Social Pressure and its financial impact

One of the causes of the current subprime mortgage meltdown and wider credit crunch that is never talked about may be the social pressure put on people to appear as if they are better off than they actually are. Wealth is quite interesting - you cannot fundamentally tell how wealthy someone is by looking at them except if they are homeless in which case (Howard Hughes notwithstanding being the one exception) you can tell that they have little if anything. So after a certain amount of wealth there is not much of an ability to tell how much money someone has to their name if they do not spend very much of it.

Traditionally the way of telling how wealthy someone is without examining their financial statements would be to see how nice their possessions are - but the paradox is that anyone can have nice things, or at least they could during the last few years. How - by using subprime loans to make up for what financial resources they lacked so that they would appear wealthier than they actually are. The irony of the situation is of course that their desire to appear wealthy prevented them from achieving that goal - if indeed it was a goal.

Its almost like people save to "make that down payment on a house" as an article of faith - just like they get married and spend a lot of money on a wedding or a honeymoon or an engagement ring. When they get a raise the first thing that they do is go out and increase their standard of living - or go take a vacation which fundamentally only decreases wealth. When their house needs repairs they go and take out a home equity loan and convince themselves that getting back 85 percent of the value of the repairs - despite paying 100 percent in cost - is somehow an "investment" despite all financial evidence to the contrary. You can make money in real estate - but your residence is not, in my mind, an investment, or even really an asset so much as its something neutral - both an asset and a liability. Its the other real estate that someone owns in which they can make a profit if they know what they are doing - but they should not let emotions cloud their judgment and convince themselves to buy more house than they can afford.

Let me finish by stating that I am not an expert on all this its just something that's been on my mind for quite a while.

An interesting situation

What is the situation going into the 2008 election campaign? The "fundamentals" or underlying factors that are describing the race or that at least describe most races are confusing and its difficult to tell what is ultimately going to happen in November.

President Bush approval rating (RCP Average): 33 approve, 63 disapprove
Right/Wrong direction: 19 right direction, 75 wrong direction (according to CBS)

These things would seem to indicate that the Democratic candidate would have a significant advantage. However, look at the congressional job approval ratings:

Congress approval rating: 24.7 approve, 66.7 disapprove

Congress is, it turns out, even more unpopular than the President is, so the future is decidedly cloudy this year, although my sense is that the Democratic nominee goes into this campaign with an advantage although it remains to be seen if its going to hold throughout the year.

Back

Well after a long hiatus from posting I am finally back.

Tony Blair

Tony Blair announced on Thursday what we had all long known was going to happen - that he's going to be resigning as Prime Minister to trigger a leadership contest that will be basically a coronation walk for Gordon Brown. He leaves at a time when his party is behind in the polls and his reputation is damaged badly by the Iraq war and the failures that have happened there, as well as his steadfast support for President Bush on the war even when things were going badly. A resurgent Conservative Party under the leadership of David Cameron looks ready to give Brown an extremely tough fight in the next general election, and most people in Britain are undoubtedly going to be glad to see Blair finally making his way to the door. Some commentators have even talked about Tony Blair as one of the worst Prime Ministers that Britain has ever had, but such characterization is unfair and an example of what I like to call "presentist bias."

Note: presentist bias means the tendency to judge things through the prism of the present day rather than seeking a broader and more informed historical perspective.

Blair has not been a great Prime Minister, but he's not nearly as bad as people think that he is and he's certainly not the worst Prime Minister of the modern era. He's certainly the most successful leader that the Labour Party has had in the modern era, winning three elections and serving ten years which is something that no previous Labour leader had ever done. Those who criticize him for "destroying socialism" forget that all Blair did was recognize when something old has died and proceeded to do what needed to be done in order for the Labour Party to establish itself as a governing force. Blair was not responsible for the 1997 election victory - the Tories were a divided and spent force and a big win for Labour was inevitable but at the same time, Blair made Labour into a party that was more than a protest. With fits and starts, Blair has made Labour into a party that people have trusted, for better or for worse to be in government for three terms. Perhaps the greatest tragedy of his time as Prime Minister is that he could have accomplished so much more.

Those in politics overrate their importance

We all tend to have an exaggerated sense of our own importance and the importance of the things that we are doing - witness our behavior when we are running out the door as if the thirty seconds that we save by not picking up the newspaper out of the driveway (or something else) is going to be the crucial factor in whether or not we are on time to where we are going. In politics - like all professions, and indeed there are self-important people in any profession - oftentimes this is magnified to where politicians (and parties) think that what they are doing every single moment is what everyone is focused on. It means that politics becomes as much about maneuver as about getting things done and ironically demonstrates a failure to understand how to be politically successful.

