Capitalism versus Socialism

Capitalism versus Socialism

I have always advocated Democracy, Christianity and Capitalism as the government for America. I have always been afraid of Democracy, Atheism and Socialism.

I have always known that Capitalism was dangerous, but thought Christian Principles could control the harsh nature of Capitalism. Unfortunately, Christian Principles no longer have any control over Capitalism because Christianity has been effectively removed from American Society. When you eliminate the Ten Commandments, you basically authorize lying, cheating and stealing. Isn't everyone doing it?

When the Economic Disaster of 2008 unfolded, I wanted to know what went wrong with Capitalism and wanted to know if I was wrong in what I advocated. What became apparent was that the root cause of the Economic Disaster of 2008 was the Community Reinvestment Act, Fannie Mae and Freddie Mac. The CRA was a socialistic program that forced banks to make risky sub prime loans. Banks resisted the risky sub prime loans till Fannie and Freddie were created to provide a guarantee for the sub prime loans. The guarantees gave sub prime loans an implied "AAA" rating so every crooked organization got into the sub prime business.

I knew Obama was a socialist, but I had no idea how effective he would be in making Capitalism the scapegoat for the Economic Disaster of 2008. I never thought so much money would be spent on implementing Socialism so fast.

I believe America is in for a world of misery as there is an attempt to implement Socialism.

In the long run, I believe it will be proven Capitalism is better than Socialism, but the question is whether America can recover from the Socialism.

Capitalism is loaning money to people you expect will pay it back.

Socialism is loaning money to people you hope sill pay it back.

Capitalism produces unequal prosperity, but Socialism produces equal proverty.

The following are my concerns about the Socialism being implemented by the Obama Administration.

Inflation

The democrats are spending money like a bunch of horny sailors on leave. democrats are asking for 600 billion for health care, 100 billion for education, 200 billion for the Iraq/Afghanistan war, etc. Inflation is sure to follow when the government starts printing money. Hillary Clinton would not mention human rights to China because the Obama Administration needs China to buy American debt. Why would China buy American debt at a 2 of 3% interest rate, when China can see an inflation rate of 10 to 20% in America?

Price Controls

When inflation starts, price controls will be implemented. Right now doctors, hospitals and medical insurance companies are looking at the massive health care/welfare spending as a pot of gold, but as sure as inflation starts, there will be price and wage controls on doctors and hospitals. There won't even be a need for insurance companies.

Wars

Socialists are usually pacificist, so they will not fight an enemy. They spend money on defense, but defense is useless in a siege situation. Just one time that the defense fails and it is all over. Capitalists know they will make mistakes in offensive wars, but it is better to make a mistake and kill the enemy instead of making a mistake and killing your own people. The appeasement policy of the Clinton Administration caused 3000 Americans to be killed on 9/11. A failure to have a strong military is always an invitation to an enemy.

Christians

Socialists are usually Atheists, so they will try to eliminate Christianity. The "Hate Crime" legislation is a sure sign of the way things can go. A lot of money is going to spent on education, but "diversity training" may be the main part of the education. For information on what is happening in Massachusetts go to www.massresistance.org

Free Speech and Freedom of the Press

The Atheistic Liberal News and Entertainment Industry has always been biased for democrats, but if the news media begins to turn on the Obama Administration, the government will take over control of the news media. The "Fairness Doctrine" is a sure sign of the way things can go.

Correction

Correction

In the original post I stated the following.

I did not realize how bad this situation is till I saw a statement that said that the problem in Europe was a 40 trillion dollar problem. It is hard to believe numbers that big, but 200 hundred million people in America with an average family size of 3 yields about 70 million homes. Assuming the average house has dropped at least 20,000 dollars, that means the housing bubble represents a 20,000 dollars times 70 million homes or 1.4 zillion dollar problem. Even if Fannie Mae and Freedie Mac are on the hook for only one third of the problem, that is still 40 trillion dollars.

This was incorrect and should read.

