The economic crisis imperiling America and the rest of the world is not one that was caused by deregulation or under-regulation.
It was not one caused by laissez faire capitalism.
It is not one caused by banks and financial institutions simply running out of money.
And it is not one that will be fixed by infusing those institutions with more money at taxpayer expense.
The problem is debt.
And the problem was caused by government.
Government agencies and officials actively pressured banks to write more loans to people who were poor credit risks. The idea was to make home ownership a national right, rather than a benefit of hard work, savings and achievement. Two government-sponsored enterprises – Fannie Mae and Freddie Mac – were at the forefront of this political scheme.
Not only did these two corporations engage in improper and fraudulent accounting practices, but they also became major political contributors – giving millions of dollars to political candidates, especially Sen. Barack Obama, who shared their agenda and were considered likely to back increasingly risky practices.
In the 1970s, Jimmy Carter signed off on the Community Reinvestment Act, which gave federal regulators the power to pressure banks into issuing high-risk loans. In the 1990s, the Clinton administration signed off on giving the CRA regulators even more power to force banks to provide riskier loans.
On top of these policies that set the stage for the train wreck, the Federal Reserve cut interest rates below the level of inflation, further encouraging banks to write loans that would be hard to sustain when interest rates inevitably rose. But the policy of writing them continued because, after all, these bad loans would be bought up by Fannie Mae and Freddie Mac.
When Fannie Mae and Freddie Mac became insolvent, as any high-school economics student could have predicted they would, the bottom tier of the pyramid scheme known as the heavily indebted U.S. economy was effectively yanked from its foundation.
The $700 billion bailout is nothing more than a temporary bandage placed on an acutely hemorrhaging patient. It didn’t address the root of the problem – government’s active encouragement of unsustainable public and private debt.
I hate to be the bearer of bad tidings, but the government is dead broke. It doesn’t even have $700 billion. All it has is negative numbers in an electronic ledger.
How can you solve what is fundamentally a debt problem caused by government with more government debt? It makes no sense. Americans intuitively understand it is a giant rip-off – perhaps the biggest scheme to loot taxpayers in the history of the world. But, despite their anger, they won’t do the only thing they can do – something that would cause a massive political earthquake in that it could be the beginning of the restoration of constitutionally limited government in America.
They won’t throw the bums out. They won’t punish the members of Congress who did this to them – and to their children and grandchildren. They won’t do it. They’ll gripe. They’ll bellyache around the water cooler about it. Then, on Nov. 4, they’ll vote to send 95 percent of the incumbents, including those who betrayed them and the Constitution with the bailout, back to Washington.
Mark my words.
That’s why we’ll not have a sound economy again in America in our lifetimes. That’s why we’ll not have a return to dollars based on gold. That’s why we’ll not have constitutionally limited government. That’s why we’ll continue down the road of socialism, globalism and ultimate collapse.
If you are feeling as helpless and frustrated as me, there is something you can do besides vote against those incumbents who saddled you with even more debt. You can examine your own personal financial situation and extricate yourself, as much as possible, from the real problem – debt.