Capitalism is based on self-interest and self-esteem; it holds integrity and trustworthiness as cardinal virtues and makes them pay off in the marketplace, thus demanding that men survive by means of virtue, not vices. It is this superlatively moral system that the welfare statists propose to improve upon by means of preventative law, snooping bureaucrats, and the chronic goad of fear. So wrote a young Alan Greenspan in 1963 as an adherent to Ayn Rand's Objectivist philosophy. Some forty years later the morality of capitalism is again on display in Greenspan's new book "The Age of Turbulence" and his subsequent comments.
There is a certain void in a capitalist's outlook. Production and consumption are one thing, but what of ethics and morality? Rand, who came to America from the Soviet Union in 1926, wondered the same thing. She embraced America's entrepreneurial spirit but wanted to give it a little soul. Ultimately she described her Objectivist philosophy as the "concept of man as a heroic being, with his own happiness as the moral purpose of his life, with productive achievement as his noblest activity, and reason as his only absolute." Indeed, it was largely a celebration of self and production and consumption for the good of the self. It is not hard to see why such a point-of-view has taken an influential role with many capitalists, eager to give their careers a little more heart. In the 1950s Greenspan became a member of Rand's inner circle, The Collective, a group of intellectuals who sat around dreaming of utopias and how the world should be run. His book chronicles American economic history from roughly that time to the present day. Of contemporary interest is Greenspan's conjuncture with President George W. Bush and his advice on Iraq.
Much has already been made of Greenspan's comments that the war was "largely about the oil." Greenspan seemed a bit surprised by the reaction. "I was not saying that that's the administration's motive," Greenspan explained in an subsequent interview, "I'm just saying that if somebody asked me, 'Are we fortunate in taking out Saddam?' I would say it was essential."
He also said in his discussions with President Bush and Vice President Cheney, "I have never heard them basically say, 'We've got to protect the oil supplies of the world,' but that would have been my motive." Greenspan said that he made his economic argument to White House officials and that one lower-level official, whom he declined to identify, told him, "Well, unfortunately, we can't talk about oil." Asked if he had made his point to Cheney specifically, Greenspan said yes, then added, "I talked to everybody about that."
The author's book and comments have proven to be as revealing as one could hope from such a calculated economist. Many have suspected all along of ulterior motives for Bush's invasion of Iraq, but Greenspan comes right out and says it. And since he enjoys a rarefied level of respect and admiration it is hard to dismiss his words. But what are we to make of the former Federal Reserve Chairman, once thought to be an independent financial entity, lobbying the president for an invasion of another country?
What we have witnessed over the last seven years is the collusion of policy and ideology. Indeed, not just in America, but world-wide, one's world view is quickly trumping all other responsibilities. Bush is the true believer in the power of Christianity and Democracy as the liberating forces in the world. Greenspan, the Objectivist, believes the same thing about capitalism. The Iraq war represents the confluence of religion, freedom, and capitalism, all brought to bear in an attempt to free the oppressed people of Iraq, and secure our interests. Never before has a war felt more entrepreneurial, so American-made, and the result has been a complete disaster and you'll never hear a hint of hindsight from the men who conjured it up in secret meetings. They are the "prime movers" of our society. The ones who, like Rand and the Collective, sit around and ponder how to better run the world the way the rest of us study football.
Rand's message has often been attacked by people her circle labeled as "do godders," those who argued that individuals should also work for the benefit of others. Her philosophy has been labeled as an elaborate type of Social Darwinism in-which the "fittest" survive and augment what they have. What matters is the person who produces, who works with others to increase what he has and, in theory, increase his happiness. Lining up such a view with Greenspan's deadpan explanation of the Iraq war seems almost too transparent to believe. Keep in mind that perhaps a half a million Iraqis have died since the US led invasion in 2003. Then consider the numerous reports saying that our invasion has made the region significantly less stable, and enhanced terrorist recruiting. Then consider the thousands of US lives that have been shattered, and billions of dollars spent, and the deceit by the Bush administration to bring the invasion for tuition. All of this is on one hand, and the "protection of oil supplies" is on the other. The long-term results of the invasion are impossible to predict, even to someone with Greenspan's acumen, but surely these possibilities must have occurred to the man and factored in to his equations. Surely the value of life must be more than stable oil supplies.
The problem with people like Greenspan and Bush is not necessarily what they believe, but that they believe their point-of-view can't possibly fail. There is no stopping someone like Bush because he has the power of religion and an almost childlike faith in America to filter his decisions. Greenspan, on the other hand, uses reason and the computational power of economics. Two very different methods of induction, yet the results are the same. Groups of power, like the Collective, like Washington think tanks, are nothing more than self-serving entities wrapped in a philosophy. It does not take long to see their morality when it comes to using other people's lives.
