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Monday, December 10, 2007

Once Upon A Time, I Was A Capitalist ...

Attorney Sean Olender, writing in the San Francisco Chronicle, offers helpful insight into why I am about a hair's breadth from total disillusionment with capitalism. His article explains more of the behind the scenes development of the mortgage bailout and its real purpose, which is not to prevent the little guys from losing their homes, but to protect corrupt rich guys from getting sued for fraud. I wish Mr. Olender would explain more exactly why he believes so many mortgages originated through fraud, but I've read enough in other articles to believe the claim is largely substantiated. There is the damning point that Goldman Sachs did not invest in the housing market at the same time that it was bundling and selling off to its clients the CDOs and MBSs that are now causing so much trouble. They were betting against the housing market; how could selling these investment vehicles while holding that belief be other than fraud toward clients trusting their banking and investment advice?

To paraphrase Churchill, capitalism may be the worst system in history, except for all the other ones we've tried. But the fact that it's better than socialism, communism, fascism, or any other organizational scheme for economic doings doesn't mean it shouldn't be regarded as a thing to pick up between thumb and finger while holding one's nose. We do not have, and never seem to have had, and it may be impossible to have, a mechanism for keeping wealth sufficiently dispersed that the really wealthy cannot buy off, knock off, or head off anyone who opposes them. While that remains true, I now defend capitalism only as against the other, worse systems the world has tried. But America, it's nothing to crow about.

Meanwhile, here on the frozen tundra--oops, I mean, Minnesota--sellers better get real. The statistics floating around say that even with a "loan modification" (refi, I think), somewhere between 35-60% of Alt-A and subprime (those are credit ratings) borrowers default on their mortgages within 2 years. The consensus in the opinion world seems to be that the rate freeze isn't really going to solve the default problem. I saw a Coldwell Banker ad in yesterday's Pioneer Press; the sign on the realty post said, "Now is the peak of the affordability." Keep dreaming, Coldwell Banker. May all your agents have sweet sleep. But don't try to pass that little daydream off on your selling clients as good advice; they'll end up with nightmares.

And while we're applying what we know, the DFL better get real, too. Minnesota may have had some appeal, despite high taxes and costs of production, while the real estate boom lasted, but now that people can't enjoy appreciation on their home investment, who wants to move to a place where it's winter 5 months of the year, you can count on snow in April, and the reigning party can't see anything better to do than add to the tax burden? The DFL needs to come to grips with the fact that it has to sell a remote (relative to everywhere else), cold location with a shrinking housing economy to entrepreneurs; their only hope is to stop spending and regulating so they can cut taxes, so that the extra green in the business bank accounts can make up for the lack of it on the ground and in the trees every November.

2 Comments:

Blogger G-Man said...

I'm still a capitalist. It is congress' willingness to extend its power beyond the constitution that gives those with influence a greater opportunity for exploitation those without.

12/11/2007 9:14 PM  
Blogger Daria said...

Never thought I'd hear that "capitalism is nothing to crow about" coming from John Galt, though you make some very good points about the DFL's need to catch the reality train.

El Rushbo (that's "Rush Limbaugh" for all of you MPR-listening liberals) has called capitalism the "economic engine of freedom" and postulates that the problems of the world are not caused by unequal distribution of wealth but by the unequal distribution of liberty and capitalism. Take heed, as Rush is very seldom wrong! ;)

An interesting site that explores this concept, The FreeMan, was given some on-air promotion a few years ago by economics Professor Walter Williams when he sat in for Rush.

A really good piece from this organization can be found at:

Global Capitalism: Curing Oppression and Poverty

This is a quick and very refreshing read, especially after enduring the constant big government liberal spin on economics (ie. bashing capitalism) found in a lot of the mainstream media.

-D

12/12/2007 6:10 PM  

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