The Recession Spectator
Ten Thoughts on the Causes of the Bubble and Bust
It's all beginning to make sense.
1. "When it comes to the home mortgage boom and bust, who was to blame? The borrowers? The lenders? The government? The financial markets? The answer is yes. All were responsible." (Thomas Sowell, The Housing Boom and Bust, 2009.) This seems fair.
2. Not explanatory of the problems are "greed" and "no regulation." Greed is a constant, always with us as part of human nature. As for "no regulation," the highly regulated commercial banks and the highly regulated thrifts are deeply enmired in the swamp of the bust, just as they have been many times in the past, constant regulation notwithstanding.
3. Economic and financial cycles are natural and cannot be avoided. The bubble was an exaggerated cycle. Various government actions contributed to making it worse:
• Fannie Mae and Freddie Mac, a government-sponsored duopoly, were made into huge points of concentrated vulnerability to failure, which then indeed failed. They significantly inflated the housing bubble though their huge entry into high risk mortgages right at the top of the market -- financed, of course, with government-guaranteed debt, so that the buyers of their debt did not have to ask about the soundness of their asset expansion. (See paragraph on trade deficit and China below.) This risky strategy was encouraged by politicians and by HUD's "affordable housing goals."
• The "Greenspan Gamble," which was intentionally to ignite and feed a housing boom to offset the deflationary effects of the tech stock crash, succeeded too well. Instead of a mere housing and mortgage boom, we got the bubble.
• The dominant rating agencies, a government-sponsored duopoly, were made by regulation into concentrated points of vulnerability to failure, which then failed, when their high credit ratings of MBS built from risky mortgages did not include anything resembling the downside case which became reality.
• Politicians all cheered rising home ownership rates and "creative" mortgage financing, which simply meant riskier financing.
4. There was a "logical" very widespread belief that house prices could not fall on a national basis. "Average U.S. house prices rarely fall from one year to the next. Bankers, brokers, appraisers, loan servicers, mortgage investors, homeowners and the designers and promoters of collateralized debt obligations all attest to the truth of this assertion… 'History is definitive,' pronounced the American Banker, 'the national average price of a home may remain flat for a number of years, but it doesn't fall.'" (James Grant, Mr. Market Miscalculates, 2008.)
Mortgage professionals were well aware of many instances of regional housing and mortgage busts, with falling house prices and high defaults and losses. But it was thought that this would not, and perhaps could not, happen on a national average basis. This firm belief by almost all parties made it possible for the belief to be false, in the paradoxical way of financial markets.
5. The market and the regulators became enamored with statistical treatments of risk. But: "The model works until it doesn't." (Moore's Law of Finance)
Human sources of risk are old-fashioned: short memories, the inclination to convince ourselves that we are experiencing "innovation" when what is happening is lowering credit standards, optimism, speculation which is successful in the early bubble stages, gullibility, group psychology.
6. "The good times of too high price almost always engender much fraud. All people are most credulous when they are most happy." (Walter Bagehot, Lombard Street, 1873.) True then, true now, unfortunately.
7. Highly leveraged financial systems are bound to have panics and busts from time to time. Increasing leverage of households was promoted by lenders and the government to create "affordable loans," with both higher LTV ratios and higher debt to income ratios. Financial firms were highly leveraged. Financial engineering produced highly leveraged structures, including CDOs, SPVs, CDOs-squared. Banks are able to be highly leveraged because of government deposit insurance, and have created balance sheets heavily concentrated in real estate risk. The entire macro economy became more highly leveraged, with record debt to GDP ratios, the "Big Balance Sheet Economy." Leverage always feels good when things are going up.
The "Great Moderation," of which the world's central bankers were so proud, created the conditions in which increased leverage seemed successful, thereby also creating the conditions for the bubble and bust. "Stability creates instability." (Epigram of Hyman P. Minsky's "financial fragility" theory.)
On the way down, needless to say, the leverage is more than painful.
