The Fed is not the only player here.

The overall federal budget hands out 5 times more in total subsidies to homeowners than to renters and rental property owners (mostly through the interest tax deduction), and we wonder why homeownership rates kept growing to the point that there are so many "at-risk" borrowers out there?

The federal government has encouraged lower income people to take ridiculous risks in the name of homeownership. It's time to change our priorities: http://www.southfloridaceo.com/article700.html

JakeNewton: What a bunch of Utopian theoretical happyspeak! I don't even know where to start! I don't know what Neverland Ranch you made these observations at, but they have nothing to do with reality for the average worker. Workers in this country have been reduced to indentured surfs with no quality of life whatsoever. They work two jobs for seven days a week, or face illegal promotion overpass (neighbor at Lockheed) their unions have been completely destroyed by years of NeoCon non-efforcement of current labor law, pension law, working condition law, whistle blowing laws; while the robberbarron elite pay no taxes and produce zero benefit for the health of the economy. Trickle-down is a myth. There isn't any. And now they face the daunting prospect of NeoCon privatization and deregulation of every service and utility they need. Translation? No government oversight of monopolies and oligopolies. Little or no meaningful competition. Inevitable price-fixing and spiraling energy and taxation to cover all the unconscionable Repuke out sourcing and no-bid contracts at every level of bigbus/gov collusion. In short sir, complete corporate communism within my lifetime. It doesn't matter if you are a consumer or an employee, if you're not part of the Red-State Machine, you're just another cost center to eliminate. And forget about any balance with the press. It consolidated into the Fortune-500 years ago. In short, America is unrecognizable from the dream of freedom it was just a few years ago. People in Europe and in some third world counties, contrary to what you believe, have a slow paced pleasant life, working five days a week and not worrying constantly about the constant American possibility of being homeless or having their door kicked down for some perceived minor infraction of police state law; possibly without any charges or warrant being filed.

Never before have so many lost so much to so few.

JakeNetwon: As for greed, wouldn't it be better to assign this trait to *individuals* and to the extent that the behavior is criminal we can then identify them by name, cuff them, try and convict them, and then punish them?

ENTERIK: Yes, we can call people greedy when the shoe fits. Since the courts have seen fit to force the notion that corporations are individuals, I think it is perfectly reasonable to label profit maximizing companies as greedy, stingy even selfish. Actually, I don't even think they need to have the legal rights of individuals to be labelled. For example, Enron certainly had a greedy CEO and a greedy chief accountant, but even greedy callous low level energy traders were gleefully in on the bilking of California utilities and citizens. So if the individuals who steer the fate of a company motivated by greed, that company is greedy, no matter how many bad apples there are in that barrel. Once you toss out those apples, maybe the company will behave responsibly, but even so, the damage has been done, aside of restitution and retribution (which seldom make the victims whole) all that is left is legislation and regulation to ensure such predatory practices are not allowed.

JakeNewton: Enterik, I don't take any joy in the fact that some people have a hard time surviving on low paying jobs.

ENTERIK: But are ou troubled? Well, it's good to know that you can accept that there is a problem. They say that is the first step to recovery.

JakeNewton: My thinking is that in an ideal world, where we are not and never will be, minimum wage jobs are for people with no skills and experience and are using the opportunity to gain both, and will then move on.

ENTERIK: In Japan gas station pump jockeys were jobs for vocationally-oriented non-college bound high school graduates to gain a record of steady responsible employment so that they could move up to jobs with more responsibility in other industries.

In contrast, such jobs in the US are seldom stepping stones for a career. One learns no real skills, no-one really values your prior experience and the references are sad or weak at best, suitable mainly for getting the same job somewhere else. Theer is no real career path, more like a career cubby. A lot of the advancements that are available from working poor type jobs have a hard time making a living wage (Assistant manager at McDonald's starts at $8-$10 per hour) and managers start at $25K(~$12.50 per per hour, assuming they don't work more than 40 per week...yeah right). The problem with your ideal solution is that it has very little to do with the market as structured, which produces tons of low wage low skill low advancement service jobs. So move on to what? For many, the opportunity to move on is quite remote.

JakeNewton: Or they are a student working part time, or they are finding it a good way to supplement the income of another job.

ENTERIK: it is an error to think this logic runs both ways. While it is probably true that most students work low wage jobs part time, it is highly unlikely that a majority of low wage workers are students. Also, while some people might work an extra low paying job becuase they want to, far more work one or more full time low pay jobs because they need to.

JakeNewton: I am pretty sure this is the situation most of the time. Where the case is that someone is "stuck" in this kind of job long term, I think it's good to examine why that is and perhaps to explore how one could help, but not by artificially valuing the labor at a higher rate arbitrarily through law.

ENTERIK: Everything about the way we value labor is artificial, just like the market is artificial. But it doesn't have to be immoral as well. In fact, the trend over time is for our business dealings to become more moral. Widespread poverty wages have resulted from a destructive power imbalance, where the employer holds all the cards. That is why we have a minimum wage in the first place, to balance things out. Nowadays, the minimum wage is totally inadequate and needs to be replaced with a living wage tagged to the CPI It is the moral thing to do.

JakeNewton: I would instead always start at the individual and their unique situation, then go from there.

ENTERIK: There's plenty of room for that kind of effort too but it doesn't address the problem of structural poverty and it's consequences. Unless we the people increase the minimum wage to a living wage there will always be underpaid people living in
squalorous conditions which causes society all sorts of problems. Business doesn't need that to run profitably and it only happens now because we let them get away with it.

ENTERIK: I think you'll find a living wage is considered a fair idea by a majority of Americans. Just ask the simple question, "If you work for a living, should your wage allow you to support your families with basic needs?" I think most will say yes, it is fundemental part of the American tradition of fair compensation for hard work."

JakeNewton: *You* think that would be fair, you are entitled to think that, and you are entitled to pay *your own* employees that level because you think it's fair.

ENTERIK: And the American people are entitled to define a morally responsible living wage as fair. Over the years dignity and respect for peoples basic humanity has been expanded in America. From the lows of feudal-type of plantations, sweatshops and robber barons we have ensured that we the people will not be subject to slavery or child labor practices, with the 40 hour week and the 8 hour day we are far less likely to be worked into the ground. All kinds of health and safety regulations. A minimum wage. The EITC. These are all things that true believers of the economic myth say are bad because they "steal" potential profits from business. The rest of us Americans realize that business has gotten by just fine without those immoral sins of the past

JakeNewton: I don't know anyone, and most people I hang with are left leaning or more, who think a burger flipper ought to be able to support a family or even themselves by flipping burgers. I think they would say that they should be working on acquiring more valuable skills before doing that, or perhaps pooling resources with freinds or family.

