Words of wisdom

Excellent insight into the housing/financial crisis, remarkably so given that is was first published in 1946, excerpted from the book "Economics in One Lesson," by Henry Hazlitt

"The Case against government-guaranteed loans and mortgages to private businesses and persons is almost as strong as, though less obvious than, the case against direct government loans and mortgages. The advocates of government-guaranteed mortgages also forget that what is being lent is ultimately real capital, which is limited in supply, and that they are helping identified (person) B at the expense of some unidentified (person) A. Government-guaranteed home mortgages, especially when a negligible down payment or no down payment whatever is required, inevitably mean more bad loans than otherwise. They force the general taxpayer to subsidize the bad risks and to defray the losses. They encourage people to "buy" houses that they cannot really afford. They tend eventually to bring about an oversupply of houses as compared with other things. They temporarily overstimulate building, raise the cost of building for everybody (including the buyers of the homes with the guaranteed mortgages), and may mislead the building industry into an eventually costly overexpansion. In brief, in the long run they do not increase overall national production but encourage malinvestment."

Every person in America should read this book, but at the very least all elected and appointed officials. I wonder if it would have made a difference in our economy over the last 50 years?

-Joe

the end of american manufacturing???

it's becoming increasingly apparent that true wealth, lasting wealth is not created through financial gimmickry but in actual productivity and production capacity. i question the relevance of our manufacturing base, we simply aren't as good at it as we once were. our once great production prowess and efficiency contributed to the allied victory in WW2, yet a mere 50 years later the very titans (Chrysler, GM, and Ford) who delivered the majority of the production are begging for a government bailout or threatening insolvency. i realize the midterm impact of failure would be painful but perhaps it is necessary. people and businesses can only be absolved of accountability for so long before they start behaving badly. consider GM, less than a decade ago they had a fleet of electric cars (the EV1) but chose instead to purchase the Hummer brand vehicles. GM CEO Rick Wagoner stated this about the EV1's cancellation "It didn’t affect profitability, but it did affect image," and that the worst decision of his tenure was "axing the EV1 electric-car program and not putting the right resources into hybrids." i wonder how GM would be fairing today if they had continued to develop the electric car platform over the last 10 years? perhaps their current troubles could have been mitigated by a ten year head start on hybrid technology? but Wagoner is probably right profitability wasn't affected...unless of course you add millions of electric cars sold placing your company in a dominant market position for the vehicle technology of the future.
the point of my example is this: we need manufacturing as a nation to have economic health, but it can't be crap. many companies compete on price or quality; apparently our major manufacturing companies do neither; they build junk at excessively high prices. damn foreigners making good stuff for cheap!
if it takes economic turmoil and the reorganization of uncompetitive companies in order fix our nations manufacturing perhaps that what needs to happen. poor choices and bad decisions should not be "bailed out." free markets require consequences to function properly, something we haven't had in our country for a while.
what do you think?
-joe