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David Mathews Needs Help| 5.29.09 @ 6:31AM
Stupid...blah, blah, blah.... poor little..... blah, blah, blah.... 21 per cent and declining.... blah, blah, blah... bigot, racist... did I mention stupid? .... mankind is doomed.... blah, blah, blah.... oil.... extinction... old, white male.... please, someone, make the voices stop... blah, blah, blah
Mike| 5.29.09 @ 6:49AM
So to sum up. We were living beyond our means with cheap borrowed money. Now we must pay the piper. Painful, but necessary.
So what is Obama's solution? Have the government spend beyond its means with cheap borrowed mony.
Sadly, the pain is not nearly over. I fear that Obama's Keynsian fix will cause as much additional pain as the original housing market/financial collapse.
2Anglico| 5.29.09 @ 7:57AM
And I quote, "This sort of behavior began with Ronald Reagan....." hahaha...hahhaha..HAHAHAHAHAHAHAHAHA.....HAHAHAA....
Robert Rosencrans| 5.29.09 @ 8:01AM
All you need know is but one thought: Central economic planning by the government.
The follow up to that thought is that it always fails.
Faffnir| 5.29.09 @ 8:10AM
No, Mr, Mathews, the practice of government spending massive amounts of borrowed money started under Franklin Delano Roosevelt ( a Democrat) and to a lesser extent Woodrow Wilson (a Democrat). I have been convinced for quite some time that the ignorance of basic economics of the average American is apalling and the same ignorance on the part of Congress is criminal. And as with so many "progressives" you are not nearly as smart as you think you are. I would suggest that you read Friedman, von Mises, Hayek and Sowell. You won't, because you will prefer to remain ignorant.
Griff| 5.29.09 @ 8:21AM
Davey,
There you go again. Reagan's budgets were declared "dead on arrival" by the Ol' Tipster. Instead, we got Democrap spending, spending, spending to buy votes (as usual). Obamachev the Community Organizer is spending us into the hole more than ALL other presidents combined. Go back to your shuffleboard club in that low-rent Mediterranean joint you call home.
Griff| 5.29.09 @ 8:32AM
Davey,
We've only had one conservative president in the last 40 years and he was hobbled with a big-spending Democrap Congress that spent like, well...like a bunch of drunken democrats. (Kinda like now.)
Indiana Alex| 5.29.09 @ 8:57AM
And here's the ignorance of the left once again shining through.
Who has the ability to appropriate? The legislature or the executive?
And he wishes to teach.
He is a child.
Indiana Alex| 5.29.09 @ 9:12AM
There they go again...
rmartin| 5.29.09 @ 9:21AM
May I offer an eleventh thought: there never was a bubble that did not burst.
TAO| 5.29.09 @ 9:38AM
Tsk, tsk, tsk...
There goes the "military-industrial complex" thing again. Yes, it exists. So what? It is by far less hurtful to the average Joe than the left's government-union-corporate complex.
The military-industrial complex actually put people to work, put money in people's pockets, and gave the average Joe technology ranging from digital watches to microwave ovens to advanced computers to cell phones. It put factories in less developed areas of the nation (read, "fly-over country" to the statist), and provided the local benefits needed by the neighborhoods.
What has the government-union-corporate complex given, by comparison?
The housing and banking collapses, losses of jobs, losses of livelihoods with millions enslaved to meager government subsistence programs, destroyed 401k accounts, decayed inner cities, shutting down auto dealerships and factories in small towns.
If I had to choose which is better - the so-called Reagan "socialism" of the industrial-military complex, or the government-union-corporate complex as promoted by the Democrats for longer than most have been alive, I'll take the Reagan option.
And, Reagan is a "socialist" only through severe twisting of words. He stood more for the rights of individuals far more then Democrats could ever hope to. I guess that's why the childish must smear him. Typical Daily Kos mentality.
This article gives some very good reasons why we are in the mess we are in today...and all of them can be linked to a statist-Democrat effort to impose their will on the people.
PolishKnight| 5.29.09 @ 10:41AM
DavidMatthews needs help, absolutely hilarious! You summed up his position so well: Smugness, anti-white male racism and sexism, juvenile "stupid" name calling, and of course, the sublime hypocrisy. I honestly through you WERE David Matthews for a moment there!
