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Jim Cook

 

RUNAWAY SOCIAL SYMPATHY

Every once in a while I switch the TV channel from Fox to CNBC to see what the liberals are saying.  After listening awhile I get a deep sense of hopelessness and foreboding for our country.  The most important thing for the left is giving money to people.  They are happy to see the growth of food stamps, disability payments, housing subsidies, free healthcare and all the other welfare benefits.  They utterly fail to see the damage it is doing to the recipients.  Whole cities that once flourished have deteriorated into rotting eyesores populated with shambling hulks of chemically dependent drones.  These people are no longer employable.  They have become incompetent and helpless and the liberals can’t see that it’s their doing.

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The Best of Jim Cook Archive

 
Best of Jim Cook
November 7, 2007
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LIARS LOANS

A left-wing columnist, writing in the New York Times, blamed the mortgage mess on lack of regulation. As usual, these socialist solutions are wide of the mark. This was, first and foremost, a government induced problem. We would agree with the columnist if the government were to further regulate itself. But, that won’t happen.

The central bank was the main culprit for subprime failures. First, they artificially lowered interest rates, which motivated buyers. Then they flushed the system with exorbitant amounts of newly created money and credit. Lending was loose and that caused the demand for real estate to overheat. The Fed fostered a boom. Mr. Greenspan has proclaimed his free market views on economics in the past. Unfortunately, they didn’t include sound money.

That lending practices descended into the realm of the bizarre can be attributed to human folly. This you cannot regulate against. As Herbert Spencer pointed out, "The ultimate result of shielding men from the effects of folly is to fill the world with fools." Years ago we wrote about the lack of oversight when mortgages were bundled up and sold. The originator of the loan suffered no loss if it went bad. Few of us were aware that mortgage applicants no longer had to verify their incomes. These "stated income" mortgages became known as "liars loans." Furthermore, poor credit became far less important in sub-prime lending.

A lot of this lending came about because of the Community Reinvestment Act, a government program that forces banks to lend in poor neighborhoods. Any kind of new regulation that would have reduced these mortgages wouldn’t stand a chance. Liberals can’t have it both ways.

My old buddy, Howard Ruff, hit the nail on the head when he wrote, "The markets should ruthlessly teach the stupid and the greedy: 1) the dumb borrowers; 2) the greedy mortgage companies; 3)the short-sighted bankers."

The government’s solution to the mortgage mess will be more of the same. Inflate our way out through further credit expansion and currency debasement. International markets see this chicanery. They punish the dollar. That drives up the price of raw materials and everything we import. Domestic inflation worsens. According to Richard Russell, "The Economist Magazine puts the year-over-year dollar index of ‘all item’s’ up 16.7%. They put the price of food up 31.6% year-over-year. So our government tells us that ‘core inflation’ is running below 1%. And people take these figures seriously."

I had this sudden premonition that the U.S. might hit the skids. Despite entrepreneurs like Steve Jobs, Bill Gates and other high tech innovators, despite the miracles of capitalism and the greatness of America, the government just may have screwed things up so badly that we are going down. If the dollar ever gets replaced as the world’s reserve currency, we’re moving from feast to famine in a heartbeat. I suspect the heyday of America is behind us. We’ve got way too much socialism. We’re probably at the midpoint in the transition from capitalism to socialism. Half of what we earn goes to taxes and half of the people are subsidized, including people who don’t work, farmers, owners of gasohol plants and immigrants.

The socialist philosophy has proved ruinous whenever it’s been tried. It spreads poverty. Those who believe in more government are selling out America for their runaway social sympathy. It feels good to look down your nose at the masses who have less intelligence and compassion.

The key to the future of our nation will be who gets the blame for the mess that our overly liberal government has made of things. If it’s the free market and capitalism, kiss your country goodbye. If it’s big government and the liberals who endowed it, we have a chance.