One word that sums up 2008….. PONZI.

Today the last date of the year, was reminiscing over and trying to come up with one word that defines and kinda sums up the eventful 2008.

After quite a bit of contemplation the only word that stood out was PONZI. The reasoning behind it is as follow

1) The mortgage giant called Country Wide with its no paper required mortgaging, zero down payment – mortgage scheme laid the ground work for mortgage crisis as we see it today. This scheme was targeted specifically at lower middle class and on boarder line poverty ridden consumers. These consumers were basically duped into buy homes under ARM( adjustable rate mortgages) and they never in their wildest dreams imagined the housing sector to collapse inwards in a downward spiral effecting every means of living. This was the very first PONZI scheme. Where in a few made money off of hard working Americans in the name of fulfilling the “American Dream” of owning a home
a) For the above said to take place the very core of the mortgage crisis was “own a house” philosophy of our President Bush. Though the premise of this was make the American dream more affordable never was this thought through. This lead to the above said.
b) With Country Wide going bust and the ARMs adjusting for major chunk of the population there was a growing number of Americans who saw their home value depreciating. Suddenly a monthly mortgage that was $2500/- per month jumped to $4500/- a month ( due to ARM) and to top it all, the over all value of the house started falling drastically. Hence if you had a $400k house mortgaged at $2500 a month the new equation took a reversal to $4000/- a month for $350K( and lowering in value every passing day) for the very same house.
c) For most of us in American living on credit is living the American dream (I included). For those who own a house – this is the biggest investment after car (well for most of us). Suddenly with the house not being worth what it was – your equity just got lower and your debt ratio increased affecting your credit score – now this is where the rest of the world takes its dive! With fewer dollars to spend and credit scores lowering people could not spend as they had lived for the better part of the last three decades. When Americans spend less the world economics went haywire. Not only did they notice but they just could avoid the ill effects of it.
d)The mortgage crisis took with it Freddie Mac, Fanny May, WaMu Bank, Lehman Brothers, Merrill Lynch and Wachovia Bank to name a few high players.

2) The other record setting event for 2008 was price of oil, we saw prizes sky rocketing to > $140 a barrel all in the name of speculation – and today it is less than $34 a barrel this I believe was the biggest PONZI schemes of all.

3) There is no short supply of PONZI’s in 2008, Mr. Rod Blagojevich the governor of IL pawned the very seat that Mr. Barack Obama vacated – some guts I would say especially when he knew he was under FBI radar.

4) The biggest of all was Mr. Bernard Madoff – ran a PONZI scheme that busted big time. It literally had the very rich looking for air to breath. This scheme had investments by the super rich in the country looking for quick cash. The way I look at it is – we do need a Madoff to make the very rich realize what a common man feels like to be thrown out of house that he has been paying for and leading to foreclosure. Forces me to think if that was KARMA.

I am open to your thoughts feel free to add in adjectives / words you things sums up 2008.

Note: I am not saying 2008 was completely rotten. We got to live through and experience the historical American elections which had its many firsts – record turn out for election, first woman in race, first black in race and ultimately leading to first African-American President of USA. But again the year had been so very depressing that one feels almost a sense of grief and dismay at the heaving task(s) for the next president.

_ Common Joe.

Obese obsession for oil!

One major factor in my budget allocation was GAS until today. It is quite unthinkable that the price of any commodity could fall from $140 to >$34 a barrel in four months. But again you might argue what about the stock price of GM? Very close comparison indeed. Agreed that we are going through tough time but $140 to $37.9 I still find this unimaginable.

As said in my first article on Hybrid cars – it is a known fact in American economy that the oil prices will shoot up during summer. But the prices one got to experience this year were not only unprecedented but it was solely to enhance stock portfolios of few and was guided by greed and favoritism. This kept building higher and higher until it reached $140. (http://en.wikipedia.org/wiki/File:US_oil_price_in_dollars_from_1999_to_2008_November_21.svg ).

This time around unlike the previous years the average consumer was taken for a ride of a life time and they had about had it. There was a complete reversal in human behavior to a point that you would get one of those “looks” from other commuters incase you happen to drive one of the gas guzzling SUV like GMC Yukon/Denali or Hummer for that matter of fact( I did not mean to point out SUV’s from exclusively GM but these are the biggest guzzlers out there). There was increased awareness of the environmental effects of fossil fuel (though this was not a desired or intended result), people stopped / reduced using cars and opted for mass transit. In some areas mass transit experienced record numbers in commuter traffic.

All this just for making bucks off hard working consumers – most hit was the middle class and the people below poverty line. Not only did they have to balance their monthly budget in terms of high gas prices but the average grocery bill just shoot up 20% due to the direct /indirect dependence on oil for transportation by the agro industry. Since oil affects almost every aspect of life, average living expenses shot up by 20%. Having to experience this in an economy that was not only in recession( though none admits to it) but with the mortgage and credit crisis plus looming unemployment number that was on rise from one month to the next, common Joe just couldn’t make it.

There was a paradigm shift in the way an average individual took to OIL in general. Over this past summer the very OIL that churns the wheels of this economy and is vital for the economy to survive took a nose dive in demand. Not only did the consumer grow OIL averse but they started thinking green and to large extent I would say GREENER and GREENER ( once agin this was not the intended result but the consumer awareness in green energy as we get to experience today has lot to do with the bad times experienced this summer, it just made you think how very dependent our day to living relies on oil) .

The administration did not see this coming, to favor a few in the Petro and its own investment in OIL stocks it went blind sighted in its greed and ultimately dug its own grave. Today the consumer has rejected SUV’s completely poor GM had to halt its Hummer production and not ONE SINGLE model produced by the American big three looks like would see the light of 2009 unless they receive a bail out by congress with tax payer’s money( the bail out got approved thing morning for roughly $17billion this morning, as I write this article).

When the population grew fatter – instead of practicing and professing better food habits and health awareness it was assumed and marketed that an SUV, CUV and big behemoth vehicles was the way to live. The car makers did not have any clue what was coming, with the reverse psychology playing a big part in day to day decision, people just started abandoning cars al together. Before we knew the bigger the better was totally un-cool and smaller the smarter was the selling point.

Now those egos have shrunk to an extent that they would fit in a car the size of Honda FIT!

But the bigger question is with TWO THIRDS of its population officially obese would a smaller car be better FIT? Or better - How would the obese America fit into smaller car the size of HONDA FIT?

I just realized that not only do we have to trim our dependence on OIL if we want to survive but we have to trim our WAISTLINE! America is not only the largest / biggest consumer of OIL in the world it also consumes >1/3 of everything produced with the highest rates of obesity in the world.

Hence not only should we curb our obsession with OIL but also consumption that has turned gluttonously obese. A better pragmatic approach to development needs to be defined and followed.

- Common Joe