If you ask Harry Reid or Nancy Pelosi who is to blame for the price of oil, you are guaranteed a reference to the evil oil speculator. They are even considering legislation to “rein in energy market speculation blamed for high oil and gasoline prices.” Harry Reid says:
“If we did nothing else but pass this speculation bill, the American people would be very, very happy and the markets would be struck quickly and the price of oil would go down,” More meddling in the marketplace, but it makes me wonder why we treat the oil speculator one way, and the housing speculator another. These are men and women who bought with the plan to then turn the house over for a profit in the future. It works the same way as oil speculating.
Let’s pretend you are a housing speculator. You see a house that you think is worth the money being asked, but think that in the near future, it will be worth more. You buy it, hoping to turn a profit. Instead of a profit, you find the market tanking. Your house is now worth less than what you paid for it. You are upside down on your investment.
The reason the market tanked is because you helped create a bubble, a “rise in the price of an asset based not on the current or prospective income that it provides but solely on expectations by market participants,” also known as speculators.
So these housing speculators who find themselves in a financial bind are being punished by the market. This is called a correction. Confident Investment Strategies defines a correction as:
“A temporary reversal of the prevailing trend in price movement for a market or security. The term is most often used to describe a decline after a period of rising prices. A correction is often considered beneficial for the long term health of the market, in that prices had risen too quickly and the drop put them back to more realistic levels where investors again see attractive value.”
You helped inflate the housing market bubble to the point where the market had to make a correction, and now you are losing your shirt. That’s how the market works. It punishes unwise investments.
Enter the United States Government.
THE US Senate has approved an elaborate housing rescue plan to help thousands of home owners avert foreclosure and bolster mortgage finance giants that have struggled amid a volatile housing market.
But the move came as the Government shut down two more banks, taking the total to 10 that have been closed in 18 months. The Senate adopted the bill, which provides $US300 billion ($A313 billion) in guarantees to help refinance troubled mortgages, by a vote of 72-13, after the House of Representatives passed it on Wednesday.
President George Bush had dropped his earlier opposition and promised to sign the bill into law as soon as possible.
Before the vote, senators praised the bill as a product of rare bipartisan co-operation and said the legislation was vital to stem the fallout from a slumping housing sector.
“You’re having the worst of all possible worlds. Wealth is declining, the source of wealth creation and costs are rising simultaneously,” said Democrat Chris Dodd who chairs the Senate committee on banking, Housing and Urban Affairs.
“When we consider the role home equity has played in support of consumer spending, we see the danger of a vicious downturn.”
Chris Dodd sees it as the federal government’s responsibility to shoulder your poor decision making. You find yourself saved by Congress’s vast power to tax the people for the “general welfare.” You have been rescued like a child. Your bad decisions now fall on everyone’s shoulders, the people living today, and the future generations of taxpayers.
This is not how the market is supposed to work. The free market allows people to feel the pain of poor decisions, so that their future decisions will be based on good judgement. There is an old saying that I love: “Good judgement is the result of experience. Experience, quite often, is the result of bad judgement.”
How can the investor be expected to show good judgement in the future when his bad judgement is not punished? The housing market is in bad shape right now, that is true. But this is just a correction. As noted above, corrections are a good thing. It gets the market “back to more realistic levels”
Losing money is the risk of investment. You have the chance to win big or lose big.
The government has changed things, however. We do not have a free market, which makes this article from the Los Angeles Times difficult to stomach:
For a generation, most people accepted the idea that the core of what makes America tick was an economy governed by free markets. And whatever combination of goods, services and jobs the market cooked up was presumed to be fine for the nation and for its citizens — certainly better than government meddling.
No longer.
Spurred by the continued housing crisis, turmoil in financial markets, spiking oil prices, disappearing jobs and shrinking retirement savings, the nation and its political leaders have begun to sour on the notion that the current market system is the key to a fair, stable and efficient society.
“We’re at a hinge point,” said William A. Galston, a senior fellow at the Brookings Institution in Washington who helped craft President Clinton’s market-friendly agenda during the 1990s. “The strong presumption in favor of markets, which has dominated public policy since the late 1970s, has been thrown very much into question.”
Now, to a degree not seen in years, politicians and outside experts are looking with favor at more, not less, government involvement in the economy.
The Brookings Institutue is a left wing think tank that comes up with all sorts of socialist ideas. The fact that the also left wing L.A. Times went to them for a quote shows the agenda behind the article. Rather than show that government policies helped to drive the housing crisis, they promote the socialist agenda of demonizing the free market and showing the people’s salvation as being more and more government.
As I said before, we do not have a free market in America. Every day, the free market gives a little more control to a centrally planned economy. Calls are being made to nationalize the oil industry, to nationalize the health care industry, to create a floor that would prevent the value of houses from dropping too low. My friends, this is socialism. And the tenets of this evil are being promoted by Democrats and Republicans alike.
Winston Churchill said, “Socialism is a philosophy of failure, the creed of ignorance, and the gospel of envy, its inherent virtue is the equal sharing of misery.†Each one of us is having our property taken from us and given to another, a person the government feels is more deserving of our creations. The left screams that the rich are still not paying enough. This is the “gospel of envy” that Churchill speaks of. Take from one, give to another. Redistribute the wealth.
This system has failed every time it has been tried.
It is written that “great nations rise and fall:”
The people go from bondage to spiritual truth, to great courage, from courage to liberty, from liberty to abundance, from abundance to selfishness, from selfishness to complacency, from complacency to apathy, from apathy to dependence, from dependence back again to bondage.
America stands now on the bridge from apathy to dependence, and I can see serfdom from where we stand. Our lack of interest in the affairs and actions of our government is driving our country to the same ash heap of history that the U.S.S.R. lays on. As Abraham Lincoln said, “America will never be destroyed from the outside. If we falter and lose our freedoms, it will be because we destroyed ourselves.”
That day will come unless the politicians who are robbing Peter to pay Paul understand that the reason 81% of Americans think America is headed in the wrong direction isn’t because we aren’t being taxed enough. It isn’t because we don’t have enough social programs or government regulations.
It’s because Washington is out of control. A majority of Americans want less government. We get more and more every day. Is it any wonder the Congress has a 9% approval rating?
With every dollar we spend on social programs, on bailouts, subsidies and foreign aid, we march further and further down the road to serfdom. We are destroying ourselves with our own hands.
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