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Why Conservatives Favor Transferring Wealth from the Middle Class to the Rich [LM]

June 13, 2012

Guest: conservative radio talk show Jim Greenfield.

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  • nitemare2 June 19, 2012 5:16 pm

    Now before you blame the loss on Bush, Wall st, the GOP, Tea Party or anything other than what it really was. Let’s take a look at the facts. So, according to the Fed’s numbers, approximately 67% of the decrease in wealth can be attributed to declining home values. The remainder can probably be blamed on unemployment and stagnant real wage numbers. So what caused the home values to decrease? Housing has been propped up by imaginary market forces and too much intervention by outside sources. In a free market system the government should NOT subsidize home ownership. But that’s exactly what both parties support. It’s not just the left but also the right. The GOP with Bush as a leader supported the increase in subsidies for the housing market through credit guarantees. As did Jimmy Carter and Bill Clinton and oh Frank and Dowd as well as Obama. The Democrats and the Republicans, yes, both parties supported the artificial credit environment as both parties supported government guarantees that eliminated down payments and provided credit to Americans at artificial low rates. Lack of free market is the root of our economic problems and the reason why the credit/housing bubble took place. Contrary to the misconception that it was the free market that made the housing bubble possible it was interference in the market place that distorted the demand and supply variables for credit and real estate. The Federal Reserve greatly distorts the supply and availability of money with its anti-free market loose interest rate manipulation. The Government also interferes in the market place with non-sense guarantees of home loans made through Fannie Mae, Freddie Mac, USDA, and VA. In a free market system the cost for credit is dictated by the market forces that consist of the relationship between the demand for credit and the availability of savings to be lent. It wasn’t the free market that encouraged malinvestment and speculation. It was the Government guaranteeing home loans through various agencies such as Fannie Mae and Freddie Mac that eliminated risk as the lender would have the ability to make loans while the Government guaranteed its potential losses. As such there was no incentive to lend money conservatively as doing so would restrict the number of transactions while not minimizing potential losses since these losses were absent due to the Government guarantees. To make matters worse, Republicans and Democrats alike voted several times to increase the FHA loan limit during the housing bubble. This allowed people to take on greater debt and perfectly illustrates that government subsidies do not lower the price but make the underlying assets more costly. By raising the FHA loan limits the Bureaucrats in Washington voted to extend the housing bubble, raise prices, and delay the inevitable correction. I’m aware of the profits and losses due to mortgage backed securities but MBS weren’t the root problem. Without the artificial low interest rate policy by the Fed and the many anti-free market subsidies for the housing and credit markets by our Government housing wouldn’t have appreciated the way it did. The Government and the Fed laid the foundation. Wall Street will always look to profit from a product that is its job. We have to learn and realize that it is not the Government’s job to distort the market with interventionist policies. A free market would self-regulate. Its government and Fed policies that interfere in the market that 1) create bubbles or 2) allow financial bubbles to grow much bigger than they would otherwise. With all the green Government policies there will be a speculative bubble for green energy/carbon exchange credits, etc. College degrees already have lost value as they are “given away” with the help of government non-sense guarantees of student loans. Not only does the cost go up for education but on top of it there is more demand for college education and curriculum around the country are being watered down.
    The report data does provide the latest indication, however, that the recession reduced income inequality in the United States, at least temporarily. The average income of the wealthiest families fell much more sharply than the median, indicating that some of those at the very top of the ladder slipped down at least a few rungs. According to the Fed, nearly every demographic group lost wealth. Isn’t that the opposite of what you and Obama keep preaching? Too bad the FACTS don’t back you up.