Tuesday, February 05, 2008

a stupid statement by somebody who apparently doesn't understand capitalism

So often it is difficult to narrow down the stupidity and mendacity you see in the news to just a couple of examples. But there was a good one today.

In this article about the housing crisis' affect in the Phoenix area, a guy who publishes a local real estate newsletter - his name is R.L. Brown - criticized the stupid stimulus plan being considered by Congress. Brown said, "From the housing perspective, what would help is some kind of program that would permanently mitigate the resets. But who is going to make the difference up to the investors? It is a real dilemma."

Is R.L. Brown a confused communist or something? "Who is going to make the difference up to the investors?" Does Brown understand how capitalism works? Here, I'll give him a clue about capitalism first, and then an answer to his question second.

In capitalism, investors risk their money. The greater the risk, normally the higher the return. It's really quite simple. And the various financial instruments backed by subprime mortgages, by liar loans, by interest-only mortgages, promised high returns - hence high risk.

So who should make up the difference to the investors? NOBODY. They didn't need anybody to "make up the difference" between the high rate of return they enjoyed on these risky instruments during the years they paid off, and the rate they would have gotten with safer investments. And they don't deserve ONE DIME. That's the name of the game. To "make up the difference" just encourages risky behavior, and the corporate-welfare attitude that when the market goes UP, the government should keep out of it. But when the markets go DOWN, then the cry goes out for Uncle Sam to save everybody from their own greed or poor decision-making.

What does that represent? The ideology of the modern Republican Party.



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