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Wednesday, December 24, 2008

Harsh Answers To A Harsh Economy

Harsh Answers To A Harsh Economy
by Garry

PoliTICKians know nothing about the free market economy. If Econ 101 was being rewritten today, that statement would be on the inside front cover. Or the sub-title perhaps, if the author was interested in truth in marketing.

When a poliTICKian tells me to turn left, I will normally go right. If they tell me to speed up I will slow down. etc.etc...

So now we have poliTICKians who created the current economic meltdown telling us they need to fix the problem by taking more of our money and in effect socializing private businesses in much the same way Hugo Chavez has and continues to do in Venezuela.

The amazingly obvious connection to the two circumstances seems to escape even the poliTICKians on the Right side of the aisle, which leads me to believe they may be on the right, but they are definitely wrong.

More taxes, (to provide a stimulus), more government intervention, (to safeguard the industries) and more corporate handouts (bailouts) to ensure workers don't lose jobs at companies which are failing because they are failures at standing up to over regulation and consistently bow down to the union thuggery at the national and local level.

When the poliTICKian tells me to turn left, I go right.

The answers are simple and obvious to me.

Re: The Big Three Automakers

Instead of bailouts for companies which are failing, let them fail. The assets of the company aren't going anywhere, they will just change hands.

Instead of protecting workers jobs who work for companies which are failing, let them lose the jobs and find something useful to do instead.

Instead of continuing a failing business model, start over from the beginning without the union thuggery which gives GM a workforce of 96,000 [+/-] and nearly 1,000,000 receiving retirement benefits. Just another Ponzi scheme doomed to failure and ratified as a failure in 2006 when the Federal Government chose the route of the “Pension Protection Act of 2006” signed by the Moderate Democrat President Jorge W Bushez.

Losing the current business model will allow GM at lest to lose all of the $70 per hour employees instead of a few of them.

The housing market is equally simple. (background)

The housing market problem began with the Community Reinvestment Act (CRA)of 1977. The CRA wasn't a terrible idea in itself, it was just wrongheaded from the beginning. Instead of encouraging people to work hard and save enough for a down payment, it relaxed the rules for home ownership and brought in people who might otherwise not qualify for home ownership. Again not a horrible idea, just wrongheaded.

Liberal Soft hardheadedness at work.

The clencher came though with the 110th congress and the Socialist Democrat agenda of "homes for all". Socialist Democrat Senators Chris Dodd and Barney Frank both were in the drivers seat for that fiasco, with the willing help of Nancy "The Red" Pelosi and Dirty Harry "Gimme Land" Reid.

When that disaster hit the fan, and the sub-prime market collapsed as it had to do someday, everyone with a recent mortgage based on hype inflated prices took a hit. The number of homeowners who are "underwater" (meaning they owe more than the home is worth) ballooned nearly overnight and lending institutions began to fail.

Answer: The poliTICKians tell me to turn Left, I turn Right.

The Federal Reserve (not the government) is lowering interest rates to spur lending (and also lower the Adjustable Rate Mortgage rates.)

The real answer is to raise interest rates again, let those who can't afford to own a home lose the house and sell it or give it back to the bank or lender. The lender in turn lowers the cost of the home to a rational price and sells it. On paper, some have lost a fortune in equity, but the equity was never really there in the first place except as a function of the housing boom brought about by government intervnetion paid for by the Federal Reserve and the governemtn borrowing money (mostly from China) through the sale of Governement bonds.

The equity loss is the loss of a mirage, a whisper of wind in the trees, a pile of plain old paper. The assets aren't gone, they just change hands. And just like the failing business model, the housing market is able to recover because the artificially low interest rates are gone and only those with good credit who can actually apy back the loans can now buy a house. Just like it's been since before the Socialist Democrat Social Engineering Experiment in Housing began in 1977.

* The bottom line in all of the answers will be for the Government to step back from the problem and allow the market to correct itself.
* The likelihood of that happening even if Mitt Romney had been elected was close to zip, zero, nada.
* For it to happen with the Fuddmeister Liberal Democrat McCain in office was a lightly negative number.
* For a market correction to occur with a full blown Marxist/Socialist BHObama in office is beyond the realm of consideration.

My belief system tells me the odds of the Rapture occurring while the BHObama is in office is more likely to happen than a true Free Market Response.