ENTERIK: Have you ever asked them? Go ahead and ask a burger flipper or a ditch digger. Tell them what they don't deserve. Tell the tens of millions of Americans who work low wage jobs essential to keep our society running that if only they had more valuable skills no-one would have to do those necesary hard jobs. Even a child can see that if all those people got educated those jobs would still need to be filled by someone. Since the society needs to fill those jobs and doesn't create enough of the ones that need valuable skills, we have a moral obligation as a society to treat the working poor fairly with wages you can live on. A universal living wage for individuals should be the minimum wage and the extra for valuable skills piled on top of that.

ENTERIK: Talk about you cruel and callous conservative. we have responsibility to ensure that hard working families aren't ruthlessly abused by the profit motive. It is just this sort of amorality that is destroying the American family and making poverty-related difficulties worse.

JakeNewton: I think it's immoral for people to selfishly and recklessly bring children into the world that they know beforehand that they can't afford, and then make me and others have to pay the difference. One of the reasons I don't have kids is because I am concerned about being able to care for them financially. Isn't that the way people should be thinking? I stand by this.

ENTERIK: I guess you're not selfishly and recklessly having sex then :-) You seem to think about other people in terms of your money, not their humanity. You have put the cart before the horse. Decades of the low wage poverty have failed to create the responsible behavior you desire, as undereducated underpaid underepresented people repeat the same cycles of poverty generation after generation. Clearly, the economic system you are supporting is not creating the outcome you desire. With a living wage money is injected into the community, lowering poverty, supporting communities, increasing tax revenues for schools, thus improving education. And it is quality education that lessens all of societies ills, like reducing unwanted pregnancy. All these improvements then contribute to even more improvements in the next generation. If we continue to use poverty wages to create an underclass of working poor, we make another generation of poor and undereducated workers and we will continue to pay more for their life long problems of poverty.

ENTERIK: The notion that employers should be able to pay as little as they see fit is so wrong.

JakeNewton: This is a mischaracterization. The figure is one *agreed upon* by the two parties involved, and is not one sided as you say. In fact, conditions in the labor markets do not always favor employers.

ENTERIK: For low wage employment conditions almost always for the employer. Even a three year old can tell a false choice when he sees one. Yes, the employer and employee do agree upon a wage. The emploer says, "I will pay you $5 an hour, do you want the job"?, The employee says,"How about $7 an hour"? The employer responds,"$5 an hour, take it or leave it"! That is how low wage employment is *agreed upon* in the real world. The fact is that the Federal Reserve is managing the economy to ensure a certain level of unemployment, so employers can get away with just that kind of thing. With a federally mandated living wage the employee won't work like a dog to live in poverty.

ENTERIK: For there to be a broken window, something has to be removed from the market.

JakeNewton: That would be the expense of additional money paid by the employer, as forced by law, with nothing to balance on the asset or income side.

ENTERIK: I think you need to read up on the parable of the broken window. It is the broken window that has diminished the entire community economically, not the cost to the shopkeeper. When we look at the living wage, what has the community lost? Nothing. It's true that the shopkeeper has paid more to his employees but that is what is fair. Otherwise the community would just let him be a child-slave holding sweatshop, so that he could really reduce his costs, since that seems to be your highest moral standard, maximum profit. The law of the land is moral, we the people have a fundemental responsibility to uphold human dignity and promote the pursuit of happiness by allowing those who work for a living to actually live comfortably on their wages.

ENTERIK: but if the Shop-owner happens to give his employee a raise, nothing has been lost, no window is broken."

JakeNewton: But this is presumably the decision of the Shop Owner to do that! Don't you see the fundamental difference? Maybe the employee has demonstrated by *already improved performance* that they are worthy of the raise. Your system has it exactly backwards, cart before the horse.

ENTERIK: The point was that more money to employees is not a loss to the community. America has a minimum wage, that is not a choice and if we the people decide that wage should be higher then that is the cost of doing business in America. The point was not about how to maximize return on the costs of human "resources" (as if they were cattle) but on how to ensure our citizens who work at hard low wage jobs can live sustainably in healthy communities with dignity.

ENTERIK: Higher wages reduces employee turnover, they are more content with their jobs, they are les likely to search elsewhere for a job

JakeNetwon: Not when the higher wages are not based on their own merit and instead is decreed by the state. It may in fact be that the contented worker, knowing his higher rate is now guaranteed, is more likely to slack off. Mechanism denied.

ENTERIK: Or your lazy contented worker is a another myth to rationalize immoral treatment of the working poor. I'm describing Nobel prize winning economics to you laymens terms. Go read some Akerlof and Stiglizt. In a market with the persistant threat of unemployment (such as ours), the opportunity cost for job loss due to slacking increases as wage increases. Additionally, my contented workers are ones who realizes they are not being wildly underpaid for their labor due to their weak bargaining position in the market. Knowing they are getting a fair shake from their employer, they are less likely to reduce efficiency to compensate for any perceived disparity.

ENTERIK: But in the end, despite the clear benefits to society and the wealthy, a living wage is simple moral issue of fundamental American fairness and humanity.

JakeNetwon: And this is your *opinion* of what is fair and that is fine. What is not fair is for the government to force this upon people, that is a moral issue.

ENTERIK: What the government enforces in the market is intrinsically moral and our very American morality, our sense of fairness, cannot be separated from how we govern ourselves. We have contract law, that is fair. We have child labor laws, those are fair. We have sexual harassment laws, those are fair. We have minimum wage laws, those are fair. I could go on an on with all the laws that enforce our shared morality of fairness. It is fair to make the minimum wage a living wage. As the richest nation in the world we can afford a decent wage for all our citizens who are willing to work hard. As the role model democracy we have an obligation to ourselves to live up to our ideals and treat our citizens with the dignity we have steadily expanded since the founding of this country.

JakeNetwon: Careful what you wish for. If you have a Mom and Pop shop competing next to an outlet from a large corporation, and they both have minimum wage workers on the payroll, which one is more likely to be able to absorb the costs of a raise in the minimum, and to continue to be able to compete?

ENTERIK: A clever attempt at inserting a red herring wedge issue into the discussion. Immorality is immorality be it mom-and-pop or the WalMart that is already putting them out of business. Every worker should receive a living wage. Practically, it seems unlikely that we will get to a living wage as soon as I would like (there's a lot of educating to do), so there will be plenty of time for "container" stores to drive mom-and-pop out of business at current minimum wages. Assuming there are still mom-and-pops around when it comes time legislate a federal living wage, I would probably suggest phasing in wage increases more slowly for mom-and-pops (say nine or fewer employees) than for larger businesses. I think such a plan would cover the most number of workers while causing fewer small business closings.

BTW, investers often like stocks of companies that have had layoffs.

"In todays news, it is reported that Countrywide Mortage is going to lay off 12,000 people. Anybody nknow if companies like this are in some way owned by other corporations in China? "

Publicly traded US stocks are pretty much available to any individual or corporation in the world.

"What happens when China decides it isn't going to take anymore losses?"

