Wednesday, January 19, 2011

Confessions of a Refi Junkie

Tibor R. Machan

No, I am not actually a junkie of any sort but I sometimes feel like it when I reflect upon my history of borrowing funds against the estimated value of my home.

You see, I have been trying to encourage my and my children’s various endeavors, just as many other parents who somehow think they can are wont to do. Helping with down payments for a home, chipping in a bit with rent, or, and this is the biggie, subsidizing a love for a serious extracurricular activity, not to mention the more immediate help with daily expenses--all these and others have induced me to try to generate resources not just from productive work but at times from borrowing against anticipated income.

And so on several occasions I have done what millions have, namely, refinanced my house, mine in Southern California. I even experienced the bail-out phenomenon when I have taken over some of the credit card debts of one or another of my children.

This all has slowly subsided, of course, as they have become more productive and thus reasonably self-supporting but it has left me with fairly hefty debts which I keep paying off. (And I am now nearly where I would like to be, leaving me with just my mortgage and car loan payments.) Of course, it also means that retirement is out of the question, at least so long as I am fit to keep working and like my work reasonably well to keep me interested in it. At 70+ now, this is all a bit iffy but not beyond the pale.

In all this I believe I have behaved pretty much as most people would, given the information they possess about market conditions, public finance, etc. Once the extortion by government has transpired each year--taxes forked out on time so the dastards cannot nail me while I am relentlessly hammering at the ideology that supports their policies--I am still in a position, given the excellent management of at least one of the places where I work, to carry on, although not without constant maneuvering through the financial maze of my life.

And let’s not forget, the role of good luck in all this! I am reasonably fit, with but a few manageable maladies--back problems, sciatica, etc., and so forth--so I don’t have to shell out gobs of funds for medical care (apart from the insurance I carry through my place of employment). Not everyone has such luck and while that certainly obligates none of us to submit to servitude in their behalf, it should encourage some understanding and maybe even generosity toward the deserving unlucky among us.

In any case, if one multiplies my situation a couple of hundred million fold, leaving aside for now out and out corruption and shady dealings, it is not difficult to see that all that would lead to financial disasters, what with the government creating a political-economic environment of false signals and phony incentives which to most ordinary citizens who are trying to navigate their economic lives isn’t fully disclosed. (Who among ordinary folks knows why housing prices rose and why one could refinance on such welcoming terms? Does anyone but a small proportion of the population realize that President Clinton, among others, had foisted upon the country financial policies that made borrowing money so easy? And what about the influence of past decisions, such as making mortgage interests partly deductible from one’s taxes? Who but experts or especially savvy lay people realize the impact such policies have on the long term economy of the country and, indeed, on most of the citizenry?)

As with regular junkies--or even with people who just like to do certain things a lot and will do it more if the cost isn’t prohibitive--those who are trying to improve their economic situation will take the opportunities around them at face value and not normally realize that they often flow from the minds of tricky politicians and all their little helpers throughout the bureaucracies of the country (not to mention the academic apologists supporting them)?

That is, at least, one way to make sense of recent economic and financial undulations in America. But this is a work in progress for me, so I keep on thinking about and studying just how to make sense of it all.

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