Bingeing on Tea Bags

A few days ago I posted about Rick Santelli’s call for a Chicago Tea Party. His remarks have inspired some creative ideas to raise awareness of the Obama bungle—that is, Obama’s alleged “stimulus package.”

john-kenHere in southern California we have an AM radio station, KFI 640, with “More Stimulating Talk Radio.” Mid-day banter is dominated by the ranting duo, John and Ken—as in John Kobylt and Ken Chiampou. They have some goofy ideas about how to get in on this tea party thing. They’ve targeted our state lawmakers in Sacramento with loud provocations to mail tea bags to the capitol en masse. This because they are righteously angry about the new tax-imposition plan that was passed in our state within the past week. The problem is that California has gone from a smokin’ economy, envied round the world, to a broken economy with rapidly accumulating incentives to pull up stakes and go elsewhere.

What’s goofy about the John and Ken advice? Several things. But one is noteworthy for its irony: it will cost the state of California money to process all the tea bags that arrive by post at the state capitol. And whose money will be spent sortieing the tea bag salvo? Money earned by the very people encouraged to launch the salvo. (Note: there’s a website called California Tea Party, “United to Repeal California Taxes.”)

It’s not the people in Sacramento or DC who need to hear from us. The ones who need to hear are fellow-citizens who are out of the news-loop and don’t know what’s going on. The electorate can make a bigger difference than elected officials by electing different officials. But the electorate has to be informed.

Can tea bags be used effectively to raise consciousness about our national crisis in leadership? Possibly. I like a suggestion offered by Brittney Linvill—spread some tea bags out on your desk at work and when those who are curious inquire about your new proclivities, remind them of the Boston tea party and explain its contemporary analog in the present circumstances. Stress the lesson that energized citizens can make a difference.

If you want to be a little more overtly eccentric, here’s a variation of the idea—tie a bunch of individual tea bags to a string that can be draped conspicuously from one end of your office or cubicle to the other.

Bottom line: decorate copiously with tea bags; enlist all of your friends to follow your example; host tea parties to plan tea bag binges in public. Then . . . buy stock in Unilever (UL) . Why Unilever? Because they are the consumer goods makers that own Lipton Tea.

Note: You may find it inspiring to read Brittney Linvill’s “About” page.

Is Living High Pie in the Sky?

Despite the ouch-factor of the economic downtown, Michael Shaffer’s hand-wringing seems a tad over-wrought. Click here for his article titled “Only Yesterday,” where he invokes the motif of FrederiOnly-Yesterdayck Lewis Allen’s 1930s bestseller to draw dire parallels between the stark days of October 29, 1929 and our recent decent into economic chaos.

Yes, many 401(k)s have been depleted by 25-50%, and home equity has followed suit. True, the worst may not be over. I’ve joked without feeling humored that I might be working for the rest of my life. Fewer Americans are eating out, having their cars washed, or seeing a movie on a Friday night. Some have all but abandoned aspirations for a leisurely retirement, a college-education for their high school kids, or mortgage-free ownership of their home. Last night on main street in Yorba Linda, California, for the annual holiday festivities, classic cars were lined up along both sides of the street; but this time, an alarming number of the spiffy machines was for sale. We’re being squeezed and we don’t know when it will be safe to loosen the tourniquet.

Still, it’s too early to draw confident conclusions that happy days are gone for good. We need the reminder that wealth is no guarantee of satisfaction. But there also are reasons to expect reversals in the other direction. Home prices will plateau at a level that’s more realistic, and then rise from there. The stock market will bottom out and trend upwards as always. Paying into a 401(k) hasn’t been this cheap in ages. Colleges and universities have to have students, so prices will adjust, as their administrators take stock of their priorities. Heck, they might even devote more effort to delivering an education, something parents will want to be sure their dollars are paying for when money is in short supply.

