Our Inscrutable Debt

By
Real Estate Agent with Real Living Spectrum Real Estate

In today's Wall Street Journal, one of the few papers that might remain in existence, Nick Gillespie takes President Bush to task for our $8 trillion debt. Bush deserves this criticism because he failed to keep a close eye on domestic spending. I honestly believe the man was willing to let the spenders have their way on the domestic front so he could have a free hand with spending on the war.

Now you might wonder about that $8 trillion figure and with good reason because a variety of websites have posted a variety of numbers. I believe the $8 trillion comes from the global research site because I visited that one. It includes, among other things, our social security debt. That fact of the matter is that we cannot continue to have this type of debt and we all know this because as individuals we realize we cannot spend our way out of debt. Current research by historians and economists has shown that the tremendous spending during the New Deal lengthened the Great Depression by at least 5 years. Think about it, we paid farmers to stop growing food when people were going hungry. Remember the recent effect of subsidized ethanol this past summer. The New Deal actually created a Depression within the Great Depression. Keep in mind we got out of that mess with World War II.

What to do? I would recommend what Ben Stein noted the other evening, a large Resolution Trust Corporation to buy up all the toxic assets, the original plan of the TARP bill. I also want to see the repeal of the Community Investment Act and the infamous accounting techhniques called "mark to market" so that banks can safely lend again.

In closing let me note that we are in a very dangerous situation. Many and possibly a majority of us believe our politicians are corrupt. Yet we are willing to continue to allow these corrupt people to govern us and set the rules and regulations for us. I don't know about you but I consider that to be a case of collective insanity.

Comments (2)

Brian Griffis
Realty Choice - Springfield, MO

I respect Ben Stein as a good attorney and a great writer/actor, but he was totally wrong on the economy.  He wrote about a year ago that stocks were sound and one should not sell anything because he asserted, the economy was too big to fail.  Well, as we now know, nothing is too big to fail.  He is wrong again, as buying toxic assets would simply add to our national debt.  Why do you think they call them toxic?  It's because they likely will never be paid off.  At least by buying stock in banks, and then guaranteeing their survival through the fed, it is much more likely taxpayers will see some of their money back.  The repeal of mark to market would also take us back a step, as the previous treatment of assets is what got us into this situation in the first place. I agree there has to be some modification for certain assets, but letting banks assign whatever value they wanted to assets was a recipe for disaster that we are now witnessing. Banks are currently working on a new Basel accord, so hopefully sounder heads will prevail and we won't just throw out the baby with the bathwater. 

Jan 24, 2009 11:43 PM
Anonymous
Chris Miller

I would respectfully disagree with you. Paulson's initial idea was to buy up the assets in order to get credit flowing. Certainly what he has done has not cased liquity to happen. The RTC of the Savings and Loansituation was not initially welcomed but we did get out of the mess over a relatively short period of time. Thus I think we should exam the possibility of a larger RTC.

I am also of the opinion that the fact that the Community Reinvestment Act and Mark to Market are still there is a major reason for credit being locked up. What banks need to do is stop with the 100% financing, everyone should have something in the game. They should also look at dollar amounts. I do not believe we need 20% down. I put 10% down, $1200, on ny first house. It was $11,500 in 1968. Can we look at 5% down today. On a $100,000 mortgage that would be $5,000. Let's also end closing costs roll in. And let's look at the fees charged by lenders. They should have some skin in the game also. I believe rolling in closing costs inflated home and therefore lenders values. Remove that and your asset values is more realistic and stable.

As to stocks. that has always been a tough game. The market has provenn itself in the past to be a bit fickled from time to time. I have always believed that good companies and variety will save the day along with the ability to see what is happening and acting to preserve what you have.

Jan 25, 2009 12:41 AM
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