DadTalk

Main Street Struggles While Wall Street Seems Oblivious

Hey everybody, did you know America’s economic problems are all over? That’s right, kiddies, after a week of stories revealing a continually worsening housing market, continued job loss, soaring prices and plunging consumer confidence, Wall Street is indicating the worst is over.

Just watch CNBC for a few minutes as pundits take turns pummeling any analyst who says, “But what about those folks struggling on Main Street?”

You see moms and dads, the economy isn’t really about you and me. It’s about oil and commodities and credit. Think I’m kidding? Check out this New York Times story:

Many on Wall Street, the epicenter of the credit mess, seem to think that the worst is over. For the first time in months, analysts and executives sound upbeat again. Many of them see a broad, sustained recovery in both the economy and the financial markets coming in the second half of this year, a prediction some market strategists call hopeful at best.

Why the constant drumbeat of happy news when most of us are trying to find affordable housing or considering whether to give up bread or cheese? Because in America, telling people that they are happy is a proven formula for success. Most of the time, anyway.

And certainly, the bigwigs in government and business don’t want you thinking too much about the monumental problems we face everyday. Problems such as these:

Are You an Economic Optimist or Realist?

Why are some humans optimists and others pessimists? I was discussing this question with an acquaintance on my bus to work last week.

My theory: optimists often don’t see or simply ignore the downside to trying out a new restaurant, athletic fete or business.  A pessimist – though I substitute the word realist – viscerally sees the downside to new and old ideas.

Without optimists, we’d still be riding horse and buggies (or walking), the moon might never have been explored and supercolliders never built. Without realists, planes would fall from the sky and even worse politicians would be elected to office.

No place is the tug of war between optimists and realists more evident than the economy and the housing market. Here’s the historical smack down:

Ramblings on Sustainability, Economy and Pricey Shoes

While hunched over sick with the flu on the train ride home last week, I overheard this nugget from a fashionably-dressed, middle-aged woman talking to another:

“I don’t care what they’re made of, a pair of $16,000 shoes cannot be called ‘sustainable.’”

Both ladies were dressed in a style I would call, Green Green – that is, costly, yet fashionable “natural” clothing.

I’ve long wrestled with the idea of maintaining a “sustainable” lifestyle. During my 11 years in Arizona, I tried biking to my job. Considering that my work day started at 2 p.m. and ended at midnight – I had a four-day workweek back then – it didn’t work well.

Biking in when it was 110 degrees left me sticky with salt and I didn’t like how my shirt would stick for the rest of the day. Biking home at midnight left me unable to fall asleep for hours. Sustainability is a great concept, but it is a lot tougher to execute than is sometimes practical.

Worse, there are often those pesky unintended consequences. None is more obvious than skyrocketing food prices, caused in part by the need to use corn and other plant material to make biofuels, reports Paul Krugman of The New York Times.

Here’s a sample:

Effort to Stop Housing, Credit Bailout Plans Is an Uphill Battle

A battle for the hearts and minds of Americans has begun. No, I’m not taking about American Idol.

This battle is filled with arcane terminology, numerous moving parts and seemingly no clear “right” answer.

I’m speaking of course, about bailouts being proposed for homeowners and financial institutions. But before we talk about bailouts, we should ask ourselves these questions:

• Should we keep homeowners, who are stretched beyond their means, in houses they can’t afford?
• Should we let borrowers lose their homes and see what happens in the marketplace?
• Should we treat subprime borrowers differently than prime?
• Should we allow large financial firms to fail?
• Are we damaging capitalism, and thereby the economy by bailing out either group?
• Will our children shoulder a bigger tax and inflationary burden if we bail everyone out?
• Or will the situation be worse if we don’t?

What Kind of Bricks Is World Financial System Made From?

Each morning, I get off the bus early and walk down a mile or so of fabled LaSalle Street, home to Chicago’s banks, trading firms and other financial institutions.

At the beginning of the walk, I pass under the rusting elevated trains that mark the northern end of the Loop. Right after the bluish glass of the James R. Thompson building (state government) comes the imposing City Hall.

Or rather, the building would be imposing, except for all the larger financial buildings that surround it. Although most of Chicago’s largest buildings do not line LaSalle, the imposing Chicago Board of Trade at the end of the street got me to thinking about the relationship between cultural institutions and buildings.

Is the Fed Reserve Using Homes as Collateral Twice?

Warning! This post is confusing. Very confusing. Which is the whole point of it.

I find money and credit confusing. Take home loans: The bank gives the homebuyer money to buy a house. That money goes to the seller, who then pays off his bank.

