Your Two Bits

I was thinking about stuff and decided to write my recession haiku.

Failed economy
Doom and gloom on all-day news
Six months’ income saved

That sums up most of my thoughts.

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I think that this post’s title may have also been a phrase used in Jim Collins’ book, Good to Great, but it’s appropriate for some thoughts I’ve had about our current economy. Good is the enemy to great, because we tend to become complacent and content as long things are good. In general, work and life don’t have to be great; and as long as they aren’t bad, we chug along fat, dumb, and happy. Actually we may not even be all that happy. We’re content to ride along with a bur in our saddle; however, if our bicycle seat is missing, most of us will take action. That’s why good is the enemy to great. Unless the fire gets unbearably hot, we’re not inclined to move.

The current economy may be enough to spur people into action. Even though—contrary to popular opinion—our nation’s and the world’s economy hasn’t completely collapsed, leaving everyone destitute and about to die of starvation, it has unsettled many. Most of us know people who have lost their jobs or been affected in some way. Most of the companies we work for have been affected in some way (for some companies, the effect has been increased business).

The silver lining in all this seems to be the opportunity for change. It may not be the kind of change people were looking for when they voted for President Obama, and it likely isn’t what he intended. But it is an opportunity for change. At my work, we have experienced some slowing, which has caused the company to take a look at itself and see if there are any opportunities it is missing. The result has been some great brainstorming sessions, and we are now working on an interesting project that we probably never would have considered previously.

This economic dip could be a proverbial blessing in disguise for many. People who have been laid off may be able to pursue a change in life and career that they were considering for a long time but never had sufficient motivation to shake them from their adequately content stupor. That doesn’t mean it will be easy. For most people, it will likely still be very difficult but extremely rewarding.

For example, a few years back, my brother and brother-in-law worked for a steel detailing company. One day both of them along with most the rest of the company were laid off.  This created a very stressful time for both of them and their families. Both of them intended to find work in the same field but ultimately decided to partner and create their own steel detailing business rather than hire on somewhere else. The endeavor was a little uncertain at first, not because they couldn’t find projects but because getting paid tended to take up to 90 days after completing the project. As long as they could make their money last until they got paid for the first few projects, they thought they would be okay. They just weren’t sure the money would last. Fortunately it did. Owning their own business has not been easy, but it has been very rewarding. My brother told me, “After owning my own business, there is no way I could go back to working for someone else.” The business, Freedom Steel Detailing, has done very well. What began as a crisis, turned into a blessing.

Likewise, as long as there isn’t too much meddling and stimulating to keep the credit bubble artificially inflated, this economic situation could be a great blessing, allowing us to reset, readjust, and refocus our national, corporate, and personal economies—or better yet, our lives.

What do you think? Do you see opportunity?

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I don’t think AIG execs should be the scapegoats that Congress has turned them into. Of course, I also strongly disagree with how AIG has handled the bonuses. It doesn’t make sense to me that you would give people bonuses, when those people have not saved the company from bankruptcy; that’s where the company would be, if it weren’t for the bailout. And I think that’s where it should be. Our economy was in a credit bubble that collapsed. Why are we trying to sustain a bubble? Doesn’t that make for a very shaky foundation?

One of my biggest concerns with this situation is how riled up people have been about $1.65 million dollars worth of bonuses, which amount to about 1% of the total that the government (representing we the people) gave to AIG. Do we really think this is the only misuse and waste of taxpayer dollars that this and other bailout companies will cause? I think there’s a bit of blame that could be shared with our elected officials for so hastily passing such massive debt spending, without spelling out the stipulations. Interestingly there was some language about using the bailout money for bonuses, but that was removed before passing the bill.

Also, I don’t like the idea of coming up with ways to retroactively punish the company and its employees. I particularly don’t like that the House passed a bill trying to impose a tax on those employees. A lot of people will say, “But we can’t have them stealing our money.” I’m quite irritated by that as well; however, I’m quite concerned when I see our elected officials rousing the people into a mob-like fury against a small group of people.  The laws of our lands should be equitable for all. If we target this group this time, it sets a bad precedent. Then the next time somebody is doing something we don’t like, we just rile up the people and impose taxes or other forms of punishment on that group.

Rather than being so quick to punish these people who were not acting illegally (Irresponsibly? Yes, but not illegally), and implementing taxes that we would find extremely unfair if aimed at ourselves or other minority groups, we should make a ruckus and simply clarify how bailout money is to be handled going forward.

What’s interesting is that we are stuck with this company. In normal conditions, our disgust could be demonstrated by not buying the company’s product, causing it to fail or severely stumble. That would be a strong lesson to the company and other company leaders, helping them to avoid such poor decisions. However, in this case with AIG, because we have bailed them out and won’t allow them to fail, it will only cost us more as the government has to pump more money—our money— into the company to make up for people not wanting to do business with them. That means we end up paying twice for a product we don’t want.

There are problems all around with this AIG case specifically and plenty of blame to be shared, but my biggest concern is that we allow ourselves to become so focused on this one instance that we lose sight of the bigger long-term implications. Wouldn’t we be in much better shape, if we, including our representative government, behaved more responsibly with our money and kept in mind the defense of our fellow citizens, recognizing that allowing one group to be targeted makes defending another group more difficult?

All that being said, two good pieces of news are emerging: 1) at least a third of the bonus money is being returned, and 2) the tax bill that passed the House last week seems to be losing steam and likely won’t make it past the Senate.

I’ll readily admit that while I have followed this pretty closely I may have missed some important details and am open to additional insights others may have. Please share your two bits, so that we can learn and potentially avoid making such huge mistakes at the federal, state, and personal financial levels.

——-

After publishing this post, I ran across a post on the  Weakonomics blog that covered this same topic, with some additional interesting points. “AIG Bonuses Have You Pointing the Finger in the Wrong Direction.”

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With today being the first day of the new year, I figured I would achieve my goal to start blogging more regularly. To do so, I needed to actually begin; hence the first post on Your Two Bits.

With the economy in a tailspin, waiting to be corrected by the financial wizards on Capitol Hill, I couldn’t think of a better time to begin a blog about money and investing. Everybody is so anxious to get their money into the stock market and watch their portfolios exceed their wildest dreams…

Hold on a minute…

My wife informs me that people aren’t feeling that way at all and are actually quite scared of the market if not currently running from it, right now. That being the case, I think the next six months will be rather telling as far as how severe and long the economic downturn will be. Regardless, can I suggest that we all make a new year’s resolution to be optimistic? I’m not suggesting a Pollyanna complex, but simply that we have some optimism in us. It seems to make life more enjoyable.

Wishing you all a happy new year!