Tuesday, November 27, 2007


Today SephardiLady asks on her blog, Orthonomics, this question in regard to a series of articles she is posting about dealing with crazy tuition fees in Jewish Day Schools:

I am pleased by this answer [that grade school education for children is more important than supporting married/kollel age young adults]. But does anyone want to take a stab at what "juggl[ing] funds" entails?

One of the responses in the comments says this:

With respect for Rav Feurst, I think we all know "juggling funds" is newspeak for "run it up on your credit cards, then take out a home equity line to pay down the cards, then borrow against your 401k to keep from losing your house, then run extra expenses up on those credit cards........" You can either afford something, or you can't, so juggling funds responsibly means you stop paying for something while you pay for something else. November 27, 2007 12:24 AM


This is the point where if you could see me, you would see me pulling my hair and pounding on the desk!


WHY DOES ANYONE STILL THINK IT IS ?!?!?!?!?!?!?!?!?!?!

It's like what's going on out in the real world can never touch Jewish communities, and they aren't even interested in what's going on "out there."

In real life, what's going on "out there" bears very directly on this issue.

ECONOMIC REPORT - Home prices falling everywhere:
S&P Down 4.5% nationally over past year, Case-Shiller says By Rex Nutting, MarketWatch Last Update: 11:42 AM ET Nov 27, 2007

The last time prices fell so much, it took more than eight years for home prices to return to their peak level.

That means with mortgages alone, you owe more than you can sell your house for, and will have NEGATIVE equity possibly for the next eight years! You couldn't get a home equity loan or refinance if you life depended on it right now, unless your credit is already perfect and you aren't already in debt up to your eyeballs in ratio to your income! And people in that great condition don't need to refinance or dip into their home equity in the first place!

"We judge the recent decline in home prices to be the beginning of an extended decline," wrote Drew Matus, an economist for Lehman Bros., who said prices would probably fall 15% from peak to trough nationally.

"With supply overhang growing and mortgage financing tougher to obtain, home prices are going to soften considerably further in the quarters ahead," wrote Joshua Shapiro, chief economist for MFR.

Falling prices make it more difficult for homeowners to tap the equity in their homes or refinance their mortgages. Millions of homeowners who took out adjustable-rate loans in 2005 and 2006 face sharply higher mortgage payments this year and next, with foreclosures having already soared as the result of payment resets.

As I have explained before - the millions of foreclosures on the market mean the market is glutted - in some areas there are enough houses on the market right now to fulfill the needs of the next two or three years worth of people who would ordinarily need to move to the area. However, most of those who would have bought can't sell their own homes - so they aren't going to be buying anytime soon, which will extend the glut even further into the future. It's a vicious self-perpetuating cycle.

And "borrow against your 401-K?" What kinds of equities does this person suppose her 401-K retirement funds are invested in? There are numerous articles, but for frankness you can't beat this one, by James Howard Kunstler:

It's hard to describe what constitutes the bulk of the stuff moving through the world's financial markets for the simple reason that it was purposely-designed to be so abstruse and provisional that traders would be too intimidated to ask what it represents -- and the growing terrified suspicion is that it's mostly worthless. By this I refer to the global freak show of derivatives, concocted "plays" on hypothetical "positions," credit default swaps, arbitrages in imagined "differentials," nifty equations, hedges, promises, algorithms executed by robots, and "off-book" wishes chartered in the Cayman Islands. Probably all of them, in one way or another, are just scams, since they are unaffiliated with productive activity.

At a more fundamental level, these mutant "investments" were derived from a very tangible trade in loans and mortgages made to flesh-and-blood chumps, but even those are only the last in a long spiral of serial "bubbles," or market frenzies based on unreal expectations. And this leads into the very real realm of poor choices, fiscal and fiduciary irresponsibility, deliberately deceptive policy, criminal malfeasance, and the broad abandonment of standards in acceptable behavior by people in authority. A lot of observers attribute this to the Gordon Gecko ethos -- the discovery back in the 1980s that "greed is good," which was meant to trump a previous ethos that life is tragic.

Anyway, the trade in mutant investment entities appears to be collapsing now as their worthlessness in market terms (as opposed to theoretical terms) becomes manifest. The major holders of this dreck are losing the ability to conceal their losses, but suspicion now reigns that the losses are far greater than even the massive multiple billions reported so far by the likes of Merrill Lynch, Citicorp, and others. I suppose that what we've been seeing lately is a desperate attempt to hold things together just long enough to cut those Christmas bonus checks so that when the pink slips do finally fly in 2008, at least some Big Boyz will walk away with enough cash to cover a hacienda in Uruguay and the salaries of a half-dozen private security goons to guard it.

So those who are "betting the farm" on being able to refinance or sell or dip into home equity or 401-k's to straighten up the mess caused by their outlandish tuition requirements and resulting credit card debt debacle are going to lose the farm, sooner or later.

This responder's comment on the Orthonomics Blog shows that some people still don't get it - although I am reasonably certain that most do, in fact get it, and this remark could have been made tongue-in-cheek due to the fact that even though people are getting it, THEY DON'T SEE ANY OTHER WAY OUT OF THE DILEMMA. They cannot bring themselves to get rid of the expenses that they cannot afford - so they are digging themselves deeper and deeper into the pit, and there's no light at the end of this tunnel, either.

None at all, class. This has nowhere to go but bad.

We CANNOT continue to spend more money than we actually make, class. That path only leads to disaster, and until we all decide to deal with that reality.

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