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Fed stimulus package

Discussion in 'Financial Cents' started by monkeyman, Jan 30, 2008.

  1. monkeyman

    monkeyman Monkey+++ Moderator Emeritus Founding Member

    What do you all think of the stimulus package the Feds are talking about where they send most of us nice checks? Personaly Im somewhat devided on it. I figure it is definatly a BAD thing for the econemy given that the main source of the problem is out of contrloe debt which this will only compound and further devalue the dollar. The there is the personal leavel where I look at it in the short term that $1500 extra money into the house at this point would be helpful for paying off some bills in the short run.

    What do you all thing, good thing and glad to see it or wish they woud reconsider and not do it?
  2. Seacowboys

    Seacowboys Senior Member Founding Member

    There is no simple answer to this. Personally, I think it is a stupid idea but understand the sort of logic behind it. Number one is that it is a platitude for low-income households that probably shouldn't be allowed to vote but will cast their vote towards the money machine. The other side is that our whole system is based on consumerism, designed obsolescence, and shopping. 90% that receive this little tax credit will spend it on Chinese crap at walmart and the system is supposed to jump-start. I resent that the controllers think we are so stupid but I don't resent that as much as I do the fact that most of us actually are that stupid. What would that little money be to me? I would probably spend it on a weekend in New Orleans or maybe a couple trips to the range. The big effect is that a lot of people that don't participate in the tax system will jump on now to get their free money.
  3. TnAndy

    TnAndy Senior Member Founding Member

    It's simply another in a long list of "feel good" measures Congress passes on a regular basis so they can say they "did something about the problem".....and won't do jack to affect the economy.

    Last 3-4 years, Americans have pulled 600-800 billion a year out of their home ATMs in the form of 'home equity' loans..... on 'equity' that has now disappeared. That money got spent into the economy.

    This plan of Congress will put 150 billion or so into the economy.

    Drop in the bucket.


    The almost unbelievable irresponsibility with debt displayed by
    homeowners like today's is so amazing, so far beyond any form of
    excusable behavior, that you have to wonder if it is right to forgive
    it. If someone borrows hundreds of thousands of dollars against their
    home and ends up with a short sale requiring the forgiveness of this
    debt, how do you feel about it? Remember America's Debtor Prisons or
    Are Short Sales Moral? These questions do not go away. Does a really
    extreme case change your opinion about the subject? Let's see...

    Asking Price: $1,195,000
    Income Requirement: $298,750
    Downpayment Needed: $239,000
    Purchase Price: $397,000
    Purchase Date: 7/20/2001
    Address: 9 Soaring Hawk, Irvine, CA 92614

    Beds: 4, Baths: 2.5, Sq. Ft.: 2,960
    Type: Single Family Residence
    MLS#: S517428

    So lets walk through the mortgage history of this property and see
    just how bad HELOC abuse can get...
    7-20-2001 The house was purchased for $397,000 with a first mortgage
    of $317,600 and a downpayment of $79,400.
    11-07-2001 HELOC for $48,000 taking out over half of downpayment.
    8-26-2002 Refinance for $360,000.
    11-26-2002 HELOC for $29,000
    11-26-2002 HELOC for $71,000
    6-18-2003 HELOC for $56,000
    6-18-2003 HELOC for $100,000
    6-1-2004 Refinance for 517,500 -probably paid off HELOCs at this
    10-22-1004 HELOC for 89,900.
    4-21-2005 Refinance first mortgage of $624,000
    4-21-2005 Refinance second mortgage of $156,000. Total debt of
    $780,000 at this point.
    9-12-2006 Refinance first mortgage of $948,750.
    9-12-2006 Refinance second mortgage of $189,750. Total debt of
    $1,138,500. No HELOCs

    So there you have it. This homeowner went to the housing ATM 8 times
    over a 5 year period and pulled out $820,900. Now they have a property
    priced at a WTF asking price hoping they can find some knife catcher
    to come pay off their bills. Even if you wanted to buy this house,
    would you do it knowing that you were about to pay for $820,900 worth
    of consumer spending (They may have spent $200,000 on the renovation,
    but please spare me the BS about investment or illness or any of that
    crap. Look at the pattern of withdrawals. They spent it, and you know
    it.) I suppose the lender can always hope these people stashed some of
    this money away somewhere to cover the shortfall at the closing table.
    Doesn't seem very likely, does it?

    Fed is trying to bail out and help home owners and financial
    institutions, for what???
  4. ghrit

    ghrit Ambulatory anachronism Administrator Founding Member

    To me, a lousy 600frns is essentially meaningless. Not that I would object to an incoming check, we can all appreciate a bit of a boost. However, the long haul is the problem.
    Question: Where is that free money coming from?
    Answer: More federal debt.
    Question: Who pays the federal debt?
    Answer: Too obvious, eh?
    Question: What is the result of the free money?
    Answer: Collectively, we owe more than we got "for free" simply because of interest owed on the borrowing so we could get a small check.
    Net result: Either taxes go up to pay off the debt, or the economy tanks. Taxes go on forever, but freebies don't.

