Friday, June 26, 2009

The Sad Way Our Country Works

Today, the US House of Representatives passed the "American Clean Energy and Security Act", by a vote of 219-212. This historic legislation not only represents a sweeping change which will mean lots of things to lots of people, and will no doubt be fiercely debated in the Senate (and where I, as someone who is rooting for America to return to prosperity in spite of the Democrats, hope it is killed), but it also is a great example of exactly how politics in this country works today, and pretty much everything which is horribly corrupt and broken with the current system and most of its participants. As such, I figured it would make a good specific case study to examine, in hopes that future governmental systems can be crafted to avoid every single thing involved in coming to this point with this bill.

First, let's look at the official name: broad, sweeping, and sounds nice, like something everyone would be in favor of; after all, who doesn't like clean energy and security. The only problem is, it's completely misleading, to the point of being intentionally deceptive. The bill is a simple new tax on energy use, with about 1000 pages of extra crap piled onto it. At the very least, it should be the "Energy Tax and Other Crap" bill, if nothing something more descriptive like "Cap and Tax and Pork", or "All Hail Global Warming and Zenu", or maybe something topical like "Swine Flu Energy Tax"; anything would be better than this deceptive garbage.

Second, let's look at the background. The bill is nominally intended to help prevent Global Warming, a religious movement of the past decade or so lead by environmentalists and Democrats, and opposed (or at least debated) by scientists, rational thinkers, and humans with functional brain stems. It's not the first time public policy has been dictated by religion and/or politics, and it won't be the last, but every single time is regrettable and unconstitutional, and this is absolutely no different.

Third, let's talk about the false pretenses for a little bit. Obama and the Democrats tout the bill as creating jobs, when the exact opposite is likely to be the case, which they know, and their advisers know, and pretty much everybody knows, but the supporters of the bill are willing to trade as an acceptable sacrifice for advancing their agenda and getting a system of arbitrary government controls and a system where financial success is determined by government mandate rather than capitalist competition in place. Again, this sort of obviously deceptive, "open lie" that everyone repeats is exemplary of the standard political procedures in effect today.

Forth, lets look at the actual legislation itself. It began as an agenda item, fulfilling promises given during various campaigns to effectively give handouts to particular special interest groups. As it made its way through various committees, it gained pages, as people tacked on their own special interest pork and unrelated changes to unrelated laws. The night before it was to be voted on, the author added 300 pages of unrelated law changes with nobody else in the House even read before they voted on it. It was so laughably ridiculous that when the leading Republican decided to read portions of the bill to the rest of the House, everybody had a good laugh about how incomprehensible it was, and how nobody knew what it said or meant, how ambiguous the sections he did read were, and how absurd it was to be voting on new US laws without even reading them! It could be the script for a juvenile comedy about a ridiculous made-up laughing-stock government, except it really just happened! Moreover, it's not even strange enough to warrant more than a passing notice; these days it's apparently business as usual in the juvenile laughing stock we call the US House of Representatives.

I could go on to talk about the language and the bill itself, although apparently it's not yet actually available for anyone to read, anywhere, despite the fact that it's already been passed. I could discuss the partisan nature, and how the vote was roughly along party lines, and what that implies for the much-touted and yet to be observed "new spirit of cooperation" the Obamanation was supposed to usher in. I could talk about how our so-called "representatives" are supposed to be representing the interests of the people, and not special interests. However, all of those are pretty well-known already, and it just emphasizes the point.

This bill represents everything which is wrong with American politics, in summary form. May it serve as an example to other or future governments of how horribly wrong your governmental actions can become if the system is even slightly flawed or the people do not actively check their "leaders".

Thursday, June 18, 2009

The economic consequences of subsidization

So I thought this would be a topical post, with the $1,000,000,000 "cash for clunkers" subsidization government waste provision being added to the bill funding our troops overseas (the topic of "riders" on bills will have to wait for another day, although it's probably the single most destructive problem in our government system at the moment). Instead of just saying why this bill is dumb, though (in a departure from my usual rhetoric style), I'd like to examine the effects of government subsidization programs in general, and see if the reader can surmise what I think of this latest effort.