Greenspan's words are not only troubling in their cold and calculated reasoning for a war that has turned into a human rights nightmare, but they seem so selfish and short sighted. They seem imbued with a sense of privilege, as if nothing could be more reasonable than deciding the fate of Iraqis over morning coffee. What could possibly go wrong when your world view is brought to task? To the true believer, nothing, but his words are cold comfort to those remaining in Iraq, and those who have been displaced. And if Mr. Greenspan is such a genius, why couldn't he tell the task of regime change and asset securing was well beyond the reach of a man like George W. Bush? Perhaps his irrational exuberance in the power of capitalism also corrupted his judgment of character.
Sunday, September 23, 2007
Thursday, September 20, 2007
Senate to crown Petreus Christ
Today the Senate approved, by a 72 to 25 vote, a symbolic, Republican-initiated resolution condemning the recent MoveOn.org ad that called Gen. David Petraeus, Gen. "Betray Us," with 22 Democrats voting with the Republicans. Well, why not? One more warm fuzzy for the road before our patriotic fever condemns Iraq to a sectarian fueled hell.
What are we doing here? What’s the point of this resolution? I think the best show of support the General could have received was a nice Senate ass-kissing while conducting the "surge" against the will of the people. Of course he got that, because he’s the Christ or something. Ever since taking over the man has received unprecedented support from Congress, and members of the media, and anyone else with any power and influence. (How many times do I have to hear he's the right man for the job? Well why the hell did it take us four years to find the him and crown him Imperator?) And then some wild-eyed liberal organization issues a half-assed advertisement and the Senate has to rush in and make sure Caesar’s feelings aren’t hurt? What is going on?? Is Petraeus the top commander in Iraq or a cuddly Teletubby? Tinky-Winky, did the crazy man scare you? Are you going to be able to deal with the humanitarian crisis engulfing Iraq or has your will to fight been shattered?
Look, I’m no fan of MoveOn.org, I think their advertisement is ridiculous, but the Senate just wont be outdone, will it? Yesterday they decide to block a bill allowing more troop leave and then today issue this statement condemning any criticism of the General under the guise of patriotism. So when they could have done something of substance they balked, and the very next day they fashion this piece of junk resolution out of childish rhetoric and congratulate themselves on how much they love the troops. This is as nutty as the Freedom Fries boycott; as hollow as a yellow ribbon on your SUV; as crazy having the conduct gay sting operations in airport bathrooms while I have to take off half my clothes and hand over my shampoo just to get to an airplane because apparently the threat level is Orange.
President Bush himself felt compelled to hold a press conference and label the ad "disgusting." He then said, "I felt like the ad was an attack, not only on Gen. Petraeus, but on the U.S. military." Yes, I'm sure the President was deeply troubled by the ad and its effect on military morale. After-all, this is the guy who sent the troops into Iraq to hunt for WMDs and strike a blow on terrorism, neither of which existed in Iraq at the time. Then he sat by while we fumbled around the country and lost control of security. Then there's the whole lack of troop armor thing. And on and on. The president admittedly loses no sleep over any of these morale killers, but finds MoveOn.org's ad "disgusting." What a joke.
What does all of this say about how we really view our troops? This isn't respect. This is just posturing. It's condescending to the very people we've asked to carry and win this war. They're good enough to carry that burden but not good enough to hear what some anti-war liberals think? What this is really about is using the troops, again, for political gain. It's not about protecting troops from harmful words, it's about making it look like you're their protector. It's like when daddy has to show up at school to tell the other kids to stop teasing his big, tough son. On one hand we send our youth to boot camp to learn to defend democracy to the death and on the other we treat them like a bunch of innocent woodland sprites whose psyche is so delicate that any criticism of the war will destroy everything they've ever believed in. Don’t worry, if putting your life on the line for the grandeur of George W. Bush isn't a rude awakening, nothing MoveOn.org comes up can be.
General Petraeus is a smart and powerful man. He is an expert in counter insurgency, with a PhD from Princeton, wielding the most powerful military in history. I don't think he needs any lackeys in the Senate to protect him from the likes of MoveOn.org. How can they love the idea of fighting for freedom but have to hide behind the flag every time someone gets their pacifist back up. Something is amiss here. I am going to submit this is why we can't win in Iraq. The war's creators and strongest supports are living in a dream world with absolutely no backbone or substance. They talk tough but a hairball from MoveOn.org makes them so nervous they have to issue resolutions against it. Yes, observe how much they love America by passing this symbolic resolution re-asserting faith in the grand General Petraeus, and banishing patriotic-less verbiage back into the darkness whence it came. Somewhere a dog barked.
What are we doing here? What’s the point of this resolution? I think the best show of support the General could have received was a nice Senate ass-kissing while conducting the "surge" against the will of the people. Of course he got that, because he’s the Christ or something. Ever since taking over the man has received unprecedented support from Congress, and members of the media, and anyone else with any power and influence. (How many times do I have to hear he's the right man for the job? Well why the hell did it take us four years to find the him and crown him Imperator?) And then some wild-eyed liberal organization issues a half-assed advertisement and the Senate has to rush in and make sure Caesar’s feelings aren’t hurt? What is going on?? Is Petraeus the top commander in Iraq or a cuddly Teletubby? Tinky-Winky, did the crazy man scare you? Are you going to be able to deal with the humanitarian crisis engulfing Iraq or has your will to fight been shattered?
