Ok - the only reason most people aren't scared to death about this economic meltdown we are involved in is because nobody has felt any real pain yet. If you have stocks or a pension or a 401K and aren't pulling it out right now, you have not felt any pain. But sooner or later (probably sooner) we WILL have to rely on these assets and that's when it is going to be real tough for most of us.

Right now, you want to be flush in cash and low in debt (of course, when ISN'T that a good idea. But the problem is, we all created this mess because we are all GREEDY. GREED caused every bit of this and the sooner we ALL realize this, the sooner we can get back to a comfortable economic position. Here's how I lay the blame.

WHY DID YOU EVER THINK YOU COULD AFFORD THAT?!?!?!Enter the greeder consumer. Why in the world would someone making $60,000 a year (that's pretty good money - huh?) ever think they could afford a $350,000 house? The reason is that they were greedy and bought something they could not afford. Where is that person going to get $3,000 a month just to pay a house payment??

WHY WOULD YOU EVER LEND $350,000 TO SOMEONE MAKING $60,000 A YEAR??
Enter the greedy banker. Bankers created something called an ARM (Adjustable Rate Mortgage) which means they change the interest rate and monthly payments from time to time (usually a two to three year time period). But to help you get started, WE WILL OFFER YOU A LOW BEGINNING INTEREST RATE - 'CAUSE WE WON'T YOUR PAYMENTS LOW SO YOU CAN GET INTO THIS HOUSE YOU WANT (but can't afford). So for the first two years, its tight, but you can make the payments. However, at the end of that two years, we are going to ADJUST your mortgage. If rates are down, you win, we will actually lower your rate (never happens). But if the RATES ARE UP - WE HAVE NO OPTION BUT TO RAISE YOUR RATES!!!!! Guess what, your monthly payments just went up $1,000. But the bank doesn't care because all they earn is the FEE they charged you to ruin your credit. The sell these loans within a couple of days (other institutions, like Fannie and Freddie buy these loans, give the bank their money, so the bank is off the hook.

WHAT WERE THESE INVESTMENT BANKERS THINKING (BESIDES GREEDY THOUGHTS)
Enter the greedy investment banker. The investment banker is looking for people or groups (like you pension plan) to sell investments to. Let's say you put $200 a month toward your pension. That money doesn't just sit there, you expect it to make more money, to be invested. Your pension fund has a manager, and she spends her day trying to figure out the best way to make your money grow. All of a sudden, she sees an investment bank that is offering a high percentage return if you will invest, say, $50,000. The money manager of your account keeps her job if she earns you a lot of money, so she is motivated to buy this investment from the investment bank.

WHAT JUST HAPPENED?!?!?!?!
Your life savings was just "INVESTED" in a company because 1) they promised to pay you a great return and 2) you believed that their assets (the stuff they have) were so good that they were worth more than you had given the company. In other words, if we sold all the stuff this company had, we could make enough money to pay everybody back.

GUESS WHAT???
The assets that these companies had (your house) all of sudden were not worth the money that they had given you to buy the house. People quit paying their loans, the investment house quit getting their monthly cash payment. The investment bank called the homeowner and said "we are going to reposess your house" and the home owner said "come get it".

So now the Investment company has a bunch of assests (in this case houses) that they bought with YOUR MONEY (your pension) they can't sell cause they aren't worth spit.

WE WERE ALL GREEDY AND THERE IS GOING TO BE SOME PAIN IN ALL OF THIS BEFORE WE GET BETTER.

But we will get better. There are many good assets (stuff) still around with lots of value. We just have to get back to being honest and maybe not being so greedy.

What do you think? Write something, I dare you.

PEace. Mike Ritchie