Mike| 5.29.09 @ 11:19AM
Obama's spending madness makes Bush and Reagan's deficits look like mere incidentals. And that's saying something.
Say hello to higher interest rates...and yet even lower home prices...and more financial meltdowns.
frankg| 5.29.09 @ 12:29PM
I think the government took in more revenue under Reagan's policies. He was pro-business and had to rebuild the military after the disastrous carter years. The liberal democratic congress held the purse strings.
Under obama revenue is plummeting while overspending is accelerating. Business is adjusting for his catastrophic taxing policies and destruction of any and all profits.
California under democrat, pro-union, big government and continual spend more than you take in policy have proven to be a total disaster.
In the 90s conservatives who tried to halt the growth of big government were accused of "starving the children"-children who became human shields for tax and spend liberals. When "compassionate conservatives" tried to be progressive under bush II and spend on social programs, big government tax and spend liberals clamored that was all "spending like drunken sailors". And since gaining power in 2006, have accelerated the exact same polices.
So you can't please the left.
Unless you put big government, taxes, with no accountability or audits, before everything else-like independence, freedom, fiscal stability, and the truth.
ds80| 5.29.09 @ 1:58PM
David Matthews: can you quit playing with yourself long enough to look up some FACTS?
The following comes from readily available data from official US gov't sites (e.g., BLS, GPO, CBO):
Since 1901, when:
Republicans have controlled both houses of Congress, there have been 28 surplus years and 14 deficit years.
When Democrats have controlled both houses of Congress, there have been 46 deficit years, and 8 surplus years.
When control of Congress has been mixed, there have been 12 deficit years, and 2 surplus years
When a Republican was President there have been 26 surplus years and 34 deficit years.
When a Democrat was/is President there have been/is 10 surplus years and 40 deficit years .
Shall I recap?
Republican Congress: 28 surplus, 14 deficit
Democrat Congress: 8 surplus, 46 deficit
Republican President: 26 surplus, 34 deficit
Democrat President: 10 surplus, 40 deficit
History shows Democrats as the party of fiscal irresponsibility.
Which everyone except David Matthews knows.
Gill O’Teen ✝✡| 5.29.09 @ 2:04PM
No President can be blamed for deficit spending. No president has ever balanced a budget. Though there is a valid argument that THE EVIL BUSH did overspend when he attempted to save the auto industries by issuing an executive order authorizing such a bail-out. However, before the obumarrhoids start braying “See! See! See!”, they need to check out how their golden boy voted on this issue when he was a lowly senator. I consider THE EVIL BUSH’s actions in this matter to have been impeachable, yet given this opportunity, the dumbocrats did nothing. I wonder why not. My first guess is that they simply don’t know that the U.S. Constitution gives the ultimate authority of spending our money to Congress. That’s right! Even our current orgy of spending is properly blamed on Congress, though it is certainly not good that the liar-in-chief is cheering them on and is all too willing to sign any document hairy or pea-lousy puts in front of him.
Missing from this discussion is the price of oil. Towards the end of the Clinton presidency the per-gallon pump price of gasoline began to creep up. That and the dot-com debacle led to the recession Bush inherited. That the per-gallon pump price of gasoline topped $4.00 last year certainly contributed to our current financial woes. When the price of fuel rises, so does the price of everything else. The more it costs to buy essentials the less money we have to purchase non-essential items since it’s illegal to print our own or to forge checks. The per-barrel price of oil just hit its 2009 high point this morning. I won’t know its closing price until later today. Predictions are that it’s headed for $75 this year. Interestingly, government sponsored propaganda claims that our current mess has bottomed out and that recovery is only a corner away. That’s not a recovery, folks. It’s a runaway train and we have been strapped to its tracks. Where’s our Dudley Do-Right?
Comparisons of our government to "drunken sailors" are off the mark. Inebriated naval personnel spend their own money.
David Govett| 5.29.09 @ 2:11PM
"We were living beyond our means with cheap borrowed money. Now we must pay the piper. "
Unfortunately, the piper is China. Still Communist, still belligerent.
