Calblog

So, there is nothing new under the sun.

Is there anything of which one might say "See this, it is new"? You might think this post were about Ecclesiastes, but it's not, it's more about finance, money, and what not. I think those are words to live by, and try to look through that lens. Let me throw out some financial ideas, and let me know what you think as well.

So, for as long as I can remember (okay at least a long while) people have talked about the dangers of easy credit. Story, after story tells us that we are drowning in debt and foolish with our money. And that we had better watch out cause as soon as interest rates go back up...You're all SUNK! I find this dynamic interesting as can be.

If you get a moment, look at this graph too. It's the DJIA. Where am I headed with all this. That's a very good question. When I look at the graph I notice a couple things. The first is a strong upward trend over the entire period. However, there is a major period of time where that is not true. 1965 through about 1981, after that, hold on we're in for an exciting ride. When you think about it however 1965-1981 was a truly interesting time in American History. It was the rise (or fall?) of the Not-So-Great Society^TM.

This was also the period of time in which interest rates were high and we had the malaise index (or so I'm told). As a result, most "baby boomers" got 30-yr mortgages on their homes, and ARMs are considered crazy, and the like. However, are ARMs the appropriate way to go? I can't help but wonder. Consider, rates were low throughout the '50s, in fact we are constantly told that FRB rates haven't been so low since the 50s. As a result, we are told that rates can go nowhere but up. I can't help but wonder, does this misassume the Not-So-Great Society^TM era as a benchmark?

What if instead we are seeing a return to the "good old days." Finally, policy makers seems to understand that rates have little affect on inflation, and the policy justification for high rates seem few indeed. Maybe I'm falling into the "It's changed forever trap" (hence the reference to Ecclesiastes), but what if what's really happening is a return to the way it should be? Lastly, look at this graph. What jumps out at me is, "Look the damage from the Johnson, Nixon, Carter era has finally been undone...Maybe Reagan should be promoted to Great from Near-Great! See the Wall Street Journal