In early January thousands of people crossed the river into work in Washington DC, not thinking for a minute that it would be the first day of the new congress - they had to earn a living and don't know what's going on. In short, they don't really care about this or that amendment or vote, or about the procedures for going about said vote. They also have a greater sense of the absurd debate that switches around depending on who is in the majority. They don't have any sympathy for Republicans complaining about being excluded because they recognize that the Republicans would do the same thing if they were in the majority. They are also deeply sceptical about promises - however genuine - to "change the tone of politics" or some variation of that theme because no one ever delivers on it. They may genuinely intend to change things but its naive for any politician to think that things are going to be different when they are in the majority.

There is actually room here for someone to bring about genuine change - the present-day flaws of politics are only as permanent as we choose to make them - but no one seems willing to step in and fill that gap. Someone needs to help create new electoral incentives if our political system is to change for the better.

Managing a political comeback

Politics is filled with incumbents who have been left for dead, plagued by scandal and broken promises, sometimes both, their plans rejected and their approval ratings in the 30 percent range or even lower. Potential challengers in the other party are lining up for what they view as a sure spot to win the election and they believe that the real battle is going to be in the primary. Oftentimes the discussion turns to what's going to happen after the current incumbent is defeated and it becomes a foregone conclusion that all is over for them. But it doesn't always turn out this way. Why? Why do some of these incumbents manage to come back, and what is their secret? Is there any way to predict who is going to come back and who is going to be defeated?

The reason why I say this is that many of them do end up going down to defeat just as its predicted, but some of them do not. I think that the key to it is to consistently apply the right strategy whatever happens with the individual circumstances. Also, getting the unpopular things done early in the term is a big help as well. The conventional wisdom is that there is a "honeymoon period" when the new Governor or President or Mayor (or other offices in other nations) should just bask in appreciation for their new status and try and rack up easy victories. However, I tend to think that the importance of a honeymoon is greatly overrated as the goal should be to put as much distance between the enactment of things that are unpopular and the next election. Its better to be at 30 percent approval with only 16 percent of voters willing to reelect you, and trailing your opponents by 25 points three years before the election rather than one year before the election. The goal should be to give enough time for anger to subside before the next election happens.

I will talk more on this later.

Senators with low approval ratings

According to SurveyUSA there are some Senators who have approval ratings that are quite low, many of whom are somewhat unexpected. Here are the Senators who have approval ratings that are either more negative than positive or that are quite close

Jim Webb (D-Virginia): 42 approve, 47 disapprove
John Cornyn (R-Texas): 44 approve, 42 disapprove
Jim Bunning (R-Kentucky): 40 approve, 48 disapprove
John Kerry (D-Massachusetts): 40 approve, 53 disapprove

There are also others who are not doing so well, such as Frank Lautenberg (D-New Jersey) but its too early to figure out what's going to happen 6, 4, or even 2 years from now. Still, some of these are surprising.

There's never a time for prejudice

Recently Rep. Virgil Goode (R-Virginia) has said that Rep-Elect Keith Ellison (D-Minnesota) poses a threat to American values because he wishes to use the Qu'ran during his private swearing-in ceremony when the new congress opens and he officially takes office. Congressman Goode made these comments in a letter to hundreds of voters, according to the New York Times.

There is NEVER A TIME for comments such as Congressman Goode's, as Keith Ellison was duly elected by the people of his district and has the same right to be a member of the House as any other member from any other district. Goode seems to believe that there is something wrong with a member using the Qu'ran for swearing-in, and that Ellison would be setting a damaging precedent. Apparently he believes that if other muslims are elected then if they wanted to use the Qu'ran then that would pose a threat to "American values."

As I just said, there is NEVER a time for this. NEVER.

We must be tolerant of all religions and opposed to discrimination not only in rhetoric but also in reality because its the right thing to do. Goode is not being tolerant or accepting either in rhetoric (as this note is pretty intolerant) or in reality (as I assume he genuinely believes this), and he does no service to either himself, his party, or the cause of justice and equality by making comments like this.

This is not to say that I don't have problems with Keith Ellison, as I find the fact that he skipped an event at the White House to be obnoxious. I certainly would not have done that no matter who the President was, if any President wanted to give me an invitation (which I doubt, but work with me here), be it Bush, Clinton, Bush Sr., Carter, or Ford, I would go because I think that the presidency itself deserves respect regardless of who the current President is. I also find his ties to the Nation of Islam troubling and they don't seem to be fully explained. Indeed, the voters of his district had some problems with this as well, given that this is a safe Democratic seat, and yet Keith Ellison was only elected with 55.56 percent of the vote, with about 21 percent each for the Republican and for an independent who promised to caucus with Democrats. This is a safe Democratic seat and he may (and I think probably should) face a primary challenge in 2008, but that has nothing to do with his religion and everything to do with shady connections that he may have.

That said, there is never a time for prejudice of this sort. In trying to defend "American values," Virgil Goode seems to have forgotten acceptance, one of the most important American values of all.