Saturday, October 11, 2008

Economic Meltdown... Indictment of Free Markets?... NOT!

Friend and former colleague Chad Clawson sent the following along from this father-in-law. I thought he said it pretty well and believe this is worth your reading.

"Many people jump to a conclusion which feels good to them and don't want to be bothered by facts or information unless it fits their conclusion. Statements such as 'Let's not point fingers,' or, 'Everyone is probably equally at fault,' feel good because they let people feel 'nice' or 'fair' but they lead to bad conclusions and bad results. The primary cause of the huge financial crisis is government interference in the housing markets, first by creating Fannie Mae and Freddie Mac to displace private mortgage lenders, but more problematically by pushing those institutions to relax lending standards in the name of social equity so that borrowers who couldn't afford to pay would be able to buy houses just like everyone else. This brought millions of new buyers into the market, which pushed housing prices up. The surge in housing prices tempted millions of people to buy bigger houses than they could otherwise afford and more houses than they could afford because they assumed they would be sure to make money since housing prices always went up.

Without understanding how the government created this problem by ignoring economic reality to pursue their goal of equal outcome for everyone, uniformed voters are easily persuaded that we need more government intervention to correct the problems in the free market system. This compounds the mistake rather than correcting it.There have been several attempts to restrict Fannie and Freddie's power and influence in the housing market including the most recent attempt in 2005/2006 which McCain also supported. Unfortunately, Fannie and Freddie had purchased powerful enough friends to stop this attempt also. There are also plenty of Republicans who have resisted reform attempts and political consultants and politicians on all sides who have benefitted financially and/or politically from their opposition to sensible reforms.

Obama had a fairly minor role in this, but it is revealing that despite his hype as the agent of change, his record on this topic is one of support for entrenched special interests and opposition to meaningful change. The biggest concern is the attitude that the government should be the solution to most of our problems. This is the road that ends in tyranny and an early stop on the road is the sort of patronage system Chicago politics made famous, a system where Obama was able to thrive. It is a system where political loyalty is rewarded when politicians dole out overpaid positions to unqualified political hacks in exchange for their support. Corruption becomes rampant and politics is then a route to fortune as well as fame and power.

Although Obama has been ambiguous about the specifics of the change he would bring, this sort of patronage system is the change I would expect him to actually deliver. The result is bigger government, claiming to solve your problems and have someone else pay for it. Sadly, we have too many people who twist JFK's famous words to be 'Ask not what you can do for your country. Ask what your country can do for you.' The same people are willing to vote for the candidates who have no qualms about claiming to be able to solve everyone's problems -- we just need to give them power. This oldest of political strategies has a long and sordid pedigree beginning with a 'politician' a long, long time ago who got 33% of the vote by promising to give people what they wanted in exchange for power. Many politicians have followed this strategy and if enough people are deceived, the result is inevitably a loss of individual liberty.Even though I am not sure who said it first, I like the following quote:'A government that is big enough to give you everything you wantis powerful enough to take it all away.'"

Background on the Financial Crisis

Barney Frank's major role in creating the crisis,2933,432501,00.html

The role of Community Organizers, including Obama

Ann Coulter's perspective

Bill O'Reilly and Barney Frank

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