Emergency Economics - 9/30/08

In my endeavor to understand the world around me, I realize I need to go a step further and understand it to the point as to be able to articulate and discuss how I see it.

The thing I hate most about politics is evident more than ever right now...politics itself. Here we are on the cusp of the most dire economic situation since the Great Depression and the political leaders are spending more time maneuvering and blaming each other than figuring out what needs to be done. This continual pointing fingers and petty speech making is getting in the way of success and action.

There are many many MANY reasons why we are here. I would argue there isn't a leader in Washington that hasn't contributed, not a mortgage company executive or an over burdened mortgage owner thats not at fault. From previous administrations actions to the current's, from previous Congress' actions to the current's, from lobbyists to community organizing groups, from the home buyers to the mortgage lenders, from the Fannie Mae & Freddie Mac executives to the Wall Street Executives an argument can be made as to that entities responsibility or at least their contribution to the current disaster. I'll let you come to your own conclusion as to who should carry the burden here but the reality is we are all going to have to shoulder it.

So what do we do? For all the posturing and end-of-the-world-as-we-know-it talk from our leaders I believe no one knows or can know exactly what the market will do in response to any given action. We can theorize. We can speculate. We can look at different things through history. But we can't KNOW! So how do we decide what to do?
We must decide based on principle. We should always make our decisions on principle to avoid being blinded by emotion or lack of knowledge but the mother of all times to use your principles is when you can not know all the facts or know all the possible reactions to your action. Every act will have its consequences, a perfect solution is not possible, therefore, we must act on our principles.

To name a few things that I feel are relevant to this situation are the beliefs I have that a free market is better than a government controlled one. That the larger the issue the more patient you should be in coming to a course of action. That you can't fix an issue by addressing the symptoms.

Having the government bail out industries is bad enough but to have it step into and bail out the whole market is two steps inside the sphere of socialism. There are those of the far left who have no qualms with that and would likely encourage even more, but to me thats a core no-no. Show me one state whose socialistic activities created a humane, just, free society.

The other thing that bugs me is all the talk that we have to act quickly. This is a disaster that has been years in the making. It is one that effects nearly every sector of business and therefore every sector of life and we are to think that the powers that be can fix it in 48 hours...or less? The demand for acceptance of the Treasury Secretary's plan by Bush is insulting. It is irresponsible not to consider the options. In the 24 hours since the House declined the Bailout bill I have heard a handful of options that I think show some real merit. Like repealing the Capital Gains Tax or adjusting how we determine a financial instruments value from "Mark to Market" to a fair-value system like we used for 200 years prior to the scandal at Enron. Now, while I don't understand the effects of these examples enough to articulate it here, my point is not that these are what we should pursue but rather that there are options out there that aren't being considered because politicians are to busy politicking. They are not making decisions for what is best for this country but rather what is best for themselves or their party line.

Finally, the problem has been the ability for people who can't afford a house to be allowed (and in some cases are required by law to be allowed) to get the money for one. We need to correct this issue. The fact that many of these loans are now default, causing banks to hoard their money, which then has caused a credit problem for major investment banks and soon to be smaller entities are products of the problem. Fixing them, by throwing money at them, does little good in the long run. Our focus should then be to look for a correction to the erring business philosophy. And then, in my opinion let the market recover on its own. Is it gonna be pretty? No. But thinking its always gonna be up is foolish. The down side has to be just as real as the upside or you destroy the whole thing. To belabor the point I heard this week that risk without failure is like Faith without sin.

So the next time you see a replay of Pelosi's speech railing the Republicans just before the House voted on the Bailout Bill, or see House Republican leader John A. Boehner's follow up comments that they voted against the bill because of Pelosi's comments or hear Barak Obama heave the responsibility for this crisis entirely on to the Bush administration and republicans or likewise hear McCain say he is going to suspend his campaign to go to Washington till this thing gets hammered out only to not contribute any worthy opinions AND then pick up his campaign days later without any evidence of assisting the issue AND while both candidates refuse to take a stance on the bill know that they are not going to be the real solution. We are. Regardless of what they eventually do, and regardless of who gets labeled by history for having gotten us in to this, you and I have to get us out of it and keep us out. We have to live with integrity, with a sense of personal responsibility. We have to be willing to work hard regardless of what the economists are predicting. We have to be better stewards of our money and wiser with what we commit to. We have to be better. Or the next generation just might face something worse than the Great Depression.

Paul Wizikowski