First, let's clarify what I mean by a subsidization. In general, this is whenever the government spends money, directly or indirectly, to help offset the cost of something. Usually the government does this for policy purposes (overt or otherwise), and there are a variety of mechanisms typically used. Some examples are direct payments, tax rebates, subsidized loans, etc. So the "cash for clunkers" program will be a direct payout, whereas the housing tax credit is a tax rebate, the tax-free cap gains for sales of primary residences is a tax credit, the GSE loan rates currently are loan subsidizations, and the Fed's artificially low interest rates and lax oversight subsidized lending during the housing bubble, etc.

What's the effect of subsidization? Well, in the short term, it encourages people to do those activities, because they are effectively cheaper. However, unless the subsidizations affect only a small subset of the "buyers", the "sellers" will quickly figure out that the buyers can pay more, and normalize their prices accordingly. The amount which the sellers will raise their prices to compensate will be roughly proportional to the percentage of buyers who can qualify for the subsidy; if the percentage is small, prices won't be affected much, and if the percentage is large, prices will rise nearly equal to the subsidy.

Fortunately for the sellers, normally subsidies are available broadly, so as the appear to be fair. Moreover, in many cases the subsidy is so large as to render purchases without using the subsidy to be infeasible (see, for example, the number of people borrowing money currently for jumbo mortgages vs the number borrowing for GSE-qualified subsidized mortgages: approximately none to all). This allows the sellers to usually raise their prices to compensate entirely for the subsidy without affecting sales, or where the loss in sales (from the non-subsidized customers who can no longer afford to buy) is made up for by the increased revenue from the subsidy. Note also that in these cases, the cost to the buyers who can still buy (those who qualify for the subsidy) remains constant; the buyers are not aided by the subsidy, they are only not excluded from buying as the non-subsidized would-be buyers.

So, let's look at the end-effects in the "typical" case. The seller net profit is increased, and they are effectively being given free money from the taxpayers. At the same time, the sellers have raised prices such that people need to qualify for government handouts to purchase the items or services which they would have been able to purchase normally without the subsidy in place. The people who cannot qualify for the subsidy are excluded from purchasing, or need to spend extra money to get the same items or services.

Sound insane? Well, yeah, pretty much. Lest you think these are purely hypothetical examples, let's look at some recent actual costs which have been directly increased by the effect of subsidies: housing (loan rates and tax credits), higher education (loan rates and tax credits), and health care (tax credits and direct subsidies). Anybody think any of these are excessively cheap now? Anybody think they are more affordable now than before they were subsidized? Anybody confused about what the obvious, predictable, and inevitable effects of subsidization are?

At least with the "cash for car dealers" handout program, they're not spending the extra effort pretending that the subsidy is anything other than a handout: apparently, the "vouchers" will be issued electronically directly to the dealers. Makes me glad we are a rich country, with an extra billion dollars lying around to give to car dealers; after all, everybody thinks car dealers and dealerships are stand-up, honest, helpful institutions which deserve a "thank you" from the taxpayers for all the nice things they have done for us... right?

Wednesday, June 17, 2009

"Undocumented worker" BS

Yes, it's time once again for one of those posts which will no-doubt be ridiculed for being "racially insensitive" and not PC. Seriously, though, we need to find a better term to describe people who are in the country illegally, working or not, with or without the intention to "immigrate" permanently (and by that, I mean establish roots in the US). This article talks about settlements for workplace injuries for illegal workers, which is not by itself offensive (although getting a $2.5 million payout seems pretty ridiculous); however, referring to people in the country illegally as simply "undocumented workers" is stupid and potentially inflammatory.

Why is it dumb? Well, it's kinda like claiming I'm the uninnaguated President of the United States. The description of "undocumented" is intentionally misleading: the implication is that other than some simple paperwork, they would be normal workers. The term "illegal alien" is more technically accurate, but many people in the US illegally do legitimate work which many people tacitly approve of, so that might be too harsh a term. The "illegal" term also doesn't indicate the level of criminal activity, and "alien" sounds weird to many people; I could see the argument for toning down the language when referring to people who are basically trying to do the same thing the people who originally immigrated to the US were striving for: a chance to work for your own prosperity.