Ordinarily it isn't rational to make huge sweeping moves in a portfolio without good reason. However, markets usually have both a rational and an irrational component at the same time.

" People complain about immigrants taking U.S. jobs, it doesn't compare with the jobs loss to corporate greed."

When jobs are created, there is never a guarantee that they are permanent or anywhere close to that.. Long-term support for a given job has more to do with the business environment than anything else. In the case of the 12,000 mentioned, it may be tough to find work with other firms doing exactly the same thing as things stand now. Same as when Enron went under. It will be hard for some no doubt, but fortunately individual people are adaptable as are experiences and skill sets.

As for greed, wouldn't it be better to assign this trait to *individuals* and to the extent that the behavior is criminal we can then identify them by name, cuff them, try and convict them, and then punish them?

In todays news,it is reported that Countrywide Mortage is going to lay off 12,000 people. Anybody
know if companies like this are in some way owned by other corporations in China? What happens
when China decides it isn't going to take anymore losses? People complain about immigrants taking
U.S. jobs, it doesn't compare with the jobs loss to corporate greed.

I appreciate the time you guys are taking.

"The lyrics of "Sixteen Tons" pretty much state the laboror's fate of 19th century America. And unfortunately the present as well."

I just don't agree. When I look around today, I just don't see anything at all resembling what I know about what happened decades ago. You have to see that in fact we have mad long strides from that. China is another story. In any case I'm not going to sit here a defend child labor and the like.

"inability to set aside any real equity remains."

Do you not count equity in comanys? If not, why not?

ENTERIK: I don't take any joy in the fact that some people have a hard time surviving on low paying jobs. My thinking is that in an ideal world, where we are not and never will be, minimum wage jobs are for people with no skills and experience and are using the opportunity to gain both, and will then move on. Or they are a student working part time, or they are finding it a good way to supplement the income of another job. I am pretty sure this is the situation most of the time. Where the case is that someone is "stuck" in this kind of job long term, I think it's good to examine why that is and perhaps to explore how one could help, but not by artificially valuing the labor at a higher rate arbitrarily through law. I would instead always start at the individual and their unique situation, then go from there.

" I think you'll find a living wage is considered a fair idea by a majority of Americans. Just ask the simple question, "If you work for a living, should your wage allow you to support your families with basic needs?" I think most will say yes, it is fundemental part of the American tradition of fair compensation for hard work."

*You* think that would be fair, you are entitled to think that, and you are entitled to pay *your own* employees that level because you think it's fair.

I don't know anyone, and most people I hang with are left leaning or more, who think a burger flipper ought to be able to support a family or even themselves by flipping burgers. I think they would say that they should be working on acquiring more valuable skills before doing that, or perhaps pooling resources with freinds or family.

" Talk about you cruel and callous conservative. "

" we have responsibility to ensure that hard working families aren't ruthlessly abused by the profit motive. It is just this sort of amorality that is destroying the American family and making poverty-related difficulties worse. "

I think it's immoral for people to selfishly and recklessly bring children into the world that they know beforehand that they can't afford, and then make me and others have to pay the difference. One of the reasons I don't have kids is because I am concerned about being able to care for them financially. Isn't that the way people should be thinking? I stand by this.

"The notion that employers should be able to pay as little as they see fit is so wrong."

This is a mischaracterization. The figure is one *agreed upon* by the two parties involved, and is not one sided as you say. In fact, conditions in the labor markets do not always favor employers.

" For there to be a broken window, something has to be removed from the market. "

That would be the expense of additional money paid by the employer, as forced by law, with nothing to balance on the asset or income side.

" but if the Shop-owner happens to give his employee a raise, nothing has been lost, no window is broken."

But this is presumably the decision of the Shop Owner to do that! Don't you see the fundamental difference? Maybe the employee has demonstrated by *already improved performance* that they are worthy of the raise. Your system has it exactly backwards, cart before the horse.

"Higher wages reduces employee turnover, they are more content with their jobs, they are les likely to search elsewhere for a job "

Not when the higher wages are not based on their own merit and instead is decreed by the state. It may in fact be that the contented worker, knowing his higher rate is now guaranteed, is more likely to slack off. Mechanism denied.

"But in the end, despite the clear benefits to society and the wealthy, a living wage is simple moral issue of fundamental American fairness and humanity."

And this is your *opinion* of what is fair and that is fine. What is not fair is for the government to force this upon people, that is a moral issue.

Careful what you wish for. If you have a Mom and Pop shop competing next to an outlet from a large corporation, and they both have minimum wage workers on the payroll, which one is more likely to be able to absorb the costs of a raise in the minimum, and to continue to be able to compete?

ENTERIK: A living wage is a matter of fairness

JakeNewton: Fair according to whom exactly?

ENTERIK: I think you'll find a living wage is considered a fair idea by a majority of Americans. Just ask the simple question, "If you work for a living, should your wage allow you to support your families with basic needs?" I think most will say yes, it is fundemental part of the American tradition of fair compensation for hard work.

ENTERIK: if you work for a living you should be able to support your family on your income

JakeNewton: Says who, and at what level of support?

ENTERIK: Good question. Congress approved a long overdue hike in the minimum wage to be phased in over two years and that will still only get us up to $7.25 in 2007 dollars (or likely $6.79 in 2009 dollars since it isn't linked to the CPI). At the very least a living wage should allow a family to live paycheck to paycheck at the federal poverty line (family of four making three times the money required for a sufficient diet). Currently, that works out to $9.66 per hour. These people still can't afford healthcare, can't save money, can't afford a car and can barely afford housing, utilities and clothing. I define a living wage as one that a person working forty hours a week, with no additional income, should be able to afford a basic level housing, food, utilities, transport, health care, and recreation for their family. Needless to say, I think the living wage should be somewhere above a CPI-indexed federal poverty line.

There is a Universal Living Wage Formula to estimate the most basic wage needs of a full time individual who spends no more than 30% of their income on a one bedroom apartment rented at HUD fair market rates. So the real living wage will vary but they did the calculation with the US average fair market rent of $667 for a one bedroom apartment and determined the minimum average living wage to be $12.83 per hour. It is not unreasonable to suggest a family of four needs a two bedroom apartment ($804) so an average family-based living wage would be $15.47 per hour. Using that value, the average, probably higher than the median, US hourly earnings ($16.74 per hour) isn't much better than a barely living wage suggested.

JakeNewton: The problem is there are a lot of jobs out there that require such a low level of skill and experience that anyone can do them, and are therefore just not worth that much in the market. People who are able and willing to only work in such jobs should not have the luxury of a family that they cannot be responsible for, indeed they have fundamental problems they need to overcome before that.

ENTERIK: Talk about you cruel and callous conservative. Go ahead and peddle your economic elitism to the American people. Tell them that they are only allowed to have a family once they've got a job with a high enough income. Certainly, people should take as much responsibility as they can for their own circumstances but as a progressive moral society we have responsibility to ensure that hard working families aren't ruthlessly abused by the profit motive. It is just this sort of amorality that is destroying the American family and making poverty-related difficulties worse.

