It was Reagan, or more correctly his cronies, who decided that supply side economics could cure the recession of the early 80's.  They allowed anyone with wealth and connections access to "easy credit" at  the Savings and Loans "window".  When that scheme collapsed, they ingeniously revived the Fanny Mae / Freddy Mac "pass-through" regulations, which allowed any shyster broker  to plug into the flow of new money, bypassing the banking system.  That is to say, they allowed new money to be digitally created in favor of well connected clients from the elite layers of our society.  Loans were made from money that did not exist in any bank by using a "pass through" to the securitized mortgage hedge funds that have now collapsed.

While it lasted, all was just great! Money flowed abundantly, the elites and their apologists in the media were on a roll!  It was said that all you had to do was ask for it, and you would receive abundant funds, for any purpose.  As this largess spread overseas in the name of "neo liberal" economics, the party went global.  The Asian Tigers were once admired for their bold investment "strategies" in the 90's. They would eventually pump up the stock market and create the dot com stock bubble.  Easy come, easy go, as they say in Las Vegas.  Our economy was corrupted by a flow of freshly minted SWIFT money from overseas, and from money created out of thin air by Fanny and Freddy for their fat cat clientele.

As it turns out, it is only real people, not corporations or financial institutions, that have a real problem.  Some people borrowed more "easy money" than they should have, to cover a home purchase, at speculative values.  Now, the value of their mortgage is "upside down", as they say in the automobile aftermarket.   These people owe more money to their mortgage company than their home is NOW worth, after the speculative party has ended.  

This situation is quite common. A lot of people were deluded into thinking that the "new economy" touted by the corrupt republican elites was here to stay.  They took out mortgages or lines of credit for more than 75% of their home's valuation.  Now, when the home's value has deflated to it's real value, they are holding obligations that they can not pay, since selling their home will not cover them.   They are stuck without a future, they have become mortgage slaves, as the Chinese say.

This housing crisis is here not because some banks might have to write off loans made to sub-prime customers, it is a crisis because people can not sell their homes.  The mobility of the US economy has been compromised, since people can not sell their homes, move to a better job in a  different city, and build a new home there.  We have entered a state of housing inertia, not a recession. 

In a human sense, this crisis is a necessary remedy, a foul and bad tasting medicine that we must take for the sake of our financial health.  We could not allow our economy to bloat with more hot gas to the point where our currency would become worthless.  The neo-liberal "exuberance" has been stopped in time, let the chips fall where they may. 

There should be a government assistance program in 2008, but certainly not extending tax favors to wealthy Republicans, nor giving a $250.- pittance to the middle class at tax time.  Let's focus on the human problem, and solve it in a humane way.  We should not extend Regan's deception into the future, nor offer populist pablum for the sake of a few votes.

Atlanta, GA
Jan 17, 2008