Seriously, though, we need a better term to use in the mainstream media (not that they would, but hypothetically). I'm not sure what the right term would be, but maybe we could start with "foreign trespasser", and refine from there; "undocumented" is just BS.

Tuesday, June 16, 2009

California's Worthless Legislature

I know I've said this before, and I'll likely say it again, but California legislature has some of the most worthless scum the government has to offer. They are beyond incompetent, beyond idiotic to the point of dangerous, beyond corrupt, and into full-on maliciously destructive. I wouldn't wish personal harm on anyone, but if there was a karmic line, they would be ahead of ambulance-chasing civil lawyers for some karmic retribution for all the damage they have done, and continue to do, to the once-great state of California. Not all of the legislatures are bad, to be sure, but the bad ones are bad enough to give all of them a bad name, by reputation alone.

Take, for example, just the latest end-run around the will of the people. As a refresher for readers not in or too familiar with California recently, the state has a budget problem, to the tune of roughly $26B this year (based on optimistic estimates, no doubt). The most recent attempt to "confront" the massive wasteful corrupt out-of-control spending which has put the state into this position was to propose massive tax hikes, which would have passed, except for a while back someone did a smart thing, and passed an amendment requiring tax increases to be approved by either 2/3 of the legislature, or the voters. This amendment is the only thing standing between California and a complete collapse into anarchy.

Predictably, the legislature failed to get a 2/3 majority for the tax hikes: thank goodness there are still a few sane people there (and man, that's a thankless job, to work with scum all day and just oppose everything they try to do, and then get lumped in with them in generalizations by bloggers like me; I have respect for those few members of California's legislature, keep on keepin on, please). The tax increases then went to the voters, where they were soundly and entirely predictably rejected as the complete wrong approach to fix out-of-control spending. The Governator even pointed out that the voters had rejected new taxes, and the will of the people was to cut spending instead. Now, as we barrel along toward running out of money in roughly two weeks, we have the budget proposal from the Democrats in the legislature.

So what did they do to balance the budget? The proposed tax increases, again. No, you didn't read that wrong: those f-ing assholes, after all the back and forth, years of delays, decades of overspending, getting every single one of the tax hikes they put on the special ballot for the voters just a few months ago rejected by the people of California, those arrogant bastards proposed more tax hikes!

... I'm near speechless at the audacity, the callous disregard for the people or anything resembling doing what's necessary for the state, or any hint of a lack of total corruption and maliciousness.

I'd like to propose a new amendment for the next ballot: any legislator who proposes, or votes for, a tax increase of any kind after the voters made it crystal clear that they didn't want to pay more taxes in the state with the highest combined tax rates in the entire country, is fired, immediately, and fined a couple million dollars to help close the deficit they likely helped create. I hope by next year that would be a pretty easy one to pass, and we'll have to resist the urge to add the death penalty on too. The state is bankrupt, in concept if not in reality, and we need to clean out all the corrupt failures in management and start over.

More boring economic theory

This article, by Andy Xie, former Morgan Stanley economist and current board member of Rosetta Stone Advisors (and found from this blog), is a pretty interesting analysis of what's going on right now with US economic policy, and what could potentially happen in the near future. I'm just going to include a small section I found interesting:
Stagflation in the 1970s spawned the development of rational expectation theory in economics. Monetary stimulus works by fooling people into believing in money's value while the central bank cheapens it. This perception gap stimulates the economy by fooling people into demanding more money than they should. Rational expectation theory clarified the underpinning for Keynesian liquidity theory. However, as they say, people can't be fooled three times. Central banks that tried to use stimuli to solve structural problems in the '70s saw their stimuli didn't work. People saw through what they tried again and again, and began behaving accordingly, which translated monetary stimulus straight into inflation without stimulating economic growth.

