Rethinking a fiscal and monetary policy.
I woke up to the headline yesterday of foreclosures sitting at 18-year lows. Not a huge shocker, as serious mortgage delinquencies are at multi-decade lows. I’ve eluded to it before in some Linked In posts. As we are painfully aware, our industry was unanimously blamed for the housing crisis. Yet here we are, potentially on the brink of what I’ll call some market pain, and it seems like we have absolutely NOTHING to do with it this time. How is that possible? Without our liar loans, greed, neg am products, fancy retreats, etc, etc??? Can’t be!!!
“It would be wrong to ask you why”
“because I know what goes inside”
“Is only half of what comes out”
“Isn’t that what it’s about?” – Mike Patton, Faith No More
In our newfound cancel and blame society, we seem to look for the who, instead of the why and the how. We want to blame instead of taking account, take responsibility. So it should come as no surprise that when the pendulum swung the other way, making it nearly impossible for several years to borrower mortgage money without a full-body physical and a few pints of blood, we found a way not to pay other bills; like student loans and credit cards. If you recall, when mortgage delinquencies were atmospheric, folks were paying their other bills at stunningly high rates. In historical context, it made no sense. It was at that point that it became clear to me how we got to this point — the convergence of the web (information), automation, and underlying financial anarchy. I mean how can we ever have real inflation ever again if we 1) have enough information to not overpay, 2) enough automation such that jobs are becoming obsolete at an alarmingly high pace thus pressuring earnings and 3) not enough integrity to pay our bills even if we can afford them. I’d argue that financial integrity was the lynchpin for housing growth — the very reason it made sense to push homeownership. Folks always pay their mortgage no matter what, right? Gone in an instant. Gone when on a chilly winter day, at the height of the crisis, a large bank shared with me that 70% of their current book of delinquencies still qualified for the loan they were defaulting on. Let that sit for a second.
So let’s take account for a moment. It’s not broken. It’s not anyone’s fault. All the QE and easy money in the world isn’t going to fix it. If you want to blame anyone, blame everyone. We used to do whatever it took to pay all our bills. Work 4 jobs. Tighten our belts. Heck, most households never put themselves in those positions, to begin with. Speaking of households, there has been a multi-decade long trend that’s another elephant in the room; stagnant wages. I argue our booms are fed by transitory savings booms fueled by tax cuts, stock gains, housing appreciation, and inheritance. Unlike wages that theoretically persist and even grow so long as you're employed, all of this other money goes away once it’s spent or lost. We’ve been paper rich and cash and wage poor for decades. Here we are earning the same money, give or take, that the average household earned two decades ago. This most recent decade long boom we’ve been enjoying has been enjoyed without any real wage growth. Let that sit for a second.
And yes, a good number of folks are doing better. And yes I’m a capitalist through and through, but dare I say that the wealth gap issue is real. Today I woke up to a report that says the wealth gap is statistically more significant than it’s ever been. That while wages have indeed finally started to grow, that growth has hit baby boomers nearing retirement and not millennials and “Gen Z'rs”.
The question I keep asking is why is it so hard for economists and the Fed to see this? The numbers are right there, right in our faces! Our booms are fueled by these temporary cash pops, and our busts come after the money runs out. And instead of taking account of these facts and inevitabilities, doubling our efforts to take ownership of our lives and rethinking a fiscal and monetary policy that addresses these issues, the economists and pundits keep searching in the same old spots, and we continue to blame everyone but ourselves as we dig our own graves.
The Real Deal with Phil Mancuso
Philip Mancuso is the Chief Revenue Officer of Equity Prime Mortgage. Philip has almost 25 years’ experience in the mortgage industry as a top producing loan officer, sales and branch manager and executive. Prior to joining EquityPrime Mortgage, Philip has held many positions in management including Executive Vice President of The Money Store. Philip attended Rutgers University, double majoring in Accounting and Management.