trying to soften the blow of the "down", but that may be a post for another day. But, if America hasn't seen the basic lesson in all of this yet, I hope this past week has been a wake up call - "Debt is dumb, cash is king."

Mommy, it smells like delicious eggs!

This was Micah's comment today as we drove with the windows down through a rather soggy area of town. The things kids say are just too hilarious sometimes.