Rational expectation theory discredited Keynesian theory and laid the foundation for Paul Volker's tough love policy, which jagged up interest rates and triggered a recession. The recession convinced people that the central bank was serious about cooling inflation, so they adjusted their behavior accordingly. Inflation expectations fell sharply afterward. The credibility that Volker brought to the Fed was exploited by Alan Greenspan, who kept pumping money to solve economic problems. As I have argued before, special factors made Greenspan's approach effective at the same. Its byproduct was asset bubbles. As the environment has changed, rational expectation theory will again exert force on the impact of monetary policy.

It's an interesting analysis, if you're into that sort of thing. If not, just don't read it. :)

Sunday, June 14, 2009

More Audacious and Offensive BS from the Obamanation #2 Man

Joe Biden, the man next in line in the Party succession, spewing BS about the stimulus. I mean really, how stupid is the audience his handlers are writing his speeches for? I'm not going to go through an exhaustive list of the inaccuracies and insults to non-vegetative listeners, but here are a couple highlights that stood out:

- Biden claims that nobody could have predicted that the $800B waste bill wouldn't create the utopia of economic activity and job creation that was promised... I guess he's not counting everyone outside of the Party who pointed out exactly that. Talk about living in a bubble, kinda like being hooked up to a machine to help you breathe because your brain is too stupid to even form the thoughts to keep bodily functions going.

- Then he spews some BS about preserving jobs for teachers and police; it's a common tact, claim your corrupt wasteful spending was necessary to help the children, and/or keep you safe. I guess he could have a point, I mean our public education system is the envy of the world, and the ridiculous amount of money we already spend on rewarding teachers unions has produced the pinnacle of global education, right? Well, maybe he more meant the police, who are paid my the states, which now have budget surpluses and don't need to reduce spending; no, wait, that's completely false also.

- Well, maybe we should give him a break; it's hard to track exactly what jobs would be created by giving $800B to cronies, campaign supporters, and agenda-related entities. Maybe we should instead focus on overall unemployment, which the Obamanation told us would stay under 8% if we enacted their enormous waste bill; at least while quadrupling the deficit we can keep unemployment down. What's that, though, unemployment is over 9.4%? About 20% over the maximum projection even with your gigantic insider payout fleecing of the American taxpaying public? What kind of f-tarded scum are you people?

I could go on; there are more gems about not being able to predict the extent of the downturn, blaming other people, not being realistic enough, not being able to go anywhere without an assistant to wipe up his drool and make sure he puts clothes on, etc. He's one step from ruler of the Obamanation, which is probably as astute pick by Obama; after all, as a ruler you want someone more offensive and dangerous than you next in line, and Obama must have looked far and wide to find someone quite as thoroughly moronic and repugnant as Joe Biden. Way to be a team player, JoeBi, here's some pudding, try not to smear it all over yourself this time.

Saturday, June 13, 2009

Inflation/deflation; lies, distortions, and economics

So this post is kinda an exploration of inflation and deflation, what causes each, and why you can have economists proclaiming that we needn't fear inflation despite the fact that the government is printing and spending record amounts of money out of thin air (at last count, roughly 4x the record deficits during the Bush administration, which itself was criticized for out-of-control spending). I don't think I have all the answers; I'm not an economist, or a financial planner, and I didn't even really take an economics course in school (I did econ on independent study in HS, which mainly consisted of playing games on the computer between acing the trivial tests). Nonetheless, I'm going to take the opportunity to explain my thoughts on the subject, educated or not, and perhaps they will be enlightening.

To begin, the value of goods/services (which I'll call goods) in currency generally varies with two factors: the supply of the goods, and the supply of currency. Basically, the more of a good you have, the less it will cost, and the more money there is to buy the same amount of a good, the less it will cost. We can also consider the traditional supply/demand relationship when examining price, but if that is constant, the price will only fluctuate with supply of goods and money. If the supply of goods is also constant, than the only thing which affects price is the supply of money; this is the basics of inflation/deflation.