    One of the pols stated the other night that the dot gov really should start a prudent money program, exactly like us poor citizens are expected to do; that is stop spending beyond our means. Might have been RP, can't remember, but it remains absolutely true. If we had debtor's prisons, the biggest occupant would be our darling dot gov. The solution is obvious, go on a strict budget and pay off the debt with something besides fiat money.

    In short, the idea sucks.
  5. ozarkgoatman

    ozarkgoatman Resident goat herder

    I think it is a bad idea over all. But right now I regetably could really use the money to help pay down some debt. We will get by without it so over all I hope it doesn't happen but there is a small part of my brain that says man it would really help. [beat]

  6. Clyde

    Clyde Jet Set Tourer Administrator Founding Member

    Its like giving someone a pint or two of blood when they are bleeding from their femoral artery. It simply postpones the inevitable death, but makes you feel like you are doing something to keep the guy who is dying from knowing he is dying.
  7. Seacowboys

    Seacowboys Senior Member Founding Member

    I wonder how much money they'll give away when they realize how many are spending it on ammunition?
  8. Blackjack

    Blackjack Monkey+++


    But I, for one, will be happy to get that pint that'll make me last a little longer.

    My landlord will be happy to see a little of the back rent I owe him in the envelope, and it'll keep my electricity on for another couple months.
  9. Blackjack

    Blackjack Monkey+++

    Now that would be funny...... CNN Report...."Millions of Americans take their gov check and go directly to the gunshop to buy ammunition".
  10. Tracy

    Tracy Insatiably Curious Moderator Founding Member

    I'm not exactly sure where I stand on this one, MM. Sure, we could all probably use a little money back from those who take it from us in the first place, but we'll end up paying it back in the long run.

    I'm assuming it will be taxable income. That type of "rebate" really burns my buttons. Just like; if I get a tax refund, I have to claim it as income on next year's taxes. So, I'm taxed on the extra taxes I paid.:mad:
  11. Tango3

    Tango3 Aimless wanderer

    We are starting our taxes tonight think they'll buy a deduction for a "government alignment tool.308"?
  12. monkeyman

    monkeyman Monkey+++ Moderator Emeritus Founding Member

    Actualy it is supposed to be taxexempt so that part is at least 'nice' of them. I figure I can use the money so on a personal note like the idea but in a broader sense I hate to se it because I figure it will hurt the economy even more. I dont figure they will 'borrow' the money I figure they will just crank up the presses and 'make' the money thus creating more supply and lowering its value. Kind of like the way that if the families that rule the dimond industry wanted to bring in a bunch of money they could just open up the vaults and flood the market with dimonds but then they wouldnt be scarse and if all of them were put into the market then they would have little more value than quartz, thats pretty much the same thing I see this doing to a lesser degre to the FRN. Then back to me though, the main thing Im worried about the money for is paying off debts that are a fixed number of FRNS so on that it dont matter if the FRNS are worth 1% or 5000% of what they are supposed to be.
  13. Clyde

    Clyde Jet Set Tourer Administrator Founding Member

    If the stimulus packages costs $330 Billion -- $330 Billion that will need to be raised by the .gov selling $330 Billion of Bonds at 4% interest, then the annualized cost of financing this expenditure will be $12 Billion a year for the rest of our lives since the .gov never pays off its debt, but just keeps sucking all of the "equity" out based upon increased future income.

    That is what you don't see in this "stimulus" package and what they don't want to tell you. A major depression/recession will decrease income and shake the markets because worldwide investors will begin to worry that the income stream they are counting on may not happen. When that happens, kiss the $$ goodbye.
  14. <exile>

    <exile> Padawan Learner

    MM, it sucks and shouldn't be done...the less the government hands out and takes from taxpayers the better. IMHO the best part of the stimulus package is knowing that it will be helping out fellow monkeys but it needs to stop, NOW!
  15. CraftyMofo

    CraftyMofo Monkey+++

    I think it's unbelievable that that illegals that possess a taxpayer ID will get this rebate, while upper income taxpayers do not.
  16. ChemicalGal

    ChemicalGal Monkey+++

    I don't think it's going to help anything except to delay the crash another little bit. But it's coming and I think they just hope to delay it TIL after the elections. I really don't think they are going to be able to do it.

    But if they send it, I will invest it in animal feed so when it crashes I should have feed until garden starts coming in.
  17. jash

    jash Monkey+++

    I have to agree-what is the debt up to now? We are putting ours into solar panels. Funnily enough we had that much earmarked for some, now we can buy more than we thought. What happens to the debt when we crash & burn? Will the countries holding it forgive our debt as we did the axis powers after WWII, considering what we have done for other countries? Doubtful. I think in the long run that $1500-$1800 is just not going to seem worth it.
  18. monkeyman

    monkeyman Monkey+++ Moderator Emeritus Founding Member

    I suppose we could just cut off aid to other countries and tripple the check for everyone here and still have a bunch left....
  19. ColtCarbine

    ColtCarbine Monkey+++ Founding Member

    I think I should receive an extra bonus check for not sucking all the equity out of my home [troll]
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