AMERICAN CONSERVATISM IN 2008 AND BEYOND

They just love to mislead by showing only what they want people to see without any of the "necessary" explanations or its causes.

Typical conservative strategy; mislead enough times, and people will believe it's true.

http://cato.org/pubs/policy_report/v30n6/cpr30n6-1.html

Cato Policy Report, November/December 2008

Are We Ailing from Too Much Deregulation?
David R. Henderson
...
Fannie, Freddie, and the Housing Crunch

On housing prices, Gosselin claims that "the rise in house prices and the recent plunge grew out of an almost unregulated corner of the mortgage market"the one for riskier loans." But in fact much of this problem arose from regulation. Jeffrey Hummel and I detailed how in Investors' Business Daily ("Blame the Feds, Not the Fed, For Subprime Mortgages," March 23, 2008). Federal government regulation contributed in three ways. First, the federal government helped cause the boom in housing prices by helping cause moral hazard: people taking risks because they know that if things turn out badly, someone else will bear some of the cost. The federal government's semiautonomous mortgage agencies"Fannie Mae, Freddie Mac, and Ginnie Mae"all buy and resell mortgages. Of the more than $15 trillion in mortgages in existence in early 2008, about one third were owned by, or were securitized by, Fannie Mae, Freddie Mac, Ginnie Mae, the Federal Housing and Veterans Administration and other government agencies that subsidize mortgages.

Although Fannie Mae and Freddie Mac were no longer government agencies during the time period at issue, they were government- sponsored enterprises. Many buyers of their repackaged loans, therefore, assumed an implicit federal-government guarantee. That assumption, as we now know, was all too true. This implicit guarantee caused less scrutiny by lenders than otherwise, which helped drive up housing prices.

The federal government's second contribution to the increase in housing prices was the Community Reinvestment Act. This act, first passed in 1977 and beefed up in 1995, requires banks to lend in high-risk areas that they otherwise would avoid. Banks that fail to comply pay fines and have more difficulty getting approval for mergers and branch expansions. As Stan Liebowitz, a University of Texas economist, has pointed out, a Fannie Mae Foundation report enthusiastically singled out one mortgage lender that followed "the most flexible underwriting criteria permitted." That lender's loans to low-income people had grown to $600 billion by 2003. Its name? Countrywide, the largest U.S. mortgage lender and one of the lenders in the most trouble for its lax lending practices.

Finally, a little-noted change in regulations by the comptroller of the currency in December 2005 acted as the trigger. The comptroller made it mandatory for banks to require minimum payments on credit card balances, causing increases of at least 50 percent for most cards and as much as 100 percent on others. Many people who hold subprime mortgages are people for whom a higher monthly payment on a credit card would be a problem. Whereas before this regulation, many people's priorities would have been mortgage first, credit card second, the new regulation caused many borrowers to reverse the order. Thus the comptroller's seemingly small increase in regulation had the unintended effect of causing some mortgage borrowers to default.

This is not to say, of course, that private businesses never do anything stupid unless it is caused by bad government policy. Certainly, many actors in the private sector put their and other people's money at risk in absurd way. It is safe to say, though, that in the case of the subprime mess, regulation and government subsidies deserve much of the blame.
...

AND, inflation during Clinton's administration was ONLY SLIGHTLY LOWER than during Bush 43's administration!

http://www.reason.com/news/show/34826.html
Re: Envy--Research by two British economists, Daniel Zizzo of Oxford University and Andrew Oswald of Warwick University: "Are People Willing to Pay to Reduce Others' Incomes?"
...
Zizzo and Oswald set up an experiment in which groups of four subjects were initially given nearly equal amounts of money. They then played a computerized gambling game. During the game two of the players received an extra endowment of cash, a fact to which all of the players were alerted.

At the conclusion of the gambling sessions, each player was given the chance to spend his own money to anonymously "burn" some of the cash won by his fellow participants. It was made clear that there was no prospect that burning his fellow player's winnings would in any way make him richer. In fact, if he chose to burn another player's money, he had to pay between 2 cents and 25 cents for each dollar subtracted from the other player's take.

Zizzo and Oswald found that nearly two-thirds of players happily paid for the privilege of impoverishing their fellow participants. Even as the price of burning went up, the percentage of people who chose to burn other players did not fall substantially.

