A wonderfully colorful conservative website has posted an article that blames the "socialist" monster for creating Freddie Mac and Fannie Mae which were incorporated during America's "communist era" during the reign of FDR. They alert us to the fact that 50% of the mortgages on homes in America are held by these two semi-governmental institutions ($6 Trillion) and that since our annual national budget is only $3.1 trillion we are in big do-do having to bail them out. They rightly report that Americans are mad as hell and our "Knight McCain" has promised to split these two government-backed institutions into little privatized entities and make them survive or fail under the rules of the free market.
They go on to point out that Wall Street is backing Obama because he will keep these "socialist" institutions alive backed by the full force and credit of the United States government and our wallet. They believe Obama will allow the liberals on Wall Street to keep milking our Federal cow through the fence. The only problem with that allegation is that the amount of contributions to Obama don't add up to a quarter of a year's salary of just one executive on Wall Street. In addition, the entire $6 trillion in mortgages is not upside down and in jeopardy of default possibly only 2% to 4% - $120 billion to $240 billion.
Everyone is mad as hell now that the piper has to be paid and the government must cover any losses our modern financing methods have created. I didn't hear the same complaints when those same people could finance or refinance their homes at rates of 1% to 3% for the last five years. I didn't hear those cries when the equity they tapped was used to fund our recovery from a potential depression greater than the one in 1929. No there were no cries just laughter and joy in an economy which during the last 7 years has created more millionaires and billionaires than in any period of recorded history.
The proof that everything wasn't so bad and our managers, Bush and Greenspan, did a credible job is the other reason so many ordinary Americans are mad. And that is that some Americans made so much money that an "income disparity" arose between those who knew how to play the capitalist game and those who didn't or couldn't.
All is well in America. We continue to experience a period of uninterrupted growth and haven't fallen into recession. In time and in Rise Up added to "trickle down" the American Dream will come true to more and more Americans.
The upshot of all this fuss is that like all major economic events there have been those "aggressive" Americans who have pushed the envelope and gamed the system. The "socialists" in Congress insisted that the lenders not discriminate against people in the poor sections of the city and boy did that unleash a storm of greedy brokers. New financial tricks like securitization simplified the massive manipulation of thousands of bundles of mortgages. Executives were compensated by how many mortgages they initiated and artificial means were manufactured by them to meet those targets - normal excesses to be expected in a free society.
However, these excesses and in some cases fraud pale in consequence to the underlying principle of using interest rates to manage an economy. The American people were blind in the 1930's. They let FDR and the socialist raise interest rates, taxes and tariffs all of which prolonged the Great Depression for 13 years - until the Second World War rescued the economy. Since then America has gotten smarter and when faced with a similar disaster our Master in Business from Harvard correctly and immediately lowered taxes and interest rates and we suffered only a four-month recession. Subsequently those moves created a booming economy and because he lowered the rate of taxation on investment and capital to 15% as well. Nice going guy.
Like all things economic there is a price to pay for making mistakes. Alan Greenspan failed to raise interest rates slowly and moderate the speculation in real estate values after the depression was averted. He failed to tighten banking controls on lending. He printed so much money to lend at 1% we are suffering now with the results of a boom-bust cycle in real estate and the devaluation of the dollar to 50 cents of its previous value.
However the price we are about to pay is minuscule compared to what could have happened if we had socialists at the tiller who refused to lower taxes and print money. We didn't and we averted another Great Depression and replaced it with a boom. We did however learn another lesson. We must slowly return to normal rates of interest much faster than we did this time around and get more expensive and better governmental monitors that can project and predict how to avoid making these mistakes and smooth out the degree of movement on boom and bust cycles.
Despite the media, despite our own consternation with Washington, despite the inequities in wealth and its creation, despite the energy crisis and all the other nonsense like the "greening of America" we are still the most powerful, most prosperous and most admired society on Earth and that is not going to change anytime soon. We built our infrastructure on $2 a-barrel crude and no one is going to catch us in these days of $100 a-barrel crude. Furthermore we let 300 million people make their own decisions and create their own path. We are the technology giant and the most innovative society on Earth. We rock as the kids say.
We should be proud - not whining, tittling at windmills or swinging at balls in the dirt. If you need motivation just listen to John McCain and go out there and "Fight, Fight, Fight" and let's privatize the national government like Switzerland has and rid ourselves of the power of politicians and their ability to complicate a problem beyond recognition - then send us a bill for it. If you must, take a swing at the $45 trillion of unfunded entitlement debt - that should keep you busy.