Now with fractional reserve banking, the situation becomes a little more complicated; not because the basic ideas have changed, but because the definition of "money" has changed a bit. Since people can borrow far more money than actually is on deposit (this is how fractional reserve banking works), and that borrowed money can be spent interchangeably with normal money, the supply of money is more or less the supply of money and credit (in government statistics, this is the M3). As you can imagine, this has been shrinking recently as lending standards have swung back toward rational in all but the government-subsidized or controlled lending institutions, and credit has been severely reduced. This, by itself, would create deflation: there's less money to buy goods, so they should fall in value.

As an aside, deflation can be a good or bad thing, depending on your perspective. In one sense it's good, cause everything is cheaper, people can buy more stuff, etc. On the other hand, if you're heavily in debt, deflation can make it harder to pay back money as monetary amounts go down semi-uniformly. So if you have savings, deflation is good for you; if you're living recklessly and have accumulated massive debt living above your means, deflation is bad for you. Also, deflation can be bad for businesses that rely on discretionary spending, because people tend to wait on purchases more. Ok, back to the general topic...

The question arises: how can the government print nearly $2 Trillion dollars to waste on agenda items, fraud, and handouts to insider cronies, not to mention the $2+ Trillion the Fed has handed out to banks as rewards for creating the current recession, and not have that create inflation? Well, first, the amount created and handed out is less than the credit removed from the private banking industry, so in spending money terms, the supply is still decreasing. Second, there are no good places to invest money in the economy currently, since the housing market still has a ways to fall and everybody who manages money knows that the US economy will not start to really recover until housing bottoms out; and with the government making sure the recession is not over quickly, most people are stashing their money in "safe" places (eg: Treasuries), and there's not a lot of private lending going on. These two factors mean that on the whole, the supply of "money" is still shrinking, which means we should see some deflation.

So when, if ever, does the massive print/spend push come back to haunt us? Well, as close as I can figure, when the economy finally bottoms out and starts expanding again, we'll see all those newly-created dollars being used as fractional reserves for more lending (at which point there could be a bigger bubble than the previous one). Alternatively, and probably before that point, investors holding US debt could lose faith in the ability of the US to service its debt, at which point they would demand higher yields for long-term debt (as is already starting to happen). The servicing of the national debt is already a large percentage of the government's annual spending, so if the interest rate for that debt goes up substantially, it could overwhelm the budget, causing the fear to become a reality. At that point, we get hyperinflation, and/or the government defaults, the currency becomes worthless, and bad things happen; but in the interim, we keep merrily skipping along toward the abyss.

So at this point, we would expect to have gradual deflation until credit expands again, followed by greater inflation, then possibly followed by an eventual collapse of the currency; and events could unfold that way. However, I'd also point out that the actual economics are more complicated and subtle: for example, if you borrow money for commercial ventures, do you really spend it uniformly (creating uniform inflation), or do you spend it on specific things? If you're speculating on the market with 30-1 leverage, what are you buying (which drives up the price for that thing while everything else remains constant, eg: oil)? As housing prices "deflate" from their bubble levels and consumable prices go up, is it accurate to say we have "deflation"? All of these factors (and many more) contribute to the complicated actual machinations, and make it hard to analyze what's actually going on.

Where do we stand? Well, aside from this being a somewhat rambling post, I think it would be foolhardy for our government to print and spend while ignoring the negative consequences. I also think that as Ron Paul is fond of pointing out, we'd me much better off without the Fed and their artificial currency manipulation, and with a fixed-value currency based on a physical commodity (eg: gold standard) or fixed amount in circulation, so as to have a stable currency to conduct business in. I think it's clear that fractional reserve banking contributes to more exaggerated swings in asset valuations, and government attempts to compensate for those swings are just making the problem worse (while siphoning public money to corrupt insiders, of course). Finally, I think it's silly for the government or its proxies to claim that increasing the national debt by approximately 20% in one year alone is anything related to responsible or good for the country, and there will be consequences. Of course, that's just my opinion, and I could be wrong.

