Monday, December 01, 2008

Why The Economy Can Correct Itself - Without Government

Our economy can correct itself without chronic government bailouts. It can be done through a variety of means. I would like to look at two areas in particular. Fannie
Mae and Freddie Mac need to be sold off by the government and allow to operated by a private entity. This would take the harsh political nature of this company out of play and allow for the free markets to work in the mortgage market. What would happen is that if you can't afford a mortgage you would not get one. You would need 10% to 20% as a down payment and have actual verifiable income levels to support your mortgage. This would self correct the run up in housing prices and allow for housing to be affordable for those who work for a living and chose to live below their means. Second, the auto industry does not warrant a bailout. Because of its' poor management over the years, excessive salary and benefit structure, poor product, the non consumer friendly dealership buying environment, it deserves its fate. That would be a merger and or bankruptcy. It would not be the end of our economy if economies of scale and efficiency would be reintroduced to our domestic auto industry. Why do other auto manufacturers produce at a much lower hourly rate than the big three? Why do they produce more economically?
Our government frenzy of throwing $6.3 trillion dollars in bailout money at our economy will have long reaching effects on our national debt and our ability to borrow money. It is political, short sighted, and inefficient. And ultimately taxpayers will be paying for the political gains of our economically illiterate Congress.


joebetac said...

Good comments; Joe Swick, VA

johnsane said...

Mr. Swick,
I couldn't agree more. You'd be amazed at how people want to stick their heads in the sand and act like Obama and company have just saved this country from a massive depression. A classic example is in a discussion forum taking place on Obama's tax proposal: the death of tech?

You might want to chime in, membership is free, and it is covering some ground you seemed well versed in.
Great comments,
John Sane