Here are three articles (with various opinions) about the current Financial Market “Apocalypse.”
Now that you have a massive migraine and the sudden urge to assume the fetal position let me attempt to put the crisis in simple terms. Lets start with the ideal situation:
People need money. Banks have money. Money is cheap.
Banks lend money to people. People make more money. People pay back banks. Banks make more money.
While not all of the corporations that are sinking are banks, the same principle applies. They are all business that have something to do with assisting individuals to secure and grow wealth. Now lets look at the above situation with a few additions that I believe are the cause of the current crisis:
People need money because they are excessively taxed. Banks have money, but are forced by Congress to loan it to people who can not possibly pay it back or know that if their loans tank then there will be a US government bailout at the end of the road. Money is not as cheap because the Fed is treating interest rates like their personal yo-yo.
Banks lend money to people whether they should have it or not. People do not make enough money (for various reasons). People do not pay back banks. Banks do not make more money. Banks go broke and the US Government bails them out. People can not get loans for homes and new business, so wealth generation is slowed. A Republican is in the White House so capitalism is blamed. US Government regulation is now the “solution.”
If you ask me Option A is the better road. The problem here is not Wall Street greed, or a lack of regulation. The problem is a lack of risk and over taxation. If individuals and business were not taxed to the level they are now, then this convoluted loan industry would not be as large or as necessary. If there were more risk (i.e. no more bailouts) then companies and individuals would be more careful about how much they borrow and banks would be more careful about how much, and to who, whey lend. In order for capitalism to work companies must be able to fail, no matter their size or “importance” to the national or global market. Here is a couple of quick equations for you:
Necessity + Risk = Prosperity
Necessity – Financial Responsibility + Excessive Taxation + Class Envy + Regulation = Bankruptcy
Which would you pick? It doesn’t take an economist to figure it out.
Peace be with you,
Bishop Joe
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