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  • From: "Don Bowen" <don.bowen AT earthlink.net>
  • To: <homestead AT lists.ibiblio.org>
  • Subject: Re: [Homestead] Fannie/Freddie bailout question
  • Date: Sun, 7 Sep 2008 11:59:06 -0500

> >And anyone who thinks that politicians can fix it are drinking or
> smoking really good stuff.

Politicians maybe cannot fix it but they can sure make it worse.

This crisis has been going on for a long time, the housing slump is just the
most recent manifestation of it. Over the last couple of decades the
economy has had more downs that at any time previously. Each slump, crisis,
panic, whatever has had significant government interpenetration to prop up
the works. The end result is that the props remain in place while someplace
else slumps. Greenspan pumped money into the system under Y2K fears and
after the dot com bust. That money had to go someplace and the recent
combinations of deregulation and relaxed oversight meant some of the money
went into RE loans which in turn feed the under regulated credit markets.

But other problems loomed. Our huge deficient meant we needed money form
outside investors and with the lopsided balance of trade payments we have
run up those investors were in China and the Middle East. Throw in a world
global trade made possible by cheap oil and manufacturing slid. But that
was OK because the government felt that financials were the place to place
effort and protection.

A long running and misbegotten war has added to the debt while the income
from SSI taxes were treated as free money. We can put off the debt for the
war on the next generation or let inflation take care of it but not so the
SSI debt. That will come due and have to be paid so the options are to
significantly raise taxes, significantly cut benefits or more than likely
both.

One thing we should do but is difficult is to keep track of the under
currents of political discourse. For example we have been hearing about how
the middle class is shrinking, average wages have not kept up with
inflation, etc. We are hearing that the middle class is worse off that it
was seven years ago, but that retirees are ahead because SSI income is
indexed by inflation. I do not know where they are taking that argument but
it needs to kept an eye on.

It is a very shaky system that may take a collapse to weed out the problems.

Don Bowen KI6DIU
http://www.braingarage.com/Dons/Travels/journal/Journal.html





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