Sunday, September 28, 2008

Trying to Understand the Global Financial Crisis

On Friday, as I watched various news networks follow the fate of the $700 billion bailout plan, I heard several Congressmen and reporters opine that "The average American will probably never fully understand the danger that the American economy is in." That was like a waving red flag for me. In physics, there are variations on a quote that goes something like this, "If you can't explain something to your grandmother, then you don't really understand it." I've seen this quote ascribed to both Ernest Rutherford and Albert Einstein. Richard Feynman's version supposedly goes like this, "If you can't explain something to a first-year physics student, you don't really understand it." As a physics teacher, I am forced to admit that I don't fully understand a concept if I can't explain it clearly and succinctly.
When Congressmen and reporters tell me that I cannot understand the situation and yet do not attempt to explain it, that tells me that they probably do not understand it. The President in press conferences and the current candidates during the debates did nothing to explain causes of the situation either. I have spent a few hours this morning trying to understand the basics of the current crisis. Personal finance blogs and the links they contain have been the resources I used. I still don't have a clear picture of the situation, but I have learned a few things--I think. If I am drawing incorrect conclusions, please let me know. I really would like to learn.
  • There is no such thing as a completely "free" market. Initiators of the system have an inherent advantage over others, therefore regulation is necessary for to help establish a fair playing field.
  • This crisis did not develop overnight; it has been building for the past three decades (at least). The Federal Reserve and the Treasury Secretarys during the past five administrations should have had a clue that the bubble could not go on forever, and that the correction would be severe.
  • Lobbying by the banking and investment sectors have had too much influence on the lack of regulation.
  • Congress has not kept pace with the changes in the stock market. They don't understand it either (and they should!)
  • The increases in the stock market over the past 30 years do not reflect increases in real, physical value. The increases reflect investing in and insuring debt--not real goods.
  • Speculation, junk bonds, hedge funds, credit default swaps (CDS), and deriviatives are all things that I do not completely understand, but have to do with the current crisis. I really don't understand why these practices were accepted and encouraged by financial companies. I think that people made a lot of money without adding any real value to anything.

The sources I used were:

Lynne at Being Frugal has a great round up of links concerning the financial crisis. This is were I started.

From there, I went to three financial blogs that have been around for a while and whose authors:

The American 419 Scam at Cash Money Life
What Caused the Financial Crisis of 2008? at Moolanomy
The $700B Bailout Bill at Blueprint for Financial Prosperity (This has been updated--3 times so far)

On Cash, Money Life, there is a link to the Treasury Department Fact Sheet on the bailout. It sounds like socialization of the stock market. Strange from Republicans. I think old strategies ("free markets") won't work for international stock markets.

On Moolanomy, there is a link to a funny article, Me too, Secretary Paulson! at Wise Bread. A link in the comments led to the most informative article by Henry Liu, Too Big to Fail Versus Moral Crisis. There is too much information here to take in all at once, but overall there is a historical framework that was instructive for me.

Is anyone else struggling to understand the economic crisis? Maybe we can help each other.

Wednesday, September 24, 2008

Buddy is so smart!

You may recall that my daughter's dogs had been having trouble adjusting to the new house situation, well, Buddy the Beagle has doing much better in his house training. DD1 has been very consistent in taking him out on a leash and rewarding him with treats for doing his business outside. He has had a few instances of regression, but there has been a big improvement since September 12. We have heard from several beagle owners that their dogs regressed when moving to a new house.

Overall, both dogs seem very content. They both enjoy chasing my dog, Gretzky, and kissing the cat, Sebastian. Fun times!

Tuesday, September 23, 2008

Debt Reduction Progress

I updated my progress in reducing debt and increasing savings on my side charts (I'm having a little trouble updating the NCN chart). This month I added $65 to my mini emergency fund and paid $790 in credit card debt. I like seeing the progress on the charts and tickers, but I would also like to see the difference monthly in a graph. Does anyone of a widget that shows debt reduction graphically?

Monday, September 22, 2008

Recovering and Week 4 Updates

It has been over a week since my last post. It was quite a busy week, plus I was dealing with a nasty cold that was making the rounds at our school. I struggled to teach each day and then come home and collapse. I'm telling myself that since I caught this cold so early in the school year, I'll probably be immune for the rest of the year ;-). Enough complaining, on to the updates.
September Goals
1. Establish morning and evening routines for both home and work. Even though I have not been vigilant with my morning and evening routines, I have still been getting to school early. DD1 gets the credit for helping me get out of the house in the morning. She packs my lunch and gets DS up. I will renew my efforts this week to keep up the morning and evening routines. I won't always have DD1 living with me!
2. Pay off CC1 ($925). I have paid $690 to this credit card in September. I don't think I will be able to pay more. The reason for the miscalculation is that my part-time job at the local community college changed the pay schedule, so I brought in $200 than I had planned. Even so, I haven't completely given up paying this one off in September.
3. Investigate membership class at church. I attended the membership class to find out more about the theology and mission of the church. I think the theology is a good fit for me and I love the worship services. The main obstacle to joining, is that the church is 35 minutes away. I don't change easily, so I am reluctant to commit in case the distance would prove daunting. Next step-sign up for a small group to determine if I like that aspect. I don't change easily so I am extra cautious (maybe too cautious) in commitment.