The problem is that there are a lot of people out there who have been misled into thinking of other people as exploitable resources to be used and discarded just like any other commodity. These same people have been led to believe there is such a thing as a natural market that somehow function amorally to create the best of all possible worlds. Evidence that they have been misled is staring them in the face. The Market is a manmade moral construct. The SEC and WTO structure markets with rules that enforce contract and treaty laws. Slavery and child labor are outlawed. These restrictions are fundamentally moral. Once we realize that the notion of an amoral market is an academic fantasy, we can begin to consider how to improve the public market to further serve the public interest.

Now it is true that our labor market as currently constructed has many unpleasant low skill jobs that are essential for society to keep functioning from strawberry pickers to bus boys to slaughter houses. These are hard jobs with low wages that make them even harder, so hard that businesses break the law to illegally employ imported laborers for low wage jobs no-one can get by on for long. These businesses are not even playing the game by the rules of supply and demand, they are cheating by putting extra pieces on the board. When businesses pay a living wage they would have no problem filling those low skill jobs with local citizens who will be glad to have those jobs. Just look a US coal miners who get $19.37 per hour for one of the crappiest jobs around. There is no shortage of people willing to do those jobs.

JakeNewton: This idea that the pay from the lowliest jobs should be able to support even yourself is so wrong. Such jobs are fine as a contribution to a household with other income sources or to supplement another job, or as a good way for someone with no skills or experience to gain both. Besides, minimum wage earners rarely stay at that rate long, almost always getting a raise or a promotion or a better paying job somewhere else.

ENTERIK: The notion that employers should be able to pay as little as they see fit is so wrong. It's immoral. You are not content to have people slave away for poverty wages, you want them to have multiple jobs just to get by or wait how many years until they are fired for being too costly. There are tens of million of Americans in the underclass and no ammount of hard work is going to get them all up from the bottom en masse, there just aren't enough better paying jobs. And even if we could, there would be no-one left to fill all these necessary economy-supporting jobs.

So if we look at the current situation realistically, we can force a large portion of our citizens suffer in relative squalor with few legal opportunities to advance their station above the poverty line and in so doing deal with and pay for all the negative consequences of these conditions, OR we could become a moral and just society that ensures that those willing to do the hard thankless work will be paid enough so they don't have to struggle from paycheck to paycheck.

ENTERIK: The business benefits from higher employee morale, higher productivity, and lower recruitment and training costs.

JakeNewton: How? Especially the productivity point, exactly how does an arbitrary government mandated increase in the employer's payroll expense translate to higher production? I would love to hear your description of the mechanism we can expect to work. If not, there is a broken window.

ENTERIK: If I fail to describe a mechanism by which productivity will increase there is still no broken window, there is merely the absence of one of the proposed benefits. For there to be a broken window, something has to be removed from the market. In the parable of the broken window, the community and the shop-owner were made poorer by one window, but if the Shop-owner happens to give his employee a raise, nothing has been lost, no window is broken. Anyways, I will not fail to explain why productivity increases with wages.

Higher wages reduces employee turnover, they are more content with their jobs, they are les likely to search elsewhere for a job that will meet needs already met. Less turnover means less time (and cost) training and more skilled employees. More skilled employees can do the job better and faster, so the mployer gets more product and less expense per hour worked. Increased wages also increases the opportunity cost of involuntary unemployment (being fired). Less shirking means more productivity. Higher wages means more people willing to do the job and more applicants from which the employer can pick and choose which means better qualified employees and higher productivity. Socially, employees develop a sense of what is a fair wage for a particular job and those who perceive themselves as being paid fairly have higher morale and higher productivity.
Living wages improve the local community by reducing the cost of community poverty and crime services, indirectly this lowers the business tax burden and improves the lives of their employees.

ENTERIK: And since low end wage earners spend all of their money, unlike the wealthy,

JakeNewton: Unless the money is stuffed in a mattress, all money is spent. The rich tend to spend a lot more of their money on assets that provide an income or are expected to increase in value.

ENTERIK: The working poor spend every penny, every month in their local community, they create demand, just getting by. The wealthy take advantage of this by expanding supply. It's more efficient for demand to precede supply. Give the wealthy that same money they will invest it in stocks and bonds, they will save it, they will invest it oversees, the will sink it into securitized AAA-grade subprime mortgages. What they will not do is create nearly as much demand and jobs in nearly as sustainable way as millions of working poor. A living wage also lessens a lot of society's ills. But in the end, despite the clear benefits to society and the wealthy, a living wage is simple moral issue of fundamental American fairness and humanity.

The damage has already been done here. Put on a pot of coffee and Google "rural depopulation". China is still in the process of luring people, foreclosing, relocating, or whatever other technique to render large numbers of materially people perpetually landless -- and so victims of an even worse sort of poverty. The planned & maintained sort.

It's already been done here.

The lyrics of "Sixteen Tons" pretty much state the laboror's fate of 19th century America. And unfortunately the present as well. The "work" is different, but the maintained landlessness and inability to set aside any real equity remains.

"The US is a specialist in poverty types #2 and #3."

So I think we are talking about the US today. Right?

"How do you think China is getting people to leave its villages and work dirty/dangerous sweatshops? Where do you think the British got their factory workers, including children, during their industrial age heyday?"

I guess we aren't.

Jake,

Let's have this conversation in 20 years. How do you think China is getting people to leave its villages and work dirty/dangerous sweatshops? Where do you think the British got their factory workers, including children, during their industrial age heyday? People just gladly hand over their traditional/tribal lands, their ways of life and economies, and rush headlong into dangerous 70 hour work-weeks for a pittance because they love it? Of course not, they've been squeezed.

I don't mind if you don't trust me for some reason. But at least go to someone else and brush up on your labor history.

Let's clear up poverty.

"3) Oppressive poverty. This is the sort that interests me the most. Any culture which forcibly evicts the poor, and those unwilling or unable to work the most profitable/carnivorous industries, and on its terms, is responsible for manufacturing, building and maintaining poverty."

Clearing things up or making things up? Seriously, I think you are reaching on this.

"A living wage is a matter of fairness, "

Fair according to whom exactly?

"if you work for a living you should be able to support your family on your income "

Says who, and at what level of support?

The problem is there are a lot of jobs out there that require such a low level of skill and experience that anyone can do them, and are therefore just not worth that much in the market. People who are able and willing to only work in such jobs should not have the luxury of a family that they cannot be responsible for, indeed they have fundamental problems they need to overcome before that.

This idea that the pay from the lowliest jobs should be able to support even yourself is so wrong. Such jobs are fine as a contribution to a household with other income sources or to supplement another job, or as a good way for someone with no skills or experience to gain both. Besides, minimum wage earners rarely stay at that rate long, almost always getting a raise or a promotion or a better paying job somewhere else.

