While I disagree with the current government's significant intervention into the market, it provides some of us with unbelievable opportunities. I continue to believe that banks should have been forced to fail, and that American car companies need to go into bankruptcy in order to become profitable. Even a day or two ago, you might have heard me complain about how most Americans were unfairly bearing the burden of corporate mishaps. I have come to believe that corporations and financially responsible citizens (with a good credit score and some savings) are both benefiting from the government's actions. Take interest rates for example. If I decided to (and could) refinance today, my monthly mortgage payment would be reduced by $300. If I refinanced and changed from a 30 year to a 15 year mortgage, it would only cost me $75 more per month. That is $75 more per month to pay off my house in 15 years! Even then, my mortgage would be less than rent on a comparable house in the area.
Unfortunately, most people won't be able to take advantage of the opportunities. Many people will lose their jobs during this economic cycle, and even more will be pushed to or beyond their financial limits. People with average (and worse) credit scores and those who are living paycheck to paycheck are the ones who will be most disadvantaged.
Here is the dilemma. While I disagree with these actions, I can significantly benefit from them financially. The moralist in me wants to reject these opportunities but the rationalist sees all of the benefits and possibilities. Can someone live a congruent life while disagreeing with these government actions and taking advantage of the opportunities while others can't?
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Investing today for tenure later...
2 comments:
Isn't that the problem with government intervention in the marketplace, that it distorts incentives and undermines the idea of the "invisible hand" producing social benefit? It takes all private enterprise and makes it a public good, so then you get problems with free riders. If food comes from work, I have to work to get food. But if food comes from the government, then I have incentive to not work (assuming work is an inferior good, as it is for me) but still collect my food. Everyone has this incentive, though, so no one works and everyone expects food.
Also, from what I've read banks may be advertising particular loan rates, but not actually extending any loans at the moment while they figure out their balance sheet and the balance sheets of those banks with whom they do business. So they may say, "Mortgages as low as 4.5% with qualifying," but the fact is, at the moment, no one can qualify unless he has the entire principle in a coffee can.
Congruency? I say you HAVE to take advantage of government action to show the stupidity of the action. If they offer everyone an HDTV antenna coupon and it doesn't hurt them financially, they'll think it was a fine idea and do more stupid stuff like that in the future. Make sure to get your maximum allotment of coupons, even if your TV doesn't receive over-the-air signals. I really think the only way left to combat socialism is to bankrupt it.
So, I did it. I refinanced at 4.9%. That is down from our current mortgage which is at 6.8%. I don't feel bad about it at all. I have done my financial homework and kept my books clean.
I still feel bad for those others.
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