Recognize that capitalism is under assault from within our own country. There is little need to cloud the waters with nuance. The Obama campaign is busy ascribing the current economic crisis as a failure of government, the current government specifically. And the implication is that the answer is… government, a government led by an Obama administration, specifically. He is, of course, half right.
To understand why, we need to look at why so many sub-prime interest mortgage loans were made, and then why so many failed. And you will see that government was indeed a huge contributor to the problem as it implemented policies that Obama may very well have supported. This is by no means a hyper-technical analysis. But it doesn’t need to be in order for your mother, your neighbor and your friends to ‘get it.’
Today’s news of failures and impending failures on Wall Street are commonly and consistently linked to sub-prime mortgage loans gone bad. The genesis for these loans came from government demands that mortgage companies extend a certain percentage of their loans to mathematically under-qualified home buyers in the spirit of extending the American dream to more Americans. If the mortgage companies did not comply, they would either be penalized or not be extended certain relief.
Government got involved.
Not a charity, mortgage lenders could only extend mortgages to buyers lacking sufficient income to maintain payments by dropping the initial years’ rates, and then raising them later – the concept of an ARM (Adjustable Rate Mortgage). When the rates went up over time, the under-qualified buyers could often no longer maintain what had once been a manageable monthly payment.
Couple that eventual reality with national and localized economies that struggled resulting in some with lost jobs and/or reduced income, and loans began to go into default. With so many risky loans out, there were also a great number of defaults: Mortgage companies who had laid out hundreds of thousands of dollars in exchange for a long stream of monthly payments that simply stopped.
Get enough of those, and mortgage companies begin to go under, with expenses continuing apace but income from agreed-to payments decreasing exponentially. Enough of that going on, and companies who own or are largely invested in those mortgage lending companies, and they begin to go under. Investment firms, banks and the like. It’s a trickle-up collapse.
And why? Largely because the federal government mandated socialist policies on a purely capitalistic economic system.
In this governmentally-forced merger of oil and water, we continue to transfer what cash wealth we have abroad for energy at historic prices. No part of the answer to this siphoning, according to those who seek to transform the American economy into a socialized government managed charity, is producing more of our own energy, wherever it lays or in whatever form. No part of the answer is in producing more for ourselves what we are paying far away states unimaginable sums for every day.
We continue to allow stupid policy after stupid policy to wreak havoc on our economy in the name of extending the American dream, saving polar bears and turning back the rising tides. We continue to allow the world’s largest, most productive economy ever to be bled dry in a death by a thousand cuts. Our waters and our snowcapped ranges, you see, are not ours. They belong to the fish and the polar bear.
Obama is half right: Government is largely the cause of the current economic crisis. But more of that same government is not the answer, no matter which administration staffs the White House. You are. We are. Our entire economic system may hang in the balance of our electoral decisions this fall. And there are no do-overs.
NOTE: I failed to directly and overtly express the entire point of this post, which is to say that we cannot increase ‘access’ to the American dream by lowering the bar without risking the entire economic system any more than we can increase access to Olympic dream by handing out two gold medals and a silver instead. But, unlike the Olympic system, our economic system is not a zero-sum game, with a predetermined number of winners and scales.
Instead of lowering the bar, we should be raising the level of the American citizen – or more correctly, assisting them in raising themselves. This is done through education, training and the championing of entrepreneurship – effectively increasing the level of productivity and the resultant economic gain the individual realizes through that.