Look, I’m no fan of MoveOn.org, I think their advertisement is ridiculous, but the Senate just wont be outdone, will it? Yesterday they decide to block a bill allowing more troop leave and then today issue this statement condemning any criticism of the General under the guise of patriotism. So when they could have done something of substance they balked, and the very next day they fashion this piece of junk resolution out of childish rhetoric and congratulate themselves on how much they love the troops. This is as nutty as the Freedom Fries boycott; as hollow as a yellow ribbon on your SUV; as crazy having the conduct gay sting operations in airport bathrooms while I have to take off half my clothes and hand over my shampoo just to get to an airplane because apparently the threat level is Orange.
President Bush himself felt compelled to hold a press conference and label the ad "disgusting." He then said, "I felt like the ad was an attack, not only on Gen. Petraeus, but on the U.S. military." Yes, I'm sure the President was deeply troubled by the ad and its effect on military morale. After-all, this is the guy who sent the troops into Iraq to hunt for WMDs and strike a blow on terrorism, neither of which existed in Iraq at the time. Then he sat by while we fumbled around the country and lost control of security. Then there's the whole lack of troop armor thing. And on and on. The president admittedly loses no sleep over any of these morale killers, but finds MoveOn.org's ad "disgusting." What a joke.
What does all of this say about how we really view our troops? This isn't respect. This is just posturing. It's condescending to the very people we've asked to carry and win this war. They're good enough to carry that burden but not good enough to hear what some anti-war liberals think? What this is really about is using the troops, again, for political gain. It's not about protecting troops from harmful words, it's about making it look like you're their protector. It's like when daddy has to show up at school to tell the other kids to stop teasing his big, tough son. On one hand we send our youth to boot camp to learn to defend democracy to the death and on the other we treat them like a bunch of innocent woodland sprites whose psyche is so delicate that any criticism of the war will destroy everything they've ever believed in. Don’t worry, if putting your life on the line for the grandeur of George W. Bush isn't a rude awakening, nothing MoveOn.org comes up can be.
General Petraeus is a smart and powerful man. He is an expert in counter insurgency, with a PhD from Princeton, wielding the most powerful military in history. I don't think he needs any lackeys in the Senate to protect him from the likes of MoveOn.org. How can they love the idea of fighting for freedom but have to hide behind the flag every time someone gets their pacifist back up. Something is amiss here. I am going to submit this is why we can't win in Iraq. The war's creators and strongest supports are living in a dream world with absolutely no backbone or substance. They talk tough but a hairball from MoveOn.org makes them so nervous they have to issue resolutions against it. Yes, observe how much they love America by passing this symbolic resolution re-asserting faith in the grand General Petraeus, and banishing patriotic-less verbiage back into the darkness whence it came. Somewhere a dog barked.
Wednesday, September 19, 2007
What will the Iraq end-game be?
I have been overcome by a certain malaise when writing about the Iraq war or George W. Bush. What ever your view, Iraq, and the President's legacy, will remain with us for quite some time. While the news has been filled with Iraq reports, the President's televised address, and General Petreaus's Senate testimony, sifting through the information and misinformation is not only incredibly time consuming but largely fruitless. Which is why I greatly appreciate the work of George Packer.
I have followed Mr. Packer's writing since first reading the incredibly even-handed Dreaming of Democracy which Packer wrote in early 2003 before the fateful invasion of Iraq. With hindsight that peace proved to be incredibly predictive of the now historic lapses in judgment that accompanied Operation Iraqi Freedom.
I have also read Packer's book The Assassin's Gate which devotes 480 pages to America's activities in Iraq after the invasion. Packer has also written numerous pieces on Iraq for the New Yorker but it is his latest report entitled Planning for Defeat which brings to light a few more unfortunate truths.
Both General Petraeus and President Bush have hinted at future troop reductions in Iraq, those men say the draw downs are due to recent success, but in truth they are the product of more mundane forces. The American "surge" in Iraq will have to end at some point next summer. It will end for logistical reasons--brigades will have to rotate out because their tours will be over-extended. The surge's 160,000 troops will inevitably be reduced to 130,000 which will eventually be further reduced due to political pressures at home. (All of the Democratic presidential front-runners are calling for a withdrawal of troops.) But what then?
This is the answer Packer seeks in his article, the conclusion of-which is grim: Iraq will continue to slide into sectarian factions. Barring an incredible turn of events, control in Iraq will continue to rescind away from the central government and into more localized control. These are conditions no one wants to talk about and if the military is doing any planning in this area it is highly secretive. Hillary Clinton has asked the Pentagon for a briefing on their Iraq exit strategy but her request was largely rhetorical, insinuating that surely the pentagon plans to leave Iraq at some point, right? But would anyone be surprised if no such plan exists?
