The State Of Imagination

We are waiting in the wings for our bailout money, my wife and I. Wells Fargo Bank is preparing to organize new lending rates for customers with houses and we are hoping to step in and improve our mortgage terms. My wife had a conversation with a banker last week and he said there is a chance we could qualify for new terms at 4.5 % and we could even possibly get a 20 year loan yielding the same $2500 a month mortgage payment while knocking 7 years off the repayment schedule...The fact that the bank is ready to consider this is a measure of the extraordinary times we are living through. It gets better.

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These splendid new terms are supposed to be on offer soon and with no points or costs. "Are you okay to hang on for a while?" our Wells Fargo broker asked anxiously. Herself reassured him on that score. We, our government jobs and our strong credit rating will stand in the wings until we hear from him. He's happy, he's a broker with the chance to do some business again, we get better terms on our mortgage. Everyone is happy.

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But wait there's something weird here. Usually to get a home re-financed you have to submit an appraisal at a cost of a few hundred dollars. In this case if we get the house valued it will come in horribly low, well below our $390,000 mortgage, so in a normal financial world we could never re-finance. Why would a bank offer us a loan far higher than the property is now worth? At far better terms for us? To keep us paying off , so the debt stays on their books as an asset, is why!

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It's rather like the astonishingly low cost of gasoline these days, which in the Lower Keys is holding steady around $2 a gallon. We all know that gas should cost a lot more than that but the economy is such that it cannot be priced higher. And we know there will be hell to pay if/when the economy kicks in again and demand increases and prices rise. Especially as the search for new sources of oil has dried up with petroleum selling at less than $40 a barrel. Our bank is willing to give us an Alice in Wonderland re-finance deal because the housing market and all it's housing assets are so...not real? Wait until the stimulus spending kicks in and inflation takes hold. I'll be paying off my fixed mortgage with my lunch money...

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But wait, there's more. I have suffered for the past three years at the hands of a truly unpleasant insurance agent in Key West. His staff are aggressively rude and he is a noisy angry man who believes business should be conducted inefficiently with a large dose of his Neanderthal political opinions thrown in for free. He has a point, home insurance is problematic, but his business practices don't help. Private insurance companies withdrew from Florida after the state told them they couldn't charge what their actuarial tables indicated was needed to cover their risks. So the state, in an effort to pacify the voters took over home insurance and set rates artificially low, using prayer as a back up form of risk avoidance. Insurance companies know what it will cost should Florida have a close encounter with a major hurricane, and those costs set premiums unacceptably high to people who vote. So this year I said enough, I want an insurance agent with customer service skills in the event our home should get wiped out, so I went to a Big Pine Key agent who had me get another house inspection ($150) and voila! Now we face a premium of around half the original cost. I find it totally weird how this stuff works. A major hit this summer in the state of Florida will be interesting, as the state is already $4 billion in the hole, and my premium will be less than it has ever been.

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Perhaps this how deflation works. If you keep your job and your income and your home and your health benefits you find your formerly imperial task masters are suddenly your friends. I have spent the past half century living with inflation in a world where savings were despised as a way to lose your money, a world where spending money was the way to keep the economy buoyed. Now suddenly we need to save our jobs, save our money, build our savings. Our way of life, the one where we were ordered to spend like our economy depended on it, is now being re-written as profligate and stupid and we we were all being wasteful as we obeyed our orders. Now we are all Japanese, thrifty, hard working, conscientious. I just can't wait to see what 2009 will bring, as I borrow my imaginary loan for my imaginary home insured by the imaginary state of Florida, a state that is already bankrupt with an imaginary economy with no clue how it will pay off hurricane damages this summer... How I got to this imaginary place I have no idea. I never thought adulthood would be so crazy. Perhaps I will wake up and find it was all a dream and I am 12 years old again, dreaming of my first moped.