Affordable Housing Follies and the Intentional Corruption of Supply and Demand Economics

Abstract: The left continues to chase failed social policies in education and ‘affordable housing’ despite eternal failures. They continue to push the silly nostrum of ‘equality’ when this is impossible and has been shown to be a joke throughtout history. They really don’t believe in this notion, but employ it a method of maintaining power. The current phony plan is to lease back homes from owners in foreclosure or potential foreclosure and that will sustain the property values and keep the looters from selling the plumbing and rugs. This process has a 70% failure rate as it is. All this is being financed by printing money and that is the fastest way to trash our currency and our society. Several other governments, who, presumably, are educated and open eyed are also elevating their debt to GDP ratios to astronomical heights and inviting financial default. The debased dollar is currently fueling the stock markets and gold prices and will eventually produce a bigger bubble than the 2008 mess. Many people cannot handle debt or finances and our tax monies derived from borrowing and printing money pay for these follies. We face a second bubble soon if we continue on like this. But, this may be a grand opportunity for the Democrats who can celebrate the collapse of capitalism with party and song.

We can always make rough approximations and slice some pie in various ways to illustrate some new analytical view on any subject. Today, we can carve up the housing pie to show that there are really only two kinds of people in the world: those who can cope with capitalism and those who cannot. The government, despite its sticky array of erudite folk from Ivy League who draw high salaries and cushy benefits on the government dole cannot manage to understand basic economic principles, or they don’t wish to.  Their political path forward depends on failure and poverty—not success.

Consider, for the joke of the day, the current status of government structured home foreclosure prevention. To say that this operation is run much differently from some freak side show at Coney Island opens the sayer to criticisms about the knowledge of even basic economics or finance. Most of this nostrum is infected with the salient quest for ‘equality’ for the ‘masses’ that we inherited from a swarm of losers from the past two centuries.  In 1920, the thrust of ‘equality’ was to redistribute the wealth through violent means if necessary and Winston Churchill responded to this quest in this way:

On equality:

"....But my hatred of Bolshevism and Bolsheviks is not founded on their silly system of economics, or their absurd doctrine of an impossible equality. It arises from the bloody and devastating terrorism which they practise in every land into which they have broken, and my which alone their criminal regime can be maintained...."— Text of Winston Churchill's July 8th, 1920, British House of Commons, Amritsar Massacre Speech By Winston Churchill  given July 8th, 1920[1][2] [Emphasis is mine in all quotes.]

For the simple, the notion of equality rings loud and sweet as many see free money falling from the skies and decorating their hovels mandated by the historical theorem that this is some kind of payback for stolen wealth by the bourgeois. The supporters for reparations sing this song; this is ‘social justice’ in the parlance of the rabid left. But, not based on sound economics or even believable social theories we always find the persistent residual tenet of this theme that still survives the anvil of reason and persists like some metastatic disease throughout the world. There is no such thing as equality in any social or cognitive vector selected at random or extracted from lengthy thinking. This phony attribute that synthetically defines of all mankind persists for two reasons: [1] that politicians can gain power and prestige and wealth by promising the impossible to the low classes and [2] that the low classes want to spend money and enjoy this process as much as those who can work the levers of capitalism and make it work. These two factors always result in opposition and failure. The system that does work is for the entrepreneurs to create wealth and employ the rest of us in some kind of cooperative adventure where everybody gains wealth although not equally. This is not acceptable to the left.

There are two major diametrically opposing mechanisms operating here:

Capitalism is self-adjusting and rewards the successful with profits while destroying implausible or inopportune business adventures with stark business failures and unavoidable bankruptcies, but the Political Classes never self-adjust unless there is famine, war or inflation and tend to merely accumulate more and more unsuccessful people in their ranks. One trendy facet of this is to ignore drug addiction and crimes in inner cities but to ensure that they will vote properly at the proper times. This is a phenomenal political success for the liberal Democrats. Thus, one system constantly improves and the other remains stagnant and an increasing burden upon the other in the form of parasitism. This notion that ‘education’ can eventually ‘level the playing fields’ is absurd and a topic for another blog. Education is not the word that must be used here—the proper word is propaganda. [3]

“Silly economics” is currently being showcased with the tinsel, hokum and curious circus acts all shouting “affordable housing.” This is a proxymoron[4] from the old socialist days where current ‘scholars’ and their appreciative political hacks sort through the histrionic rubble of Marxism and its aftermath for hidden truths by the liberal swarms and then stodgily recap the old stale precepts recast in new habits. This process works because most humans cannot compete equally  in capitalist societies [e.g. The Bell Curve[5][6][7] shows this clearly] thus there are always a large group of disadvantaged, poor and restless persons for whom this offering is their best hope of getting at least something in this world. Thus the divide between those who can produce goods and services and those who can only burden such process is maintained like the Great Wall of China. It is always of interest to note that programs by the left are not successful thus prompting us to think that many are predestined to fail to maintain the political power of Democrats and their allies.

