I don’t think soooooo…..

I have never made enough to own a house in the DC area, thanks to the hyper-inflated values of the market here. I’ve always had to rent. Yet I, like so many people who work in this area, with my labor, support many of these ‘high-rollers’ ability to make vastly more money than I ever will, by dint of an MBA and connections, and little more than that.

And I am supposed to have sympathy for their plight because they made p!$$-poor investments? I and others in the same boat are supposed to be oh-so-grateful for the opportunity to provide a gold-plated life-preserver for these jerks? When they’ve moved Heaven-and-Earth to ensure that, God forbid I ever had to declare bankruptcy, I wouldn’t be able to?

If we do have an all-out financial collapse in this country, we may yet see pictures of Americans hauling wheelbarrows of Federal Reserve Notes to the grocery store to weigh them before their value drops even further. Such conditions lead to social strife, and create the perfect environment for outright fascism to arise. Just ask European survivors of the 1930’s/40’s where that leads.

No bailouts. Let those who created this mess eat their ‘toxic paper’. Let them choke on it. We’re still paying for the S&L crisis of the 1980’s and sundry other messes that their ilk caused; we’ll be paying for the wars in A-stan and “Eye-rack” for several generations to come on top of that. Now this crap.

It’s becoming ever more obvious that the American people have had enough, and will not stand for any more wallet-siphoning to be handed out in the form of ‘golden parachutes’ and other such ostentation for these high-roller losers at the financial crap tables. The chickens have come home to roost, and this country can no longer afford its’ profligate ways in spending for such ‘rich man’s hobbies’ like foreign interventionism and ‘nation building’ abroad, and a DrugWar at home. Time, long past time, for this nation to live within its’ means…just like just about every sensible citizen has to.

Bullcrap. Bailing them out sends the signal to the rest of the world, already waiting with their fingers hovering a millimeter over the “Dump it all!” button, that the US government will inflate the currency and destroy the economy in order to pay off extortion by the Federal Reserve, which currently has its big, fat shoe stomped down tight on the garden-hose of credit-liquidity–deliberately.

As always: Go to Karl Denninger’s “Market Ticker” for the low-down.

1. Create moral hazard (i.e. government program) to “fix” a problem.
2. Blame the market for the unintended consequences (i.e new problems).

rinse and repeat.

I love the smell of interest in the morning.

I was reading a snippet on CNN today where some official was taking questions from the public. To paraphrase when he was asked where the money will come from:

“Since we owe 9.5 trillion, there really is no surplus cash out there. So we will just have to print more money.”

Well there you go!? Problem averted. On to the next crisis please.

“This is what happens when you are greedy and irresponsible. The government will not violate the constitution and the rights of every citizen of this country by rewarding your brazen recklessness with taxpayer money that you don’t deserve. Let this be a lesson in the future: Pay your bills, invest wisely, and most importantly ONLY BUY WHAT YOU CAN AFFORD. Thank you, and goodnight.”

I could have just signed my name at the bottom of that. It describes my wife and I and our situation exactly.

Not only do we not have homes to show for ourselves, but if they bail out these homeowners it will keep the prices artificially high. Arrrrrggh.

All the banks may have shut thier doors by that point.

This is exactly the sort of hyperbole that’s driving me crazy right now. If the bailout is such a good idea, why was it necessary to sell it with the most implausible scary predictions? If Congress had done nothing then yes, the finance system would have contracted. Healthier firms would have bought out weaker ones, and some businesses would have failed. Nonetheless, there will always be people who want to loan money for interest, and there will always be people who want to borrow money. In the absence of government intervention, some mechanism–banks or something else–will exist to connect these two groups of people, because there is a profit in doing that.

Sounds good to me. No bailout. The value (to me) of my home is living in it. I didn’t buy it for speculation, but for housing. I also want the neighboring properties to decline in value, so I can buy them.

And low and bwhold, here we are in the midst of a collosal mess. And I’m damn mad that I have to bail out idiots who thought they should buy the McMansion when they knew they couldn’t afford it. But I still see these things going up all over the place (who is buying these things now?).

BUT…You should be part of the solution because by being a member of this society you are and were part of the problem whether you actively took part or profited. Your country, your government, your society – you take the good with the bad or you move to an island somewhere where you are not part of a society made up of millions of different people with millions of different needs all relying on each other to make the right decisions and act conscientiously.

Never mind what message it sends to us frugal folks (I bought something between as much house as I needed and as much hosue I could afford, in 1996, much less than as much house as I would have liked), what message does it send to the sepndthrifts and gamblers?