I did not realize how bad this situation is till I saw a statement that said that the problem in Europe was a 40 trillion dollar problem. It is hard to believe numbers that big, but 200 hundred million people in America with an average family size of 3 yields about 70 million homes. Assuming the average house has dropped at least 20,000 dollars, that means the housing bubble represents a 20,000 dollars times 70 million homes or 1.4 trillion dollar problem. Even if Fannie Mae and Freddie Mac are on the hook for only one third of the problem, that is still 467 billion dollars.

CRA, Fannie Mae and Freddie Mac

CRA, Fannie Mae and Freddie Mac

The CRA by itself would never have produced the Financial Disaster of 2008, but when the risky CRA loans were guaranteed by Fannie Mae and Freddie Mac, the risky loans became "AAA" rated because they were backed by the federal government.

This linking of CRA, Fannie Mae and Freddie Mac occurred when the CRA was revised in 1995 under the Clinton Administration.

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2/23/09
Community Reinvestment Act
From Wikipedia, the free encyclopedia

In October 1997, First Union Capital Markets and Bear, Stearns & Co launched the first publicly available securitization of Community Reinvestment Act loans, issuing $384.6 million of such securities. The securities were guaranteed by Freddie Mac and had an implied "AAA" rating.[29][22] The public offering was several times oversubscribed, predominantly by money managers and insurance companies who were not buying them for CRA credit.[30][edit] Legislative changes 1999.

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Please note the phrase "implied "AAA" rating".

The reason the housing bubble lasted so long and the dangers not fully recognized was "rising home values". I remember a phrase called "flipping". Flipping meant buying a rundown home, throwing some paint on it and selling it for a very large profit. It was all possible because home values were rising and the Fannie and Freddie were guaranteeing the loans. Even if the people buying the home defaulted, another coat of paint was applied and sold again with a big profit.

Everyone was fat, dumb and happy, until the housing market was saturated with homes. When the defaulted homes could not be resold, the people turned to Fannie and Freddie to pay, but Fannie and Freddie did not have the money to pay.

Fannie and Freddie are now in default on there loan guarantees.

The root cause of the Financial Disaster of 2008 was the CRA, a piece of socialistic legislation passed by the democrats in 1977 in the Carter Administration and amended by democrats in 1995 in the Clinton Administration.

The idea for a solution being floated is to wipe out all the sub prime debt and start all over again. This means trillions of dollars lost by people who thought they were buying an investment that had a "AAA" rating. It also means violating the rule of "Moral Hazard", because evil activity is being rewarded.

Gramm-Leach-Bliley Act

Gramm-Leach-Bliley Act

There is no question the GLBA contributed to the Financial Disaster of 2008.

The influence of big profits by unregulated investment institutions was too great a temptation for regulated banks (Glass-Steagall Act) and Republicans.

The GLBA made the problem worse, but the heart of the problem leads back to the Community Reinvestment Act, a socialistic program passed by democrats in 1977 in the Carter democratic administration and strengthened in 1995 in the Clinton democratic administration.

There is no question Republicans yielded to the temptation of the money, but I would assess the blame as 80% democrats and 20% Republicans.

Democrats are unfit for running the government because they enact socialistic/Atheistic legislation that create financial and moral messes.

It is unfortunate that the Atheistic Liberal News and Entertainment Media provides propaganda to help get democrats elected to control the government.

There is a cultural war in America between Christians and Atheists. This war is being fought on the battlefield of politics. The battles are in the voting booth. The prize in the cultural war is the hearts, minds and souls of the children. The Atheistic liberal news media greatly influences both domestic and foreign policy by constantly reporting only bad news about Christians, Conservatives and Republicans and only good news about atheists, liberals and democrats. The agenda of the Atheistic liberal news media is to promote evolution, extreme environmentalism, socialism, feminism, pornography, abortion, adultery, homosexuality and the Atheistic Lifestyle by having democrats in control of government.