Why would people pay to hurt others without any benefit to themselves? Is it not the height of irrationality for a person to harm himself just so he can harm another more? Zizzo and Oswald believe the desire to burn other people's cash "appears to be strong evidence for the existence of some kind of envy or concern for fairness."
...
Socialists often claim that capitalism is based on humanity's worst impulses, greed and selfishness, despite the fact that people who live in societies that participate in markets tend to be more generous and cooperative than those who don't. Oswald and Zizzo's research suggests that socialists who believe that their ideology appeals to humanity's better instincts have it backwards. Envy is behind the leveling spirit of socialism. A truly generous and rational soul would wish others well, especially if they have done no one any harm.

Only an open society in which people clearly see that they have an opportunity to rise seems capable of containing and channeling humanity's envy instinct. The task for champions of freedom is to encourage people to want more cows for everybody.
...

Quote:

http://www.reason.com/news/show/34826.html
Re: Envy--Research by two British economists, Daniel Zizzo of Oxford University and Andrew Oswald of Warwick University: "Are People Willing to Pay to Reduce Others' Incomes?"
...
Zizzo and Oswald set up an experiment in which groups of four subjects were initially given nearly equal amounts of money. They then played a computerized gambling game. During the game two of the players received an extra endowment of cash, a fact to which all of the players were alerted.

At the conclusion of the gambling sessions, each player was given the chance to spend his own money to anonymously "burn" some of the cash won by his fellow participants. It was made clear that there was no prospect that burning his fellow player's winnings would in any way make him richer. In fact, if he chose to burn another player's money, he had to pay between 2 cents and 25 cents for each dollar subtracted from the other player's take.

Zizzo and Oswald found that nearly two-thirds of players happily paid for the privilege of impoverishing their fellow participants. Even as the price of burning went up, the percentage of people who chose to burn other players did not fall substantially.

Why would people pay to hurt others without any benefit to themselves? Is it not the height of irrationality for a person to harm himself just so he can harm another more? Zizzo and Oswald believe the desire to burn other people's cash "appears to be strong evidence for the existence of some kind of envy or concern for fairness."
...
Socialists often claim that capitalism is based on humanity's worst impulses, greed and selfishness, despite the fact that people who live in societies that participate in markets tend to be more generous and cooperative than those who don't. Oswald and Zizzo's research suggests that socialists who believe that their ideology appeals to humanity's better instincts have it backwards. Envy is behind the leveling spirit of socialism. A truly generous and rational soul would wish others well, especially if they have done no one any harm.

Only an open society in which people clearly see that they have an opportunity to rise seems capable of containing and channeling humanity's envy instinct. The task for champions of freedom is to encourage people to want more cows for everybody.
...

"The task for champions of freedom is to encourage people to want more [wealth] for everybody." Not want less for those who have more, and more for those who have less.

Fascinating. And I don't have a doubt that there are those who so resent the success of others that they would do that so that their own failures and/or lesser accomplishments would not be so obvious.

Karl Marx had the well intended but misguided view that if you could just force society to structure itself so that everybody enjoyed the same benefits and assets, then we would have as close to utopia as can be achieved in this life.

But Marx did not allow for human behavior, human ambition, human greed, human willingness to leach off others, human distaste for being taken advantage of by others. And it was these characteristics of humanity that doomed Marxian ideals to failure. No government was possible who held the ideals as more important than self-serving power, influence, and profit and no society was subjected to it that did not become mostly impoverished, oppressed, and without hope or opportunity to help themselves.

A reasonably regulated Capitalism, however, seeks to be all that we are capable of being, and when it is manifested in a free and compassionate society, all persons are encouraged and have incentive to be all that we can be. The government then serves best by performing its constitutionally mandated responsibilities, enacting sufficient laws to prohibit the people from doing injustice and violence to each other, and then get out of the way.

But Marx did not allow for human behavior, human ambition, human greed, human willingness to leach off others, human distaste for being taken advantage of by others. And it was these characteristics of humanity that doomed Marxian ideals to failure.

On the one hand, Marx argued for a systemic understanding of socioeconomic change. He argued that the structural contradictions within capitalism necessitate its end, giving way to communism:
“ The development of Modern Industry, therefore, cuts from under its feet the very foundation on which the bourgeoisie produces and appropriates products. What the bourgeoisie, therefore, produces, above all, are its own grave-diggers. Its fall and the victory of the proletariat are equally inevitable. ”

" (The Communist Manifesto)[6]