Now that the housing crisis is visible to all, let’s do what 21st century Americans do best: point the fickle finger of blame at someone else.
“Idiots Fiddle While Rome Burns“, Barry L. Ritholtz, posted at The Big Picture, 16 July 2008 — Bold emphasis added. Excerpt:
The collection of ne’er do wells, clueless dolts, political hacks, and oh, let’s just be blunt and call them what they are — total Idiots — expands into an ever larger circle.
While the Republic burns due to the unsavory combination of incompetence, ideological rigidity, and crony capitalism, the fools and assclowns seem ever more determined to avoid any personal responsibility for the damages they have wrought. Instead, they flail about blindly, blaming everything and everyone — except their own horrific negligence.
This is financial incompetence writ on a scale far grander than anything seen for centuries.
As a nation, our institutions have failed us: Under Alan Greenspan, the Federal Reserve slept through the most reckless and irresponsible expansion of bank lending in history for reasons of ideological purity. His opposition to the Fed’s regulatory role reached the point of malfeasance long ago. History is unlikely to be kind to the Maestro.
There is a choice to be made: Either we regulate the Banks, or leave it to the vagaries of the free markets to punish those who trade with, or place their assets in the wrong institutions. But for God’s sake, do not give us the worst of both worlds — do not allow banks the freedom to make horrific but preventable mistakes (i.e., only lending money to those who can pay it back), but then expect the taxpayers to foot the trillion dollar bill.
That’s not capitalism, its not socialism, its not regulation, and its sure as hell isn’t what free markets are. Our language is insufficient to describe this hodge-podge system, other than to call it a random patchwork of quasi-capitalism, quadrennial-socialism, and politics as usual. Ideological idiocy is the only phrase I can muster that has any resonance with the daily insanity.
We have entered into a fit of Orwellian madness: The American Capitalists, long the globe’s leading advocates for free markets, have become near Socialists. Halfway around the world, the Chinese Communists have picked up the baton, and are moving rapidly towards a form of Capitalism. Ironically, it is the once largest communist nations — the Chinese and the Russians — who holds much of Fannie and Freddie’s paper.
Like most 21st century American analysis, this comforting rhetoric absolves us of any blame.
(1) For years we read of no money down, no documentation (liars’ loans) mortgages — how could we have known this would end badly?
(2) Home prices ascend beyond anything in our history, as people wildly speculate on further appreciation … how could we have known this was not fine and proper?
(3) Our savings rates dropped to zero, as we plunged heedlessly into debt — each month Wall Street applauded as the increase in consumer spending exceeded that in consumer income. We are just citizens, not rocket scientists; why should we have worried about this?
On a deeper level this is absurd: “That’s not capitalism, its not socialism, its not regulation…” This is both sensible and easy to understand. Powerful groups have made uncounted billions during the housing boom — in finance, construction, and related industries. Now the damage to the system must be repaired at the public’s expense. This is a form of exploitation of the state common to both socialism and capitalism — just the form varies.
Correct diagnosis must preceed a successful cure. Analysis like this is fun to read but helps not at all.
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For more information about this subject
A brief note on the US Dollar. Is this like August 1914? (8 November 2007) — How the current situation is as unstable financially as was Europe geopolitically in early 1914.
The post-WWII geopolitical regime is dying. Chapter One (21 November 2007) — Why the current geopolitical order is unstable, describing the policy choices that brought us here.
We have been warned. Death of the post-WWII geopolitical regime, Chapter II (28 November 2007) — A long list of the warnings we have ignored, from individual experts and major financial institutions (links included).
Diagnosing the eagle, chapter I — the housing bust (6 December 2007)
Death of the post-WWII geopolitical regime, III – death by debt (8 January 2008) – Origins of the long economic expansion from 1982 to 2006; why the down cycle will be so severe.
Geopolitical implications of the current economic downturn (24 January 2008) – How will this recession end? With re-balancing of the global economy, so that the US goods and services are again competitive. No more trade deficit, and we can pay out debts.
- A happy ending to the current economic recession (12 February 2008) – The political actions which might end this downturn, and their long-term implications.
- What will America look like after this recession? (18 March 208) — More forecasts. The recession might change so many things, from the distribution of wealth within the US to the ranking of global powers.
The most important story in this week’s newspapers (22 May 2008) — How solvent is the US government? They report the facts to us every year.
To see the all posts on this subject, go to the archive for The End of the Post-WWII Geopolitical Regime.