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Gramm-Leach-Bliley Act
From Wikipedia, the free encyclopedia

http://en.wikipedia.org/wiki/Gramm-Leach-Bliley_Act

The Gramm-Leach-Bliley Act, also known as the Gramm-Leach-Bliley Financial Services Modernization Act, Pub.L. 106-102, 113 Stat. 1338, enacted November 12, 1999, is an Act of the United States Congress which repealed part of the Glass-Steagall Act of 1933, opening up competition among banks, securities companies and insurance companies. The Glass-Steagall Act prohibited a bank from offering investment, commercial banking, and insurance services.

The Gramm-Leach-Bliley Act (GLBA) allowed commercial and investment banks to consolidate. For example, Citibank merged with Travelers Group, an insurance company, and in 1998 formed the conglomerate Citigroup, a corporation combining banking and insurance underwriting services under brands including Smith-Barney, Shearson, Primerica and Travelers Insurance Corporation. This combination, announced in 1993 and finalized in 1994, would have violated the Glass-Steagall Act and the Bank Holding Company Act by combining insurance and securities companies, if not for a temporary waiver process [1]. The law was passed to legalize these mergers on a permanent basis. Historically, the combined industry has been known as the financial services industry.

Remaining restrictions
Crucial to the passing of this Act was an amendment made to the GLBA, stating that no merger may go ahead if any of the financial holding institutions, or affiliates thereof, received a "less than satisfactory [sic] rating at its most recent CRA exam", essentially meaning that any merger may only go ahead with the strict approval of the regulatory bodies responsible for the Community Reinvestment Act (CRA).[9]. This was an issue of hot contention, and the Clinton Administration stressed that it "would veto any legislation that would scale back minority-lending requirements." [10]

Information Web Links

Here is some links to the facts about the Economic Disaster of 2008. From the start of the problem to the end.

These links show how the socialistic - racially biased Community Reinvestment Act was imposed on Capitalism by democrats.

http://en.wikipedia.org/wiki/Fannie_Mae

http://gatewaypundit.blogspot.com/2008/09/bush-called-for-reform-of-fannie-mae.html

http://www.youtube.com/watch?v=_MGT_cSi7Rs

http://www.youtube.com/watch?v=RAuOEdttjZQ

http://iusbvision.wordpress.com/2008/09/21/in-plain-english-how-did-the-biggest-financial-scandal-in-history-happen/

http://www.foxnews.com/story/0,2933,432501,00.html

http://query.nytimes.com/gst/fullpage.html?res=9C0DE7DB153EF933A0575AC0A96F958260&sec=&spon=&partner=permalink&exprod=permalink

http://en.wikipedia.org/wiki/Community_Reinvestment_Act

http://online.wsj.com/article/SB122212948811465427.html

http://www.villagevoice.com/2008-08-05/news/how-andrew-cuomo-gave-birth-to-the-crisis-at-fannie-mae-and-freddie-mac/

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aSKSoiNbnQY0

http://www.investors.com/editorial/editorialcontent.asp?secid=1501&status=article&id=306370789279709

http://www.washingtonpost.com/wp-dyn/content/article/2008/09/11/AR2008091102841.html

http://seekingalpha.com/article/95436-the-u-s-on-the-precipice

http://www.opensecrets.org/news/2008/09/brothers-grim-is-lehman-next.html

http://directorblue.blogspot.com/2008/09/jamie-gorelick-mistress-of-disaster.html

The Republicans trying to stop it,

http://hotair.com/archives/2008/09/16/whose-policies-led-to-the-credit-crisis/


http://www.marketwatch.com/News/Story/Story.aspx?guid=%7B74DABC67-B059-465E-AF68-6DB22EB961CD%7D

http://query.nytimes.com/gst/fullpage.html?res=9E06E3D6123BF932A2575AC0A9659C8B63&sec=&spon=&pagewanted=2

Credit Default Swaps

Credit Default Swaps

The idea of credit default swaps was that an insurance policy could be bought so that if a stock went down, the insurance policy would cover the loses.

The idea of all insurance is that if something bad happens the insurance policy will pay for the cure for the problem.