Thursday, June 11, 2009

Why the housing market decline is far from over

This chart shows the recast dates for various loans over the next five years, based on the current rate of negative amortization (copied from CalculatedRisk). I think it would be fair to assume that most of these are going to be defaults, as soon as (or slightly after) the recast time; almost everyone who can afford their house is either already in a fixed-rate mortgage (and thus not appearing on this chart). This virtual tidal-wave of defaults represents roughly $25,000,000,000 worth of housing inventory being added to the market, per month, for the next five years.

For reference, the NAR's latest statistics indicate there are only about $66B in sales of existing homes, per month, total, in the whole US. That lines up pretty well with the latest estimations of total home sales which are foreclosures, which is around 45% (REO's are selling slightly better than non-REO's, cause they are more realistically priced). Most people agree that the housing market is not likely to stop declining until foreclosure sales are back down to a smaller fraction of the overall sales (say under 10%), but the recast chart says sales would have to increase by a factor of almost 4x before that would be the case (ie: higher than the bubble-frenzy rate), and that situation will persist for at least the next five years. Anybody want to bet on that level of increase in sales numbers while the market is still declining? If so, have I got a poker game I want you in...

I used to think my prediction of roughly 50% decline in house values from peak to trough nationally was perhaps a stretch on the high end, and people were incredulous when I was saying it in 2007. These days I revise it by including phrases like "real value", to compensate for the massive inflation I expect the government's enormous deficit spending will create, but I also think it's now a conservative guess. Housing: not going up any time soon, plan accordingly.

Saturday, June 6, 2009

Thoughts on the melting pot concept

Fair warning: I suspect this post will be offensive to many PC/liberal type people. If you're one of those people, feel free to skip this post; you're probably not rational enough to understand the debate, much less the position I have. Moving on...

I think English should be the official language of the United States. I don't think this only because I speak only English, although I admit that the more standardized on English the world becomes, the slightly better it will be for me personally. No, the primary reason I hold this opinion is because it makes it possible for everyone to communicate with each other, which is one of the primary barriers to understanding, acceptance, interaction, and integration.

... ok, that got kinda mushy sounding. Seriously, though, America is supposed to be a melting pot of cultures and ideas, a place where people of different backgrounds and beliefs can come together and make a better society by taking the good ideas and rejecting the bad ones. It's the ultimate social experiment in genetic engineering at a societal level, and the only thing which makes it work is if the societal organism can fuse its DNA.

In my opinion, all government business should be in English; it would save money, provide a common base, and encourage people coming to the US to adopt to our culture. All schools should teach in English, and not make excuses or allowances for children who do not speak the language of the country they are growing up in. Obviously there can/would be adult schools conducted in other languages teaching English, especially to immigrants, but children should not be culturally isolated from the country which they will need to integrate with to be prosperous, or disadvantaged by being kept segregated by language.

It's more than that, though. I also think all public store-fronts, signs, and business communication should be written and conducted in English. Right now, our larger cities have cultural divisions, separate areas striving to limit communication with non-members, to isolate themselves, to carve out a niche of exclusivity at the expense of community. Part of the reason there's virtually no crime in small towns in America is that when everyone knows each other, and everyone talks with each other, you get a community, which works together, instead of against each cultural division. By encouraging these divides and allowing them to prosper, America is sowing the seeds of civil discord, to the detriment of the people.

Perhaps it's intentional; it's possible that the politicians have nurtured the divisions, to keep the people fighting with each other, and limit the possibility of them rising up, and defying their puppeteers. Or perhaps, as I suspect, it's a happy coincidence for the oppressors that their peons have organized into fractured groups, and all the PC platitudes run wild have produced a society so intent on self-conflict that they are trivial to control. After all, it seems a great number of people in America were so enthralled with getting either the first black or first female president elected, that we forgot about all the freedoms and liberty which was supposed to define the country, and voted in socialist tyranny.

America is broken, a beautiful experiment gone very wrong. Cultural homogeny will not fix all the problems, certainly, but it would go a long way toward giving the people a chance to wake up, and right the ship we're all on together.