Focus for the next week:
1. Concentrate on morning and evening routines. Decide which to keep for next month.
2. Pay more on CC2 if more money comes in.
3. Sign up online for a small group at church by Friday.

Evaluating monthly goals is motivating for me. I enjoy reading the goals and update of other bloggers, also. Some bloggers I follow who update goals frequently are Notes from the Frugal Trenches, Paid it Down, Paradigm Shifted, and Renee. Check them out and cheer them on!

Sunday, September 14, 2008

It's Me or the Dog

I don't usually watch much TV because I tend to get addicted. Last evening, however, my daughter and I found a new (to us) show called, "It's Me or the Dog" , which I really enjoyed. The premise is a dog behavior expert comes to help frazzled dog owners with out of control pets. The dog trainer, Victoria, is amazing. She is a well-dressed woman with a medium pitched voice, but when she talks, the dogs listen.
My daughter and I found the program helpful because since she and my SIL moved in with me two weeks ago, her two dogs have had a little trouble adjusting to the new schedule. The older dog, Sully (a golden retriever), has been fine, but Buddy, a 8-month old beagle, was getting worse instead of better. He was regressing in house training which was no fun.

One episode of the TV show dealt with house training regression. Victoria's advice was to go "back to puppy training basics". The new regime is to take Buddy outside, feed him and take him outside again. If he does his business, he can play in the house. If not, he goes back into his box for a while. This was the same schedule, DD used when first house training him. Hopefully, a few days of "back to basic" training will alleviate the accidents! I'll keep you posted.

Friday, September 12, 2008

New budgeting tools

I have been trying to budget for years, sometimes successfully, other times, not so much. One contributing factor to my lack of success has been my inability to track my actual expenditures. Francois, at Liberia, has posted an expense tracker spreadsheet that may be helpful. (Thank you, francois, for sharing this great resource.) It looks simple and easy to use. Take a look for yourself. If you decide to try it, too, let me know. Maybe we can help each other!

I can't wait to try it for September!

Thursday, September 11, 2008

Snowflake goal update

My goal for the week was to collect three snowflakes (reimbursement from work and two insurance reimbursements). I followed through with two out of the three and actually received two other payments that I had forgotten about! The snowflake total:
  1. Mileage $52
  2. CC boosters $58

Applied for:

  1. AFLAC $75
  2. Am. $260

I still need to send a letter and receipt to Mr. D.

I'm thinking about opening an ING account for irregular expenses with these snowflakes by the end of the month. Not sure--may send it to CC1.

Sunday, September 7, 2008

September goals: Week 2 update

The weekly update for my September goals are as follows:

1. Establish morning and evening routines for both home and work. Routines will help simplify and de-stress my mornings. My mornings have been less stressful. I have gotten to work 45 minutes earlier each morning. This time has been very helpful in planning for my morning classes.
2. Pay off CC1 ($925). This should be doable, if no other Murphy visits occur.
I paid $100 to this CC, but am still hopeful to pay it off by the end of the month.
3. Investigate membership class at church. I've been thinking about this for several months.
I signed up to attend the 1st class this Thursday.
4. Collect snowflakes.
I followed through with 1 out of 4. Goal for this week--snowflakes!

I made progress on all four goals! Now to persevere and complete them!

Saturday, September 6, 2008

Cross Country Race

DS finished 11th in the big cross country race today! There were over 100 runners, so he was pretty pleased with his race. His time was 17:20, 5 seconds slower that his personal best. He wants to work on his finishing sprint because 4 runners passed him in the last 800m. I am really proud of him and impressed by all the runners. They all run 3.1 miles which is an amazing feat to me.
I hope to be able to post some pictures tomorrow!

Debt down, Savings up!

As you can see from my side charts, my debt is inching down and my savings are inching up. New totals:
CC1 $830 (I still hope to pay this one off this month)
CC2 $6000

Savings (mini emergency fund)
$515 (adding $80 each month)

Progress is slow, but the numbers are going in the right direction!

Friday, September 5, 2008

Cross-country races and exciting family plans

This has been an exciting week for my family. My 16 year-old son is a cross-country runner and this week, he finished very well in two races, 6th in one and 4th in the other. These are his highest ranking finishes so far. This week-end is a huge race 3 hours away. He would be very happy with a top 10 finish. I'm going to try to take pictures!
Other news, my daughter and son-in-law moved in with us while their house is being built. It's really fun having them around.
I'm off to visit my parents and go with them to the CC race. I will update the goals and financial picture later in the weekend.