The assumption of every type of insurance is that only a small fraction of the stocks will go down, or that only a small fraction of the people have a problem.

The Economic Disaster of 2008 has proven insurance does not work if a large fraction of the stocks go down. Insurance will not work if a large fraction of the people expect to get anything from insurance.

Insurance and socialism are closely linked, because they are a way to avoid personal responsibility. You can take a greater risk if you have the safety net of insurance.

People must return to personal responsibility.

The best way to achieve personal responsibility is by following Christian Principles, but that requires accepting Jesus Christ as Lord/Savior and committing to following the commandments/doctrines of the Bible.

Moral Hazard

Moral Hazard

The phrase moral hazard is now being used in the discussion of the Financial Disaster of 2008.

The moral hazard is that if you bailout a bank that created its own problems, what is to prevent it from doing the same thing again.

This leads to a similar problem in contracting called "implied consent". If you fail to warn a company of the first infraction of the contract, there is an implied consent that the infraction provision of the contract was not important and can not be used for breach of contract later on.

By bailing out or infusing capital into banks the government has crossed over into socialism.

Moral Hazard is the problem with socialism. If you give health care/welfare to a person that created their own problems, what is to prevent them from doing the same thing again.

The reality is that when you do offer health care/welfare or bailouts, you are giving implied consent to the evil that was being done to create the problems.

In the economic world Moral Hazard was killed by saying that the economy would die if the bailout was not done.

In the social world Moral Hazard is killed by saying the person will die if the heath care/welfare in not provided.

There is no good thing (cure) that can be done after sin has been begun, just bad choices.

By following Christian Principles the sin can be prevented, but that requires accepting Jesus Christ as Lord/Savior and committing to following the commandments/doctrines of the Bible.

Economic Disaster of 2008

Economic Disaster of 2008

I believe the whole truth cannot be kept hidden, but it is usually not told all at one time, especially when those who could tell the whole truth would be hurt by the whole truth.

It is only that by piecing together information from various sources and reading between the lines on information that is make available is it possible to construct the what I believe to be the whole truth.

I welcome any information that confirms or refutes the following discussion. Many web links already exist that show how the democrats defended Fannie Mae and Freedie Mac when questions were raised by Republicans. One of the best is

http://www.youtube.com/watch?v=_MGT_cSi7Rs

It will be necessary for private individuals to piece together the whole truth because the Atheistic Liberal News Media and democrats both support socialism and aid each other in a Cultural War that has been taking place since the Roosevelt Administration.

I believe the Economic Disaster of 2008 was mostly the fault of the democrats when they passed the Community Reinvestment Act.

Red Lining

The failure of our financial system was caused by the democrats creating the socialistic programs, Community Reinvestment Act, Fannie Mae and Freedie Mac. In order to simplify home loan processing, banks had identified (Red Lined) areas where they would probably not make a loan. The concept of Red Lining by Banks could have been considered either good economics or bad racism. The democrats treated Red Lining as bad racism and forced the banks to make sub prime loans to people by passing the socialist Community Reinvestment Act. The banks refused until the democrats created Fannie Mae and Freedie Mac to guarantee the sub prime loans. With the loans being guaranteed by the government, it did not make any difference about the home buyers ability to pay, since the loan was with the government. All kinds of financial thieves jumped in the sub prime loan business and the drove up the price of housing for everyone, creating a housing bubble. When the sub prime loans defaulted the housing bubble burst, and the value of every home in America dropped.

Some will say wall street should not have taken advantage of the sub prime loan guarantees, but there was a saying by W. C Fields, "It is a mortal sin not to take advantage of a fool". It is best that you do not tempt people by spending money foolishly.

This affected the whole world because the sub prime loans were bundled together with good loans because even a sub prime loan is a good loan when guaranteed by the American government.

