As a child do you remember your mom telling you not to run through the house with scissors in your hand? The reason she said that is because she knew that even with all of your good intentions you’d stop paying attention and end up looking like Slick Rick, less the gold teeth and fedora. For the many that made it to adulthood without losing an eye or an appendage, we’re all grateful to mom for the oversight.

The similarities between the performance of the last half decade of our economy and the indiscretions of an innocent child are eerily similar. This era has been one of gross negligence, greed, and down right stupidity. There is absolutely no question that the system is broken, but the $850 Billion question is who broke it? I’d love to stick the blame to George Bush, Hank Paulson, hell even OJ, but none of them alone are the true culprit. The economic issues that exist today don’t belong exclusively to Main Street or Wall Street…we did this to we.

credit: thorinside

Are You Running w/ Scissors?

Remember when the housing market was hot, when you could get a home loan for $5 down and a smile?
Remember you could take the world’s worst credit into a luxury car dealership and drive away in a $50,000 gas-guzzler with no payments for 90 days?
Remember when the requirements to get a credit card were a pulse and pen?

As consumers we reveled in these times and used the easy credit to enrich our lifestyles beyond belief. Where in the universe did any of these transactions make good economic sense? We discounted the fact that the day would come when we had to pay the piper.

In addition to living like Diddy on a $45,000 a year salary, we also pushed and pushed to make sure our investments were as prosperous as we were. We celebrated the sexy earners on Wall Street and clamored to get a part of their financial windfalls without asking how. If a company wasn’t performing as well as its peers, then there was a problem. Oust the existing CEO and get a real earner in there.

CEO’s got rich, 401K’s got fat, and home values got higher than KC and Jo Jo at a Columbian Cocoa convention.

Through it all we never asked ourselves how or why is this right. We just took it and ran.
I once had an economics professor who asked the same questions on every one of his tests. The question was:

What does Caveat Emptor mean and why is it important?

For those who don’t know, it is the Latin translation for Buyer Beware. It seems like a simple enough question to answer on a test, but it’s more difficult to apply to life. Today I realize why that question was so important. Of the two parties involved in a transaction, the buyer has to be better, more educated, and the more rational risk taker. If he is not, he’ll lose it all on one turn of pitch-and-toss. Sure, human nature, the sales pitch and our love of vanity/riches, make us as American’s drunk on the possibility of the one hit wonder, but one hit wonders fade quickly.

credit: PittCaleb

We were All Bullish

If Wall Street and Main Street had been aware, maybe we would not have witnessed 650,000 properties being foreclosed on in the first quarter of 2008. Maybe financial icons like Lehman Brothers and Morgan Stanley would still be around. Maybe your neighbor would still have the title to his home.

I wish my mom had been there to tell my neighbor and the CEO of AIG to stop running with scissors in hand. I know, hindsight is 20/20 and now we’ve got to focus on how to get out of this mess, but if past performance is indicative of future results, we’ll be dealing with this mess for another 45-50 years. I just hope that we’re all able to make better decisions.

Caveat Emptor Forever

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