My take on the economy

http://jameshowardkunstler.typepad.com/clusterfuck_nation/2008/09/a-ripe-moment.html

I was emailed this article today and read it with some interest. There's some good points in there, but a lot that I think is simply wrong. I initially responded directly to the email, but I think it was a reasonably good response, so I figured I'd toss it up on here as well. And so, without further babbling, here it is:

Meh. He far overstates the case.

Did Republicans contribute to the current problems? Absolutely. Their insistence on deregulation and slavish devotion to extreme free market practices led to a lot of this. However, much of the foundation was set during the Clinton administration, albeit with a Republican-controlled Congress. Certainly, of the two parties, the ones to shoulder more of the blame are the Republicans, but the Democrats aren't guilt-free by any means.

The thing is, this isn't a political thing. The government isn't the cause of all this. Yes, they should have been keeping a close eye on things and regulating the housing/mortgage industry a bit more. Bu that's like saying it's the fault of the police when a crazy man goes on a rampage and kills 30 people. Had they watched him and regulated him, he probably wouldn't have killed as many if any people - but are the cops to blame, or the person behind the trigger?

When you're looking at people to blame for this whole thing, the focus needs to be squarely on the bankers and economists directly involved. They got greedy. They saw this opportunity to make a ton of money off of poor people by giving them risky, overpriced mortgages (that the bankers pretty much knew they couldn't afford and knew that their customers were financially naive enough to not realize just how risky it was), the banks made a fat profit and then figured the could eventually foreclose, sell the house and start over again for some more fat profits for little work. On top of that, they saw that the risk itself was fairly minimal because you've got Fannie Mae and Freddie Mac sitting at the bottom of the mountain with government-secured financing to back them up. There's no way THAT's going to fail, right??

If they had been able to stay just a *little* greedy, we'd have been fine. Yes, some poor folks would have ended up getting screwed, but not that many. The real problem was that those small fat profits weren't enough. So every year, the banks lowered their standards a little more... exposed themselves to a little more risk... snared even more people with risky loans... and the whole time were telling themselves, "Yeah, it's risky... but it hasn't failed yet. And not everyone can be doing as much risk-taking as we are, right?" And then it turned into almost a competition of "Which bank can have the largest portfolio of risky loans?"

And had it stayed there, we still might have been okay. But then the economists and the stock brokers got involved.They saw the fat profits on these loans and wanted their piece of the greed pie. So buying and selling of mortgages become a trendy way to make money. Investing in these risky lenders became the thing to do. And the whole time, the economists out there are telling us that this is a good thing, that profits are at record highs and that we should all be happy and comfortable, never taking the time to tell us that all of this is a house of cards built on the back of people that can't afford to keep buying more cards to build with.

Now, where in all that do you see Republicans or Democrats? Other than the fact that the bankers involved have some sort of personal politics, you don't see the government involved at all. Granted, that's part of the problem as I mentioned already - 10 years ago, regulators should have seen this starting and said, "Enough is enough. Stop it, you wascawwy wabbits!", but they didn't. So while I can understand the desire to blame politicians, especially Republicans as we're trying to find ways to ensure we don't suffer another 4 years of the vomit-inducing bullshit we've dealt with so far this century, it's simply incorrect to do so.