And if it doesn't exist, which is highly likely, it is not because the military does not know how to plan. It is because the administration fears even the thought of planning for defeat. Such a thing would, in the mind of a true believer like Bush, be like kryptonite, radiating its negative energy through the Department of Defense and draining the will to fight. We are living with a President who only sees what he wants to see, and he has proven acutely representative of a country who also sees what it wants, but in slightly different ways. Where the President believes victory first comes from the absolute abolishment of the hint of failure, Americans want to pull the plug on the whole operation, back out, and hope the radicalism we have unleashed in Iraq never manifests itself on our shores. This too is selfish and wishful thinking.
President Bush, most of the Republican presidential candidates, and a hand-full of hard core supporters, continue to talk about victory in Iraq, a concept which has moved from the removal of WMDs to hoping that the Iraqi central government can gain enough traction to run the country. The point of the surge was to buy the Maliki government some time to do this. This seems highly unlikely since the government has become "dysfunctional" according to a recent report), unable to overcome the sectarian rifts that separate its constituents. The big winners could be the tribal warlords, insurgents, and Iran, a country with a vested interest in seeing Iraq's Shi'ite majority remain in power.
Perhaps our leaders have come to grips the very real possibility that Iran's stature will be enhanced. Maybe this is why the administration has upped its rhetoric against that country and why we are now arming Sunni groups to defend themselves. America says this is to battle Al Quada, but the long-term goal could be to build a proxy buffer against Iran. Adept readers will recognize this is essentially the very same role Saddam Hussein filled when his Sunni minority ruled Iraq with an iron grip, and kept an eye on its blood enemy Iran.
So perhaps in the end, after all that blood and treasure, the administration is taking steps to duplicate as closely as possible the situation as it was before we ever went into Iraq. But will anyone realize it when we declare victory and pull out? Removing Saddam paved the way for a Shi'ite led, sectarian government in Iraq, thus matching Iran's. The solution to a very minor problem has created two intractable issues at the heart of the Middle East. That this possibility could have eluded the minds of the war's creators seems baffling but not all that surprising when you consider the people who cooked up the idea in the first place.
I have followed Mr. Packer's writing since first reading the incredibly even-handed Dreaming of Democracy which Packer wrote in early 2003 before the fateful invasion of Iraq. With hindsight that peace proved to be incredibly predictive of the now historic lapses in judgment that accompanied Operation Iraqi Freedom.
I have also read Packer's book The Assassin's Gate which devotes 480 pages to America's activities in Iraq after the invasion. Packer has also written numerous pieces on Iraq for the New Yorker but it is his latest report entitled Planning for Defeat which brings to light a few more unfortunate truths.
Both General Petraeus and President Bush have hinted at future troop reductions in Iraq, those men say the draw downs are due to recent success, but in truth they are the product of more mundane forces. The American "surge" in Iraq will have to end at some point next summer. It will end for logistical reasons--brigades will have to rotate out because their tours will be over-extended. The surge's 160,000 troops will inevitably be reduced to 130,000 which will eventually be further reduced due to political pressures at home. (All of the Democratic presidential front-runners are calling for a withdrawal of troops.) But what then?
This is the answer Packer seeks in his article, the conclusion of-which is grim: Iraq will continue to slide into sectarian factions. Barring an incredible turn of events, control in Iraq will continue to rescind away from the central government and into more localized control. These are conditions no one wants to talk about and if the military is doing any planning in this area it is highly secretive. Hillary Clinton has asked the Pentagon for a briefing on their Iraq exit strategy but her request was largely rhetorical, insinuating that surely the pentagon plans to leave Iraq at some point, right? But would anyone be surprised if no such plan exists?
And if it doesn't exist, which is highly likely, it is not because the military does not know how to plan. It is because the administration fears even the thought of planning for defeat. Such a thing would, in the mind of a true believer like Bush, be like kryptonite, radiating its negative energy through the Department of Defense and draining the will to fight. We are living with a President who only sees what he wants to see, and he has proven acutely representative of a country who also sees what it wants, but in slightly different ways. Where the President believes victory first comes from the absolute abolishment of the hint of failure, Americans want to pull the plug on the whole operation, back out, and hope the radicalism we have unleashed in Iraq never manifests itself on our shores. This too is selfish and wishful thinking.
President Bush, most of the Republican presidential candidates, and a hand-full of hard core supporters, continue to talk about victory in Iraq, a concept which has moved from the removal of WMDs to hoping that the Iraqi central government can gain enough traction to run the country. The point of the surge was to buy the Maliki government some time to do this. This seems highly unlikely since the government has become "dysfunctional" according to a recent report), unable to overcome the sectarian rifts that separate its constituents. The big winners could be the tribal warlords, insurgents, and Iran, a country with a vested interest in seeing Iraq's Shi'ite majority remain in power.
Perhaps our leaders have come to grips the very real possibility that Iran's stature will be enhanced. Maybe this is why the administration has upped its rhetoric against that country and why we are now arming Sunni groups to defend themselves. America says this is to battle Al Quada, but the long-term goal could be to build a proxy buffer against Iran. Adept readers will recognize this is essentially the very same role Saddam Hussein filled when his Sunni minority ruled Iraq with an iron grip, and kept an eye on its blood enemy Iran.
