Monday, October 12, 2009

They Must Be Insane

One definition of insanity is repeating a behavior or practice that has always been unsuccessful in the past with the delusional idea that it will somehow succeed in the future, in spite of all the evidence to the contrary. Such insanity is frequently manifested in government policies that somehow get imposed on us over and over even though they always fail to accomplish what they are intended to accomplish, and frequently result in adverse effect not foreseen at the time they were imposed. A good example of this is price controls. Yes, we all know that these have failed in the past when they were tried by dictators, despots, left-wingers and other assorted politicians down through the ages. If you put an artificial ceiling price on any commodity, the ceiling will immediately become the floor, and pressure will inexorably mount to raise it. And until it is raised, not only will there be a shortage of whatever commodity is thus regulated, there will be corruption, black markets, etc. created. It happened with gasoline in the 70s, with price controlled rental units in large cities for decades, and with countless other items over the centuries. It is really a singularly bad idea. Yet “progressive” politicians resort to it over and over again to placate the ignorant bleating of their benighted constituents who clamor for “fair prices.” Adam Smith, in The Wealth of Nations, clearly spelled out the inevitable failure of price controls and the virtue of free markets way back in 1776,(oh the irony), but he is mostly ignored and dismissed by today’s left-wing professors of economics, who, none-the-less, have failed to come up with a better system. Russia’s colossal failure in their seventy year experiment in “government control” over prices and production should serve as a warning beacon to all but the most thick-headed.

So, in spite of the abundant evidence that it won’t work, surprise, surprise, here comes the Obama administration with price controls. Yes price controls in the form of interest rates banks are allowed to charge on loans. As of October 1, 2009, banks are restricted in the rate they can charge on mortgage loan products. Of course the new rules are supposed to "protect consumers from problem mortgages,” (which, by the way, were caused in large part by the government requirements imposed on banks by Jimmy Carter’s Community Reinvestment Act.), but in reality they will decrease the amount of loans available to borrowers. The new policy limits the rate banks can charge. Therefore, banks will simply stop making loans to all but the most qualified of borrowers, since the government controlled rates will not allow them to recoup their costs on the riskier mortgages. Additionally most banks have already raised their rates to the highest rate the government will allow since that is the “government approved rate” so they no longer have to compete with one another. No more competition, decrease in products offered, higher prices. Inevitably the pressure will mount for the government to increase the “ceiling” rates. Higher rates for everybody will result due to the lack of competition. Without a doubt banks will make fewer loans to fewer borrowers and the very people who jammed these rate controls through will be crying “discrimination” when the banks elect not to make risky loans. Without being able to price these loans to be viable, they will simply stop making them. This has already happened. We’re not talking the “loan shark” rates that some financial institutions were charging. We’re not talking 36% mortgages here. The banks were making these riskier loans at 2% or 3% over the rate available to the best borrowers. But no more. These loans will no longer be available due to the price controls imposed. Classic consequences: Less supply, less of the market served, more demand equals inflation, corruption and higher prices for everybody. It is insanity.

Friday, July 24, 2009

The Law of Unintended Consequences

As Rush Limbaugh says frequently, "Words mean something." In Barack Obama's lame excuses for besmirching the entire police profession by saying they acted "stupidly", he only exacerbated the situation by claiming his words were mis-calibrated. The words were uttered in plain English. There was no nuance, no obscurity, no doubt about their meaning whatsoever. Obama has now dug a deeper hole by trying to bury the first one he dug. If we had an honest press they would be calling him on it. Don't hold your breath.

The facts are apparently clear in this case: The police officer responded to a call about a possible burglary, investigated and encountered an obviously out-of-control left-winger with a giant chip on his shoulder. The officer apparently did nothing wrong. The professor clearly refused to cooperate with the police officer in any way. The 911 tapes would probably make that abundantly clear if they were allowed to be released. If we had an honest civil administration in the Cambridge police department, they would have already released the tapes. Don't hold your breath.

The tapes will probably not be released precisely because they would exonerate the police officer. They will refuse to release the tapes because it would displease the left-wing power brokers who do not want the professor's outrageous behavior further illuminated. They probably don't dare release the tapes. Don't hold your breath.

One of the most pernicious ways left-wingers wreak damage on our society can be summed up neatly in the Law of Unintended Consequences. In actuality, and in fact, very frequently the opposite result than the left-wingers had intended in their policies and regulations, occurs. For example, John Locke warned over 300 years ago that artificially restricting interest rates lenders could charge resulted in more problems than benefits for most people because the lenders simply stopped lending money at the restricted rates. Therefore, average people could no longer get credit. Instead of helping benighted people to save money on interest, the nanny class prevented them from prospering at all. Many other such examples abound.

Affirmative Action is yet another example of supposed good intentions gone wrong. Professor Gates is a product of the affirmative action generation of the sixties and seventies. No one can ever know what his real merit was when he was accepted to Yale since at the time he was accepted many, many unqualified minorities were being accepted based not on merit, but on the quaint notion that society could correct long-standing injustice against them by just jamming them into Ivy League colleges. Some of them undoubtedly were well-qualified and would have been accepted and would have graduated on their own. However, since they were all lumped together with the unqualified, the smell left behind by affirmative action lingers on and on, permeating each minority college student who attended colleges such as Yale since the sixties. Nobody can know, or ever will know, if any particular student got in, and graduated from the Ivy League educational institutions on their own merit or if the whole thing was as a result of the misguided efforts of do-gooders to right all of the supposed wrongs of prior racial discrimination by reserving slots for less-qualified persons of color, then passing them along because, after all, they couldn't be allowed to fail. The result of this meddling is that many of these "scholars" have a permanent, giant chip on their shoulders, of the variety Professor Gates apparently amply demonstrated. They know the aura of invalidity will follow them the rest of their academic lives no matter what they do. It has to be a heavy burden to bear.

Maybe Professor Gates is the world's greatest scholar on "Black Studies." The news media is convinced he is. The sad reality is that because of the law of unintended consequences as applied to affirmative action, the world can really never know. An honest assessment by commentators would admit this. Don't hold your breath.

Thursday, February 19, 2009

Hooray! I no Longer Have to Pay my Mortgage!

President Obama says so. In an incredible leap of socialism, president Obama will take $75 billion from other people to pay my mortgage for me. I’m only sorry that I didn’t buy a much more expensive house to not pay my mortgage on. I’m sure I would have been much more comfortable in a larger, nicer house than the one I’m currently stuck with. After all, why should those who moved into houses they couldn’t afford, based on fraudulent, phony income, with no down payment, and with mortgage payments based on negative amortization or interest only payments, lose their houses? (THEIR houses? They have nothing invested in these houses. The houses actually belong to the bank and the bank’s shareholders, but that logic totally escapes the Obama thought process!)

But not to fear, Obama will save us all. Many of the very people who are currently not paying their mortgages are in the homes they couldn’t afford because Jimmy Carter, Bill Clinton and now Obama REQUIRED banks to make loans to people who couldn’t afford those houses under the Community Reinvestment Act.

Free welfare for all…. We have to subsidize people who are not paying their mortgage, for the good of all you understand. Hey, this could really catch on! Why pay for anything? Obama will pay for your food, your car, your clothing, your house and everything! Why pay anything? Why work? Incredible!