Old Texican| 5.29.09 @ 2:13PM
Thank you Mr. Pollock
Pretty accurate article.
It is beside the point though.
We are in the midst of the biggest power grab in American history. The specific "battlefield" we must win is the US Senate.
Please guys, fire off personal e-mails and letters to your Senators as often as you can...to simply say "NO!...or I will fight against your re-election with everyone I know."
Howard| 5.29.09 @ 3:27PM
I am forced to agree with Dave Matthews about the Presidential party and deficits. There has not been a balanced budget under a GOP president since Ike. However, the Democrats record is also appalling. The so-called Clinton surpluses were only because Social Security surpluses were factored in. However, I think the Obama deficits will make the GOP's look like childs play.
fundamentalist| 5.29.09 @ 3:44PM
“3. Economic and financial cycles are natural and cannot be avoided.”
That is the view from mainstream economics. As Dr. Greg Mankiw wrote on his blog, mainstream economists can’t predict anything because busts are random shocks to the system. However, there is a minority view called the monetary theory of business cycles that says the Feds cause booms and busts with their manipulation of the money supply. Friedrich Hayek won the Nobel Prize partly for predicting the crash that resulted in the Great Depression and he improved the most on the monetary theory. It’s also known as the Austrian Business Cycle Theory. The depth of the bust depends upon the extent of leverage during the boom.
“Chinese savings became high U.S. house prices.”
Where did the Chinese get such vast savings? From sales of exports to Americans. Where did Americans get the vast amount of dollars to buy Chinese exports? From the monetary pump of the Fed. The money flowed from the Fed’s pump through American purchases of imports to China and back to the US as loans.
Tim| 5.29.09 @ 3:54PM
There is plenty of blame to go around. The newest thing seems to be that we are actually spurring inflation as the only way out of this massive debt. We've begun printing money to pay ourselves back with.
Thomas| 5.29.09 @ 4:58PM
I love the law of unintended consequences. Here we have the PRC bying huge amounts of US debt for the purpose of placing themselves in a position to favorably influence US policy from their position as chief US creditor. Now that they are faced with the prospect of holding billions of dollars and billions of dollars in US debt instrument that all may become worthless in the near future, they are suddenly becoming a major cheerleader for US economic stability and even gain; something that they have been actively working against for a decade.
As to the government's plan to save the economy by printing fiat money and increasing the national debt, what do you expect from the people who brought you the $199 toilet seat and the $50 hammer?
aware| 5.29.09 @ 6:23PM
Gill O’Teen...right on the money, especially about what's coming....it's gonna be terrible indeed!
However, one small quibble if I may, the rise in price of one commodity will not spark a general rise in all prices, even one as important as oil. That's because consumers make adjustments to that high price by cutting back or eliminating spending on everything else. That is what happened last summer.
The only thing that can be truly inflated which has a direct effect on the entire market at every level is the medium of exchange....money. And who in charge of the money supply? You will pay many more dollars for everything because every dollar will be worth much less.
Yes oil is going to be higher, and so will everything else, as a result of the diabolical and insidious monetary policy foisted upon us by the Evil Dead at the Federal Reserve. But since it is the Money Machine for the State its failures mean......even MORE control!
Is it rational or realistic to believe that the institutions and policies that have led to financial meltdown will lead to financial "recovery" if they are magnified? Nobody is that stupid, not even State apparatchiks!
They know exactly what their doing...squeezing every dollar out of the middle class to concentrate it in the hands of the State and its loyal minions in the corporate elite, with chicken feed handed to their "favored" constituency's among the "poor" to buy their votes. They are going to make as many as possible dependent on the State and totalitarianism takes a big step forward. And the people cheer!
Old Texican| 5.29.09 @ 10:49PM
Aware
Splendid synopsis!
I shall be quoting you.