That part is easy. The part I find confusing is “Where did the bank get the money to lend to the new homeowner?”

I used to think that money came from bank depositors. That is, Mike puts his savings into Stately Bank, which then loans that money to homebuyer Nick. Stately Bank and Mike share in the interest that Nick is paying on the mortgage.

‘Green Crack’ Is Drying Up Despite Fed’s Best Efforts

The addict rifles through the mail piling up on his kitchen counter.

Late electric bill.

Late gas bill.

A warning from his mortgage company.

“Crud. It’s gotta be here somewhere.”

Half of the pile falls, scattering on the floor.

“Sh---”

John bends over to pick up the pile. There, just under the cable bill – that one is always paid on time – is what John is looking for.

“Pay off all your bills!”

“Low your interest rates!”

“Consolidate debt!”

John shakes as he opens up the envelope. A rush of warm liquid power courses through his body. “You are approved for up to $8,000!”

“I swear, this is the last time I’ll ever borrow money,” John says quietly to the cat.

Meanwhile, deep in the recesses of America’s financial power, the Federal Reserve Board considers its next move to keep Green Crack flowing out to businesses and consumers.

The Credit Czar considers his recent efforts:

“Lower interest rates. Check.

“Make it easier for financial institutions to borrow. Check.”

“Let banks use worthless holdings as collateral to borrow money. Check.”

“Print more money. Check.”

Bailouts Benefit Who?

I have been having a hard time posting lately. Part of the problem is career distraction, but an equally large part of it is digesting what is happening to the economy in general and the housing market in particular.

What’s most disturbing are the efforts to “fix” our economic problems. Each solution has been designed to stick it to the taxpayers by shifting bad mortgage debt from financial institutions to government-backed entities.

The latest humdinger came from Ben Bernanke on Tuesday when he suggested that the Federal Housing Administration should “expand its insurance program to let more people switch from expensive subprime mortgages to federally-insured loans,” writes The New York Times. Bernanke also wants Fannie Mae and Freddie Mac to raise additional capital to buy mortgages off the hands of struggling financial firms.

But here comes the lie: “In theory, the change should not cost taxpayers,” writes the Times. “But because the companies are chartered by Congress, investors have assumed that Congress would bail them out if needed.”

Saving Money If the New Shoes Fit, Why Pay Full Price?

I’ve always been good at saving money on shoes. While we’ve all shopped at outlet stores, there really are two kinds: the big malls where prices don’t seem any cheaper, and then there are places like the Sports Chalet Outlet.

The Sports Chalet Outlet, tucked away in a remote building near Montclair Plaza in Southern California, is not easy to find. I suppose that’s because the high-end sporting good retailer doesn’t want to advertise the fact they sometimes sell discontinued running shoes for as little as $4. Or $150 hiking boots for $15.

A lot of the merchandise is topnotch if you look past some of the weird styles. I’ve outfitted my entire family – me, wife and kids – with a season’s worth of clothes and shoes for under $100. The same items bought at regular retail prices would probably have cost several hundred dollars.

I suspect there are other “secret” outlet stores – I’m still looking for them in Chicago – hiding in your neighborhood. The key is finding them.

Saving Money We All Know Prices Are High; But What Can We Do About Them?

I'm sure this won’t come as a surprise, but gas and food prices are soaring. By spring it may cost $4 a gallon to fill your car, reports The New York Times.

Wholesale prices are increasing at 12 percent annually, a recent report found, and those costs will most likely be passed on to you and me. With the Federal Reserve Board hinting it will continue cutting interest rates – which could further accelerate inflation – don’t expect the situation to get better anytime soon.

Since salaries aren't keeping up with increased costs, it’s time to consider ways to save money. For the next couple weeks, I'll be offering some of my favorites.

With fuel prices crimping our household budget, let's start there. As many parents know, one of the biggest time and gas wasters is shopping. Forget one thing, and you’re driving back to the store two or three times a week.

Make lists, whether it’s for the grocery store or Target. Our list for Trader Joe’s might read:

• Chicken Nuggets
• Fish Sticks
• Bean and cheese taquitos
• Bagels
• Vanilla frosted shredded wheats
• (Cheap) wine
• Peanut butter
• Something for dinner

If we need something in a pinch, especially from Target, I run to the pharmacy across the street from my office instead. Limiting return trips to the store saves on gas.

To further reduced those return trips, we try to buy in bulk. Our pint-sized apartment still fits several weeks worth of tissues, paper towels and toilet paper from Target – we're too far from Costco.  The better we supply ourselves, the more we save in gas. Bonus: Buying in quantity means lower cost per item.