"The business benefits from higher employee morale, higher productivity, and lower recruitment and training costs."

How? Especially the productivity point, exactly how does an arbitrary government mandated increase in the employer's payroll expense translate to higher production? I would love to hear your description of the mechanism we can expect to work. If not, there is a broken window.

"And since low end wage earners spend all of their money, unlike the wealthy, "

Unless the money is stuffed in a mattress, all money is spent. The rich tend to spend a lot more of their money on assets that provide an income or are expected to increase in value.

ENTERIK: Business will thrive as the income of the living wage is spent via the laws of demand and supply.

jakenewton: This is a version of the Broken Window Fallacy. The broken window in this case is the damage done directly to whatever businesses are forced to increase a wage while getting nothing in return.

ENTERIK: A living wage is nothing of the sort. A living wage is a matter of fairness, if you work for a living you should be able to support your family on your income without having to pick which of life's necessities you're gonna have this month, at the very least.

The business benefits from higher employee morale, higher productivity, and lower recruitment and training costs. And since low end wage earners spend all of their money, unlike the wealthy, demand increases and directs increases in supply and increases in profit. There is no broken window, the communities market is not diminished, nothing is destroyed by treating workers fairly.

It's also past due to make a full accounting of all the off-balance, externalized benefits business derive from our communities in the form of subsidies, rezonings, tax breaks, infrastructure development. It's only fair that the community get some of that back in livable wages.

No doubt some businesses will face lower profits (if you don't count employee wages as part of the gross profits). In the past business have thrived after extensions of the moral limits placed upon America's common market. Business and our manmade market has expanded profits without relying on slavery, child labor and the eight hour day. They will profit without below poverty wages.

Let's clear up poverty. There are at least three kinds of it.

1) Resource poverty. You or a whole ethnic group has been forcibly shunted into some godforsaken desert, resource-poor place.

2) Spiritual/moral/ethical poverty.

3) Oppressive poverty. This is the sort that interests me the most. Any culture which forcibly evicts the poor, and those unwilling or unable to work the most profitable/carnivorous industries, and on its terms, is responsible for manufacturing, building and maintaining poverty.

So let's not paint all so-called third world nations as poor in the same sense. The US is a specialist in poverty types #2 and #3.

"Business will thrive as the income of the living wage is spent via the laws of demand and supply."

This is a version of the Broken Window Fallacy. The broken window in this case is the damage done directly to whatever businesses are forced to increase a wage while getting nothing in return.

The ally of bad is worse.

Just because the world is filled with desperately poor people, doesn't mean that the wealth concentrating economic system of the United States isn't fundementally unfair and getting worse. The income inequality of the US is worse than Vietnam, even if a Hmong family of twelve wants to live in Michigan off of one person welfare.

Poorness is relative. The voters are beginning to sense the rate of change going against their interests as the disconnect between their experience and economic figures blathered on TV increases. When vast swaths of Americans see the rich getting richer while their incomes stagnate they rightly sense the inherent unfairness.

As much as we have, 25% of Americans shouldn't have to choose between clothes, food, rent and healthcare, just so the top 10% can horde a lot more. If you work for a living you should have enough to live on so that your family doesn't have to pick and choose between necessities, let's call it a living wage. We need to expand the existing morality built into our constructed market to honor this common sense American ideal. Communities will improve and governing will cost less. Business will thrive as the income of the living wage is spent via the laws of demand and supply. By further structuring the market to enhance the public good, all will benefit.

"We have depleted our resources, out-sourced our manufacturing, given away our technology, and our education is sub-saharan."

Gross simplification. I don't even know where to start a reply, I'll just wish you good luck with your doom and gloom I guess.

Jake:
The larger, and more important, point is this:
The U.S. Economy is done. A strong industrialized economy is built on four cornerstones; Resources, Manufacturing, Technology, Education.

We have depleted our resources, out-sourced our manufacturing, given away our technology, and our education is sub-saharan. Their is nothing left to support growth in our economy. Our high-tech military can only rob other countries of their resources, for a limited time further, we are consuming the rest of the world's resources at an alarming rate.

Which brings up a bigger point - Our economic model based on hyper-consumption does not work - it's what we have been doing for the last 150 years. Look at the results, slave labor in China, and Santa Claus wearing shorts and living in a houseboat.

Back to the smaller point: Americans, generally, have their net worth divided between housing and stocks. When the economy goes down, as it will, the values of both housing and stocks will go down. It's not wise to invest in either one. And if you are invested, it's a good time to take your profits, while you still can.

As far as retirement goes: If you are planning to retire in the next 5 years, or you would like to retire, then definitely get out of housing and stocks.

The system is broke. Over consumption doesn't work. The solution (including retirement) is conservation.

Ramsay

Your anecdotes are rather interesting jld, but I would point out the waves of immigrants coming into the US legally and illegally.

"How do you know that "our" poor are the envy of the "real" poor in other areas. Are you suggesting that our poor are somehow "fake" poor?"

Higher standard of living, income, etc.

Paul B: "Ever wonder that after half a millennium since serfdom that we still have poverty in the West? Why's that?"

Jake: "Compared to what" is always the important question. In the US anyway, our "poor" are doing better than the average non-US citizen, and are the envy of the real poor in many other areas.

Question for Jake: How do you know that "our" poor are the envy of the "real" poor in other areas. Are you suggesting that our poor are somehow "fake" poor? Have you lived in developing countries - where one might suggest that there are "real" poor? I have - three African countries and three Asian countries - always in the rural areas. One of my friends from there (a "real" poor person) moved to the U.S. - educated, spoke English, highly skilled. He got a decent job quickly but only stayed for eleven months and then moved back to his home country not understanding why anyone would want to live in the US. Some envy. I could repeat the same story for dozens of "real" poor in the developing countries where I've lived - some went to Germany, some to Spain, some to England. Life was worse for them in those places. Again, some envy.

My own perspective is that the depth of poverty in the US is far more severe than in any 'southern' country where I've lived, but it's less outwardly visible because it's a 'heart' poverty. The spiritual poverty, the lack of humane-ness of most in the US is a depth of suffering that I wouldn't wish on anyone. When until I saw the spiritual wealth outside the US borders - the humane-ness of people - my heart wept for those people left in the US.

jakenewton,

After getting my B.A. in Anthro & History, doing some grad school, fieldwork, etc. I then got a B.S. in Computer Science. I've worked in a Big-10 research environment for the past decade. Though I typically write in hyperbolic/populist style, my approach to the human condition is actually backed with some hard logic, life's experiences and research behind it...

Ramsay Mameesh/Siouxrose:

The decision on whether to sell all depends on when Siouxrose bought in. Even in my case, when I purchased a fixer-upper ranch home in 2000 for $140K, the housing market would have to go through an extreme collapse, even worse than what I predict (perhaps a 25% devaluation) in order for me to lose by paying extra on my mortgage.

