The Housing Crisis and America's fear of the R-word

There has been enough media attention on the economy lately to make it difficult for me to get through the day without a mini panic moment. I've been scouring the latest news on the bailout bill and on the housing market several times a day. It may not be very good for my mental health, especially since I can't really figure out a way to protect my assets without contributing to a run on the banks, which would be ultimate bad ju-ju.



But I am very, very glad that Congress did not pass the bailout bill as it existed. The reason...in my opinion Congress did its job, which is a tough one consisting of 2 parts: representing the desires of its constituency and protecting constitutional rights and freedom. Protecting the economy has never been part of Congress' job description. And I fail to see how getting the country $700 billion dollars in debt will fix the crisis created by offering credit to those who couldn't afford to pay it back. See a parallel? Bank to overextended credit is as US Gov't to overextended credit. Any high school student prepping for the SAT should be able to spot that one.



I'm also very proud of Congress *gasp* listening to their constituency. Hubby was listening to NPR yesterday, and they had several congressmen from both parties who stated that essentially they have NEVER seen a public response of this magnitude on any single issue before, it far exceeds the response a while back on the immigration issue, and that there was NOT ONE call or email expressing support for the bill from a constituent. NOT ONE. And these were the words of a democrat congressman.



Basically, I think the American people, although totally freaked out about their 401(k) and how they are going to put food on the table, get what certain members of both parties don't...you. can't. fix. a. credit. problem. by. obtaining. more. credit. Just as Americans who are desperately transferring balances from one credit card to another realize that it won't fix the problem.



But the U.S. government doesn't have the option of transferring its debt, or at least it shouldn't, because it is not the government's money. It is OUR money. And I am unwilling to pay $10,000 of my money, with interest (yes, I know, the per-household estimates vary widely, just assume this is an example, okay?) to protect the jobs of CEOs with multi-million dollar golden parachutes.



And I feel the measure would have given the government WAY too much power. I'm pretty far to the right, at least fiscally. I believe that essentially the people have to be very, very careful about what rights they give the government the ability to enforce at the point of a gun, which is essentially what laws are. Laws are enacted and the government uses the point of a gun to enforce them. And I'm not so keen on my hard earned money being taken from me to finance the greed and laziness of others.



I read a fabulous article today in the Christian Science Monitor (which is a well-respected news source, not partisan) in which the author said the only cure for the economic crisis is recession. She (or he, one of those unisex names) basically stated that for some odd reason the government is scared to death of recession, or of using that word (I have a theory about that...recession doesn't seem to be so good for the party in power. Americans seem to think the government has some kind of magical power over the economy and that economic downturns are strictly the fault of governmental policy). She cites an "International Monetary Fund report that examined 124 banking crises in the past 27 years" which basically says the most healthy thing to do overall is let the failing businesses fail, sell the parts off, and deal with a very rough 2-3 year recession which is then followed by "a strong growth rebound."



This is what i've been saying for about a year now. CAPITALISM...let's all chant it, people. Capitalism is theoretically about allowing business to rise and fall without interference. Obviously we want to do what we can to help businesses succeed, because profits in business create wealth for all of us. Yes, I just stated that businesses being profitable is a good thing. The oil companies posting enormous profits is a good thing, for the CEOs of that company, and for the firefighters and nurses and teachers and video-game designers whose 401(k)s have a share in the company. And letting the failing businesses fail is a good thing too.



My husband likened it to our recent forestry management. Fires are a bad thing so you stop every fire that happens. And 50 years or so of this (give or take a few decades, this is an analogy, not a thesis) creates this huge mass of undergrowth that would have been burned off by the naturally occurring fires. So now we have fires that are uncontrollable, and we're still trying to stop every fire, because now they're even bigger, badder, and threatening more homes and lives.



Recession. Bring it on. It'll suck, and it will hurt, and I hope and pray that my husband's job is still here in 2 years (which is scary considering his company's current financial situation), and that some day soon someone will purchase our starter home so we can have a positively balancing financial sheet again (we recently purchased a larger home for our growing family...big enough to grow into but NOT a lavish McMansion, something big enough to fit our whole family around the table at once). I'm not saying that recession is the answer because i'm wealthy and can afford to take a loss, but because I don't think it's the government's role to try to beat out the flames of a fire out of their control, and I don't believe they would succeed anyway. There is evidence that the governmental interventions of the thirties actually lengthened the Great Depression. Other countries, which were in similar financial positions, basically let the natural market forces run their course, and they recovered significantly faster than the U.S.



But none of our politicians will ever say that, or state like the head of the bank of England that the standard of living will fall (such cheek!). Too bad.