Tuesday, March 10, 2009

How Do We Fix The Banks?

I hope y'all will pardon me for not really understanding the banking crisis. It seems to me that the main problem with the financial system is that the government required lenders to lend money to people who had no chance of paying it back. This was called affordable housing.

Now when I was a boy affordable housing was a small house, often old. There were many people living in affordable housing, many in houses they built themselves. I knew people who still had outhouses built over holes in the ground.

My parents rented a small house up an alley until, in the mid fifties, they bought their first house. Three bedrooms, one bath, no central heat, no air conditioning. Within walking distance of their railroad jobs. The price? A whopping $8500.00. My parents lived there until my stepfather died in '85, my mother would not stay there after that so she and her sister bought a house very much like it 'cross town. That house sold for over two hundred and forty thousand dollars, after whatever mortgage was paid off. So, this house was worth about what the house I finished growing up in, about 8500 1955 dollars.

This is another part of the banking crisis, money just isn't worth much anymore. About that same time, they bought a Mercury. A big old Monterey station wagon with the big V-8 engine, automatic trans, fake wood sides, etc. $4800.00. In those days that would buy a base Caddy, too. The problem there is that dollars aren't worth anything anymore.

In the 1880s a twenty dollar gold piece would buy a new Colt Single Action Army revolver, a box of shells and a holster. Today a Colt SAA will cost well over a thousand dollars but the amount of gold in that 1880 twenty dollar gold piece will still buy a new Colt SAA.

Our currency was fairly stable right up until FDR's time when we went off the gold standard. FDR hurt but our money was still backed by silver so it was still worth something. I remember that gold was worth $32.00 an ounce, we panned a little out of the western rivers. So, those 1955 dollars were worth one thirty-second of an ounce of gold, each. Today gold is about $900.00 an ounce. What that really means is that our dollars are worth about a thirtieth of what they were in the fifties. The biggest difference? In the fifties our dollars were backed by something valuable, first gold, then silver. Today's dollars are also backed by something, a politician's promise.

So, how do we get a handle on the banks? We can't. Geintner can't fill the important deputy and undersecretary positions. Why would anyone take these positions? Anyone who tried to fix the problem in the financial business would be savaged by people like Frank, Dodd and Rangel. And those who aren't smart enough to fix the problem will eventually have to face the vast majority of people, you know, the ones who do not have nine mortgages on that $932,000 house, now worth a dollar ninety-eight on the open market. The ones who carefully put money into retirement programs now worth nothing.

Now Obama is still rairly young, so is Geithner. Plus they have well trained bodyguards. They will probably stay ahead of the large crowds with pitchforks and torches, buckets of tar and sacks of feathers. What about those Undersecretaries?

We are seeing these tea parties now. What will we see in a year or so when Obama's plans come through. When the coal fired plants are history, long before anything is ready to replace them? When energy bills are a lot higher but we still have outages? When the auto companies are history, along with the aircraft industry? When waiters and bartenders are on the street? When the Dow is at 3000?

What will we see when Obama and company get their hands on health care? Sure, Congress will have the same thing they have now, the rest of us? Some of my pills are VERY expensive. I figure I'll be doing without in a matter of a couple more years. Oh, well, I never expected to see the age of 21 anyway so it's all gravy. But what about kids with cancer? There are a lot of people totally dependent on the drug companies, more who are praying for that next breakthrough. When was the last time you ever heard a Democrat thank a drug company? Heck, when was the last time you heard a Democrat thank ANY business?

And that's why we won't see this bank crisis end. The people who caused it are running the "rescue". And instead of doing anything to help, they're spending billions on their supporters.

Update: I just noticed that Obama has an "Urban Czar". His name is Adolfo Carrion. Now I'm sure that this guy is really nice and all but should Obama have picked a guy to save the cities named after dead critters? Is that what our cities will become? Places full of carrion?

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