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Attitude and Behavior Shapes the Economy

January 14, 2008

federalreservechief1.jpg“The Federal Reserve is not currently forecasting a recession. We are forecasting slow growth,” said Federal Reserve Chairman Ben Bernanke last week. With the over-reaction of the U.S. Banking and Mortgage Industry as well as the press in the last month, the United States is seeing a jump in the unemployment rate and the foreclosure numbers as an attitude of panic ensues. As a person of intelligence, keep in mind that foreclosure is a process that typically involves many months of delinquency. In essence, the economy in this country is being measured on a process that has been in place for some time.

Conventional loan delinquency has different rules from loan delinquency of federally-backed home loans for veterans for example. Delinquency of a home loan is different from foreclosure, which varies from 60 days late to perhaps 9 months or more in the case of some Fannie Mae type loans. The banks and mortgage lenders have known about the delinquency issue for some time, whereas foreclosure is a result of continued delinquency or non-payment based on the terms of a loan. In essence, this news is not new. The lenders have been preparing for the publicity for some time. Now that they are have been forced to face the music, they are making the most of the bad news to shift the illusion of blame solely on the homebuyers instead of their lax policies, lending practices and greed that brought this crisis about. The resulting negative attitude spills over into areas like the stock market, which is based almost entirely on speculation and attitude. Many other aspects of the economy are based largely or solely on outlook.

Therefore, the question of the economy depends on you and other people in the economy, not just on the housing market, bankers, Wall Street or strictly on the latest unemployment figures. The economy is much more complex. In practice, the participants in a free economy decide what attitude they assume in any given economic scenario. The bankers feeling of doom means little if people and active participants in the economy are not overburdened with debt or are able to maintain their current way of life. Therefore, what you are hearing at this point is largely a matter of attitude as people elect to pile on. You choose. The industry would love for you to buy into everything they say so that they can shift the blame on “deadbeats” that no longer pay the bills. The industry knew most of the risks going in, taking their chances with higher interest rates and the like. As a result of the failed risk, the banking and mortgage industry will then shift the debt onto the Federal Reserve and the taxpayers of this particular economic system in the United States. That’s the system in place. The reality is that the actual debt has been spread across the world by investors, a side-effect of the global banking industry. The foreclosures in the market are a local phenomenon caused by various factors, but chiefly by an overexpansion of the housing market and overconfident projections of the lenders. If you believe the economy is weak and recession is unavoidable, it will be. Those are the facts.

The economists and bankers say that they want to induce people to boost spending, especially on capital assets like housing and cars, thus revitalizing economic activity. Yet, out of the other side of their mouth, the word of wisdom becomes the opposite as some economists now place odds of a recession at 50% and put the word out as they struggle to be right about something and seek to validate their existence. All of a sudden, the economy is all about betting. What organizations and people see in their own financial lives is what they inflict on their worldview and the worldview of others. Someone else’s reality is not necessarily yours. Behavior shapes the economy. Look at all the behavior! Whether you adopt the behavior of others depends on you.

Elvis Manning


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