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Meltdown - An Economic History Lesson; By Ed, 02/19/09

People knew way ahead of time these markets would sour in 2004.

The smart ones got out.

Idiots like Barney Frank and Chris Dodd defended the unethical operations and executives of Fannie Mae & Freddie Mac when SEC & Treasury Dept. investigators tried to blow the whistle on them during congressional hearings in 2004.

The time to act was then.

President Bush and the Democratic congress screwed around and blew it.

Bush got the continued funding for the war and had a hands off policy towards the looming financial crisis and border enforcement.

The Democrats were staunch defenders of these no asset , unsecured loans to people that had no business going into debt if normal conditions were applied .

No one wanted the credit party to stop.The credit markets / economy is what is in trouble here.

The following is a piece I wrote in reply to a person asking why things are the way they currently are it is kind of a long read. This is the way I see it:

 

I remember all this current B.S. beginning in the mid sixties after Kennedy was assassinated. At least that is my reference point in life for it .

 Lyndon Johnson's botched Vietnam war & "Great Society"programsTeddy Kennedy sponsors legislation to relax immigration standards and it passes into law.Nixon takes dollar off gold standard.Reaches a negotiated settlement for VietnamNormalizes relations with Communist ChinaUS leaves VietnamOPEC declares economic war on the U.S. and any country that supports the state of Israel.Price of crude oil soarsThe Ford/Carter yearsU.S. Congress abandons South VietnamMajor banks declare record losses on international credit markets because third world countries are defaulting on loans made to these financially shaky countries on the insistence of our own federal government. Sound familiar? See a pattern developing here?Inflation soarsCredit Rates soar because banks try and make up their losses abroad here at home.Oil prices soar even higherCarter Signs into law "The Community Reinvestment Act" and the variable rate mortgages are born.The real home loan insanity starts with this piece of "do gooder"legislation.National debt continues to rise.Manufacturing and core industries move off shore to take advantage of lower cost Pacific rim labor markets.Plants and mills shut down . Whole towns die.Merger and acquisition mania is the corporate raider game.Buy companies and raid the capital assets then sell off the carcass after pumping up the books.Regan tries to reverse these trends and the economy mends for awhile but to no avail.George Bush sr. squanders the gains made during the Reagan years with his "globalist new world order" ideas.S&L crash in 19871st Gulf WarI remember Perot too ,he was right about a lot of things but he turned out to be a let down for a lot of people after he bailed on his own cause.Economy slumps in the early 1990'sThe nation becomes totally fixated on a credit based economy .Cash sales become secondary and making the sale to sell the financing becomes the norm.Government continues to go deeper into debt counting on the economy rebounding to help pay off the debt.Clinton starts out trying to implement all kinds of socialist policies and then realizes they will go nowhere if the economy is weak.Clinton administration is rife with corruption and moral scandals.Clinton further bolsters / modifies the community reinvestment act further dropping restrictions to home buyers who could not qualify for loans.More well intentioned social engineering that leads to this tragedyThe people that do have jobs get squeezed harder as costs rise and wages cannot keep up.Personal debt consumes most incomes.Real core industrial jobs all but disappear.Border enforcement is a silently & purposely relaxedWar on terror begins.Bush Jr. is all consumed with war on terror loses it on domestic policy.Trade imbalance soarsGNP#'s are artificially inflated.Value of dollar continues to fall.big business cats do get rich but so too do the politicians , most of 'em.Obama runs on "CHANGE" platform except he is not really saying what kind of change.One of Obama's top advisors and contributors is the former Freddie Mac CEO Clayton Raines. He left with a pile of money before the collapse.Recipe for disaster.Now we are to bailout all these supposed failed credit ventures?See a pattern? We get fleeced by these cats to cover their short positions.That is my time line for this disaster.

My parents were raised during the depression years and they impressed on us kids the importance of being self reliant and not living frivolously.

Stay within your means and do not go into hoc for stuff you do not need or cannot afford to own.You repair stuff ,keep it patched up and do not replace it until absolutely required.Things do not "just go in the trash".

You stay on a cash basis for almost all things

This is something too many people in this country, including a huge majority of our current crop of politicians , seem to have forgotten.

We have become a "throw away" society of conspicuous consumers and have been led to believe that it is ok.

The credit party has to stop.People have to boycott the lenders for the next ten years to put the cash sanity back into the economy.

The government must do the same.Too much money going out ,not enough money coming in. Something is gonna break.

The only people crying the loudest are the lenders because they are not making as much money.

"We need to jump start the economy in order to get the banks to start lending money again".

Why is that so all important to do? Credit , especially UNSECURED CREDIT is what has gotten us as a nation in to this fix.

All this bailout /stimulus legislation is nothing more than a crutch for a credit based economy that is broken.The credit based economy the way it was must not be restored to it's previous state or this nation is doomed to failure.Time to turn our backs on the corporate way of living/thinking and the ever expanding big bang economic credit boom.

With politicians and leaders that continue to sell out the citizens we are doomed.

Without core industries, mining ,manufacturing & farming/food production USA starts to become a tourist stop .

A once was.

Kicking the credit habit will only be part of the solution.

Major heavy industry/manufacturing has to return to the United States in order for this economy to produce some real solid GNP#'s like in the last century.

Steady moderate economic growth that isn't achieved by leveraging everything six ways to Sunday. No more BOOM.

What will that take?

Will we all have to take massive wage cuts so we are cheaper labor than the current labor markets that are currently being exploited by business? Not Likely.

That said,Labor has to be realistic in it's demands and expectations as to what & how much the economy can stand.Wage increases do not come out of thin air.Business always has to find away to compensate/offset the increased costs.Investors want to see some dividends too.

We as a nation can no longer rely heavily on foreign sources of energy just because it is currently posed as being cheaper?Stop all these liberal left wing environazis from blocking development of our own natural resources and nuclear power. The alternative stuff will sell only if it can be done affordably/efficiently, turn a profit and actually save the consumer real coin over the long run.

The inflexible attitudes of the extreme environmentalists have caused this economy& country great economic damage.That seems to be their main aim anyway. They need to bend.

Trade barriers must exist to protect our domestic industries and labor force.

If domestic companies want to go overseas to manufacture stuff and make money in those markets so be it but the products they make overseas get sold there and stay there. They do not find their way back into our market place to undercut & compete directly against products made by our workforce.

Competing imported products need to be tarriffed to a level that is commensurate with what they do not pay their labor force compared to ours.

Stop all illegal immigration into this country. Enforce the law & the borders.

Strict pre-1965 legal immigration quotas must be returned to.

No more H1B visa abuse by business.Those are only granted on a case by case basis and not granted whole sale like they currently have been.

All these positions are not popular with the current party in power.

The current party in power wants to expand the role of government into every aspect of your life.

The party in power wants government to make everything okay for everybody no matter who they have to steal from to do it.

The party in power is intent on creating a constituency that is dependant upon the government for all their basic needs.

That ensures their power base because they are the Dolers and if the Dole stops the deal for those dependants gets queered.They want the gravy train to keep a rollin .

A government big enough to give you everything you want is powerful enough to take away everything you have.