"Giving money and power to government is like giving whiskey and car keys to teenage boys."
- P.J. O'Rourke, Civil Libertarian
What we are experiencing in the U.S. today, to use the popular lexicon is a "Crisis of Confidence". Confidence in what? you might ask. In the financial sector, and in Government. What is it that we can have confidence in? Confidence is just a measure of integrity, which means we are actually experiencing a crisis of integrity. Isn't that really what this is all about? Integrity in what? When it comes to OTCs, or over the counter derivatives, it is really the integrity of promisory notes of one kind or another. The integrity of a contract.
This crisis was enabled in Washington D.C, and was amplified by those willing to sign onto mortgages that they couldn't repay. The lack of integrity of individuals was transferred to paper, and given the illusion of value. As long as everyone played along, and pretended the paper was worth something, it was put on the balance sheet, and showed up in the price of shares of the various institutions. Individuals, perhaps even in good faith made promises they didn't know they would be able to keep. Other individuals with a little government encouragement, took out loans because they had a right to a house (so they were told), knowing they could only make token payments. This paper was concentrated in the larger banks. These banks wouldn't have done this if the government hadn't backed them, which they did through Fannie and Freddie. Alan Greenspan purjured himself before congress when he blamed the banks instead of the government. I would expect the be held in contempt if ever taken before that pack of wolves.
Housing prices fell in mid 2008, ever so slightly, and Fannie and Freddie were taken over. These events were inevitable and had been predicted years in advance, and despite the curious timing, (occuring shortly before an election) were only made possible because of the initial lack of honesty and integrity of the people as a whole.
We are in a hell of our own making, collectively. Lets not fool ourselves into blaming wall street corporations, although they took advantage of the situation. Let us blame ourselves if we overextended ourselves. The blame, however, lies even more with those in Washington who set this trap under the guise of "Fair" housing. They fully understood, having been warned years ago, what the inevitable outcome would be. I cannot believe they were merely stupid, or ignorant of economics as a whole. An attack on capitalism has been going on since before the New Deal, before capitalism was called capitalism (seeing as it was a term introduced by Karl Marx). Capitalism used to be known only as freedom. Freedom to go about business without government interference. The free market, which we haven't been operating under for some time, is what the attackers of freedom blame.
To complete this game of semantics then, we are undergoing an attack on freedom, brought about by a lack of honesty and integrity. The opportunists in Washington took advantage of the one to create the other, hoping we would turn to them when the crisis was made manifest. I am hopeful that the crisis is significant enough for everyone to see them for who they are, but not too costly in the real human life.
The free market has done more for the benefit of humankind than any institution or government that ever existed. Third world poverty has been at an all time low, and life expectancy has been at an all time high, because of the trickle of wealth and prosperity from wealthy countries to less wealthy countries, made possible by the free market. Capital will now flee the U.S. The value of the Dollar will fall precipitously in the next few years, and people across the world will suffer with us. There are no winners in this scenario. This is too expensive an education.
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