Saturday, February 21, 2009

Message to the people: Suck it up!

Peter Schiff has a good article over on I always think that's a bit of a misnomer as tacky it is not.
Anyway, his argument is basically the well rehearsed one that previous US administrations forced relatively prudent banks to give incapable borrowers money to buy houses. The borrowers knew they couldn't pay after the teaser rates fell out, but thought they could make a quick turn - which some of them did. But many more remortgaged, simply compounding the problem, and this, broadly is what the US and UK governments are now doing to the whole economy.
Of course, the US also repealed the Glass-Steagall act which had laid the foundations of good banking for nearly 70 years - one of the many mistakes the Clinton administration made in finance and economics.
In the UK, this vandalism has it's counterpart in the splitting of responsibility for bank oversite by Gordon Brown - and we all know how that turned out.
Aaron Murin Heath has a piece highlighted by Iain Dale, which has the right attitude:
" What bothers me though, is that people - politicians and the media mainly - view this recession as something that needs treating. When in fact, rather than being the disease, the financial crisis is the cure.The recession is a market correction of a hugely over-inflated housing market (it will correct, and home values will/may return to a more realistic level of appreciation). The recession is a reaction to borrowing on a massive and wholly unsustainable scale. The recession is the global economy snapping back, as rampant growth surpassed the finite resources we have available.We should stop thinking of the recession as something we can spend our way out of, and just swallow our medicine. Governments, rather than trying to perpetuate a bankrupt economic status quo (see the reduction in V.A.T.), should be using funds to provide basic safety nets for those who fall through the cracks.We should stop lying to ourselves. We need to be honest. We can’t afford to continue spending money we don’t have. Continuous growth is an illusion. Markets will fluctuate. That’s the way it is. We spent more than we had. We borrowed beyond our means. And now we have to suck it up.Sorry. But we need to grow up. And our politicians need to stop bullshitting, and tell us what we don’t want to hear. The recession is the cure. Now let’s stop making matters worse, and deal with it."
Yup, that's it chaps - it will only get better with time and we have to live with it.
Oh, and Brian Boru, this means saving, not borrowing and spending....

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