Or… Just Set It On Fire

February 18, 2009

Hey black pot… have you met kettle?

If all of the financial “experts,” economists, politicians, lenders, creditors, mortgage brokers, underwriters, title companies, banks, etc. generally agree that the single biggest reason for the current economic mess was because a bunch of people took out loans to buy more house than they would otherwise be able to afford, hoping that by the time the variable interest rates kicked in they would either 1) have the income to pay for it or 2) have flipped the house for profit…….

And at the exact same time this was going on, banks and lending institutions actually approved these loans at 100% financing without any proof of income or collateral to support the loan knowing full well that there was a better than average chance these people would never be able to pay off their loans……..

Then how is it possible that anyone actually believes that the solution to this problem is for the government (ie: home buyer) to take out a loan at 100% financing without any collateral to support it from countries like China (ie: lending institution) and use this money to buy more projects (ie: house) than we would otherwise be able to afford, in an attempt to blunt a recession and hope that by the time that payment for this bill (ie: variable interest rate) comes due we will either 1) have the money to pay for it or 2) have created enough jobs and products for sale so that the value of our dollar will appreciate against the Chinese yen? 

Seriously, am I the only one who sees the irony of this plan?  My prediction: utter failure (I hope I’m wrong.)

Here’s a better idea….  why not just take a pile of money and set it on fire?  At least that way you could fight off inflation because there would be less dollar bills in circulation.

– Paul M. Harvey

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3 Responses to “Or… Just Set It On Fire”

  1. A lot of people understand this. Cato Institute has recently published a full page ad in the WSJ and other major papers that was signed by 300 economists who understand. The problem is that elected officials and voters of the majority party do not understand and do not care.

  2. I agree entirely.

    The UK government has also been making noises about stimulating the housing market: why?? So over-inflated house prices can increase again?

    I’m with you. The solution to lax credit control is not lending more money to people or businesses that have demonstrated an inability to manage it in the past.

  3. letsgetloudpbc said

    Hey Bill and Philip,

    Thanks for your comments. I still have not been able to grasp my mind around the idea as to why anyone in their right mind would think that the solution to the problem is to execute a macro-version of the problem.

    We must stay vigilant and bring awareness to the masses. We must get loud.

    Paul

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