Right after the Republican Convention in 2008 with McCain up 7 points in the polls, we suddenly had the banking crisis. That got Obama elected and became the excuse to give bankers a trillion dollars. The banking crisis became the excuse for the stimulus crisis, which was the excuse to give other Obama supporters a trillion dollars. Then came the green energy crisis, the health care crisis, the gun crisis and now the climate crisis.
The sole purpose of these manufactured crises is to take money and freedom away from US citizens, and consolidate power for Obama.
I am a conservative. I am horrified at the direction progressives plan to take our nation. They do not have a clue how jobs, incomes or wealth are created and preserved. OK, now that I’ve made the perfunctory three statements of agreement, let me respectfully disagree with your observations from 2008.
The banking crisis was not manufactured, it was real (caused in great part by Fanny, Freddie and the liberals who engineered absurd home loan provisions for unqualified buyers and mandated banks to provide these loans.) The result would have been a great depression, potentially more severe than the 30s. Recall that for years before, people were investing in houses that they never planned to own but planned to flip for a fast buck. Further they were using artificially high home equity like credit cards to pay for HDTVs, nice vacations and other daily pleasures – literally borrowing for the next thirty years to spend and enjoy today. The financial crisis brought these and other excesses to an abrupt halt thereby slashing a very large chunk out of our economy – one built on a house of cards, but a large chunk nevertheless. We can disagree on our opinions, but these are simply the facts.
You will recall that McCain suspended his campaign and flew to Washington to assist the Republicans in formulating an economically sound and reasoned response, knowing that the Democrat response would be the usual expansion of big government spending programs that would have little to show for after the money was gone. You may also recall, McCain was marginalized in the Washington discussions by Boehner and others whose primary response to what was a tremendous demand-destruction event was to call for lower capital gains taxes – a sound economic policy, but not a policy that would have kept our nation from spiraling into a severe depression – one where there are not profits, not capital gains and not many reasons for which to invest. McCain looked befuddled and confused and on his return, his campaign never regained momentum.
Why did he lose? I suspect one reason is because moderate conservatives such as myself (RINOs if you wish) concluded that it is better to have a Democrat piss away money – as horrible as this is and as destructive to my children who will have to repay the debt as it will be – then to have hidebound, dogmatic Republicans such as Boehner virtually assure that our economy goes into a depression. A condition where far too many good and productive enterprises are destroyed along with the weak and where it takes decades to rebuild the private sector and recover. Hence I voted for Obama, he won possibly because of others with reasons similar to mine and boy did he piss away money.
I suspect you and I would agree almost totally on the principles of free markets, competition, small government and individual responsibility. I cannot agree with you however on the assertion that the banking crisis was manufactured. It was caused by progressive idiotology. It was caused by crony capitalism. It was caused by social-engineering in violation of free market precepts. But it was real. It was the consequence of a decade or more of excesses that finally collapsed onto itself. It required a forceful response.
I believe too many of us conservatives are not adequately distinguishing between 1) the typical business cycle recessions, where letting the markets clear is the appropriate response. The weak are culled, the strong grow stronger and in a short matter of time we all benefit as a result, and 2) those Minsky Moments, where the economy truly collapses, both the weak and strong are destroyed and long-term permanent damage results without reasoned intervention.
Intervention, not in the form of wasteful spending, but in the form of real investments in infrastructure – advancing projects that would be needed over the next 20 years regardless into the next 5 to offset the collapse in residential construction rather than building high speed rails to nowhere, more public funding of education in engineering, math, real sciences and other occupations needed to make the economy grow rather than climatologists and ethic study programs, domestic energy production rather than uneconomic cylindrical solar panels and burning e-cars. This is what McCain should have come away with and it is what most common sense Americans would have found to be reasonable approaches to the severity of the economic problems that we faced at the time.
I apologize for being a troll. I’ve done this before and understand that my approach does not endear me with bloggers who work hard and who are 99.9% right in what they post. But again, the facts are the facts. We had and still have a real crisis. Obama likely would have won regardless. But (and this is my opinion) the failure of Republicans in Congress to understand the nature of the crisis and the appropriate ways in which to respond in cooperation with McCain greatly hurt the Republican Party and McCain’s chances of winning in 2008.
Bank of America reported a profit in December 2008. Some crisis.
Reported is the operative word. They were most likely insolvent and still may be for that matter. The Feds strong armed the accounting standards board (FASB) to rescind their “mark to market” requirements – in other words let the banks lie about the value of their toxic assets – because insolvency of BofA and Citi would crush the economy. Which goes to the comments of Chewer below. A natural bottoming out back in 2008 would have been a catastrophic collapse. What if BofA and Citi followed the course of Lehman and Bear Sterns? Commerce would have seized up. No one would have had confidence in anything except a barter system. If those banks failed, then surely all banks would have failed – there are too many interbank loans and arrangements and these would freeze up. There would have been a massive run on the banks. Hence, the banks were allowed (and are still allowed) to lie.
http://www.calculatedriskblog.com/2009/03/fasb-to-propose-changes-to-mark-to.html
Again, 2008 was not a normal business cycle recession where a natural bottoming out is the correct course. Rather it was the collapse of a house of cards where if strong measures are not taken, the economy goes into a downward spiral and the bottom becomes a very deep well. Again, it is good when recessions carve out the waste and inefficient players, but it is very bad when depressions spiral down and carve out many healthy and productive players.
Europe is very similar. Their banks are insolvent and the ECB pumped trillions of Euros into them last summer to avoid a collapse. Even Germany ultimately agreed to this.
I suspect this is one of those issues where folks will believe what they want to since a collapse didn’t happen. I would argue had we not bailed out the banks, spent (albeit foolishly) a lot of federal money and printed a ton of dollars out of thin air, we would be in a depression, but since it didn’t happen, there is no “proof”.
What is criminal in my mind is the bank compensation and bonuses that were based on false profit statements. Literally hundreds of $ billions were awarded that should have stayed within the banks to offset the losses from their bad investment decisions. The bail-outs should have been tied to reigning this in, but then Tim Geithner would not get the cushy job that he is about to get when he leaves. Banks won and taxpayers lost.
And what are we living in now if not a depression?
Failure to allow a natural bottoming out is what smacked us then and continues to smack us now!
Changing the rules in mid stream is ignorant and downright destructive.
Amplifying multiple crisis is the best method to bring a hated nation to its knees!
Big O knows that frustration leads to resentment which leads to hate which leads to irrational thinking which leads to internal war. Regardless of the outcome, we lose and the Cult wins!
btw Steve, My maternal Grandmother was a Goddard, so maybe strong opinions are in our genes! (yuk yuk) I’m also related to that rocket guy in some fashion…
I go to your site at least once daily and enjoy the many interesting insights that you post. Lots of good, original stuff.
thanks.
Again, I apologize for the troll bomb(s) above.
I agree with much of what you say, and here comes the but. I prefer people learn hard and painful lessons when appropriate, and that they not be doomed to repeat stupid mistakes time and again.
“The Great Depression”, was just known as a depression everywhere else around the globe. Government fiddling made it “Great” here.