No, I’m not going to advise you to vote for a specific person. Not going to happen here. But I’ve got to say something about the current events that are occurring rapidly around us.
First and foremost, Capitalism has not failed. The hybridized system that we have lived in for quite some time is crumbling, but it hasn’t been pure capitalism in a long time. What has failed? Congress has failed, the FED has failed in a huge way, and “We the People” have failed as well.
During the 90’s Congress moved to have banks loosen lending standards. The FED went along with them. And the banks followed suit. Why.
Initially during the early 90’s there was a push for home ownership and loosened lending practices to avoid discrimination in the lending markets. A 1992 Federal Reserve study from the Boston FED demonstrated discrimitory practices in lending. Lenders were pushed to loosen documentation requirements, savings requirements, etc. That study was used by Congress over and over again.
Unfortunately, the study was wrong, and several years later the results were corrected. Those results were never referred to by Congress….ever. The revised study did not demonstrate discrimination in lending, and it was ignored. The first study was “sexy” and sounded better for arguments in Congress. Hey, it happens.
Over the 90’s we stepped back regulation of our banking system. The Attorney General at the time even went so far as to threaten the banking industry regarding their lending practices. Loosen or become a target of investigation.
So, lending became looser. Have you heard of “No Doc Loans?” No documentation home loans. Yeah, a friend of mine even got one to get their new house only a year ago. We were still doing those things a year ago. And we all knew the mortgage system was breaking then. Only months after he got his loan the practice stopped.
Who is responsible?
We all are. Adjustable rate mortgages, no interest loans, second mortgages, home equity lines…… we signed up for them, didn’t we? Yup. Were documents provided to us? Yup. Did we sign them? Uh, yup. Did we read them????
Come on, did you really think your home value would do nothing but go up? No improvements, move in, and in 24 months sell for $100K on top….. Does that sound like the way a real market works? No. We all know better than that. But many of us participated.
In the end, Congress, the Federal Reserve, the Banks, and We the People are all parties to the economic disaster we’re facing. And nobody can say that we had nothing to guide us. History, specifically the creation of the last Great Depression was right there for anyone to read about.
Personally my first worry came in 1997. Not too many months after Greenspan’s “Irrational Exhubarance” statement. He knew a large bubble was forming. And instead of popping it he ended up encouraging it. Once the bubble in the stock markets started deflating we moved to a new one. Housing. And boy did the Fed and Congress encourage that bubble.
What to do now?
I’m totally against bail outs. Can’t stand the idea. Companies that screw up need to fail. That frees up capital to useful companies. You stop spending on bad, and you spend on good.
With that said, the current bailout NEEDS to happen. Credit markets are on the verge of seizing up. Our watershed 1929 Crash happened last week. Wednesday night. The credit markets froze. Lending between large institutions stopped. If we don’t want a total collapse, but instead want to manage the fall (it will still be a whopper), the bailout must go through.
Go figure, it’s not going through. Congress, the folks who helped start this bubble economy back in the 90’s, is now bickering, and will continue to. On the surface, I agree. Bailouts shouldn’t happen. But with my limited information here in an Airstream I know it has to. These jokers have giant research groups at their disposal. They know what they’re risking.
So, where’s the politics come in? Simple, Congress has failed us. They’ve been failing us for a while now. Democrat, Republican, Conservative, Liberal, Independent, Green, Libertarian……everyone who’s in there has a lot of responsibility in this.
Hey, they don’t run the economy, do they? Nope, but look at what they’ve forced. Changed lending practices, oversight of Fannie and Freddie, oversight of the FED. They were there the whole way gang, and they created and changed laws that led to this.
Every member of Congress currently needs to GO! Seriously, they’re all responsible. They’re all career politicians. Their interest is in re-election. The people’s business is a lower priority than their re-election. You really want to do something. Move them all out.
Oh, we need experienced politicians, do we? Sure…..experienced politicians brought us this. I can see why that would be necessary. Every problem they try to address usually leads to 2 or 3 new larger problems. Always generating a need for their services, eh? Cool job. Like a computer tech that fixes one thing and breaks two guaranteeing a return visit. Eventually you’d fire that guy, wouldn’t you?
So, my best advice? My plan? I will not vote for one single incumbent in the upcoming election. I will seek out those who are not career politicians. I know, it will be hard. But where I can, I will find “real people” and vote for them. Heck, the approval rating for the current Congress is dismal, right? So we know we’re not happy. Vote them out! All of them!
Where are we right now? Here’s a short list:
- Freddie Mac & Fannie Mae have failed. They’ve always been backed, supported, and regulated by the government.
- Bear Stearns failed.
- Lehman failed.
- AIG failed.
- Washington Mutual just failed.
- Many more are on the way…….
Keep reading, pay attention, and watch who works on this versus who continues being a road block. You get to vote soon. Keep it all in mind.
By the way, I think it’s time that my regular readers become regular readers of one of my favorite financial columnists. Bill Fleckenstein’s article list can be found here. Go ahead and read the most recent and then work your way backwards. This guy has pegged this situation since the late 90’s. I’ve followed him that long, and I’ve been happy I paid attention to him. Most people don’t hear about him. During the bubble CNBC had him on regularly to pick on him for being a bear. CNBC was the biggest bubble cheerleader of them all, maybe they’ll go off the air some day! Wonder if they pick on his ideas any longer?
Stay informed everyone. And that means READ. If you depend on the evening news you’ll continue missing out on all the action. Information is always a valuable tool.
Oh, and I won’t say any more on politics here. Economics, yes, I’ll still comment there. But now you know where I am politically. Disgusted with both parties, and with the current pool of “leaders” we have. It’s time for a complete change.
Now on to the Mylanta for the morning……. 🙂