Sunday, September 21, 2008
Put an Economy in Your Tank?
The US economy is a pretty hot topic right now. Recent events have given a boost to Obama and caused McCain to scramble. Well, that's all well and good for the game they're playing, but it doesn't get at any solutions.
The reason that government can't get at the solution is that government isn't the root of the problem, whatever "I fight Republicans" McCain might say. The enemy, as a famous cartoonist once liked to say, is us.
Economics is all voodoo, really. If everybody thinks things are going well, then things are going well. If money is circulating freely, then it's easy to think things are going well. When the flow of money gets interrupted, it gets harder to believe in prosperity. Money, in case you didn't know, has to move around to be of any use, which is a tenet of Economics 101. What happened recently was that there was a bubble in real estate prices, caused, as are all bubbles, by unbridled enthusiasm causing undue speculation. The government can hardly be expected to tell people how to feel, so getting a bubble under control is a problem. In fact, bubbles, like the dot com bubble in the nineties, and like the real estate bubble in the, what are these years, two-thousands maybe, tend to expand until they burst. Then sometimes the government is called in to clean up the mess.
In the current case, you'll note that the agencies set up to help people buy houses, which had worked well for decades, suddenly found themselves overburdened. Prior to those agencies being created, it was almost impossible for a would-be homeowner to get a mortgage, and if you did it had a huge balloon payment after five or ten years. Essentially, you had five to ten years to pay off the place, or you were out the door. How much better it has been for everyone after Fannie Mae and Freddie Mac were created during the Great Depression. Home ownership has become the norm, and quite a few people, as I read today, actually pay off their mortgages and own their homes outright. Over thirty percent, according to an article in today's paper. That's fantastic, compared to the way things used to be.
Unfortunately, the people, always a dicey group when it comes to common sense, managed to find a way to abuse the system set up to help people buy homes. When it worked for a few the ideas on how to do it spread until too many people were abusing the system, buying things they really never would be able to pay off. Lately we've seen the results.
My point, then, is that McCain and Obama are having a good time saying nasty things about each other over the credit crisis. ("Worst financial crisis since the Depression!") But that's all it is, just two guys who for some pathological reason want the world's worst job, sniping at each other. The truth, while less glamorous, is that we all caused the current financial mess, and we'll all have to fix it. That is the case no matter who wins this upcoming election.
I guess that moving seven-hundred billion dollars all of a sudden should have some sort of effect, huh?
S.
The reason that government can't get at the solution is that government isn't the root of the problem, whatever "I fight Republicans" McCain might say. The enemy, as a famous cartoonist once liked to say, is us.
Economics is all voodoo, really. If everybody thinks things are going well, then things are going well. If money is circulating freely, then it's easy to think things are going well. When the flow of money gets interrupted, it gets harder to believe in prosperity. Money, in case you didn't know, has to move around to be of any use, which is a tenet of Economics 101. What happened recently was that there was a bubble in real estate prices, caused, as are all bubbles, by unbridled enthusiasm causing undue speculation. The government can hardly be expected to tell people how to feel, so getting a bubble under control is a problem. In fact, bubbles, like the dot com bubble in the nineties, and like the real estate bubble in the, what are these years, two-thousands maybe, tend to expand until they burst. Then sometimes the government is called in to clean up the mess.
In the current case, you'll note that the agencies set up to help people buy houses, which had worked well for decades, suddenly found themselves overburdened. Prior to those agencies being created, it was almost impossible for a would-be homeowner to get a mortgage, and if you did it had a huge balloon payment after five or ten years. Essentially, you had five to ten years to pay off the place, or you were out the door. How much better it has been for everyone after Fannie Mae and Freddie Mac were created during the Great Depression. Home ownership has become the norm, and quite a few people, as I read today, actually pay off their mortgages and own their homes outright. Over thirty percent, according to an article in today's paper. That's fantastic, compared to the way things used to be.
Unfortunately, the people, always a dicey group when it comes to common sense, managed to find a way to abuse the system set up to help people buy homes. When it worked for a few the ideas on how to do it spread until too many people were abusing the system, buying things they really never would be able to pay off. Lately we've seen the results.
My point, then, is that McCain and Obama are having a good time saying nasty things about each other over the credit crisis. ("Worst financial crisis since the Depression!") But that's all it is, just two guys who for some pathological reason want the world's worst job, sniping at each other. The truth, while less glamorous, is that we all caused the current financial mess, and we'll all have to fix it. That is the case no matter who wins this upcoming election.
I guess that moving seven-hundred billion dollars all of a sudden should have some sort of effect, huh?
S.
Labels: Politics, Social Commentary
