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Dec. 16, 2008 The joke really is on me, because I respond to Peter Pike's nonsense. Still, I always feel compelled to set the record straight. A while back, I wrote several articles to UK about the economy (I've written about many other topics as well, but Pike is obsessed with the ones that talk about the economy. I think it is because he is a supreme underachiever who is bitter about his lot in life, so the economic articles hit him quite hard.) My overall point in those articles was that the media was talking down the economy for years under Bush, even when by all historic measures the economy was strong. Before this latest capital meltdown (which was caused largely by liberal do-good policies), the economy had created millions of Jobs in the 2000's and we enjoyed a historically low unemployment rate (<5%) for an extended period of time. We also had the benefit of low interest rates and a surprising resiliency to the 9/11 attacks, Katrina, the Enron and WorldCom scandals which rocked the markets for a while, etc. Through all of this, the economy actually remained quite strong. The Dow actually reached 14,000 at one point! Even during these good times, the media in this country portrayed things as if it was doomsday. This story had little to do with a capital market meltdown to come. It had more to do with the fact there was a Republican president, and the press always overplays bad news and downplays good news with a Republican in the White House. As I stated on several occasions in my articles, which Pike conveniently leaves out of his quotes, there is no way to predict when the next economic downturn will occur. There is an existing business cycle and there is an ebb and flow to the economy. Of course, the current crisis goes beyond the normal ebb and flow. In his latest sad rant, Pike points out a quote of mine about home ownership levels. The truth of the matter is he is making my point exactly. Nothing in that old quote was wrong; it was actually quite correct. Home ownership levels for poor people had reached an all-time high. What I did not realize at that time I wrote that piece was just how much of an impact the federal government had on home ownership. It was actually artificial policies enacted by Democrats that fostered the housing bubble. Democrats in Congress long ago created Freddie Mac and Fannie Mae, quasi-governmental agencies assigned to oversee home mortgage loans for low income people. As part of this, the government under Bill Clinton began strong-arming banks to give loans to those who were unlikely to be able to repay the money. In fact, the government was coercing lending institutions to make bad business decisions. The cost if they did not cooperate was endless legal trouble and a threat to the other legitimate business operations. So the banks went along with the program. Freddie and Fannie grew big and fat as more and more low income people were signed up for home mortgages. Wall Street became creative when smart people realized they did not have to hang on to these bogus loans. Loans could be packaged together and sold on an open market over and over again. The accountability in the system was lost in the process. Freddie and Fannie continued to grow even larger, controlling billions of dollars in mortgages. The leaders of these pseudo-government agencies, that existed to ostensibly help the poor, took home tens of millions of dollars in bonuses! Money was funneled back to Washington from these organizations into the pockets of mostly Democrat politicians like Christopher Dodd and Barrack Obama among others. That's right, the very people who were in charge of overseeing Freddie and Fannie were on the take from these organizations. Only in Washington, D.C. is this considered acceptable. The Bush Administration in the early 2000's approached the Democrats about reforming Freddie Mac and Fannie Mae. Experts within the administration recognized there was a potential problem with what was going on and how business was being undertaken. They were rebuffed by the Democrats, who wanted no part of killing the golden goose. At the time, real estate values continued to rise and they, apparently, felt there would be no problem as long as the market continued to flourish. The problem was, however, that a large influx of new buyers into the housing market (low income buyers who had previously been ineligible for mortgage loans) caused a surge in home prices at the entry level. This surge then created a windfall for the people who owned those homes. They now had a large profit, more than they could have ever expected, from the sale of their homes and they in turn bid up the prices of homes in the next level up. This cycle continued up the chain throughout the housing market. Home prices were jumping up faster than ever, and this caused more buyers to jump on board, not wanting to be left behind. The problem came when mortgage rates started to increase. Many of those who did not really qualify for a mortgage in the first place found that they could not make their mortgage payments. This became so widespread that the mortgage backed securities that had become en vogue became shaky at best. Real estate values plummeted as the buyers exited the market. When it was revealed just how large Freddie and Fannie had become and how so much of the mortgages they held were worthless, the implosion was in full bloom (so to speak). The truth of the matter is that the economy had been strong prior to the capital market crisis, even when gasoline was $4.00/gallon the economy was still tracking relatively strong. This is not my opinion; the economic statistics bear it out quite clearly. Do not buy the story of the mainstream media and Democrats that the 2000's have been completely miserable; it is just not the case. The fact is that we have enjoyed strong growth in the U.S. for the better part of the last 25 years, going back to the early 1980's. Let's remember that President Bush was reelected in 2004, and his party picked up seats in Congress in 2002 and 2004. If the country was so miserable, this would not have happened. Make no mistake, the current crisis was driven primarily by left wing government policies that interfered with the free market; this has little to do with "deregulation" as the Democrats have tried to point out. There has been no meaningful deregulation of Wall Street or the banking industry during President Bush's term--none! This is just political double-speak designed to fool the public, which it does quite well for the most part. And the very people who caused this mess, like Senator Dodd, Barnie Frank, etc,. are still in power and have not been made accountable for one thing. They, in fact, successfully blamed the mess on President Bush and the Republicans. The Republican party is not innocent in all of this, but its role in the mess is definitely in the back seat. The Democrats drove this train wreck home; and most who are paying attention fully understand this. If only more of us were actually paying attention. Also, let us not forget that the Democrats have no real incentive to solve any problems--economic or otherwise--while Bush is still in office, at least prior to the election. Their goal was to get a Democrat in the White House and the best chance of doing that was if they could convince the American public they were miserable; they knew Bush would be blamed for any problems--and their mainstream media friends would help out the cause. This is exactly why the media has been downplaying good economic news for years and overstating anything negative. (Notice how little we hear about Iraq now that things are actually going fairly well over there.) So, Pike's criticism is, as usual, an empty one. He does not comprehend anything about economics, so he is relegated to believing what he is told by the mainstream press. This combined with in inherent bitterness which he harbors causes him to look at things through very tainted lenses. This explains his obsession with looking up old articles of mine, misinterpreting them, and then criticizing me based upon his cockeyed logic. As I've stated before, I never proclaimed to be a prognosticator (although Pike for whatever reason refuses to accept this point) of the economy. It's just that things were going good when I said they were good, that's all.
I do miss the days when useless-knowledge was a truly open website where writers could put down their thoughts on any given topic and do so without being rampaged by those who have their own agenda. It is because of Pike that I left this website; it has nothing to do with not wanting to back up what I've written. I firmly stand behind all of my contributions to this website and welcome any objective questions or comments.
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