So perhaps in the end, after all that blood and treasure, the administration is taking steps to duplicate as closely as possible the situation as it was before we ever went into Iraq. But will anyone realize it when we declare victory and pull out? Removing Saddam paved the way for a Shi'ite led, sectarian government in Iraq, thus matching Iran's. The solution to a very minor problem has created two intractable issues at the heart of the Middle East. That this possibility could have eluded the minds of the war's creators seems baffling but not all that surprising when you consider the people who cooked up the idea in the first place.
Wednesday, September 12, 2007
Kanye West Blows Lid off MTV Video Music Awards
Rapper Kanye West fired a barrage at the MTV Video Music Awards after watching Britney Spears open the show with a wobbly, unprepared performance to a bewildered audience. West accused the multinational conglomerate of artist exploitation."Man, they were just trying to get ratings," West declared. "They knew she wasn't ready and they exploited her. They exploited her, they played me and I really don't mess with MTV."
West showed off his famous college-level intelligence by adeptly putting his thumb on something all of us have been thinking all these years: that the VMA awards are an over-hyped, ratings-focused, sham which cares little about the music. You just can't get anything past that guy.
"What? He was serious?" an anonymous MTV spokesman replied. "Honestly, we thought that was part of his act or something. You know, the angry rapper bit. Was anyone not aware that we were exploiting our artists? I'm stunned this even needs to be mentioned. This is the entertainment industry. We treat the talent like circus animals. They even sign a waiver saying they accept being exploited. The trade-offs are far too great. Would anyone give a shit about Mrs. Spears or Mr. West if we weren't prostituting their sex appeal and skills?"
West seemed surprised and disturbed by his newfound insight. "Hell, now that I think of it, maybe even the Grammys are just hype and bullshit," He mused.
"You may not know this," West went on, "but the music industry really doesn't care about artists. All they want is another album. There, I've said it. Oh, sure, it all looks like sugar plums and moon pies on the outside, but it can be a cold, heartless business, viewing artists as a commodity and keeping them complacent by a steady diet of drugs, sex, and attention. I know, I know. Once again I've shocked you."
"While I'm at it I'm going to also say that most, no, wait, all corporations are probably motivated by greed. You think big oil may be behind the lag in fuel efficiency standards in this country? Probably! You know what else? I'm going to drop a realm bomb here: those presidential candidates who say they feel your pain? They're just saying that, see, so you'll vote for them. Are you getting all this down?"
West, who threw a wide-ranging tantrum backstage after losing all five VMA categories he was nominated for, also lashed out at Justin Timberlake, Nelly, God, the Bill of Rights, Islamofascim, the Jewish lobby, fat free lard, gravity, and Billy Crystal.
"This was a real wake-up call for me," said West, wrapped in a dark gray mink coat on the unusually cold Las Vegas morning. "I've got to go sit in my gold plated hot tub and think long and hard about this. Perhaps I've been exploited, and perhaps I've been doing some exploiting of my own. You see? That's deep. But I've learned one thing: there's more to being a rapper than being completely establishment and freaking out over who wins what award and who opens on the main stage. It's not about that. No, it's not even about having a hot, young, sexy thing in my bed every night of the week. It's not about me, or my health, or my rocket car. It's about the goddamn music. Respect it."
How Not to Buy a House
Following up my wildly popular post on how to buy a house I give you how *not* to buy a house. This advice pertains to the average potential home buyer, not the super-rich or gambling addict.
5. Take everyone's advice at face value. It may seem shocking to learn but there is quite a bit of money to be made in real estate. Most of these riches will be financed by you. In every step in the process, from the real estate agent to the lender, someone has a vested interest in you spending as much of your money as possible. So, it's probably best if you take their advice with at least a grain of salt. The object of the game is to save as much of your money as possible while still moving into the house that meets your current and future needs.
4. Begin looking at homes before you've determined how much you can afford. When you do this you become emotionally invested in expensive properties and neighborhoods out of your price range. This is a rule I learned when selling cars. It's very hard for a buyer to backwards once he has put himself into a top quality product. At that point the human brain puts all its energy into acquiring the product, monthly payments and prudent planning be damned
3. Take out an adjustable rate mortgage with no idea how it works. Adjustable rate mortgages (ARMs) are loans which start off with a low rate and then adjust at some point in the future according to the market. How much they can adjust to and when they adjust is a matter of negotiation. It stands to reason that if interest rates are very low an ARM will probably only adjust upwards, thus increasing the monthly payments. As I've said before an ARM can be a decent vehicle. You can use it to your advantage by building up equity in your home faster and then selling it before the rates adjust upwards. This approach was much more feasible five years ago when interest rates were low, housing prices were trending upwards much too quickly, and everyone was high on life.
