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What is the cause of the financial woes?

Yesterday we had our office meeting.  We often have speakers with great industry knowledge, but this was a triple header.  This has been planned for a couple months, but as you might expect, the discussion may not have been what was originally planned considering the last week or so of financial news. 

 

The speakers were Wayne Stutzer, Sr VP w/ RBC Dain Rauscher and a well known local financial advisor, Steve LaTerra with Arizona Land Organization, and nationally known economist John Tuccilllo.  Obviously the theme of the day was the financial market meltdown, what it means for the country, and what it means for real estate, as well as the future of real estate in the Valley.

 

There were many interesting points made, some of which I will cover in future blogs.  There were a couple of lines that I really liked.  One pertains specifically to the “bailout” bill that passed the house today.  That line is “Ready, Fire, Aim”. It is said that in times of peril, it may be more prudent to just fire, and not take the time to aim.  This was one of those situations.   I really don’t think there is anyone out there who really thinks that this bill is a good thing.  Obviously, the fact that anything like it had to be done is awful.  But the idea behind that quote is simple.  Nobody wants to rush to fix things, because when you rush, in a panic, you never come up with the ideal solution.  The problem is that something needed to be done fast, or we may have been looking at a rapid implosion of the financial markets.  This bill will not remedy everything.  There is still a lot of work to be done.  But the Ready, Fire Aim, isn’t much different that what normally happens in Congress anyway.  Bills are passed.  Subsequent bills are passed that change what came in the first bill.  Same idea, it’s just that this one is huge and needed quick attention.  I am not an economist and I don’t pretend to know enough to really talk about all the intricacies with any real intelligence.  But the basics of this situation are simple.  The flow of money has been greatly restricted from the norm.  Banks have become tight when lending to other banks, which is the backbone of the banking system.  If there is no free flow of funds between institutions, then it won’t flow to us the consumers.  In essence, the banking system has gotten constipated, and this bill is like a big laxative.  The problem now lies in making sure that the system now eats properly to avoid further blockages.

 

Not many people like the terms or need of this bill, including me.  But the average person doesn’t get the full picture of the causes of this problem from the media, and certainly not how it will affect them.  Our modern technological society makes it easy to breed fear. The problem is that most people don’t realize that this bill shouldn’t cost $700b in the long run if it is handled properly.  It should cost far less as the costs are recouped over the next few years as the assets being bought are turned over.  Let us just hope that there are intelligent people in place to see this through.  The funds in this bill will be used to free up the lenders to lend.  That's what makes our economy go 'round.


Adam Tarr, ABR,ePro,Assoc. Broker
RE/MAX Excalibur
Scottsdale, AZ
adam@WeAreAZRealEstate.com
480-236-7374

 

www.WeAreAZRealEstate.com

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