Tuesday, September 16th 2008, 6:45 PM EDT
By Alan Caruba
“The Hitchhiker’s Guide to the Galaxy” was best known for the two words on its cover, “Don’t Panic!” Of course, when you have Vogons wandering around destroying entire planets to make way for galactic highways it’s hard to remain calm.
Anyone familiar with the “Hitchhiker” as a book or a movie would be well advised to consider its advice as the nation’s financial system deals, once again, with another greed-driven calamity.
Don’t panic! The nation has been through these financial shocks throughout its history. The one that historians point to, of course, is the Great Depression, but that occurred in part because then President Herbert Hoover did not want the federal government to get involved and matters just got worse. Hoover was an engineer by profession. Twice in the modern era engineers, Hoover and Carter, managed to make a muck of the nation’s economic well-being.
It was Franklin Roosevelt and his New Dealers that rather frantically tried every program they could think of to end the Great Depression, but it must be said that a nation rallying to the threats of World War II had much to do with the turnaround. Up until Pearl Harbor in 1941, the nation was struggling economically.
What came out of the Depression, however, was a matrix of government agencies whose purpose it was to avoid another Wall Street “crash” as occurred in 1929. Many of these agencies and New Deal programs linger on; some well beyond their practical use and some, such as the entitlement programs of Social Security and Medicare, verging on bankruptcy of their own. Government programs are rarely allowed to die.
Warnings about what is occurring to some large investment banks and the AIG, the insurer, have been circulating for a very long time. The mainstream media does not like to report such concerns. It is focused on today’s Dow Jones Average and the rise and fall of individual companies. You have to read publications like Business Week or The Economist to get the larger picture.
Since 1982, the nation has been through four major financial crises; five if you include the aftermath of 9/11.There was the savings-and-loan collapse, the dip the stock market took in 1987, the hedge fund implosion of the 1990s, and now the seizure of Freddie Mac and Fannie Mae, the two government-backed financial entities that underwrote the sub-prime mortgage mess.
In essence, greed drove the sub-prime mess because anyone with any sense at all knows you don’t loan money to people who are unlikely to repay it. Driven by misguided notions that low-income people have a right to own homes just like the middle class, the sub-prime mortgage program was doomed from the start.
Social parity or, to use one of Sen. Barack Obama’s favorite words, “fairness”, is not a substitute for sensible loan requirements. Indeed, it is usually not a good reason for any government program whereas personal responsibility is always a good idea.
The poor are, as often as not, poor for perfectly understandable reasons. They drop out of school. They have poor work habits. They prefer crime to a regular job. They engage in drugs and other bad habits. When you add in a middle class that has grown accustomed to easy credit and taking on too much unnecessary debt, you have the makings of a financial shockwave that spreads across the entire system.
Right now, some very big investment banks are in big trouble. The U.S. treasury is tapped out and, having swiftly learned the lesson of the Bear Sterns rescue, is saying you guys are on your own. Made bad loans? Have no idea what your assets actually represent? You call yourself bankers? Not for long.
Wall Street will be in a funk for a while, but most of us need to sit back and wait out the bloodletting that must inevitably follow. Bank deposits, to a certain level, are FDIC protected. Big, well-run banks like Bank of America just picked up Merrill Lynch at a bargain basement price and you can bet they believe the stock market will rebound at some point.
Why were the warnings ignored? For the same reason that people tend to ignore warnings. We don’t want to believe them.
Right now Americans are being warned that Congress must open up ANWR and the continental shelf to oil and natural gas exploration and drilling.
They are being warned that we need to build more coal-fired and nuclear plants to cope with the doubling of our need for electricity.
They are being warned that we need to encourage the oil industry to build more refineries.
They are being warned that the nation’s electrical grid needs upgrading.
You think the financial crisis is bad? Just wait until you cannot turn on the lights.
Vote for people who want to cut your taxes.
Vote for people who want to reduce the size of the federal government.
Vote for people who want to fix Social Security and Medicare.
Vote for people who want to drill here and drill now. And don’t vote for people who talk about “Big Oil” as if it is an evil institution instead of a vital national industry.
Vote for people who will eliminate the ethanol mandates.
Vote for people who will not support policies based on the United Nations-generated “global warming” hoax.
Vote for people who want to kill Islamic jihadists, not talk to them.
Vote as if your life and the future of the nation depend on it because it does.
And don’t panic!
Alan Caruba writes a weekly column posted on the Internet site of The National Anxiety Center, www.anxietycenter.com. He blogs daily at http://factsnotfantasy.blogspot.com