my2bits

Don’t Blame Wall Street - At Least Not Completely

The people that are being foreclosed, primarily those who initially received subprime mortgages, should never have been given a loan to buy a house. These people were renters and will become renters again. Although it’s always tough to see somebody lose their home, the people being foreclosed on are not your typical American homeowners. They probably put a low or no down payment on the home, and had interest only payments probably not a lot different than they would have paid if they had continually rented.
The foreclosed houses are now flooding the market, and that excess inventory will be sold over time, then the normal supply and demand will work within the housing market.
This situation does not justify a $700,000,000,000 bailout for the banking institutions. The banking institutions that invested in these mortgages made a terrible mistake. The American System of capitalism allows people to make mistakes and go out of business. That’s the way the System Works.
If Congress agrees to the $700,000,000,000 bailout, this will bring the total government intervention to approximately one trillion dollars. This is a huge amount of money.
Forget any type of universal Health Care, look for downside adjustments in Social Security, Medicare and veterans benefits. There will now be significantly less money, for things we really need, like university education, infrastructure, dealing with catastrophic climate change, and all of the other things that we depended upon the Federal government to help finance.
Let’s give a thought to what would happen if the United States defaulted on its debt? I personally believe it’s not a question of if, it’s a question of when. Economic experts have predicted that the total cost of the war in Iraq, including long-term care of the seriously disabled veterans, will probably reach three trillion dollars. Plus you add the $700,000,000,000 bailout, to our already enormous debt, over $10,000,000,000,000. And of course we have the baby boomers starting to retire, this huge bubble in our population now starting to retire, will put a huge financial burden on Social Security and Medicare. I think we are in grave danger of not being able to afford even the interest payments on that debt, and default may be the ultimate answer. So if you believe the above scenario, now we are looking at a real financial disruption for the entire world economy.
As far as a lack of liquidity in our economic system, this basically means loans. Making loans to home buyers to and corporations is a profitable and legitimate business. There are many institutions in the world that are in the business of lending, they have sufficient liquidity to make the loans that America needs. We need to think globally in the global marketplace. Like it or not that is the reality of the world today.
Modern economics dictates that when bad decisions are made in business those businesses usually fail, and other businesses will take their place. Some will make it some will not. If there’s profit to be made, and capital available somewhere, capital will come and the job will be done.
Markets will prevail, we really do not need to bail out the rich guys one more time; on the backs of the working people and the taxpayers.
Neil Davis in Rocklin California
ronna_and_Neil @ hotmail.com