There have been numerous ‘programs’ to help out the ‘poor’ and most of these circulate like vultures around the concept of ‘land reform’ or some other form of ‘redistribution of wealth.’[8] Much of the ‘theoretical’ basis of such a concept was provided by Keynes thus lending license to governments to print money and ‘share’ in the wealth of others. The United Kingdom is running an expensive [and maybe terminal] experiment what will probably topple their society via the debt mechanism, a process that would have destroyed any corporation who emulated this folly, but since the government of Gordon Brown and Alistair Darling is socialist the process may happily run the U.K. into the financial latrines:

“So terrible was Gordon Brown's economic stewardship during his decade as Chancellor from 1997, and so huge has been his "fiscal stimulus" since, that the UK now has the biggest structural deficit of any major country.”[9]-- This financial mess isn't even the end of the beginning for UK wealth By Liam Halligan Telegraph Published: 8:49PM GMT 07 Nov 2009

Our own government’s futile attempts to make suitable homeowners out of uncreditworthy citizens and non citizens by offering to ‘restructure’ their loans failed miserably:

““HSA is showing high redefault rates on the early offerings,” FHFA director James Lockhart noted in a Congressional report this week. “Performance on the February through April offerings shows a redefault [or recidivism] rate of almost 70%, which calls into question the program’s assumptions that borrowers have the capacity to make payments going forward.””[10]-- Fannie Program Sees 70% Recidivism By Diana Golobay May 22, 2009.

A desperate attempt to preserve some value in government-owned real estate now unfolds where mortgage defaulters can essentially rent their properties so they won’t be trashed and the plumbing cut up and sold before foreclosures. If the rents are too low then we have more social engineering adventures to pay for:

“Mortgage giant Fannie Mae said Thursday that it would throw a lifeline to some people losing their homes to foreclosure by allowing them to lease those properties back for up to a year at market rental rates”[11]— Fannie Mae to allow borrowers in foreclosure to lease back homes

All of these  socialist government actions surge forward in song and theatre  and then bounce off the Wall of Reality and summarily revert back to the penalties for violating basic supply and demand theory and practice and the ability to purchase and maintain property or capital or both. Capitalists can manage capital and when they fail their unit plan disintegrates into pieces and the pieces are sold off and recombined elsewhere with a new and hopefully successful plan. Thus Capitalism is a self-sharpening economic tool while government, using the reverse technique of eternal necrosis is just a dead chicken tied around the necks of the business community.

Here, some collective of socialists schemed to get ‘affordable housing’ for the poor using federal law CRA [Community Reinvestment Act][12][13] and political  harassment machines like Greenlining[14] and the criminals at ACORN[15] and thus perpetuate this failure.

Freddie Mac [that just lost 5 billion more dollars[16]] and the intellectually and financially bankrupt Fannie Mae are both convenient socialist financial dumpsters[17] provided to toss away phony mortgage deals that will obviously end in failure and the taxpayer will pay for the mess. This is a classic redistribution of wealth foray where the ‘poor’ are subsidized by the rest of society as if high progressive income taxes were not enough.

From a previous blog: The French Revolution[18] was such a plan as the title of this blog suggests. Here, the lawyers and intellectuals and peasants brewed up a grim solution to the ever-popular notion of redistribution of wealth. Louis XVI and his peers were rounded up like cattle and their heads severed to baskets in a shower of blood as the crowds chanted about new notions of liberté, égalité and fraternité.[19] Louis had fought many wars, food was scarce and also much of this revolution was precipitated by a financial crisis, high debt, and inflation in food prices--all similar to the one we are experiencing now except inflation. The spending and debt levels are so high that hyperinflation is a surety. [20]

We should be watching our trading partners and how they handle debt and deflation:

“The IMF expects Japan's gross public debt to reach 218pc of gross domestic product (GDP) this year, 227pc next year, and 246pc by 2014.”[21]-- It is Japan we should be worrying about, not America Japan is drifting helplessly towards a dramatic fiscal crisis. By Ambrose Evans-Pritchard

We are at 12/14 or about 85% Debt to GDP ratio now and quickly copying the failed Japanese Model.

We should be watching our government was well:

““If the fiscal path is deemed unsustainable, it may be preferable to create limited inflation early on -- to nip the debt problem in the bud - rather than to allow a mounting debt burden. We think the risk cannot quite be dismissed out of hand,” said the bank”[22]-- Morgan Stanley fears global central banks will 'monetise' public debts By Ambrose Evans-Pritchard.  Morgan Stanley has warned clients that central banks in high-debt countries may try to stoke inflation as a deliberate policy to rescue governments and tackle the legacy of the crisis

We are wasting our growth potential—the only thing that can bring us back from the abyss and the leftists know this and persist in the destruction of our economy for political reasons. They are now trying to amalgamate a silly but economically lethal fusion[23] between classic Marxism[24] and Fascism[25] whereby they can dictate business and tax policies to industry and banks and finance this with printed money.

This debt will bury us and the left will be pleased:

“Harvard economics professor Ken Rogoff[26] said that the level of debt major governments have taken on to tackle the financial crisis is of considerable concern must not go unnoticed.

In a series of recent comments, Prof Rogoff cautions that countries like the US have been running up such significant national debts as a proportion of their total economies that there is the potential for default at some point in the future.

"There's no question that the most significant vulnerability as we emerge from recession is the soaring government debt," Prof Rogoff told Bloomberg. "It's very likely that it will trigger the next crisis as governments have been stretched so wide."[27]-- 'Debt levels risk another crisis' High levels of government debt around the world remain the most likely trigger of the next economic downturn, the former chief economist of the International Monetary Fund has warned. By James Quinn 24 Sep 2009

This is not going to work. But, then, why should the left want economic success? The most valiant and successful examples of the left getting what they wanted were the French Revolution, The Russian and Cuban  and Chinese Revolutions and some brushfire stuff in Africa. Did they suffer from a collapsed economy in any case? No--not the political leadership.

The destruction of your wealth and private property is their first priority. Watch it happen in California.[28]

rycK [a 5^th generation Californian in exile]

Comments to: ryckki@gmail.com