It isn't a "Financial Crisis" - we are suffering from a "Stupidity Crisis". Our financial hardships, the economy, the Second "Great" Depression which we are about to embark on is the consequence of stupidity.
Greed induced stupidity.
Let's examine the equation.
The Stupidity Crisis Equation: (A Stupid Mess Is Created) + (The Stupid Mess is Sold) + (Stupid Mess Blows Up) + (Our "Leaders" Rely On and Support the Inept To Fix What They Created) = A Stupidity Crisis.
Plug into the equation what everyone is calling a Financial Crisis: (Subprime Loans) + (MBS's Sold to Countries and Pension Funds) + (Economy is Brought to It's Knees in 2008) + (Hank Paulson, Geithner, Bernanke & Congress Reward Stupid With Trillions and Call It a "Bailout") = A Stupidity Crisis.
Notice please: This equation yields no fix, no solution and no resolution. What saved us from our stupidity crisis circa late 1990s (read: Tech Bubble) was they got lucky and appended one stupidity formula to the other.
We can look at each part of the Stupidity Crisis's equation.
(A Stupid Mess Is Created: Subprime Loans): Risky pools of subprime mortgage loans were bought by Wall Street and bundled, given AAA bond rating agencies, many of which never looked at any individual mortgages that went into the traunches and then sold as Mortgage Backed Securities. To keep it simple I won't even make mention of the CDS "insurance" that was purchased with the MBS's/CDO's.
A Stupid Mess!
(The Stupid Mess is Sold): Sold, to pension funds and countries.
Tripple A, just like the USA's bond rating!
(Stupid Mess Blows Up) April 11, 1997 DJIA 6,391 - 12 years later March 6, 2009 6,626. Twelve years of "gains" wiped out by utter and absolute stupidity.
And it wasn't limited to equities. This Stupid Crisis turned renters into home buyers. For the first time in the history the housing market had a glut of "qualified" buyers, which drove up demand, which in turn drove up prices and housing starts. It trickled over into CRE as residential rooftop numbers increased developers added commercial properties. Soon, 1 in 6 jobs were dependent on housing. Fifty-seven million Americans are in the housing market, close to 70% of Americans are (or were) homeowners.
Too good to be true: As home prices soared people felt rich, they borrowed using their homes as ATMs and stimulated the economy. In 2008 Jim Quinn pointed out that Americans BORROWED ,000,000,000.00 and spent that money on expensive coffees at Starbucks. 9 billion on credit to "buy" fancy coffee?
Soon the Stupidity Crisis had given the entire housing market, our economy and the global economy, a fake high.
Now we have buyers stranded in houses they paid to much for, upside down and underwater. As people stopped borrowing against their homes they stopped spending.
Starbucks closed 900 stores.
Shadow Statistics pegs the unemployment rate at 22%.
Basically people who worked hard, never made risky investment and had absolutely nothing to do with this Stupidity Crisis became "collateral damage."
(Our "Leaders" Rely On and Support the Inept To Fix What They Created, Sold & Then Blew Up): This is the worst part of the equation. I'm not just blaming Ben Bernanke but here is a guy who helped create the mess by inept regulation and inept funding, then said the subprime mess was contained, said housing wasn't in a bubble and to this day contends it never was. How someone can tech themselves calculus and be be the equivalent of an economic imbecile is beyond me.
Even if our leaders had a fix, allowing a guy so economically challenged to come within a hundred feet of the fix would be a misstake.
A Common Sense Formula: (The Inept Blow It Up) + (Fire The Morons, Give Them A One Way Ticket To The Distaterville They Created (Tent City in this particular case)) + Hire The Competent To Fix It = A Fix.
Until I see a formula like that my faith in the 5Gs: (G*(religious edit)d, Gold, Guns, Grub & The Government Will Continue to Screw It Up) remains strong - because one thing is certain, naming something a bail out isn't doesn't make it a bail out.