2. Buy more house than you can afford. I've heard this one go both ways. Some people want you to stretch as far as you can when buying a house because it is assumed that your income will increase over time and then you'll be sitting pretty in a really nice home. Well, you know what they say happens when you assume? You make yourself and others look like a damned fool (or something like that). I say it's better to be a little conservative. A house is not typically a great investment and the money you save each month can be used for upgrading and saving for a rainy day. It's much better to have a smaller, nicely kept house than a large, sparsely furnished one. The only reason to justify spending a little more is to get into a slightly better neighborhood.
1. Don't consider taxes, homeowners insurance, maintenance, utilities, or future uncertainty when buying a house. Your property taxes will greatly affect your monthly payments. Taxes of $2400 a year equals an extra $200 per month. Homeowners insurance can easily run $100 a month. Heating and cooling a large house can add up, another good reason to opt for a smaller home. And there will always be upkeep and maintenance. Plan on spending at least 1% of the price of your home per year on annual maintenance. Even if you don't spend it one year it will add up in time as you replace the furnace, the air conditioner, the roof, etc.
There is a lot of housing market anxiety out there, which the smart buyer can use as an advantage. Housing prices are dropping and many sellers are all but desperate to get out of those large housing boom homesteads. Buy low, sell high!*
*This article was written by a complete amateur, whose work will never appear on cnnmoney or the economist.
5. Take everyone's advice at face value. It may seem shocking to learn but there is quite a bit of money to be made in real estate. Most of these riches will be financed by you. In every step in the process, from the real estate agent to the lender, someone has a vested interest in you spending as much of your money as possible. So, it's probably best if you take their advice with at least a grain of salt. The object of the game is to save as much of your money as possible while still moving into the house that meets your current and future needs.
4. Begin looking at homes before you've determined how much you can afford. When you do this you become emotionally invested in expensive properties and neighborhoods out of your price range. This is a rule I learned when selling cars. It's very hard for a buyer to backwards once he has put himself into a top quality product. At that point the human brain puts all its energy into acquiring the product, monthly payments and prudent planning be damned
3. Take out an adjustable rate mortgage with no idea how it works. Adjustable rate mortgages (ARMs) are loans which start off with a low rate and then adjust at some point in the future according to the market. How much they can adjust to and when they adjust is a matter of negotiation. It stands to reason that if interest rates are very low an ARM will probably only adjust upwards, thus increasing the monthly payments. As I've said before an ARM can be a decent vehicle. You can use it to your advantage by building up equity in your home faster and then selling it before the rates adjust upwards. This approach was much more feasible five years ago when interest rates were low, housing prices were trending upwards much too quickly, and everyone was high on life.
2. Buy more house than you can afford. I've heard this one go both ways. Some people want you to stretch as far as you can when buying a house because it is assumed that your income will increase over time and then you'll be sitting pretty in a really nice home. Well, you know what they say happens when you assume? You make yourself and others look like a damned fool (or something like that). I say it's better to be a little conservative. A house is not typically a great investment and the money you save each month can be used for upgrading and saving for a rainy day. It's much better to have a smaller, nicely kept house than a large, sparsely furnished one. The only reason to justify spending a little more is to get into a slightly better neighborhood.
1. Don't consider taxes, homeowners insurance, maintenance, utilities, or future uncertainty when buying a house. Your property taxes will greatly affect your monthly payments. Taxes of $2400 a year equals an extra $200 per month. Homeowners insurance can easily run $100 a month. Heating and cooling a large house can add up, another good reason to opt for a smaller home. And there will always be upkeep and maintenance. Plan on spending at least 1% of the price of your home per year on annual maintenance. Even if you don't spend it one year it will add up in time as you replace the furnace, the air conditioner, the roof, etc.
There is a lot of housing market anxiety out there, which the smart buyer can use as an advantage. Housing prices are dropping and many sellers are all but desperate to get out of those large housing boom homesteads. Buy low, sell high!*
*This article was written by a complete amateur, whose work will never appear on cnnmoney or the economist.
Tuesday, September 11, 2007
How to Buy a House
Buying a home is a complex but incredibly rewarding process. It is the single largest investment most people will ever make and as such a methodical approach is advised.
10. Determine how much house you can afford. Do this before you even begin looking at houses so you immediately eliminate those which you just can't afford. There's no sense in looking at that giant home with a pool if it is way out of your price range. Don't even tempt yourself or do any foolish justification. There are various on-line calculators, like this one at bankrate.com, to help you determine how much house you can afford. There are also many articles with advice on this subject. Don't forget to factor in taxes and home owners insurance.
9. Determine how long you will be living in the house. The average length of home ownership in the United States is seven years but maybe you plan on living in your next home for the rest of your life. Having a long-term plan will help you determine whether to use an adjustable rate mortgage (ARM) or a fixed rate mortgage. ARMs are generally good if you plan on selling the house a few years after buying it since the interest rate starts off very low and you can build equity in your house faster. However, as the name states, the rate "adjusts" after a period of time. Five years ago, when housing prices were spiking and interest rates were low, an ARM was a feasible choice for a short-term home owner. Today it is less desirable but still helpful in some situations. A good, reputable mortgage lender can walk you through all of the options.