Houses are pretty much zero sum. (Vacancies due have negative externalities when the neighborhood gets worse.) If you have to sell low, some other person gets to live there cheaply.

There’s no need to leave even the idiots, and their children, starving and homeless, but if housing projects and the like are good enough for those who never made it, they’re good enough for those who almost had it and blew it. And as long as we’re going federal, why put the housing projects in expensive cities? The roof to put over their heads can be somewhere where the location is a lot less expensive.

During last season’s crisis (petroleum) everyone was blaming the “speculators”. I didn’t – I figured they were gambling, and might lose, eventually the price would stabilize to where supply and consumption-driven demand balanced. (I did look into how I could buy into the oil market, just enough to hedge against an increase on the 1300 or so gallons of oil I use every year, without success.) But if the rules are changed so that those who gambled can either win or break even, it’s not right.

1) Even if you have a good martgage and pay all your bills on time, your neighbors will probably forclose. If they foreclose, the value of YOUR HOME DECREASES (as does the value of ever other surrounding home). Based on the current lending and credit system, it would take years – PROBABLY DECADES – before you will receive the true value of your property. This may be fine if you plan on living in your house for the next 30 years. But if you think you might be leaving within the next 10, you might want to make sure these people get bailed out.

2) If there is less money in the banking sector, there is less money to loan out. This means less cars being bought, and less loans to startup and maintain small businesses. If there are less cars bought, this could severely cripple the domestic automakers (hope you like your Honda). And if there is less money for businesses, many will go under (now you can’t even buy the Honda because you don’t have a job!!!).

While I too am a renter, and completely relate to the desire to now want to “pay for the sins of others”…the reality is that if we don’t, we’re all screwed.

Unless of course, you take the viewpoint that if the markets crash, which causes housing to crash, this will cause housing prices to come down dramatically. So if you rent now, eventually, prices will go down so low that you’ll finally be able to afford a nice place for a good price.

Of course, this assumes they’ll even be a bank around who would be willing to give you credit. All the banks may have shut thier doors by that point.

Economics is not “zero-sum,” even though money can make it appear that it is. Nearly everyone will be negatively affected by this turn of events no matter what is done. In the short term, the object has to be to limit the damage to the economy as a whole. Even for those not directly involved in the failures, the systemic effects of further meltdown would far outweigh the portion of the costs of a well-conceived governmental response they would bear as taxpayers.

That, I’m sure, is the theory. Whether any plan being considered is in fact “well-conceived” in those terms is a technical question beyond my ability to analyze.

“What sort of message does this send to those of us who made good decisions? What incentive does it give us to make good decisions in the future? What’s the message and incentive for the people who were less cautious?”

Well, you will still be better off than people in similar situations who made fundamentally bad decisions. No plausible response to this is going to allow people who simply can’t afford their houses to stay in them. If some people are less worse off than they would have been without additional government intervention, that doesn’t mean they’ve been perversely rewarded.

Regarding professionals and businesses in the field, the situation could be rather different, but the (in my opinion) obvious conclusion is one that not many people reading this blog will care to admit.

When a business entity is so large that the consequences of its decisions have a ripple effect on the entire economy — when it is “too big to fail” — it is no longer a private enterprise. It doesn’t matter how it got that way; it has become a de facto extension of government. If it is desired to keep an industry in the private sector, then rules must be in place to prevent the development of “too big to fail” entities. If we must have “too big to fail” entities, then their profit and loss should be taken out of the private market and they should be subject to the rule of democracy.

The vast majority of cases would surely be better handled by limiting the size and scope of business entities to assure that there is real competition, and that should one firm take unwise risks, there will always be others who played it safe to take up the slack, than by effectively nationalizing economic behemoths. One thing, though, is for sure: the existence of private businesses that are “too big to fail” leads unavoidably to the absurd situation of private profit and nationalized loss which produces the sort of dysfunctional incentives that led to the current economic derangement.

The market got out of control (due, it seems, to government meddling with interest rates, the Coomunity Reinvestment Act, and the beasts that are Fannie-Freddie, as well as Wall Street’s myopic, short-sighted greed, as well as the considerable greed of average Americans who wanted to Flip That House.

I’d be willing to go through a painful “correction” barring civil unrest and food, electricity shortages, just to see all the major players in this fiasco take it where it hurts. Reality will assert itself sooner or later – I say bring it on.

I won’t be supporting any who vote for the bailout. Just got done writing an email to each of them.