Gill O’Teen ✝✡| 5.30.09 @ 12:39AM
Aware, I don’t think we disagree at all. You wrote “That's because consumers make adjustments to that high price by cutting back or eliminating spending on everything else.” My point exactly. It’s these adjustments which feed recession. Since everything we buy at a store was shipped, the cost of shipping will parallel the cost of fuel. If I’m on a fixed budget which allots $100 a week to buy essentials, and the very least amount of gasoline I need is 10 gallons then at $2.00 per gallon, I must spend $20 for gasoline. This leaves me $80 for other purchases. If gas is $4.00 per gallon, it will now cost me $40 to get around and I can only spend $60 for other stuff. Clearly something has to give, but everything else I need will gradually become more expensive. That can of store label peas which cost 25¢ last week with 2¢ built in for shipping costs will probably now cost an extra 2¢ since the cost of fuel has doubled. So now I’m paying 27¢ for an identical can of peas. Butt now the farmer has to pay more for tractor fuel to plant, tend and harvest those peas, and for a long time the cost of diesel was greater than the cost of regular unleaded. I seem to recall last summer that the company which collects our trash slapped its customers with a fuel surcharge, and they weren’t the only ones. Then there is the inevitable inflation caused by the glut of cash flooding into the system from the tax cheat’s printing presses. It might be sooner than we think, that we will need wheelbarrows simply to carry all the hundreds we’ll need to buy that same can of peas, but the weight of carrying all that loot and the necessary garden equipment will increase the amount of fuel I need to purchase weekly. So on and on and on and on and on until we are squeezed so tightly that we can no longer breathe. But hey! That’ll be a good thing, since the obumarrhoids are probably planning to slap us with a breath tax because the gas we exhale is now classified as a deadly pollutant and we must save the extremely rare and unheralded muggy-wuggy moth which lives only on the north side of high altitude arctic cacti. But wait, with no CO2 won’t that cacti die anyway? I digress. Overlooked so far is that as people adjust and reduce their spending, businesses that are our low priorities such as the movie house showing the new Star Trek movie or the book shoppe selling the Great One's latest masterpiece suffer as their sales decline. What a deadly cycle of no hope and spare change. This is really depressing, and I’ve already exceeded my bourbon allotment for the evening. Drat!
old farm boy| 5.30.09 @ 8:16AM
AFTER READING YOUR POSTINGS,I'VE COME TO CONCLUSION, THAT THIS WOULD BE A BETTER COUNTRY IF OBAMA'S AND YOUR MOTHER SHOULD HAVE PRACTICED SAFE SEX. DAVE MATTEWS GET OFF THE INTERNET.
Anonymous| 5.30.09 @ 9:30AM
During Mr. Pollock's presidency of the Federal Home Loan Bank of Chicago, the bank instituted a program of repackaging mortgages and reselling portions of them, a program called MPF.
Originally perceived as a usual program to increase liquidity, it eventually failed and has helped bring the FLH Bank of Chicago into serious financial difficulty. The program's problems just make it hard to read Pollock's writings about the economy and housing finance.
Rothbard Fan77| 5.30.09 @ 7:11PM
Actually, David, the term would be fascist. We don't have any socialist politicians running, since socialism would involve state ownership of all means of production. Which would be bad for the State, since all of the blame will fall upon the state and the officials of the state when the shit inevitably hits the fan for reasons that Mises outlines in his book Socialism. Fascism, neo-merchantilism, or whatever you want to call it, involves nominal private ownership of property, highly regulated by government, giving the government the best of both worlds so to speak: the ability to control everything and the ability to pass the buck around when everything goes to shit. All presidents since Martin Van Buren have been advocates of the Warfare/Welfare state (or national socialism as you like to call it).
A point as to the thought number 3: Business cycles are not a naturally occurring thing, like the Chicago School and Milton Friedman all believe. George Mankiw in particular has gotten it all wrong, making me doubt his economic chops. Remind me again, what does getting the prediction or outcome wrong mean for a positivist? The business cycle is all a function of a central bank and central planning, and by that I mean just their very existence as an entity of exclusive privilege by the government. The Keynesian School and the similar monetarist Chicago School (all proven wrong by the stagflation of the 70s) believe that the business cycle can be curbed by deficit spending and money production, to be curtailed when inflation starts to hit. Sure doesn't seem to help when there is inflation and a recession does it? In addition, Mankiw has also come out for negative interest rates, which would have undoubtedly interesting consequences for money production. The only theory that has any history of accuracy is the Austrian theory, but unfortunately, in the words of Richard Nixon, "We're all Keynesians now"
Sam H| 5.31.09 @ 1:19AM
Only a "progressive" fool like David Matthews could use the terms Revolutionary War, history and irrelevant in the same sentence and think it profound.
