Wednesday, May 19, 2010

Better Now Or A Year Ago?

Now that all of the drama of the Goldman Sachs vs Congress (actually Sen. Carl Levin) is over, what did it all mean. More importantly, WHO CARES? (well, I actually do but it's my job to care).

The reality is that regardless of who caused the financial crisis most of us just want to know when it will end and how will we survive until it does. Will knowing what a "Synthetic Derivative" help? NO, and it's not something you add to your cars oil or take out of it for that matter! If the crisis is over, if we have turned the corner on the recession, if the economy is improving, why is the unemployment rate still at record or near record levels, after adjusting for those who have fallen off of the rolls because benefits ran out, and deducting the Census workers?

The answer is easy, well at least explainable, or at a minimum, less confusing than Synthetic Derivatives. The term "Recession" is a technical economic word that rarely intersects everyday life. It deals with the number of consecutive calendar quarters that the "gross domestic product' declines. And when most TV types discuss the economy getting better they are really talking about the stock market, which a world unto itself.

For real people - are you better or worse off financially than you were 1 year ago? That's far from scientific and can be misleading, but it isn't a bad way to gauge the problem.

Foreclosures are still way up. April's figures showed fewer foreclosure sales but more actual cases where the lender has actually taken possession of the properties it foreclosed against months ago. And, the number of borrowers in default is not leveling yet. And the modification programs are still not really working. And people have so little left from their paychecks that they cannot afford to file bankruptcy using a lawyer, or even a document preparer (which is worse than filing themselves anyway).

In my office, we are taking payments for months from clients who want the expertise of a lawyer but can only pay $50 or $100 per month. The extra part-time job is gone; the overtime hours aren't available. Money is tight.

HOWEVER, at this point it doesn't appear that "the economy" will get any worse. This may not help every individual but it is an indication that we may have bottomed. How long we stay down is any one's guess.

Synthetic Derivatives? Think of a fantasy sports league based on a fantasy sports league, based on a real sports league! - (Next time I will try to explain in fewer than 5000 words)

Author's Copyright by Richard I. Isacoff, Esq, May 2010

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