Tuesday, December 30, 2008

The Economy II

A little light snow overnight made the roads a little wet this morning, but they were black all the way to my Senior Fitness Program center. My driveway had perhaps a sixteenth of an inch of new snow on it, so travelling to the street was easy. The parking lot and walkways at the complex which houses the Physical Therapy Center where the Senior Fitness is held are among the best in Southern Maine. That complex does an absolutely fantastic job in maintaining safety for its visitors.

I guess you know by that introduction that I did go there today and, although I did use a little less in the weights department, I completed all my routines. So that was good. Getting back home was as easy as getting there so my experience indicates there are few if any travel problems this morning.

As we mentioned yesterday, our economy is at the lowest point in many years, possibly decades. There are many reasons for the decline into recession. Some blame the war in Iraq. Others say the banking crisis is a fault. The auto industry has taken it on the chin coupled with the credit crunch. I think a major reason is the mortgage crisis which has led to the failure of the lending institutions is as much the reason as any of them.

The mortgage crisis began many years ago, even though it only erupted in the last year or two. The government stuck its hand into the business of mortgages for housing. It required the lending institutions to change their criteria for mortgages to give more people the opportunity to reach the American dream of owning one’s own home.

Warnings by the Administration that the lending practices were heading for disaster met deaf ears in Congress and nothing was done. As predicted, people who were given very questionable mortgages could not pay them back. Foreclosures erupted.

Lending institutions fell into bankruptcy. Credit became harder and harder to get even by financially sound individuals and businesses. At least partly because of the lack of credit, the automobile industry headed for bankruptcy along with other businesses, including builders.

Now I have to point out for anyone who already doesn’t know it that this is a very short discussion of the problem and probably an oversimplification; but I have spent complete posts in the past discussing my opinions on these issues. Now the government is seeking a way out. Government should be protecting us from forces from outside the U.S. It should be guaranteeing those rights granted to us by our Constitution are upheld.

I’m not going to review my copy of the Constitution for this post, but I don’t recall anywhere it calling for Government to stick its hands into business. But it is now. Big time. With bailouts and stimulus packages galore. They won’t work.

“Free” money without any conditions for major changes will only lead to the call for more free money when this round runs out. Doubt that? Let’s just take a look at one instance, one that occurred this year. The Government gave all of us some “free” money in an attempt to stimulate the economy. How successful was that? Did we see any great stimulation?

Now look at all the calls for more of that money. And look at where those calls are coming from. Banks. Other financial institutions. The Big Three auto companies. Individuals. Housing builders. And more. And they all want the money with only minor changes in the ways they do business. Without major change, what’s going to happen when any of these entities again run out of money? You bet. “Give us more money!”

Do I have a solution? Of course not. But then I didn’t get us into this mess. What I do believe, though, the solution isn’t in the hands of Government. However, I might start with letting those of us who EARN money to keep more of it, spend it judiciously on our needs and wants which, in turn, increases the income of business which, in turn, makes more employment available, and on and on.

And, as previous administrations, both Democrat (JFK) and Republican (RWR) among them, have demonstrated, lowering taxes also results in increased income for Government giving it the ability to stick its hands where they do belong.