Category Archives for "Obama housing plan"

Did We Ever Fully Recover from the 2001 Recession?

With all the talk about the souring economy, job losses, bank failures, and the like, the recession of 2009 is on the minds of everyone.

But I’d like to posit that we never fully recovered from the recession that officially spanned 2001-2002. And that, my friends, puts us into a possible discussion of Great Depression proportions!

Now, before you run off and withdraw all your money from the bank and bury it in your back yard, hear me out!

Great Depression?

Typically, after a recession, jobs, sales, and revenues (as well as profits) rise, most often quite rapidly.

Didn’t happen last time.

Here’s a picture to illustrate what I’m trying to describe. The red arrows represent the year of the respective recession. See how unemployment rises after a recession, then drops until the next one, from 1991 to 2001? And see how the unemployment rate dropped below the rate during the year of the previous recession? That is the typical behavior of the labor market. But look at what happened from 2001 on.

Now, I’m not saying we’re in another depression. But we’re approaching Great Depression longevity, if not to the same depths. The Great Depression started in 1929, the economy made a few attempts at reviving itself, and then WWII came along. America wasn’t fully involved in war preparations until 1941. So we’re talking 12 years, at the most.

For this last round of economic downturns, the duration has been 9 years. We’re getting there.

Of course, we’ve yet to see 25 percent unemployment. But also remember that we fudge the numbers nowadays, and there’s a different sort of mindset for what constitutes “employment.” In the 30s, if you didn’t have a full-time job, you were unemployed.

Now, if you’re no longer looking for work, you’re not even counted. Perhaps you’ve been out of a job for 3 years, got fed up, and started selling all your worldly possessions on eBay. You’re no longer “unemployed.” This set of circumstances didn’t exist in the ’30s.

So, I’d say that whatever level of unemployment you see today, raise it by 30 to 50 percent. Yeah, I think it’s that bad. But even at an official 8 percent, we’re no higher than 12 percent. Not that that’s a good thing. But it’s not 25 percent, either.

However, for some pockets of America, where there’s 12 or 13 percent unemployment (take San Joaquin County, California, for example, where home foreclosures are at all-time highs), that figure could easily be over 18 percent. I submit to you that those folks feel like they’re living in a depression! If you don’t believe me, ask them!!!

One last thing: If we hadn’t spent $1 trillion on a war (or something else, for that matter), the economic picture during the 2000s would be even bleaker.

I said all that to say this: We got out of the last depression and we’ll get out of this one (whether you believe it’s a recession or depression).

But our way of life may have to change and that in itself may be the most uncomfortable part of it all.

Jobs you would have never considered before…you may now consider. Wages you hadn’t thought about since high school…you may now reconsider. Hours you thought were only for hookers and security guards…they may be under consideration!

Things “I cannot live without” – you may have to live without them (like computers, cell phones, video games, cable, the list is endless).

All of this will break up some families and ruin lives of countless people. But the silver lining is that dire situations may bring us closer, may give us thought for conserving what he have, and give us a greater appreciation for all those things “I cannot live without” once we get some of them back.

It’s a bitter pill to swallow. But swallow it we must.

One last thought: There may never be a better time to go out on your own. Consider starting your own business. The Internet being what it is, with low overhead costs, fast deployment capabilities, and only your own mental limitations (“I can’t do it,” “I don’t have time,” “I am not that smart” among thousand of other excuses), the sky literally is the limit to your income potential.

It may not come fast, but it will come. And in the end, you’ll have more time, more money, and less stress. Get some ideas here. No pressure, no strings.


Money isn’t everything. It’s the only thing. Wait. That’s only for football.
Enjoy life. Spend time with your family.

Housing Plan Designed to Stop Foreclosures

President Obama and his team are in the midst of designing a plan to reduce mortgage foreclosures. A big part of the plan is to give some relief to existing homeowners (or, more appropriately, people who live in houses that were purchased through borrowed money called mortgages. Not many people really own their homes) by making loan modifications for “responsible homeowners.”

Before you get your panties in a bunch (they borrowed too much money in the first place), let’s just think about this:

As your neighbor loses his house, and the value of that house declines because the bank that now owns the house doesn’t want it and sells it low just to get out from under it, what do you think is happening to the value of YOUR house?

As almost everything goes in economics, Adam Smith’s “Invisible Hand” is at work! People do the things they do for self interest.

So give this one a try: If your neighbor can somehow keep his house, it won’t decline in real value (it may decline in perceived value), but until it hits the market, “comparable sales” will not show a decline in your neighborhood, and that’s GOOD FOR YOU!!!

Stop foreclosures –> stop bad loans –> start credit flow –> people buy stuff

Got that? 


Money isn’t everything. It’s the only thing. Wait. That’s only for football.
Enjoy life. Spend time with your family.