Wikinvest Wire

What difference will +$1,200 make up against -$100,000

Sunday, May 04, 2008

With home price in parts of the country dropping by $100,000 per year or more, is $1,200 in rebates from the government going to make any difference?

The now-quickly-vanishing home equity was nearly as easy to spend as the checks that are now hitting bank accounts and mailboxes. Remember when purveyors of home equity loans would offer credit cards that would tap your equity directly?

Do they still do that?

If government stimulus plans are to be effective, that's what the government should do - just issue credit cards that would tap the U.S. treasury directly and then everyone can worry about paying the money back later.

They ought to keep that in mind since it doesn't look like the first batch of checks is going to have the desired effect as explained in this report in the New York Times.

The Rebates Might Not Go to the Mall
By PHYLLIS KORKKI

Go ahead and spend — it’s your patriotic duty. That’s one way to look at the government rebates that are just starting to arrive in taxpayers’ bank accounts and mailboxes.
...
The rebates are meant to help revive our parched and stunted economy with millions of liquid infusions. But many consumers do not plan to rush to the store with the money.

According to a recent survey by the NPD Group, a research firm, 42 percent of taxpayers said they planned to pay bills with the check, and 21 percent said they would add it to savings. Only 12 percent said they would spend it on discretionary items.

It is still possible, though, that once the bills are paid, and the savings are padded, the urge to splurge will assert itself at last.
They really should consider the credit card idea for the next round - either that or just decree that home prices are going to be reset to their peak levels in 2005 or 2006 (whichever is higher) from which they will not be allowed to fall.

ooo

This week's cartoon from The Economist:

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8 comments:

tj & the bear said...

There was some asshat on CNBS last week trying to guesstimate the impact based upon prior tax rebates. According to him, the spending impact would qualify as the third biggest holiday behind Christmas and Valentines(?). Yeah, right.

Mish has a post about people pawning personal items to pay for gas and business owners pawning more expensive items to cover payroll. I'd be surprised if the stimulus checks even register (pun intended).

JerseyGirl said...

That headline should be the soundbite of this year. Those few words wrap up all the debate in a nutshell. Case closed.

Talk about asshattery, this morning CNBC kept the stimulus package going to help meme rolling along. They are a menace to investors everywhere.

MelechRic said...

The wife and I just discussed what we'd do with the money. The conclusion:

Find an investment vehicle to put it in for our son's college tuition.

It's definitely not going to the mall.

NickNack said...

My husband and I decided to sock the rebate check away into our investments as well. We learned after the tech bubble to live within our means. It has been astonishing to watch everyone else around us partying it up these past few years. Leasing BMWs and purchasing 600k homes with salaries of less then 100k combined. These folks are really feeling it now. The pull back on spending is a huge psychological blow to them. It's almost as if they had no idea how to live within their means and are really depressed about having to do so now. Our renting and our mass transit propensity isn't so funny to them anymore.

I really do feel bad for these families around me because they are all scrambling to keep their households together. It's just, I don't understand how people didn't understand what they were spending eventually had to be paid back. The reckless over consumption, to me, was extremely irresponsible. Now my taxes, which are already outrageous, will be going higher because the government is handing out money as if it grows on trees.

What I don't get is, if jobs are being lost, housing ATMs have been shut down, gas is putting the squeeze on everyone - including businesses and the price of food across the board is exponentially higher, how is it that there is going to be a stabilization in our economy any time soon? I really don't understand that logic at all.

Anonymous said...

NickNack said...

I really do feel bad for these families around me because they are all scrambling to keep their households together. It's just, I don't understand how people didn't understand what they were spending eventually had to be paid back. The reckless over consumption, to me, was extremely irresponsible. Now my taxes, which are already outrageous, will be going higher because the government is handing out money as if it grows on trees.

Let them eat granite.

Anonymous said...

Anyone watch Bill Maher on HBO?

I love how he sarcastically refers to his 'Stimulus Package'

tj & the bear said...

Find an investment vehicle to put it in for our son's college tuition.

Start by sending Iacono Research a check and then putting the rest in the resource companies he recommends.

Tim said...

Hey - thanks for the plug!

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