Tuesday, October 7, 2008

The $800 Billion+ Economic Solution: Does Anyone Really Know What's Going on?

I feel used, lied to, abused. . . and though I've been reading about it, and listening to as many of the talkers as I can stomach, I still don't know exactly what Congress did in passing the so-called $800+B "Rescue Plan" or "Bailout." This leaves me very uncomfortable.

Our US economy doesn't function in a vacuum. It actually reflects the condition of the society it serves. Ours may be weakening, even cracking.

Democratic Societies have Chinks in their Armor.

Scottish historian, Alexander Tyler, wrote something like the following in the 1770s regarding the US experiment in democracy. It is worth thinking about in light of the current economic situation.

"A democracy is always temporary in nature; it simply cannot exist as a permanent form of government. A democracy will continue to exist up until the time that voters discover that they can vote themselves largesse out of the public treasury.

"From that moment on, the majority will vote for themselves candidates who promise the most benefit from the public treasury, with the result that every democracy will eventually collapse due to loose fiscal policy."

"The average age of the worlds greatest civilizations from the beginning of history, has been about 200 years. During those 200 years, these nations progress through the following sequence:
  1. From Bondage to spiritual faith;
  2. From spiritual faith to great courage;
  3. From courage to liberty;
  4. From liberty to abundance;
  5. From abundance to complacency;
  6. From complacency to apathy;
  7. From apathy to dependence;
  8. From dependence back into bondage."
Methinks that we have transitioned through the 4th, 5th, and 6th all within my lifetime. We sure seem to be rapidly transitioning through the 7th now.

Creating Crises as a Means to Consolidate Power

There was a work composed between WWI and WWII which presented a means by which individuals or institutions could successfully wrest power in a democratic, potentially populist system. It made the case that if one could create difficult situations, challenging the security of the society, and then become the "source of solution" for the situation, the voters would move to surrender their liberties in favor of the delivered security.

I can't validate my sources at present, but I have read that Hitler followed this method in post WWI Germany to secure his position with the full support of Germany's electorate.

I fear similar patterns are at work in the USA today.

I have considered that the Savings and Loan Crisis (1980s) was largely created through legislative fiat, and "solved" by "congressional action." I wonder if the current situation isn't strangely similar.

Congress pressed for a social policy to define home ownership as a "right" during the 1990s. Part of this "policy" encouraged financial institutions to embrace "less-than-prudent" lending policies, and even pressured many to create loans counter to "more prudent" credit wisdom. After a few years of this, they required other creative maneuvers in an attempt to maintain solvency. The "house of cards" couldn't stand forever. A volitile stock-market caused liquidity to evaporate exposing the imprudent lending practices.

Yes, opportunists developed ways to maximize their own gains in light of the policy. And, yes, obfuscation, false valuations and other bad practices resulted. But for the media, the legislative and executive branches of government to place the blame wholly on financial institutions and corporate greed is, at best, incomplete, and worse, irresponsible.

Was the Bailout Just Shoved Down America's Throat?

This absolute "in your face" created crisis ushered in rushed emergency acceptance of this $800+B "rescue plan," a plan passed by the very institutions which created much of the problem in the first place. They shoved it down the throats of constituents who overwhelmingly asked them to consider something else. I, for one, feel taken.

Those "public servants," individuals with the power to create, then blame, then "fix" the problems, aren't economists. Most aren't even businessmen. They may not even be good capitalists.

Except for that degree in law, I am as intelligent as most of our legislators. As is true for them, I can't claim full understanding of world economic dynamics. I don't fully understand how global financial markets interrelate. I don't grasp the totality of the negative effects of a lack of liquidity. I don't grasp fully the potential effect of letting the market make its own correction.

But unlike these lawmakers, I don't believe that the principles at work are so complicated that they cannot be explained well enough for me, and others like me, to adequately understand what this new policy is, how and why it will work, leading, even me, to understand why it is acceptable and necessary.

Trust is Deteriorating Beyond Repair.

John Stossel said that a crisis creates the best opportunity for power seekers to seize power. I can't help but think that this is exactly what has been occurring over these past several years, coming to a head over the last few weeks.

Washington needs a significant house cleaning. But that can only occur if the now complacent, apathetic masses, who seem to be becoming more and more dependent, can turn back the clock, and find the courage to lead the country back into days of real liberty.

Nobody will be happy if we continue on the path from to dependency, right into bondage. I certainly won't.

1 comment:

Robert Thomas said...

OMG! You mean this mess may have occurred by design? I am not a conspiratorialist, but what you say makes a good deal of sense.

At the very least, I agree with your conclusion. Washington needs a significant house cleaning. Are you planning to run?