Thursday, September 25, 2008

Trickle Up Economics

All we are hearing from the politicians and pundits is that we must give the government another $700 billion to bail out the failed lending institutions or else the economy will completely collapse. That without this money we won't have access to loans for houses and cars and credit cards and student loans, etc. That even with good credit, banks will be difficult to get money from.

Guess what? That's exactly what we NEED to happen. Our economy is a sham of money moving that ends up with us being hit with inflation, debt and bailouts. Our economy was funded by bogus loans, given to unqualified people by mortgage banks, who passed the risk off to the secondary market of Freddy and Fanny, who then passed it on to the prime lending market, who then peddled it off to the marketplace via hedge companies like AIG.

Why was this done? Why was the risk passed and passed until the shit hit the fan and we got handed a trillion dollar bill? Because of social engineering by leftists, that's why. Banks were pushed by legislation created by Bill Clinton in the late 90's to give unsecured money to the economically disadvantaged, particularly the minority poor, in a bit of affirmative action lending that was enforced by Mae and Mac with an artificial, illusionary safety net handed to mortgage lenders so they would advance this "progressive" agenda.

What was the result of this social engineering? Disaster! Money was tossed around like paper at anyone with a heartbeat. No risk? Great! Here's some money! What happened? Housing inflation driving real estate prices to obscene levels that only created a viscous cycle of more and more unsecured lending, and eventually pricing the very poor who were originally supposed to benefit from this socialism right out of the housing market.

Now the bubble bursts and we get Trickle Up economic collapse. The junk loans are predictably defaulted upon by homeowners en masse, the mortgage banks look to Fanny and Freddy for bailout, who then look to the prime lending market for bailout, who then are stuck with billions and trillions in defaulted mortgages that can't be recovered.

AIG and other companies who bought millions of these junk notes and sold them under the hedge bet that they would be safe and secure suddenly find themselves with a lot of promises that collapsed. They relied on the mortgage market booming along so their futures would come out rosy for their investors, and believed the government backing made them risk free.


So, the mortgage lending banks collapse, followed by Mae and Mac, followed by the prime market and the companies that do business with them. Who pays for it?


Yet, it's somehow our "duty" to bail out this poisonous system. It's a necessity to allow the lending of unsecured money to unqualified people to achieve the liberals dreams of social Utopia. We must allow the bogus lending practices to go on or we will all perish!

Bull sh-t. We tell them here and we tell them now: The politicians did this to us, and the politicians are on the hook for it. As Americans we need to stand up and say we will not support this practice of greasing the politicians and lobbyists and as part of some left wing experiment. We aren't guinea pigs, we aren't stupid, and we are going to fight this.

I say, time to make loan money harder to get again by returning the risk of lending to realistic margins. The economy today is based on false promises that devalue the dollar, cause inflationary price increases, and create unimaginable debt. We need to be fiscally RESPONSIBLE, we need to be SOLVENT, and we need to know that when we apply for a loan we will only get it if the one lending is willing to assume the risk without the false comfort of government bailout pressuring them to award bad loans to unqualified people.

Say no to bailout, say no to business as usual, and demand the government stop meddling with our lives as if we're part of some "moral socialist experiment".



  1. AWESOME post!

    I couldn't agree more; this is an absolutely travesty for those of us who own homes that took out loans for homes we could afford based on our incomes that pay their bills, mortgages, etc, WHILE saving money, perhaps work two jobs to make ends meet...

    This only rewards bad behavior and irresponsibility in Congress and Wall Street (GREED) and to "certain" homeowners that felt they were "entitled" to houses (see: Community Reinvestment Act, ACORN, etc) but really couldn't afford them.

    Now who's paying for it?

    WE ARE

  2. We are of like minds, Todd. Mae and Mac became extentions of activist groups like Acorn and now we are being told to shut up, pay the tab, and pretend nothing happened?

    No, I don't think so.

  3. as you know, pop and i have been mending our credit ways for ten years - fixing it and working hard and going without to finally see the light of day - we didn't get, nor did we ask for help - we didn't file bankruptcy either.

    this bailout plan pisses me off to no end - spend years and years trying to teach our children that with hard work, scrimping and saving are the way to go only to see this?

    no, i'll not recover from this any time soon. WHAT THE HELL WAS EVERYBODY IN WASHINGTON DOING WHEN THIS BECAME APPARENT?

    vacationing. something nancfamily only affords itself when we've SAVED THE ACTUAL CASH TO HAVE ONE!

    i'm pist. don't know any other way to say it, madze.

    one of my sisters and her husband have filed bankruptcy (told to me on the q.t.) - they live a "have to have it now" life - give their little darlings unlimited use of cell phones - take vacations on credit cards every six months or more, drive new vehicles - $2,000 house payment...sound familiar? these be the kind of people we're helping to bail out - while the rest of u.s. struggle and work to see the light of day!


  4. Nanc, I feel your pain. Remember, tough, filing bankruptcy is not a bailout like we are being forced to do. Bankruptcy means no more credit and the party is over. Live by cash and the madness comes to a halt.

    We are being EXTORTED to give the government money so they can just keep throwing it around like water. NO accountability, and no lessons learned.

  5. "Because of social engineering by leftists, that's why."

    Insert Kuhnkatian laughter here.

    Whoa, man, you can be so funny sometimes.

    So all this freemarketeering bears no blame at all, huh? Unscrupulous operators, yes, sometimes taking opportunistic advantage of safety nets, having nothing to do with this? The free market, yep - these Master of the Universe types, invents chimerical products that no one properly understands, don't even seem to actually exist, and... DAAANGNG!... let's blame the leftists too, huh?