Thursday, June 4, 2009

More offensive garbage

Anybody seen or heard the new commercials for Chrysler and/or GM? You really should; after all, you paid for them. I mean, you could have spent those billions on civic works, or keeping more hard-working American's from losing their jobs, or putting a slight dent in the massive future obligation our government is creating for us and our children (well, only until the country's currency collapses, which will likely be within one generation or so); instead, though, you spent it on propping up colossal failures of non-competitive business, union largess, management greed and incompetence, and models of private sector failure. Do you feel good about that?

If you've spent the last few months trying to ignore the looming socialist take-over of the country, and/or trying to rationalize the thought of spending a truly enormous amount of money on the utter wastes that the US auto companies have become, then this wave of commercials is just for you. Not only are the now nationalized auto companies not dying the horrible deaths they richly deserve, they are spending even more of your money to make sure you know that your money is being spent to keep them going as enormously wasteful non-competitive nationalized entities. It's like getting a back-stage pass to see the victory party that the fat-cat management buffoons and the ridiculously overpaid union workers are throwing, where they drink expensive liquor, talk about their mansions, toast their success at embezzling billions from US taxpayers, burn effigies of the country's founding fathers, and send us the g-damn bill!

"Building a better Chrysler/GM"... yeah, right. The only thing their building is a better pipeline to siphon money from the taxpayers, through their thoroughly and reprehensibly corrupt socialist-leaning puppets in Washington, straight to their bank accounts. I'm not sure anything could make me hate those nationalized entities or the egregiously corrupt Obamanation which created them, but every time I see/hear another commercial, it just rubs it in a little more.

Tuesday, June 2, 2009

Foreclosure: not really a big evil thing

This may come as a shock to anyone immersed in the mainstream news media reporting (hopefully it won't come as too much of a shock to readers of this blog), but foreclosure is not the end of the world if you are a home "owner" who bought more house than you could afford. In essence, you took a risk, a gamble, bought a lottery ticket to let yourself live above your means for a while and maybe strike it rich quickly and easily in the crazy world of real estate. If you're facing foreclosure now, your gamble didn't pay off, and now you need to move on; maybe try an honest living instead of the get-rich-quick approach.

However, it's not like it's the worst thing that could happen. In a less forgiving capitalist society, you might be required to pay off the entire loan amount you borrowed (as you would for a normal loan), and process which might effectively leave you in debt for a long time. Worse, in less lenient societies, you could be thrown in prison for defaulting on an enormous debt, especially if you did it with knowledge of forethought (ie: you knew you couldn't afford the payment, you were gambling on getting rich). You could also be publicly ridiculed as a deterrent, forced into indentured servitude to pay your debts, and/or made to endure other punishments to discourage such reckless and socially destructive behavior from others.

On the contrary, though, foreclosure is really kinda a boon in modern US society. In most cases, you debt is forgiven when the lender takes the house: there's no recourse for the lender to seize your other assets (sometimes there is technically, but rarely in actuality). There's no public punishment, humiliation, or even much scorn; the worst black mark is on your credit report, and even that fades reasonably quickly. The law is designed to force the lenders to effectively pay for your reckless gambling, and allow you to basically start fresh in a short period of time; an extraordinary opportunity, if you think about it.

So the next time you hear some imbecile politician bragging about all your money they are wasting on trying to prevent foreclosures, or some homeowner crying about how they might lose their home to foreclosure, or some mass media pundit decrying the rash of foreclosures, feel free to slap them extra hard (mentally, or physically if you want/can). Foreclosure is the process whereby the home "owner" wins, at the expense of the lender; they just need to find a new place to live, which is a small price to pay compared to what the alternatives could, and arguably should, be.

Monday, June 1, 2009

Shameless self-link re: Social Security

How to Fix Social Security

Just cause I've been thinking about it more recently, in a "well duh, of course that's what they should do" sort of way. Welcome to people's comments, pro or con, here or on the other post. I figured rather than rant about how we, the taxpayers, purchased the majority share in a failed enterprise with no hope of actual recovery, and how that just solidifies the decline into socialism in the Obamanation, I should focus mental effort on something productive, which brought me back to fixing the largest Ponzi scheme in human history. Comments welcome. :)