And, of course, the government will start printing money. How else are they going bail out every ailing mega-company in America? The value of that money should hold up for awhile, since we’re hardly facing inflation at the moment.

I doubt if anybody really understands how the bottom rusted out of our giant economy while nobody was looking. But what happened this fall is different than what happened the fall of 1929. This time around, one man pulled the fire alarm and scared the bajeebers out of everyone. That man was Hank Paulson, Secretary of the Treasury. The most incompetent action of his career was his inexplicable announcement that the sky would be falling effectively immediately. He was right. And with that announcement he helped bring it to pass. Dumb, dumb, and more dumb. Would it have happened anyway? Not the way it did. That much is for sure.

We can’t predict the fallout of this numbscull decision. We should be wary of our elected officials and their appointees. Who doesn’t know that now? But let’s hang in there and keep our prophetic powder dry. I believe Michael Schaffer’s jeremiad is premature . . . even if we’re all unlucky enough for him to be right when the time comes.

Note: Frederick Lewis Allen’s book Only Yesterday is a good read. Schaffer is right about that. You can enjoy it here for free. Or, you can buy it here. There’s a Kindle version, too, for a couple bucks less right here.

I Want a Bailout

Suppose it’s August 2007. You apply for a line of credit against the equity in your existing home. CitiBank approves a line of credit that allows you to invest in some undeveloped property and still have something left for building a modest vacation home where you can be near your family for part of the year.

Fast forward to November 2008. CitiBank sends you a letter. It claims that the venerable financial institution has reviewed your assets and concluded that you are no longer in a position financially to meet payments on the balance of your line of credit, should you wish to borrow that money. They’ve decided to zero out your balance, effective November 5. The letter you hold in your hands arrived by regular mail on November 6.

You’re stuck. You have a piece of property with no prospect now of building. It’s unlikely that you could sell it for what you paid for it a year ago. And, in any case, you don’t want to sell it; you want to pursue your dream. But CitiBank has revoked your line of credit. This despite the fact that you’ve made all your monthly payments on schedule for over a year.

You wonder what changes in your financial situation could have reversed CitiBank’s kind disposition toward you. And then it occurs to you. Maybe it’s not your financial condition that has them worried, but their own financial condition that has them over the barrel. Maybe they’re afraid you’ll write a check against your line of credit and they won’t be able to cover it.

Sure enough, a week later you learn that CitiBank has recently laid off tens of thousands of employees and that they lost billions of dollars during the past twelve months. “Aha!” you think. “So that’s what happened!”

Is it any consolation to know that they freaked, and then dissembled? Of course not. You’re still stuck. You secretly hope that CitiBank will be held accountable, that maybe the CEO will have to look for work.

And then you learn today that CitiBank has been offered a bailout, because the economy needs it. Isn’ that nice?

The above scenario has been played out for countless customers of CitiBank. The details vary but the shenanigans are the same. Some customers “took out” a line of credit to have greater security for a rainy day. Others to meet expenses for children in college. And others to make essential repairs on the only home they’ll ever own. Every one of the customers victimized by CitiBank’s recklessness deserves a bailout as much as CitiBank. But what are the chances they’ll be getting a letter in the next week saying, “We’re happy to announce that your original line of credit has been reinstated?”

Ka-ching! Stock Market vs. Credit Market

Near as I can tell, the “bailout,” “rescue,” or whatever, is about shoring up the “credit market.” Banks have to make loans, and they have to have money to make loans. Some pundits are saying that the stock market plunge we’ve been seeing, including the dramatic dive happening today, is not a measure of the prospects for this $700 billion rescue gamble. That’s because they’re splitting off what’s happening on Wall Street with the real problem that is all about credit.

I’m not convinced that the two are unrelated. I’m more inclined to think that the near-panic we’re seeing as people pull their money out of stocks means that people will be very slow to take out new loans, even with the bailout/rescue.

Who wants to borrow money in today’s climate? Time will tell.

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