Enjoy your stay in the land of unicorns, leprechauns, penny whistles and dreams "Mr." Matthews.
Jake Peachey| 5.31.09 @ 8:29AM
The current supercycle of credit expansion is over except for the shouting. The big credit bust has occurred. Both lenders and borrowers were in over their heads with leveraging, which is the usual historical feature of credit supercycles. It was obvious that overleveraged lenders had to be bailed out to stop financial panic. But this didn't help overleveraged consumers that now portends low consumer demand for quite a while.
However, it is easy to join the endless parade of commentary and analysis of what is going wrong without offering effective solutions. I think there is a real solution that offers economic conservatives an enormous political opening.
There is the very unlikelyl possibility that huge government deficits funding public sector spending won't do more than keep the economy into a stale holding pattern ---- because it will not reduce private consumer debt at a very expeditious rate. If so, the economic viewpoint that large deficit for tax cuts, which allows consumers to retain their earnings to pay debt versus supporting big, wasteful, ineffective public sector spending (Japanese experience), should be an easy sell. (It's the economy stupid!)
Effective stimulus spending would allow the private consumer to regain financial footing. This calls for a temporary reduction or suspension of income and payroll taxes; even tax rebates in serial installments --- until consumer confidence and real demand starts rising.
There are several very good reasons for this approach: large but temporary reduction in payroll taxes and rebates would eventually expire --- something we could certainly depend upon. Big government public sector stimulus spending will be extremely difficult, if not impossible to stop its transformation into a permanent enlargement of government, which could destroy our dynamic and entrepreneurial economy.
The second very good reason: to the degree that demand-side tax cuts and rebates is used to pay down debt means; that the increase of public debt is offset by decreased in private debt. Therefore, no net increase of debt for the American economy; unlike public sector spending.
There's still a third reason: to the degree that debt is paid down, the inverted pyramid of money supply from fractional reserve banking shrinks. This reduces money supply, offsetting the increase of money supply from loose fiscal policy when the Federal Reserve creates money to finance the deficit. This reduces the threat of inflation from excess money supply, unlike public sector spending.
Why management of money supply should be shift to fiscal policy to control endless credit cycles ------- http://economics102.blogspot.com/
Tenn Slim| 5.31.09 @ 9:44AM
Cap and Soc Socratic discourse:
Cap: Reading this brings tears and a lump. Soc, we tried so hard, profits were good, sales were high, folks all had jobs, the DOW was up in the 1500's and the houses were being filled as fast as possible. Now, the bubble indeed has burst. Is the true answer, equal distribution of MY wealth?
Soc: Of course it is. You and yours made entirely too much actual cash, spent it in unwise ways, and generally made my life even more miserable. Now, the tide is favoring my kind of society. Less is more, as Ex Pres. Carter used to espouse. We can all (not me of course but you) live much more humbly. We can drive the autos till they drop, then walk to what work there is. We can let the houses deteriorate (No more use for Home Depot) till they really become like my old apt. in the slums. Cap, the day is here, live with it.
end
Cap(atilist) Soc(ialist)
Chuck Dee| 5.31.09 @ 11:41AM
When the Government illegally prints money to give to the private sector without the consent of the people, that Government becomes a tyranny, plain and simple.
The right of the Gov to bail out lenders in order to stop financial panic is not anywhere in the US Constitution. Lenders who made bad loans should have been allowed to fail. That is the way the free market works. Bad lenders and their investors lose their money, not the taxpayer. Then good lenders, the smart lenders, remain and the world is a better place for it. Instead, the Government has rewarded these incompetents and allowed them to remain so they can be manipulated and controlled by the Government. It is nothing more than a power grab.
