harmonicminer

As has been pointed out before, it ain’t rocket science, and here’s an unusually succinct statement of the problem, and incisive commentary on the bailout.

The bursting of the housing bubble — which in turn precipitated the collapse of the financial and credit house of cards — is entirely government-made. Point fingers where you will, but I point mine at those congressmen and administrations that sought to win popular support by turning the Federal Reserve System, Fannie Mae, and Freddie Mac into public reservoirs of easy credit and home loans, available even to the riskiest and most credit-unworthy of borrowers. For years, the federales have artificially lowered interest rates and opened the loan spigots for institutional borrowers which — under inducements and even statutory pressures — opened their credit spigots, in turn, for just about any and every would-be homeowner. The usual tests of credit-worthiness that typically govern lending practices in a free, competitive marketplace were recklessly abandoned — sometimes under “moral” claim that rigorously screening prospective borrowers is “discriminatory.” So, lending has become increasingly indiscriminate, especially in the sub-prime, adjustable-rate-mortgage market.

Here’s a little more history, for those who need it, on the road up to the current problems.

Sadly, both McCain and Obama are blathering away about regulatory failure, when it is Congress that laid the foundation for this house of cards in the first place, because they wanted to “encourage home ownership to widen”, in the belief that it was simple discrimination that prevented poor credit risks from getting loans. As always, whenever government tries to repeal laws of economics, disaster ensues.

In the meantime, look for Democrats (and, sadly, even a few Republicans) to blame the problem on “unfettered capitalism”, “unaccountable corporations”, “regulation failure”, and “market failure” and the like.  This is simply a lie, a particularly self-serving one, to avoid blame, and to justify even more interference in the market to try to “fix” the problems already caused by social engineering and economic blindness on the part of the Left, and again, some deluded folk on the Right…  sort of.

I have news:  pure capitalism hasn’t really been tried in the USA, at least not for any noticeable length of time.  Really.   About the time that something like modern capitalism began to emerge in the 19th century, the government immediately got involved in distorting markets, picking winners and losers, taking kickbacks and bribes, and straight ahead class warfare from populist politicians.  Not to put too fine a point on it, the modern Democratic party’s ideological predecessors were the populists and progressives who did the deed…  and almost immediately began to blame the businesses and industries with which they interfered, to justify even more interference.  The Sherman Anti-Trust act was just the beginning, and more than once it was applied to businesses that had become “monopolies” due to government regulations in the first place.

This whole thing is a very old story.

It may be that this bailout is unavoidable, both in practical economic and political terms.  After all, if you’ve been propping someone up for years, you should probably remove the props with some deliberation, gradually, so they have time to adjust.  Sadly, the Democrats are calling for more and bigger props instead of just the minimum necessary to prevent disaster now.  Their answer to failure of their ambitious programs of social engineering is always to take on even more ambitious ones. Good intentions, not results, seem to be enough for them.

We Americans do not have a lock on our privileged position economically, and we can lose our liberty, political and economic, if we tolerate enough encroachment from self-serving politicians, who think they know better than we do how we should live our lives, who make promises that cannot be kept, and, blaming others for their inability to deliver on the (impossible) promises, make even more outlandish ones to maintain their power, even if for just a little while longer, until the bill must be paid.  More than anything else, this explains the current Ponzi schemes of Social Security, Medicare, etc., and the impossibility that those promises can be kept in the future to the people paying for the current beneficiaries now.

If you pay taxes now, you are going to pay the bill for the government’s distortion of the market place, and the impossible promises it made.

For those of you who don’t like to read links, here are a couple of straightforward reports that, between them, pretty much cover the bases.

When a politician says, “Trust me, just give me your money now, and I’ll take care of you in the future,” you need to run, far and fast.  Or fight back.

UPDATE:  the Senate just passed a “bailout” measure that will go to the House.  It is unbelievably chock full of ham, bacon, chittlin’s, as well as all other forms of the “other white meat”.  It does not look to me like an emergency bill to address an urgent national need, it looks more like a herd of pigs snuffling at the trough more joyfully than usual.

I am more and more persuaded that we will not all starve if we just let the markets adjust, and accept some pain for our foolishness in having these people in office.  I truly fear that the nature of our nation will be changed if Congress becomes part owner of America’s real estate.

Tags: bailouts, finance, housing