Stupid People, Stupid Politicians
Was over at MSNBC.com and came across one of their Newsweek articles on a group of men starting what amounts to a PAC (Political Action Commity). The name is the Punchbowl Group and consists of lobyists, ex-members of the fed, ex-politicians, hedge fund managers, corporate leaders, and more who want the government to legislate a change in the way the Fed can change the interest rates.
The article can be found HERE!!!!
Basically, the gist of the group is that interest rates should be legislated to remain low because we, as American's, are a country who has based its economy on borrowing money.
More, there have been more than 14 million people in "X" number of years go in to debt to buy a house, and as the housing market is the one that is currently under attack, it is up to the Federal Government and the Legislative branch (e.g. the House and Senate) to create a bail-out plan that will not cause various industries to lose jobs, have to lay people off, or just get uncomfortable as the market resets itself. Most of the men joining these Punchbowl groups are wealthy because of investments and being industry leaders.
Unfortunately, this group, as a lobbying group, is actually having a great deal of success as it approaches Congress to force an unnaturally low interest rate. Specifically, they want the interest rate to be kept low except for specific conditions they are setting forth. Congress is listening to them.
Part of the big issue with this is that the housing market, which does help fund a lot of other markets... one of the participants in this group, the auto industry.
The auto industry is actually really good at going to Congress for monetary assistance. The outcome, instead of making vehicles that are affordable and getting rid of the cancers that exist within their organizations, one of the worst of which is the unions, they raise prices and then cry , "Foul," when the public does not immediately leap and buy new SUV's or pick-up trucks. This, in turn, forces them to lose money, go through more lay-offs, and have to go through what is termed a restructuring and in my opinion is a way to get Uncle Sam to step in and buy the companies way out of the issues they are presented with.
In the case of the housing market, housing prices have unnaturally been on the rise first because the Fed has kept interest rates lower and mortgage lenders have been handing out hundreds of thousands of dollars at a pop because they could and because interest rates were low due to a recession back in 2001, 2002, and 2003 and forward. Moreover, there has been an active effort to convince every person that has a job that they are also entitled to the joys of home ownership and, as such, that they should go in to debt because building equity within something is better than renting. This I agree with and disagree with, but then, I agree and disagree with a lot of things.
The issue here, is that sub-prime lenders have offered loans based off of variable interest rates with promises that cannot and do not pan out. In other words, lenders have repeatedly and knowingly lied to home buyers doing two things: one, bringing a lot of people who normally would not be able to afford a house in to the housing market; and two, building a time bomb in to the housing market where, invariably, there will be an implosion when interest rates started to rise causing mortgage payments to also rise, considerably. This, in turn, causes people to default on mortgage payments leading them to lose their homes and declare bankruptcy.
Evidences of this can be seen in and around many big
There is a cascading effect to this. People start to lose jobs as different aspects of the economy are affected, which in turn means that those same people cannot spend money, which means that more jobs are lost as more revenue is lost, leading to another recession.
Recessions are bad things in the sense that recession equals a lot of people out of work; however, recessions are also good things as it means the market and economy is in a state of resetting itself to reflect more realistic values. The problem with the punchbowl groups, though, is that they want Uncle Sam, through the Congress, to artificially keep payments and interest rates low thereby allowing for them to also, artificially, keep housing and other prices high. Higher prices mean higher earnings; and higher earnings means that, publicly, it appears that these same individuals are doing extremely well.
The thing that really gets me going, though, is to claim that we, as a nation, need to keep our credit market stable to maintain markets in other countries. However, this, too, is a red herring as other markets will find other outlets and will also look to produce products for less money. China, for example, is in an explosive growth stage. If we were to enter a recession this would affect China negatively. What we fail to acknowledge is that our spending may not be good for the economic growth of China or other nations that produce what we are looking for. Moreover, product manufacturing is sent offshore to reduce costs; the more manufacturing that is sent to a nation, the higher the costs because, as a result of the business sent offshore it is necessary for businesses to become more competitive, salary-wise, to get and maintain employees. This, in case you don't pay attention, is the reason why phone support and manufacturing changes nations semi-frequently - it is to keep corporate costs down and low. When they start to grow because you've invested in India (or China or elsewhere) you move them to another nation that will charge less money.
The point, though, is that the market is in desperate need of resetting. A recession will help reset it. We are better off going through a recession than attempting to maintain the current, explosive, monetary standards we are keeping. If we try to artificially avoid a recession the outcome will be hyper-inflation and an unavoidable massive recession with every nation on the Earth being affected very negatively. The problem is that the movers and shakers in the country care less about what will happen in the near future over what they think should be happening, for them, under their watch, right now.
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