In the middle of September 2008, John McCain became a little famous by saying "the fundamentals of the economy are sound."
Never mind that the real estate bubble had begun to burst and financial institutions were beginning to topple. In the aftermath, many homeowners found their homes were worth less than they owed.
And later, all members of Congress convened themselves for days on end to create a patch for the entire financial system which appeared to be capable of collapse.
So- a bailout was initiated and many different safeguards were put into place.
OK... before I go any further, I don't want to pick on Senator McCain in particular, because he was not the only person speaking this way. A trip down ActiveRain memory lane would show that he wasn't the only one who felt like this. The world was full of optimists. And many of the pessimists were underestimating the depth of the problem.
We collectively experienced a major wake-up call.
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I guess, as a rule of thumb, we don't like naysayers do we?
Negative thinkers can bum a person out.
But this sort of thinking could prove to be bad business if a person is trying to make any sort of financial plans.
Among the common advice we've all received in life is this; history repeats itself.
So- if this is the case, wouldn't it make sense to look back on this fiasco and look for clues?
But first an analogy:
Silent films are easy to break down. The hero wore a white hat and the villain wore a black hat.
So, let's look for the white hats during the bubble.
(insert final jeopardy music here.)
Can't think of any? Well... you aren't alone.
Pre bubble there were so many black hats.
In a time of greed, the greedy show up everywhere.
In the zest for profitability people can throw the typical due diligence out and will begin to make hay while the sun shines.
Who were the black hats? They showed up in places we didn't expect to see them: There were bad lenders, bad agents, bad title agents, bad home owners, bad journalists, bad pundits, bad politicians, bad fillintheblankhere.
I don't want to say every participant of the market was bad.
I don't even want to convey that most were bad.
It only took a few bad players in each element of the industry to turn a blind eye to ethics.
And, it took the rest of us to expect the best from people.
In the end, it wasn't a Republican, or Democrat, or Independant problem. It was an "all of us problem." Members of each political party acted with urgency and with less partisanship to tackle the issue. This was a time for everyone to try to figure out what went wrong so that it could never happen again.
I really don't think John McCain was intentionally saying something he didn't feel to be true. If anything, he was saying what many of us felt to be true. That is- that conditions weren't so out of the ordinary that the market couldn't fix itself on its own.
After all, capitalism has proven that supply and demand will find an equilibrium- especially unaided by our fixes that can often times be a cure that is worse than the disease.
But yikes. Conditions were tough.
And the nation felt the aftermath.
It is events like these that make us wonder if we would be able to read the warning signs next time.
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Also, no matter what time we live in, there will always be noise. There will always be people who will say we are headed for financial doom. At the same time there will be those who say we are on the beginning of the boom. These two notions simultaneously exist at all times.
I just have a suggestion for all the villains out there.
Would it be too much to ask for you to start wearing black hats?
It would make financial planning so much easier.
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Chuck Willman is an agent who helps sellers sell and buyers buy. He can be reached at this email: chuck@UtahHomes.me or on the web: www.UtahHomes.me
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Photo "White Hats" by the very talented Elizabeth Haslam. You can follow her here: Elizabeth Haslam Flickr Feed.
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