In general, the name of the game is to collect your variables: interest rates on various debts, amount owed on each, whether the asset is gaining or losing, or non-physical (a student loan), whether you can easily transfer it (a car), or borrow against its equity (a home), or deduct its interest. We should all aspire to be like the rich bastards who don't have to pay the poor tax (interest on loans). Rather than paying interest on things, they earn it. So the name of the game is to get out of every sort of loan you have ASAP, focusing most on those which hurt you the most.

I disagree on the argument that putting more money into your mortgage while the home is losing value is automatically a bad idea. For a couple reasons:
1) If you borrow $X for the home in a mortgage, you owe $X + amortized usury/interest to the bank. There's no way out of it, short of foreclosure or selling (at a loss). You'll need to pay it back one way or the other, or eat the loss at point of sale. The advantage in paying it off is that you don't pay Chase-Manhattan its extortion fee -- which over 30 years is likely to be more than the cost of the property itself.
2) Again, it depends on when you bought. If you bought a home in 2002-2006 or so, and borrowed more than the home is currently worth on the market today, you may be better off not selling at all, unless you want to feel the pain of negative equity. Sit on the home for another decade.

PAUL BRAMSCHER: We're dealing with a populous that gets disinformation hammered at them. 9/11 = Iraq, for instance. Even if only 10-50% are fooled on lending schemes, that's a significant impact on the cost of housing.

ENTERIK: Estimates of the scope can be made. The so-called share of so-called subprime mortgages ballooned in recent years from a relatively steady 9% to nearly 21% of all mortgages. Now 71% of subprime mortgages come through brokers with no fiduciary responsibility to their clients, which means there is no legal requirement for them to best serve the client. Not surprisingly, 90% of all these subprime loans have yield spread premiums attached to them, you and I would call them kickbacks, a pretty good indicator of abuse if you ask me.

So if were assume that there weren't so many defaults in the basal 9% we have 12% of all loans being part of the subprime lending scam. Assuming equal distributions of carpetbagging and kickbacks in basal and scam subprime mortgages we can figure (12%/21%)*70%*90%~=54% of all subprime loans are predatory by a reasonable definition. But I think the real percentage is probably higher.

The cause of this crisis is no different than the cause of all the other bubbles, overproduction. And what causes overproduction, or what the strategists of capital call overcapacity? The fact that in our economic system, the means of production are privately owned.

With the credit crunch, the wealth created by those who sell our labor power but owned by those who purchase it has reached such massive proportions, that, as is the usual case in these situations, the owners of it go on a rampage.

Re-investing it to purchase more means of production is a no brainer for the most part as the forces of production are too efficient. Given the exception of Chindia (China and India) there is too much capacity in the worlds auto industry and no room for further placement there. And even in China, overproduction in auto is present.

The pages of the big business press are full of articles now about the business cycle. In each boom, they lose their rational thinking and one reads increased articles actually praising its demise. Then when the bubble bursts, the more sober minds remind us that it cannot be abolished in a capitalist economy.

As Marx pointed out, credit allows capitalism to go beyond its limits, just as Keynsianism did (deficit spending) but it has to be brought down to earth. Of course, the consequences for workers and the poor is disastrous.

It is interesting. Probably hundreds of thousands of dollars will be spent searching for this waster Fosett who spends his time having fun in unproductive pursuits. I read there are 14 planes looking for him in the Nevada desert. Like this crisis, it will be the wealth of working people used to ease it as they inject our money in to the economy in order to help out the money men mostly. They will not rely on the market when the system is threatened like they ask us to do when we need vital services.

The young moneylenders who have gorged themselves on this credit binge, are getting a lesson in economics but, as always, it will be the working class, the poor and aged who will suffer most. They have amassed a lot of our wealth though and will use it if necessary.

They are now getting lessons in history from their strategists daily. See The Coupon Clippers at:
http://www.laborsmilitantvoice.org/
http://profile.myspace.com

Also, the main comparison between this form of production and feudalism should point out its differences. The "free" worker is a pre-requisite for capitalism. A human being must possess only their labor power, only their ability to work which can be bought by the possessor of capital for a period of time while the product of its use belongs to him or her.

When the surplus value created through this process can no longer be profitably used by applying it in further production, they gamble with it; they become coupon clippers with the resources of society. And only collectivizing this wealth and its allocation will prevent further crises.
aactivist@igc.org

"This entire housing crisis just proves that most people are incapable of making financial decisions. "

I agree for "some" people but why do you say "most" people?

I have been saynig for quite a while now though, as long as we have the public schools anyway, why not include mandatory course work in personal finance along with the other things deemed mandatory?

This entire housing crisis just proves that most people are incapable of making financial decisions. It's unfortunate indeed that some lenders let people decide for themselves if they could afford a repayment or not.

"If you have a 401k or stocks, sell them also, move your money into money market or short-term treasuries."

401k or stocks? Talk about mixing apples and oranges. Stocks are an equity instrument in a company, and they are an "asset class" different from say bonds or cash. OTOH, a 401k is merely a tax designation on an account. A 401k could contain stocks, or the cash or bonds that are reccomended by Ramsay. Please, lets not muddy the water here.

"I'm drawing on a double-BA in Anthro & History, some grad work and almost 20 years working in public or academic research libraries here."

That's impressive. I would be interested in how this background affects your thinking on this beyond what you have already said. Me, I am an IT worker, it's been tough, I am contantly trying to reinvent myself so as to bring some value to the market for my labor.

"The age-old compact in societies around the world has been that you are born in a community or tribe with an inherent membership. Perhaps not a home, but an inherent right to erect one."

To erect one on one's own efforts, I agree, and I think that for the most part we have that in the US.

"Today's system is more akin to serfdom than anything else in the human record."

I would ask you about your understanding of history, as to how you could feel this way.

"These risks, lack of security, etc. that you casually, perhaps flippantly, assert as "facts of life" are hardly physical laws of nature."

Really? How can any "system" eliminate risk and guarantee security?

"Essentially, our system is predicated on the laboring classes never obtaining any real equity to pass onto their children."

Show me why please. Fact is much of the laboring class does just that, and where they don't, their children start with a clean slate.

"Ever wonder that after half a millennium since serfdom that we still have poverty in the West? Why's that?"

"Compared to what" is always the important question. In the US anyway, our "poor" are doing better than the average non-US citizen, and are the envy of the real poor in many other areas.

Siouxrose September 5th, 2007 8:49 pm

"I just wonder if mortgage agreements will be hijacked the way so many contracts, things say as sacred as our Constitution, are hardly worth the paper they are written on..."

Every mortgage written has built-in, boiler-plate protection for lenders, allowing them to call in loans at any time. However, Congress has the sub-prime and Alt-A mortgage scandal to contend with, not to mention the millions of pissed-off people who got roped in to this real estate bubble scam. It's difficult to imagine that Congress would allow the central bankers to "pull the plug" on homeowners who have a good deal of principal invested in their homes and are keeping up with their mortgage payments.

