Worldview Item of the Day
If one only judged by the media frenzy, one might conclude that the world ended sometime this afternoon when 228 brave representatives listened to their constituents and their own consciences and voted against the Emergency Economic Stabilization Act, better known as the Wall Street bailout. Instead, while the economy is rough and times are tough for some people, we are all still here and without a $700 billion dollar debt against our futures.
Let me be clear: in my opinion, this bailout bill was one of the worst pieces of legislation ever to come out of the executive branch of the federal government. For anyone to believe that the way to solve a crisis involving overextended credit and bad debt is to borrow more money is to reveal the very same kind of thinking that led to this problem in the first place.
In my view, the current financial turmoil is the inevitable result of a financial system that increasingly invested in the idea that it was possible to get something for nothing. People from individual borrowers to institutional investors believed they could milk money out of the system without putting anything into it. Now, the bill has come due and no one has the money to pay for it.
What is happening now from Wall Street to Main Street is that all of the deception that has characterized the past several years of lending and investing is being revealed for what it was. All of those loans to people who could never afford to pay them back were lies. All of those debts packaged as if they were assets were lies. The balance sheets of banks that showed they were worth millions while invested in bad loans were lies. The multi-figure incomes of finance CEOs and stock market traders were based on lies.
And, the biggest lie of all was that the government could borrow hundreds of billions of dollars and somehow make the whole thing go away. Finally, some in our government had the courage to say “Enough!” and the last lie did not become a reality.
I grant that there are very tough times ahead. The economy will probably have to shed percentages of the GDP in bad debt. Some people may lose their homes, their jobs, and their savings as a result. All of us can expect to pay higher prices, see a reduction in the variety of things we are used to buying, and see less fluidity in our own interactions with the financial system.
I understand all of this will be painful, especially for those who may suffer the most due to losing homes, jobs, or savings, but the financial system has to shed the dead weight of debts and investments that would never have paid out if it is ever going to be strong and healthy again. Our modern economy is more than strong enough to sustain this hit, as long as the answer is not to invent more debt to try to solve it.
This entire event should be a wake-up call to all of us that the time has come for a return to personal responsibility, at least as far as our finances are concerned. We cannot continue to think we can spend what we do not have and somehow expect someone else to bail us out of the resulting debt. We cannot rely on the government to protect us from ourselves when the government is part of the problem. We must rely on ourselves to make good decisions and not fall anymore for the lies of avarice.