8. Determine what you want in a house. This ties in with how long you plan on living in the house. Maybe a fenced in yard is not important to you today but do you plan on having children running around outside down the line? Since you are spending a considerable sum of money on your house you might as well figure out what you'll want in it, today, and years from now. It's helpful to rank what you want in your home by desirability and complexity. Certain things are easier to add than others. For example, if you want a master bathroom you are probably better off finding a house with one in-place since putting one in can be very expensive.
7. Determine what type of neighborhood you want to live in. Again, this should line up with your long-term goals. Maybe the trendy inner city neighborhood is fun now, but is that where you want to be in five or ten years? Will quality of schools play a factor in the future? What about crime rate and commute time?
6. Should you use a buyer's agent? A buyer's agent is a real estate professional who works on your behalf during the purchase of a home. They can do everything from finding potential homes to setting up times to see the home to suggesting mortgage companies to work with. In my experience the most important function of the buyer's agent is negotiation and sage advice. So, consider your agent carefully. Will your agent be able to go to bat for you during the crucial negotiating process when you've found a house you like? I remember when I sold a condo in St. Louis and ran up against a buyer's agent who was extremely tenacious on behalf of the buyer. That person definitely got their money's worth out of their agent.
5. Begin looking at houses. If you've figured out how much house you can afford, what you really want in that house, and what type of neighborhood you want to live in, you have helped yourself out considerably when weeding through all the possible homes for sale. Now is the time to begin looking at houses. Of course you don't need your own agent to look at houses. Potential homes are easily found on the internet through any number of on-line listings like realtor.com. If you've found one that meets your criteria you can contact the listing agent and set up a time to view the house. Of course then you are dealing with the listing agent directly, rather than having a representative of your own, and for many people this is too stressful.
4. Consider which features of a house are unchangeable. The golden rule of real estate is this: location, location, location. It has been said that it is better to own the worst house on a nice block than the other way around. Of course some of this is a matter of taste. Along those lines consider carefully those things about the house and neighborhood which will be extremely difficult, if not impossible, to change. Consider the surrounding area: Are there high tension lines running over the back yard? Is the home in the shadow of a power plant? Is there a strip-club across the street? Then consider the house itself: will you need to do any major remodeling or repair? Is the siding falling off? Generally you want to work your way from the most expensive, complicated repairs down to the things which are easily fixed and see if there are any deal breakers.
3. Do not be afraid to look at a lot of houses to get a better idea of what you really want. When I bought my first home I started off looking at single family homes in St. Louis but eventually decided I wanted a condo instead. Putting in the time to look at extra homes is taxing but considering the huge financial investment you're about to make it is well worth it. Again, this is where a buyer's agent can complicate the process because it is *not* in their best interest to look at 100 houses while you decide. But, if you've done your homework (the initial steps) hopefully you'll have a good idea of exactly what you want.
3. If everything seems to line up according your criteria, congratulations! You've found a potential home. Now comes the stressful part: making an offer. Again, this is where an experienced buyer's agent can really pay off. I've seen some who have negotiated like sharks, saving their clients thousands of dollars. And others offer almost no advice or guidance and seem worried about losing a sale. Hopefully your agent will run some comparisons (comps) on recent home sales in the area to determine what offer you should make on the house. Always have your offer contingent on an inspection.
2. Have the home inspected! This may be the most important step of all and if at all possible use someone recommended by a friend. Don't use someone your agent has recommended. Try to find someone reputable who will do a comprehensive inspection, including, hopefully, a check for mold. It's of little value if all the inspector can tell you is that your water pressure is good. You could figure that out easily enough but what you can't determine, and hopefully the inspection will, is what serious flaws the house has. A good home inspection can save you thousands of dollars in the long run. You do not want to buy a home with foundation problems, termites, or mold issues. The inspection will be able to determine what repairs will be needed and you can factor those in to your negotiations.
1. Hopefully you've made a fair offer, had the home inspected, and negotiated any necessary repairs into that offer. Hopefully everyone is reasonable and it is accepted. It is definitely a buyer's market these days so a buyer can push a little harder than in the past. Try to close six to eight weeks out and lock your rates in through the bank unless there is a good chance they will go down before closing. I made the mistake of agreeing to close four months out and failed to negotiate the price of locking in rates that far out. Consequentially I did not lock my rates until two months later, and they had gone up. Remember, through the whole process, this is business. Every step requires careful planning and consideration and others may be there to give you advice but you are the one who will be signing the deal and responsible for the payoff month after month, and repairs and upkeep.
10. Determine how much house you can afford. Do this before you even begin looking at houses so you immediately eliminate those which you just can't afford. There's no sense in looking at that giant home with a pool if it is way out of your price range. Don't even tempt yourself or do any foolish justification. There are various on-line calculators, like this one at bankrate.com, to help you determine how much house you can afford. There are also many articles with advice on this subject. Don't forget to factor in taxes and home owners insurance.