If you want to see the deadbeats in this country wake up really fast and take to the streets, just have the banks call in their loans; all hell will break loose.

Siouxrose:
Why do you want to put more money into an asset that is losing it's value? House prices are declining - do you see any reason why home prices are going to rise?

Sell your house and rent an apartment. It's the advice I gave my sister in June, and the advice I've been giving people for over a year, I'm not alone in seeing this crisis coming. Everyone listened to me and politely smiled, but did nothing. Greed and Ignorance.

If you have a 401k or stocks, sell them also, move your money into money market or short-term treasuries.

This crisis is not something that happened over the past two weeks, it's been developing over the last two decades. Sadly, the trend is negative and will remain so. When the corporations did their hostile take-over of democracy - the fate of the middle class was sealed.

Gail:
Worried about your retirement? Click my name and then click on the blogroll retirement. The same people, Greenspan and banks., who brought you the economic mess, are selling you a retirement mess. Listen to them and you'll be lucky to just lose your money.

Their is another way. The current economic and retirement models don't work, because they are based on consumption, if you think conservation you can retire on much less and sooner.

Hope it brings some cheer to an otherwise depressing story.

Ramsay

"jake: I guess we disagree on capitalism & real estate. "

Yes, I guess so.

"I tend to see it as little more than the institutionalized illegal tribute that peasants of ages past were forced to render to warlords."

For my part I tend to see things from the angle of the individual situation first. Recognizing that "The System" can never be perfect, my belief in the abilities of individuals brings me to the individual situation first. That's always my starting point. I could never shoehorn thousands of individual situations against some model of what "The System" is, especially since I believe there is quite a bit of freedom and flexibility in the system we have here in the US anyway.

It would only be after I audited the individual situation and found that there was generally no gross mismanagement by that individual where I might then consider if they are victimized by "the system". And in that situation many other alternate explanations could still yet arise.

Since no one knows what lies ahead, the best bet is to keep diversified into real estate, stocks and mutual funds, and cash in various accounts and methods. The so called experts are wrong as much of the time as the average person who does some homework, so don`t put your eggs all in one basket.

jake: I guess we disagree on capitalism & real estate. I tend to see it as little more than the institutionalized illegal tribute that peasants of ages past were forced to render to warlords.

I'm drawing on a double-BA in Anthro & History, some grad work and almost 20 years working in public or academic research libraries here.

The age-old compact in societies around the world has been that you are born in a community or tribe with an inherent membership. Perhaps not a home, but an inherent right to erect one. Today's system is more akin to serfdom than anything else in the human record.

These risks, lack of security, etc. that you casually, perhaps flippantly, assert as "facts of life" are hardly physical laws of nature. They are the product of ongoing and maintained oppression, reduction of self-determination and basic human dignity. Essentially, our system is predicated on the laboring classes never obtaining any real equity to pass onto their children.

Ever wonder that after half a millennium since serfdom that we still have poverty in the West? Why's that?

Siouxrose--I had a conversation with a two-time cancer survivor who assured me that paying off a house is the worst thing a person can do. If you are forced into bankruptcy due to job loss, medical bills, etc., owning too large of a proportion of your home will put you in a position of having to sell it--essentially losing everything. Keeping your ownership to a minimum would allow you to stay in that home. That's just one crazy example of how our health care policies, bankruptcy policies, Fed policies, etc. all favor the rich to take every last dime from the working class.

PAUL BRAMSCHER or other "economics wiz" can you help me with this question? IF I was in a position to pay off a small mortgage would I be better off doing so now given 1. the US dollar is in bad shape 2. my income is low enough that the mortgage deducation is not appreciable. I don't know if it's better to keep the mortgage and have a little money, or use the money to negate the mortgage? Creeping thoughts include the lovely prospect of eminent domain, who does it belong to in this nexus? And whether I want to stay in the US as fascist trends gain tread. I hope this question applies to others out there... and perhaps someone who understands money better than I do can answer it. Thank you.

"We're dealing with a populous that gets disinformation hammered at them. 9/11 = Iraq, for instance."

Even so, I think most people realizing that buying a house and making the mortgage deal is one of the biggest decisions they ever face. I think they understand that they pay so much more for interest than principle, say.

"It's reprehensible sleight-of-hand that seems to have worked on a large number of people."

I'm going to say that in general, they should know better.

I think that recent events are showing or are going to show that "greed" and risk are a two way street.

Unless you have been locked in a closet for the past five years, eleven months and twenty four days, it should be apparent that the war on terrorism is Bush's plan for ongoing economic vitality. How many times has Bush said that this war will never end. Just get a job with a war material/mercenary supplier or buy stock in those companies. The Democrats won't end the war. They realize that ending the war will cause an economic downturn that they don't want to get blamed for.

Paul Bramscher,

I would quibble on one point. There will still be for some time opportunities for the nonwealthy with no principles or conscience to make significant amounts of money. I worry about how over time the market fairy ideology is intended to squeeze the humanity out of our youth so that they will not be able to afford principles or concern for society or the human race. It works to make the nonwealthy desperate enough that they will accept dehumanizing jobs in order to survive, and then in their depravity they will inevitably become allies of the corporate predators (overseers of those even further down in some cases).

"Amortization hides the fact that a huge number (probably a majority) of people will pay Chase-Manhattan, etc. more than their house's actual selling price while servicing a 30 year mortgage, even at a "good" interest rate."

Usually more than double I think. You really think the borrowers don't know this?

This has never been a subprime crisis. That's just the smallest box that the framers are trying to stuff it into. This is a far larger run-amok credit/lending/usury crisis. People can deny it all they want.

Ordinary market dynamics regarding the value of things should be based on supply/demand, what people are able to pay. Not what they are able to borrow. Or worse, willing to gamble. Gambling and speculation on luxury items, business ventures, etc. is arguably acceptable risk. But we're talking about a roof over people's heads, ability to generate some equity and pass it onto their children.

The fact the usury is so readily available and not seen for what it is, is the root cause of this problem. Amortization hides the fact that a huge number (probably a majority) of people will pay Chase-Manhattan, etc. more than their house's actual selling price while servicing a 30 year mortgage, even at a "good" interest rate.

Think about the long-term dynamics here. Those who have money, and can lend it, make more than those who actually work: carpenters, plumbers, etc. Or the homeowner him/herself.

Over time, more equity will belong to the banks than to people. We've come to a point where the only way to make money is to already have it. Anyone else is living on Losing Street.

Siouxrose September 5th, 2007 4:38 pm

Siouxrose, I'm no economic wiz but consider this scenario:

You have a fixed-rate mortgage where you will pay the same amount each month for the life of your loan. On the other hand, today you might pay $2.00 for a loaf of bread and one year from now you may need $4.00 to purchase that same loaf of bread; but the number of dollars you'll need to pay your mortgage will remain the same.

