The SS Economy

The US Economy

Source

Present

A country’s economy is like a ship at sea carrying all the people of the country. It needs both a helmsman and a motor.

The United States at present is running without any one steering. The motor is the financial sector. It is running and sometimes speeding unguided. It expects the people to keep it fueled yet takes them nowhere and when it runs aground expects the people to push it back in the water.

When you buy a house, first you pay a deposit then you make regular payments that include not just the outstanding balance but also interest. You also have to pay insurance.

When the economy becomes bad, it is hard to keep up mortgage payments and feed the family. As soon as you miss an insurance payment, the insurance becomes invalid. You miss a couple of more payments and the banks talk of foreclosure.

OK, so the bank has received your deposit, all the payments you have made plus the interest and as generally the banks own the insurance companies, they also have your insurance payments. On top of this they have your house.

You have nothing.

As the economy is bad, nobody has money available to buy houses. The bank has already used all the money you gave them on paying themselves salaries and inflated bonuses, the rest going in bad investments and that is why the economy became bad. They complain that all their capital is now tied up in houses that are not selling and so they have no funds available to invest and thereby try and improve the economy. They are given your tax money to help them out.

You are given nothing.

Foreclosures
Foreclosures | Source

Future

The policy should be that if the bank takes back your house, either the bank or the insurance company, should give you back your deposit. After all, apart from having your house, they get to keep all payments, interest and insurance.

That way you would immediately be back in the house market, perhaps a smaller house but certainly a cheaper house. At least you are still in the market if you wish to be.

This would mean that the housing market was still open and so the banks have still got their cash flow, they at least would not have to ask for your taxes too.

OK, the financial sector would not make so much profit but isn’t that the current problem, they want too big a slice of the pie without taking any risks.

The risk is always yours.

This would perhaps bring about several changes. Firstly the banks may ask for smaller deposits, making house purchases easier. Secondly, it may make the bank more susceptible to renegotiating mortgages before foreclosing. Lastly they may be more careful to whom they lend.

Conclusion

I am neither an economist nor an accountant and so I realize that any of you can pick big holes in my view of the future. However this is not meant as a blueprint, only a very rough guide as to a very general direction in which the ship should be sailing.

The United States is in need of a competent Captain. One who is both a pilot and an engineer. He not only needs to be able to steer the ship but also know how to control the motors.

This President is obviously not a seafaring man and Congress does not even want to board the vessel.

If no qualified person steps up to take control of the United States SS Economy it will not only be endangering itself but will be a hazard to other shipping.

YOU, as passengers should choose your skipper wisely.

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Comments 2 comments

Clarke Stevens profile image

Clarke Stevens 4 years ago from North Kingstown, RI, United States

Your SS Economy idea is right on target, as far as politicians go. But the real economy is more like this: we let borrowing go wild, it drove up prices on houses etc, and now we must pay the bills and take prices down to reality. This is painful, and many of us are getting hurt in the process. Not sure politicians can do much about this, but it would be nice for them to look out for the injured.


cbl2988 profile image

cbl2988 4 years ago from Mesa, Arizona

Central Planning? You mean we need more of the stuff that got us into this mess?? Might I suggest some reading?

http://emilyskarbek.com/uploads/The_Use_of_Knowled...

http://mercatus.org/publication/gambling-other-peo...

Here is a start. Let me know if it helps or if you would be interested in any more material.

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