Category Archive

If you listen to podcasts, I think you should you check out a post Get Rich Slowly wrote today, The Giant Pool of Money: Anatomy of the Subprime Mortgage Mess.

J.D. talks about this week’s episode of “This American Life“, perhaps my favorite NPR show. I usually end up downloading it through a podcast, but I happened to catch this week’s episode on my way to pick up T on Friday. It was an excellent sort of friendly view of how this whole mortgage mess came to be.

The show starts out talking to a guy with several part time jobs who was loaned half a million by the bank, though he himself admits he has friends who are essentially loan sharks, and they wouldn’t have even lent him it. It goes on to talk to a young guy who was just out of college making $75,000 a month, and when that dropped to “just $25,000″ it didn’t even cover his current expenses. It talks about how the financial industry is handing out awards for creating product that almost brought down the entire economy. It talks about NINA loans, or “No Income, No Assets” where banks didn’t ask how much you made or how much you had in the bank before writing you a loan. It explains how many people knew that what they were doing wasn’t sustainable, but figured it was the problem of someone higher up on the chain.

J.D. took a lot more time than I could and wrote a great summary, so please read his post and consider listening to the episode!

What am I doing to “recession proof” my life? Nothing. I’m focusing on how much I drive, but I’d do that anyway. I’m saving more cash, but I should have been doing that anyway. You can’t waterproof your shoes after it has started to rain, so why is everyone talking about “recession proofing” now? The keys to recession proofing your life seem eerily similar to standard personal finance basics: Live within your means, build an emergency fund, invest for retirement, and invest in yourself to help stay employable. These are things most personal finance bloggers and readers probably already were doing. If they weren’t, they should have been, regardless of the recession.

I don’t know what to say about the fed rate cuts or the bailouts. Which seems to be fine, since no one asked for my opinion anyway. From my vantage point, earning 5% on my savings was better than 3%. On a very personal level, I don’t like the rate cuts. However if they truly are saving the economy, then I’m glad they are happening.

Are they though? That is a big “if” up there. I don’t know. I’m pretty well versed in personal finance topics. But economics at a national/global level? Please. I haven’t had an econ class since high school, and I have to cross my fingers and hope that the fed knows what they are doing. If I were an economist and had convincing arguments on why they were wrong, I would feel responsible to speak out about it. There are economists doing this (I think) but not loudly enough for mainstream media to pick up on it. Many personal finance bloggers are speaking out against the fed’s actions, but to be honest, I don’t give most of them (including myself) much credit, unless they have some credential other than writing a blog.

I don’t understand why average people feel the need to cut spending in a recession. And by “average people” I mean responsible people who already live within their means, which I suppose aren’t “average” after all. However, they are the average blogger and my average friend/acquaintances. They are the average person that I know. I understand trying to use less gas or maybe buy a little less to offset food/energy prices, but… I guess i just don’t get it. If I wasn’t overspending before, can’t I just continue not overspending?

Perhaps I’m being too snooty about this, and I apologize for that. To me the recession really only means higher gas/food prices, so I put just a little less into savings this month. For some families, it might mean they eat a little less this month. I don’t mean to be unsympathetic, but I’m (so far) quite insulated from the more painful effects of a recession. I hope I remain insulated. In the mean time, I should find a reputable charity and donate something to help those who are more heavily impacted. What do you think about a local food bank? I’ll put it in my April budget.