The important thing to remember when making such decisions is that every unbacked dollar the Fed prints and circulates, the less our dollars are worth in terms of purchasing power for things we may need in the event of a severe recession or depression.

If you believe a recession isn't in the cards, then pay a little more each month on your mortgage. But if you think we may have a recession (as most honest economists believe), why give the banks more money now while its purchasing power will benefit them? It's always good to have rainy-day money on hand when inflation hits and the cost of goods and services skyrocket.

Some reality-based economists are recommending that we keep a couple of thousand in cash in the event that things get really bad. As ezeflyer said: The Fed is the greatest scam ever.

All us Baby Boomers who have lost our healthcare and retirement benefits to ousourcing, so that we have been spending our retirement savings today, are in even sorrier shape. What will the government do when we all end up living under bridges? It seems to me it would make more sense to find a way to keep folks in their homes at this point than to try to solve the problem later.

"Greenspan ran around worrying about deflation for the first time since the Great Depression. The only tool he could find to lift the economy out of the stock-crash recession was the inflation of a housing bubble."

I can remember a few years back when Greenspan was speaking to Congress about the economy and told them that the Federal Reserve didn't know how to handle "deflation" because they had no experience with it; on the other hand, he said they had plenty of experience with inflation and suggested that they would have no problem dealing with it. Keeping him on as Federal Reserve Chairman is like hiring a bookkeeper who doesn't know how to add or subtract.
Economic and monetary experts or evil opportunists?

Here's what Martin Weiss said in September, 2006:

"Brace yourself. The unspoken lesson of 9-11 is that no matter how ready we may be for the next terrorist attack, our preparedness for the next financial shock is the worst in 60 years."

Be prepared for the economic collapse.

jakenewton,

We're dealing with a populous that gets disinformation hammered at them. 9/11 = Iraq, for instance. Even if only 10-50% are fooled on lending schemes, that's a significant impact on the cost of housing.

In any case, it's not so much whether they know it or not -- but whether they're willing to sign on the dotted line. I really think that most people work more with the monthly figure than the bigger picture in mind. If $X per month is within their budget, that's the bottom line for them. Whereas I'd rather be able to get a piece of property and own it outright before I retire, paying absolutely as little interest as possible. But I think greed kicks in. Imagine: you can get 3 bathrooms, more square footage, new construction, modern updates, etc. Just borrow a little more... Borrow up to your monthly limit.

Most online mortgage calculator I've seen offered on realtor web sites fail to mention the total amount paid on the principal. That presents a fairly threatening sticker-shock. So they emphasize monthly out-of-pocket instead, which carefully minimizes the actual cost of housing. It's reprehensible sleight-of-hand that seems to have worked on a large number of people.

jakenewton,

I'm ordinarily pretty optimistic about my fellow human, but we live in some rough times. The whole country was swindled by Reagan, Bush Sr, and Bush Jr. time and again. What you suggest, that they SHOULD know better, is not borne out by the facts -- by the daily news. Apparently an awful lot of people DIDN'T know better. Or else they were faced with a gambling proposition given ridiculously high rents. Let's say your monthly limit is $1,500/month, and your current rent it about that much. Let's say you can get a sub-prime, prime-only or ARM at $1,500 a month. Arguably, it's a gamble worth taking. With home values making double-digit increases, the ability to deduct interest paid on the mortgage, more living space, a backyard for the kids, decent garage, etc. it might be a risk worth taking.

Though, IMHO, putting a roof over your head shouldn't be a "risk". Shit, the significant risks humanity faced for the first hundred thousand years were primarily natural, not human-caused. Now we face human risks -- getting forcibly evicted.

People, time and again, since the foreclosures of the Great Depression, or of the family farm declines in the 70's-80's etc. demonstrate that either a significant number of them do NOT know better, or that they are forced by other extenuating circumstances to borrow more than they can really afford. Devaluing of their labor and competing with sweatshops translates into digging at the bottom of the bucket.

Siouxrose,

Check out an amortization calculator like this: http://ray.met.fsu.edu/~bret/amortize.html. Compare it to how much interest paid you can deduct on your taxes, and how much interest you're paying on other things (like credit cards, etc.), and how much you can earn in investments.

Since I still have almost 25 more years to go with my home mortgage, just spending a couple hundred extra a month will shorten my 30 year into like a 20 year, trimming more than $60K off Chase-Manhattan's extortion from me.

goner: If you have the house paid off, you can always take out a home equity loan in the event of an emergency such as what you described.

GONER: That is a valid argument, but I'm wondering if the dollar falls in value, if it's better to have NO mortgage or have dollars? I think our economy is in for free fall... it's like the house on the hurricane's route being held together by duct tape and a few sheets of compromised plywood...

"I'm ordinarily pretty optimistic about my fellow human, "

Good. Me too.

"but we live in some rough times."

Compared to when?

"What you suggest, that they SHOULD know better, is not borne out by the facts — by the daily news. Apparently an awful lot of people DIDN'T know better."

How bad do you really think it is? What numbers are out there?

"With home values making double-digit increases, "

Utter fantasy that this would continue. 5% is more typical I understand.

"the ability to deduct interest paid on the mortgage, "

This is the main advantage to owning IMO, in most markets anyway.

"Though, IMHO, putting a roof over your head shouldn't be a "risk". "

Nothing is "safe". There is risk in everything. That's an important lesson to learn.

" the foreclosures of the Great Depression, "

Back then they could just call in the note all at once. It's not like that now.

GAIL: Thank you for some guidelines to consider. It just seems everything we ever relied on as being true, ethical, etc is up for grabs. I don't believe there will be an iota of social security left after Bush & the Grover-Norquist-loving-neocon-wrecking crews get done when I retire... I just wonder if mortgage agreements will be hijacked the way so many contracts, things say as sacred as our Constitution, are hardly worth the paper they are written on because those who believe they can lay claim to it all own our courts, buy our politicians, have poisoned our rivers, now make war at their pleasure and the karmic consequences will fall to all of us, many decent folks who have lived our lives trying to do the right things. Hence, my confusion!

Thank you, Paul. I like the idea of paying more each month to reduce ultimate interest, but I wonder if we can trust the bank to process this info? I know of people whose mortgages were bought by banks that bought up other banks, and lost the chains of data! The home purchaser was forced to prove what they didn't even have the paperwork TO prove. I see a lot of this today... no chain of accountability and it's so troubling. In my experience, fraud used to be something you faced once in a while. Right now I am dealing with SEVERAL situations that in my view either represent outright fraud or gross incompetence and we're talking about banks, credit card companies, airlines, etc. It's all about having to fight what should not require any fight, what is fair is fair. This is an era of bullies first, and screw decency, honesty, fair play, etc. I am amazed how much this disease has filtered from our "prez" to everyday authoritarians who have made the rush for money, as bottom line, their ersatz religion. Wow! Makes me yearn for Super man!