Money is currency by which wealth is transferred from one person or entity to another. Inflating the M1 devalues the money you and I have in our pockets.
So in effect, the Government bailed out lenders with the taxpayer's money because they forced the lenders to make loans to people they knew could not pay them back.
After the bailout there was more money available to transfer the same wealth. And since then the Government has passed one huge budget bill after the next so that now there is even more money available to transfer even less wealth. Rampant inflation is inevitable. GW and Obama, all of the Democrats and some blue nose Republicans, all believe the answer is to pump more money into the public sector and grow the Government.
Of course for people of the Left who yearn to be led by a more powerful and tyrannical government, this is a great solution. "Let no crisis go unexploited" is their battle cry. So as the economy collapses, the people will look to the Government to solve their problems and the Government will grow. And since the Government does not create wealth, the money will become more and more worthless.
Our debt now stands at 63 trillion dollars. Not a day goes by that I don’t think of this fact. I pray with all my heart that I am wrong, but I can’t shake the feeling that we are headed for an economic disaster from which we may never return. Return in the sense that we will be a free and prosperous nation. One in which all people have an opportunity to work their way up the economic ladder. I fear those days are gone forever.
This is good news for the Left. It will mean their dream of a Government controlled economy will be realized. We will all be equal and whatever economic state your are in at present, well you’ll just have to satisfied with that and press on.
Otherwise you'll be guilty of being unpatriotic. Patriotism used to mean showing your gratitude for living in a free society. One in which each man had the right to pursue his own dream and be whatever he wanted to be. Now, being patriotic means being willing to work hard and give the money you earn to the Government so others can fulfill their dreams of having everything they need handed to them.
The only solution to this crisis is to stop Government spending and stop the inflation of the money supply. Wealth must be created by the private sector to balance the increase in the money supply and balance the ratio of wealth and money. The reduction and suspension of private income tax is the only tool for encouraging more wealth creation. The problem with this solution is that it means less money will go into the hands of the Government.
This why this common sense solution will never be implemented. The people we have in power will never allow it. It's against their religion.
Biffula| 5.31.09 @ 4:52PM
David Matthews says, " Have conservatives just noticed that the government is spending beyond its means with borrowed money? This sort of behavior began with Ronald Reagan and happened to a massive degree under George W. Bush.
But you people didn't notice until Obama became president ... ! "
Hey David, you libs love to point at Bush's spending, but your boy Nobama has spent more in his first 4 months in office than ALL previous administrations....combined.
Gerard Jackson| 6.1.09 @ 12:11AM
Every boom is driven by credit expansion. Without the increase in credit a boom could not emerge. This is the history of the boom bust cycle from medieval times to the present.
http://www.brookesnews.com/061610medievalbanking.html
Realism| 6.1.09 @ 12:53AM
1. You're dumb, how did you get this job?
2. You're trying way too hard.
3. Do you have some kind of magic tv that lies? It is lying to you.
4. I stopped reading after 3 reasons, I admit it. But I could have gone on. And yes, you are retarded.
5. Pollock... lol
6. Night night, sweet prince.
Doc| 6.2.09 @ 7:14AM
I hope everyone took time to enjoy a good cigar on May 31st. (World No Tobacco Day)
ds80| 6.2.09 @ 11:26AM
Howard: can you read?
Republican Congress: 28 surplus, 14 deficit
Democrat Congress: 8 surplus, 46 deficit
Republican President: 26 surplus, 34 deficit
Democrat President: 10 surplus, 40 deficit
Dravid Mathews| 6.2.09 @ 1:18PM
I ran across some interesting numbers recently. I will reprint them here for the benefit of members of the current US administration and its supporters who seem to be unable to learn from history:
Republican Congress: 28 surplus, 14 deficit
Democrat Congress: 8 surplus, 46 deficit
Republican President: 26 surplus, 34 deficit
Democrat President: 10 surplus, 40 deficit
Fascinating, no? Neither political party has anything to brag about. But in the current economic circumstances, it would seem that the combination of a D congress with a D president creates a veritable road to perdition.
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