Socialist Meltdown
Have you ever had a sibling do something
really horrible and then have the sibling
point at you and scream, He did it,
mom!?
Well, that is the case with the big
government types (Republican and
Democrat) who are trying to blame
capitalism for the financial meltdown
caused by their interference in the
financial markets.
While government meddling is at the core
of the recent turmoil, there are also
many businesses and greedy
people in expensive suits at the scene of
the crime. But dont confuse these
participants or their business
with free markets or with capitalism.
Capitalism refers to an economic system
where people take risks, make
investments, trade freely, and make
profits (or take losses) depending on how
well they satisfy customer needs.
Governments do not fund, insure, or
otherwise partake in capitalist
enterprises. When they do, it is called
socialism.
Capitalists risk their own money (or
their investors money). Socialist
schemes risk your money. And that is
precisely what occurred in the U.S.
mortgage market.
A bank operating in a free market would
never issue a $500,000 mortgage to an
applicant with a low-paying job, a
marginal credit rating, and/or no down
payment. If it did so, the bank would
risk a substantial loss and whoever
permitted it would be fired. For the same
reason, absent fraud, banks would never
be able to sell such mortgages on the
secondary market.
So why were millions of such disastrous
loans written? Because, Freddy Mac and
Fannie Mae (known as Government Sponsored
Agencies or GSEs) were willing buyers of
over $1 trillion of such sub-prime and
Alt-A mortgages. They did so with the
active encouragement of Congress and with
the presumption of federal financial
guarantees.
The government created a fraudulent
lending environment driven by a political
agenda, not by rational economic
calculations. Those who participated were
part of a government-created fraud and
were not participants in a free market.
Government fingerprints are all over this
catastrophe. Now the taxpayers are paying
the bill for these socialist policies and
those responsible are trying to pawn off
the blame on capitalism. If they succeed,
they will tighten the grip of socialism
on our economy, further constrain our
liberties, and dramatically dim our
future well-being.
Our future depends on recognizing the
true cause of this crisis and addressing
the other socialist disasters staring us
in the face: Social Security and
Medicare/Medicaid.
A trillion here, a trillion there. Pretty
soon it will all come crashing down.
Heaven help us when it does.
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