Just about a week ago, the Federal Reserve contributed mightily to the primary ingredient that caused the housing crisis in the first place. By socializing the liabilities for stupid investments, Timothy Geithner's plan for dealing with bad bank assets makes the economic situation even worse.
Those who really think the housing crisis is over don't understand the problem.
Problem #1: Federal Reserve Prints More Funny Money.
On March 19th, the Federal Reserve produced more of what it's best at producing--funny money.
With the country sinking deeper into recession, the Federal Reserve launched a bold $1.2 trillion effort Wednesday to lower rates on mortgages and other consumer debt, spur spending and revive the economy.This is supposed to fix something? They know
I'm feeling so warm and fuzzy with reassurance now that I must have just peed my pants.it won't fix the housing crisis, and they're gambling on the likelihood that you won't know that.
But hey, the housing crisis is over regardless of reality! To the Light Brigade, I say, "Charge!" To the Titanic, I say, "It's just an ice cube!" Reuters reports that we have nothing to fear. So, by gum, it must be.
With a new infusion of drugs to the American economic crack addict, the housing problem that needs time to right itself will be exacerbated. Much of the glut
But hey, the housing crisis is over regardless of reality! To the Light Brigade, I say, "Charge!" To the Titanic, I say, "It's just an ice cube!"of vacant housing that would have gradually been reduced will now sit idle for a longer period of time as lenders run pell mell to lend the Fed's new money, and the construction industry interprets that as a signal that they should build more new houses. It's a violation of Economics 101 all over again. Prepare for housing crisis #2.
Problem #2: Timothy Geither and the March to Public-Private Socialism
From one perspective, socialism is the distribution of risk and the results of failure evenly across society. I don't know about you, but I'd rather be on the hook my my own mistakes only. I've made enough of them for myself. I just haven't gotten used to paying for the failures of politicians and their friends on Wall Street.
I'll never get used to it, but the Federal Government,
The problem will go away of its own accord (without bureaucratic tinkering), similar to how the sun gradually dries out the muddy ground after a sustained thunderstorm. But every time the Federal Reserve tries to fix it, such actions have made and will make the problem both longer and worse.both Republican and Democrat is "banking" that you will. On top of bailout packages and stimulus plans comes now the socialization of (your) responsibility for bad bank assets. Along the lines of this latest economy-destroying tactic, Timothy Geithner, the United States Treasury Secretary, came out with a poppycock plan for our economy a couple of days ago, under the title of "My Plan for Bad Bank Assets".
Geithner's explanation of the bad bank assets was just as poppycocky as his plan. He said:
..this crisis was caused by banks taking too much risk...If he was interesting in speaking the truth, what he would have said would have been more along the lines of:
...this crisis was caused by the Federal Reserve injecting too much liquidity into the system, which signaled that the economy was far more robust than it really was, which in turned caused the banks to take too much risk...But then that would be, for the former head of the New York Federal Reserve, to admit guilt, wouldn't it?
Geithner tries to reassure America that
...the Public-Private Investment Program will ensure that private-sector participants share the risks alongside the taxpayer...I'm feeling so warm and fuzzy with reassurance now that I must have just peed my pants. Under the plan, you and I will only ever have to pay for the effects of half of the financial institutions' malinvestments.
I'll admit I was surprised to hear something mature come out of Joe Biden's mouth with regard to the economic crisis:
"We're in a position where in order to rebuild this economy, it can't be built on a false bubble," the former senator said. "We have to get down to rebuilding an economy that produces a solid foundation..."Whether or not he means it is another matter. If he'd chastised the Federal Reserve in the same breath, I'd have believed he did mean it. But no.
. . .
So if you think the housing crisis might be over, go ahead and say it like a mantra. That won't make the reality any less of a contrast to your wishful thinking.
The problem will go away of its own accord (without bureaucratic tinkering), similar to how the sun gradually dries out the muddy ground after a sustained thunderstorm. But every time the Federal Reserve tries to fix it, such actions have made and will make the problem both longer and worse.