9. Determine how long you will be living in the house. The average length of home ownership in the United States is seven years but maybe you plan on living in your next home for the rest of your life. Having a long-term plan will help you determine whether to use an adjustable rate mortgage (ARM) or a fixed rate mortgage. ARMs are generally good if you plan on selling the house a few years after buying it since the interest rate starts off very low and you can build equity in your house faster. However, as the name states, the rate "adjusts" after a period of time. Five years ago, when housing prices were spiking and interest rates were low, an ARM was a feasible choice for a short-term home owner. Today it is less desirable but still helpful in some situations. A good, reputable mortgage lender can walk you through all of the options.
8. Determine what you want in a house. This ties in with how long you plan on living in the house. Maybe a fenced in yard is not important to you today but do you plan on having children running around outside down the line? Since you are spending a considerable sum of money on your house you might as well figure out what you'll want in it, today, and years from now. It's helpful to rank what you want in your home by desirability and complexity. Certain things are easier to add than others. For example, if you want a master bathroom you are probably better off finding a house with one in-place since putting one in can be very expensive.
7. Determine what type of neighborhood you want to live in. Again, this should line up with your long-term goals. Maybe the trendy inner city neighborhood is fun now, but is that where you want to be in five or ten years? Will quality of schools play a factor in the future? What about crime rate and commute time?
6. Should you use a buyer's agent? A buyer's agent is a real estate professional who works on your behalf during the purchase of a home. They can do everything from finding potential homes to setting up times to see the home to suggesting mortgage companies to work with. In my experience the most important function of the buyer's agent is negotiation and sage advice. So, consider your agent carefully. Will your agent be able to go to bat for you during the crucial negotiating process when you've found a house you like? I remember when I sold a condo in St. Louis and ran up against a buyer's agent who was extremely tenacious on behalf of the buyer. That person definitely got their money's worth out of their agent.
5. Begin looking at houses. If you've figured out how much house you can afford, what you really want in that house, and what type of neighborhood you want to live in, you have helped yourself out considerably when weeding through all the possible homes for sale. Now is the time to begin looking at houses. Of course you don't need your own agent to look at houses. Potential homes are easily found on the internet through any number of on-line listings like realtor.com. If you've found one that meets your criteria you can contact the listing agent and set up a time to view the house. Of course then you are dealing with the listing agent directly, rather than having a representative of your own, and for many people this is too stressful.
4. Consider which features of a house are unchangeable. The golden rule of real estate is this: location, location, location. It has been said that it is better to own the worst house on a nice block than the other way around. Of course some of this is a matter of taste. Along those lines consider carefully those things about the house and neighborhood which will be extremely difficult, if not impossible, to change. Consider the surrounding area: Are there high tension lines running over the back yard? Is the home in the shadow of a power plant? Is there a strip-club across the street? Then consider the house itself: will you need to do any major remodeling or repair? Is the siding falling off? Generally you want to work your way from the most expensive, complicated repairs down to the things which are easily fixed and see if there are any deal breakers.
3. Do not be afraid to look at a lot of houses to get a better idea of what you really want. When I bought my first home I started off looking at single family homes in St. Louis but eventually decided I wanted a condo instead. Putting in the time to look at extra homes is taxing but considering the huge financial investment you're about to make it is well worth it. Again, this is where a buyer's agent can complicate the process because it is *not* in their best interest to look at 100 houses while you decide. But, if you've done your homework (the initial steps) hopefully you'll have a good idea of exactly what you want.
3. If everything seems to line up according your criteria, congratulations! You've found a potential home. Now comes the stressful part: making an offer. Again, this is where an experienced buyer's agent can really pay off. I've seen some who have negotiated like sharks, saving their clients thousands of dollars. And others offer almost no advice or guidance and seem worried about losing a sale. Hopefully your agent will run some comparisons (comps) on recent home sales in the area to determine what offer you should make on the house. Always have your offer contingent on an inspection.
2. Have the home inspected! This may be the most important step of all and if at all possible use someone recommended by a friend. Don't use someone your agent has recommended. Try to find someone reputable who will do a comprehensive inspection, including, hopefully, a check for mold. It's of little value if all the inspector can tell you is that your water pressure is good. You could figure that out easily enough but what you can't determine, and hopefully the inspection will, is what serious flaws the house has. A good home inspection can save you thousands of dollars in the long run. You do not want to buy a home with foundation problems, termites, or mold issues. The inspection will be able to determine what repairs will be needed and you can factor those in to your negotiations.
1. Hopefully you've made a fair offer, had the home inspected, and negotiated any necessary repairs into that offer. Hopefully everyone is reasonable and it is accepted. It is definitely a buyer's market these days so a buyer can push a little harder than in the past. Try to close six to eight weeks out and lock your rates in through the bank unless there is a good chance they will go down before closing. I made the mistake of agreeing to close four months out and failed to negotiate the price of locking in rates that far out. Consequentially I did not lock my rates until two months later, and they had gone up. Remember, through the whole process, this is business. Every step requires careful planning and consideration and others may be there to give you advice but you are the one who will be signing the deal and responsible for the payoff month after month, and repairs and upkeep.
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