JoshWilson.org

In The Know: Should The Government Stop Dumping Money Into A Giant Hole?

via Mises.org

Fannie Mae provides backing to mortgage banks, more or less encouraging them to make bad loans. Fannie Mae makes subsidized loans to mortgage companies when they are short of cash. Freddie Mac is a government mortgage bank that sells mortgages without the usual worry of making a profit, given its taxpayer backing. The government has taken over these two losing mortgage banks, and losses will be paid by taxpayers.

My take: there are two good reasons to buy a house - 1) To live there for a long time or 2) To rent it to other people. If you fall into one of these categories, it doesn’t really matter whether the price of your home goes up or down. What does matter is making sure you can afford to make the mortgage payments before you buy it. That’s also your lender’s obligation to their depositors (and an obligation that has been abdicated).

And, by the way, since when is everyone entitled to own a home? Owning property is a right, yes, but only in the sense that the ability to do so can’t be infringed upon; not in the sense that the ability to do so must be provided for.

We’re following the same strategies that we followed the last time we were in this economic situation (that would be 1929 by the way). Mises.org hits on the head here:

They have looked at the history of the New Deal and completely misunderstood it, believing the civics-book claptrap about how FDR saved us from the Depression, whereas the fact is that FDR’s theories and policies lengthened and deepened it to the point that the only way out that the Roosevelt administration saw was war.

I found the term from a series of videos at Vimeo (via Coudal), but it seems to fit. In any case, welcome to The New Depression. I have to imagine that this is about what things looked like in 1929.

During the Senate discussions about the impending bailout of the banking system, Ron Paul questioned Bernanke’s authority to create money to purchase bad debt and take a gamble that they can get rid of it later. Bernanke’s response was that the Congress “is given the authority to coin money, and to regulate its value, and they delgated that to us [the Federal Reserve].” (in this video, at the 6:20 mark) Bernanke’s right, but he’s also very, very wrong. Here’s why. Read more»

via Wise Bread

Here’s the gist of it (well, a summary of a summary) - Ron Laszewski has created an economic model based on the Bureau of Economic Analysis’ definition of Peak Debt. When given data from 1925, when peak debt was last reached, Laszewski’s model correctly predicted the crash of 1929 and the subsequence decade long Great Depression. Bad news folks - we hit our peak debt in 2005. It seems to suggest that 2009 will be particularly rough, and the year following even worse.

Here’s my suggestion: don’t take on any more debt, pay off all the debt you can, and figure out how to cut your expenses to the bone. It’ll be much easier if you get to make those decisions under controlled circumstances than have them forced on you later.

Wise Bread is a great source to help get your finances under control.

Just a quick heads up, the banking situation here in the US is not getting any better. In fact, the FDIC just closed it’s eighth bank for the year. Now, that may not seem like many, but consider the banks that have closed:

Bank::FDIC Payout::Uninsured desposits

First Priority::$200 million::$13 million
IndyMac::$4 billion
Hume Bank::$12.5 million::$1.1 million

In all, eleven banks have failed between Feb 2007 and August 2008. To put things in perspective, before Feb 2007 the FDIC hadn’t closed a bank since 2004 (see sources). We’re gonna have big problems here.

Sources
Bank Failures, Should You Be Worried?
Coming Bank Failures
FDIC Bracing for Bank Failures

No doubt, the politicians who came up with the idea of subsidizing the diversion of grain to the production of bioethanol did not intend to starve the world’s poorest people; but the fact that the consequences were unintended does not absolve them of responsibility.

read more

Now I know it’s getting bad. My favorite technology pundit is writing about the price of gasoline and the breakdown of society. Here’s an excerpt from the discussion in the comments: 

During the Depression, when “ordinary decent people just like you and me” numbering in the millions were being utterly killed by the economy and DC was turned into a homeless encampment for war veterans and (ironically) being attacked by the National Guard…it was a time when people were seriously open to radical change. It was a time when the US could have taken an insane swerve towards Communism or national Socialism. 

Right now, if I want to visit a friend of mine who lives just an hour’s drive away, I drive over there and see him. If gas went to six bucks a gallon, I’d first do some math and realize that okay, the visit will cost me about forty bucks. And instead of an evening of dinner and conversation and some Wii, I’d stay home instead and iChat him.

THAT is a major shift, and it’d make me re-think my views towards how the country is being run.

Go, therefore, and read the article.

The guys over at Market Ticker have a nice piece on why we’re experiencing this economic crunch. Here’s some excerpts:

 People blame “Cheney” for the high price of oil and invading Iraq to “boost his buddies” but in point of fact the remaining reason we have high oil prices that are squeezing you like a turnip is that our nation’s accounting is fraudulent, corporately and nationally, and other nations have had enough of it, driving down the value of our currency. The consequence is served up upon you as a consumer in the form of higher costs for food and energy as the price of everything we import translates directly into your wallet.

Oh, and a little bit on the second ammendment

And don’t start with “the army has more guns than I do, therefore it doesn’t matter.” Of course the military and police have more guns than you do! They’re also better trained. So what? The purpose of the Second Amendment isn’t to allow you to “go postal” against the government, it is so that you and all 299,999,999 if your neighbors in this great nation can do so all at once if it ever becomes necessary.

I say, power to the people, not the government (which is not the people, but of the people and for the people).