I did not realize how bad this situation is till I saw a statement that said that the problem in Europe was a 40 trillion dollar problem. It is hard to believe numbers that big, but 200 hundred million people in America with an average family size of 3 yields about 70 million homes. Assuming the average house has dropped at least 20,000 dollars, that means the housing bubble represents a 20,000 dollars times 70 million homes or 1.4 zillion dollar problem. Even if Fannie Mae and Freedie Mac are on the hook for only one third of the problem, that is still 40 trillion dollars.

When the banks started seeing the sub prime failures, they turned to Fannie Mae and Freedie Mac to pay up on the guarantees. Fannie Mae and Freedie Mac instantly knew the worst case scenario had just occurred because they only had a 3% reserve and housing prices had dropped by at least 20%.

That is when TARP was offered to the banks to prevent the banks from taking Fannie Mae and Freedie Mac to court. Unfortunately the democrats who caused the problem by creating the CRA, got control of the government and instead of working with the banks they made the banks the scapegoat.

When the banks told the democrats that they were not beggars, but victims, the banks were told to shut up or the banks would be nationalized. Nationalization would mean Fannie Mae and Feedie Mac would not owe any bank in America anything. This means every homeowner in America faces a $20,000 loss. For self sufficient people the $20,000 is a real loss, but for the people who had the sub prime loans, it only means their bad credit rating gets worse.

Now the democrats that created the mess are asking banks to make more bad loans to solve the economic mess, but this time the democrats are not going to provide loan guarantees.

The banks should look Barney Frank right in the face and tell him the TARP money already received will be applied to the Fannie Mae and Freedie Mac debt. I don't thing Barney Frank will nationalize the banks, because it would wipe out the stock market and stop all international trade. Some might think that would be good, but America is not self sufficient either. If the flow of oil stops, millions die.

Lessons Learned

The most obvious lesson to be learned is that Socialism is a horrible concept. America started on the path of Socialism in the Roosevelt Administration. It grew into Civil Rights and there is now a concept that the government has a responsibility to provide health care /welfare for anyone that says they have a problem even if the problem is self inflicted due to too much wine, women and song (also known as the Atheistic Lifestyle).

Too much of what the democrats do is based on hope and not reality. Capitalism is lending money to people you expect will pay it back. Socialism is lending money to people you hope will pay it back.

The concept that government has a responsibility to provide anything to anyone is unconstitutional. The Constitution talks about the government providing protection but not services.

It may be reasonable for government to undertake large projects that could not be funded by private companies, but the government should contract for those projects and the projects should benefit at least 66% of the people instead of minorities.

Socialistic programs are very onerous to Christians because they are anti religious. Socialism is a dependence on the government instead of a dependance on God. A dependence on God leads to the Christian Lifestyle that is the most environmentally friendly socially responsible lifestyle that is possible.

Remedies

The government should eliminate any and all health care/welfare/socialistic programs because they favor the needy at the expense of the self sufficient. This would be a major problem for the self inflicted needy, but I believe the truly needy can be taken care of by Christian charity.

The government should be very careful about loan guarantees. In order to get banks to make risky student loans, the government allowed the banks to charge 9% interest on student loans which is almost impossible to pay off.

Capitalism is making loans to people you expect will pay back the loan.

Socialism is making loans to people you hope will pay back the loan.

The government should never accept the obligation of cleaning up a mess that a person has inflicted on themselves. Illegitimate children are a mess for the woman and all of society. It is horrible to think of the suffering of a child, but the child is the product of sin. It should be a criminal offence punishable by death for the parents to fail to financially support a child. The parents should be executed and the child put up for adoption or raised in an Christian orphanage that is contracted with the government.

The is a law whereby a business can just refuse to pay debts called "Commercially Impossibility" I believe we are in a situation where it going to have to be assumed that Fannie Mae and Freedie Mac are never going to pay anything back and figure out how to absorb the lost money. Maybe debt swaps and very long tax credits.

I have a feeling the mortgage backed securities are never going to be repaid (I am not even sure the interest on the securities is being paid). Probable best to send the title of property to the securities owners and let them decide to live in, rent or sell the property.