    Now if you would have pointed to the drawbacks of over-regulation, you'd have had some sympathy from me. Point to the plasic-card-lifestyle of so many, ditto. But you're going much to far and refuse to see what Laissez faire capitalism in the past has achieved: what we call boom and bust...

  6. Gert, I think you need to read the post again. You think that if the problem that at its core is socialist only had MORE socialism than the "greedy capitalists" would be put in there place?

    You are channelling emotion and socialist propaganda at the expense of logic.

  7. Perhaps.

    I do think it's funny when the most ardent detractors of evolutionary biology start behaving like dyed-in-the-wool Social Darwinists ("Survival of the Financially Fittest" - LOL) when it come to economics, I mean G-d couldn't be a Socialist, now could he?

  8. Gert, am I to believe you may be coming just a little more on board in denouncing the socialist engineering problem that caused this mess? This is bordering on consensus! :)

  9. The Fair Housing Act must not be allowed in this bailout otherwise we will be back to where we are now. I don't understand why loans are made to people who cannot pay them.
    Oh yes, I am a racist because I don't believe that you should loan money to people who cannot repay the debt. Garbage. I am particularly offended by the amounts of money ACORN and groups like La Raza have been provided to keep the illegal population on this dangerous treadmill.

  10. McNorman, there is word that McCain is holding out against the bailout to try and make it a combination of loans and insurance instead. Not sure about the details yet.

    Meanwhile, why will nobody call the spade a spade and call for the elimination of the affirmative action lending policies that started this mess in the first place?

  11. MZ,

    Much to the left's chagrin, this Democrat-controlled Congress (the branch of government with the actual power to influence the economy) has a 9% apporval rating for more than spending so much time wondering if baseball players use steroids.

    People understand who to blame.

    Why was this done? Why was the risk passed and passed until the shit hit the fan and we got handed a trillion dollar bill? Because of social engineering by leftists, that's why. Banks were pushed by legislation created by Bill Clinton in the late 90's to give unsecured money to the economically disadvantaged, particularly the minority poor, in a bit of affirmative action lending that was enforced by Mae and Mac with an artificial, illusionary safety net handed to mortgage lenders so they would advance this "progressive" agenda.

    You're on target.

  12. Gert,

    But you're going much to far and refuse to see what Laissez faire capitalism in the past has achieved: what we call boom and bust...

    There is no laissez faire to be found in this mess, and quite frankly, saying that this is due to laissez faire policies is super-retarded.

    I realize leftists are philosophically forbidden from understanding economics and history, but damn.

    The credit crisis was caused by Democrat-led government intervention into lending - threatening to hit banks with trumped up Fair Housing Act violations for refusing to lend money to people who just happen to have absolutely no fucking way of paying it back - and exacerbated by Democrat-led opposition to preventing this crisis when President Bush began pushing for regulatory reforms in 2003.

    At the coming debates, I think Obama will run and hide behind a curtain around the second or third time McCain mentions Franklin Raines.

  13. Madze:

    On "Social Engineering", no, not really. I believe the causes of these problems to be more complex than you and I can fathom. Left and Right are now blaming each other and that's rather an indication that both are right and wrong at once.

    But I will concede the following:

    • safety nets, like almost everything else, have their drawbacks. They can reward bad behaviour. (Re-electing republicans, after Iraq, would be an example).
    • I can understand the American people's reluctance to part with 700 billion bucks (that's the lower limit, apparently) to bail out a rotten system (whatever is causing the rot). According to CNN that amount would buy 17 Beijing-style Olympics and 70 Large Hadron Colliders!!!

    There are in the world several economies with a much higher degree of what you call social engineering that operate very much on free market principles, yet do not seem to suffer from the problems the US system is now suffering. China is one notable case, several Scandinavian economies another. Right now this problem seems largely an Anglo Saxon problem. Perhaps we should seriously ask ourselves why?

    And I like your "trickle up" thingy: good find...

  14. Gert, China has an economy that has virtually no regulation, minimum wage, or political correctness, so they have a huge advantage.

    BTW, the latest uprising by House Republicans against the Dem bill reflects the anger of the American people and I applaud them. It has McCain's fingerprints all over it, too.

  15. I was referring to China's financial system, not its bread-and-butter economy.

  16. How can this credit crisis be blamed on deregulation when Fannie Mae and Freddie Mac are government-supported entities (GSEs) that were CREATED BY GOVERNMENT REGULATIONS?

    Go ahead. Describe how the free market could have possibly produced this crisis without government-mandated unsecured lending and government-created agencies to manage them?

    You can't.

    This problem has been warned about by the right (or at least, the Republican Party) for almost 15 years. Now it can't be denied and all of a sudden left and right must share the blame?

    Americans ain't buying it.

  17. they passed it, madze...

  18. wait - no they didn't!

    happy rosh hoshanna!

    genesis 12:3

  19. Nanc,

    It will pass, or it will not.

    Obama HAS to vote for it.

    McCain doesn't have to.

    And if he doesn't vote for it, and Obama does...

    "So, let me get this straight. Your campaign economic advisors ran Fannie Mae and Freddie Mac into the ground, causing this credit crisis in financial markets while reaping much personal financial gain, and the American taxpayer has to pay for it?"

    This, of course only works if McCain votes against it in the Senate.

  20. This is the worst economic crisis of my lifetime. If the bailout fails, there will be a worldwide depression. If it passes, there will be stagflation. Capitalism doesn't have much to offer.

    Instead of railing about social engineering, rail against homelessness.

    This was going to happen, with home loans to the poor or not.

  21. oh, ren - stop being so melodramatic! do you carry a sniffer of smelling salts with you?


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