Exemplary Behavior

One of my thoughtful office mates taped this article up on the fridge at work. It reports how back in '99, Fannie May was under pressure from the Clinton administration, and was working to support the granting of a lot of loans to people with questionable credit (read: bad credit risks). Prophetically, the article also makes the observation that should there be some sort of economic downturn that caused those questionable borrowers to collectively default on the loans they were being given, Fannie May would need a government bailout.

Thank you so much, Bill and Hillary, for the years of prosperity that you are given credit for, and that Democratic drones cite to as how beautiful things are under Enlightened Rule. Of course, all of the predictions made by the writer of the article (which was published in the New York Times on September 30, 1999) have come to pass. The explosive growth of the stock market from that period (fueled in part by moves like this one) turned out to be unsustainable. There was an economic downturn when people realized that the stock they were buying wasn't worth the price they were paying (oh, and the sixth largest economy in the world - California - tanked due to a somewhat similar governemental move involving the power companies), and that resulted in many of the subprime borrowers defaulting. Fannie May needed a bailout. Bill and Hillary where able to inject billions of dollars into the market place, causing huge growth and prosperity, by getting credit for people who - based on the calculations of Fannie May and other industry entities - hadn't earned the credit, and who, in hindsight, didn't deserve the credit.

I mentioned in previous postings the idea that economies must be based on WORK. People must work and be industrious. They must spend what they earn, but must not live beyond their means. When people live beyond their means, the net effect is that they take more resources out of the economy than they put back into the economy: a small net loss. But too many small losses add up to where the economy as a whole operates at a net loss. With our system built the way it is, that net loss accumulates in the form of bad loans and worthless stock. Hence, bailouts. But our focus today is not the result, but the act: by extending government-subsidized bad credit loans, the Clinton administration was able to temporarily inflate the economy by allowing people to buy things they could not really afford. Now, the check has come due. It has become clear to many people that they cannot afford the things they've bought, just at the time they actually have to pay the loans they took out in order to buy the goods.

In typical American fashion, what has the response of the populace been? We have appealed to the legislators to protect us from the loans we took out. Protection from foreclosures on the huge homes we should never have been able to afford. Protection from reposession of the SUVs that never should have been ours. And while you're at it, can you guys in Washington do something about gas prices? I can't afford enough gas to fuel the Hummer that I can't afford to make the payments on.

Now here is the really sad part: THE GOVERNMENT IS GOING TO GIVE IT TO THEM. Facing hard economic times, brought on by people having lived beyond their means, our politicians are planning on passing laws to protect people from foreclosures, do something about the price of gas, and probably get new lines of credit for the people who screwed the pooch the last time they were able to get a loan. Rather than fixing the problem, Embracing The Suck, and emerging from this downturn with an actual solution (people living within their means, assisted by a credit system that works), we are going to find some way to keep living high on the hog, and just put off paying the check that keeps on accruing. And why not? We can't pay the tab we've already run up. Why not get one more drink to top it off? Maybe a little dessert as well? (By the by, the national debt clock in Times Square ran out of digits this morning. There were thirteen of them, surpassed when the figure rolled over $10-trillion. In classic American fashion, the plan is to add three more digits to the face of the clock, so that it will be able to accomodate more debt.)

Thus, things are going to go from bad to worse. There will be a rebound, of course, but the status quo will continue: people will continue to live beyond their means, endorsed by a Goverment that is incapable of looking further then four yeas ahead, and our system as a whole will continue to consume more than it can produce. The resulting debt will continue to accumulate in banks' defecit columns, and in stock overvaluation, and the system will come periodically tumbling down. All because people are going to vote for whoever promises to get them things they don't deserve.

God bless America. We're going to need it.