A Conspiracy of Imbeciles
Washington is playing you for a sucker
— shamelessly robbing you blind —
and they’re not just getting away with it;
they’re actually being rewarded for it
Here’s what you must do now
to hit them where it hurts
and quite possibly, to save your financial future
Dear Business-Builder,
I sincerely hope that by now, you fully understand how deeply all of us here at The Total Package are committed to your success.
That’s why our team spends hundreds of hours every week and well over one-hundred thousand dollars each year to bring you all the business-building, response-boosting secrets this blog has become known for. All for free.
But this issue isn’t about any of that. Because the fact is, there’s an 800-pound gorilla in the room — a crisis that overshadows and dwarfs the importance of our individual careers and businesses.
I’ve avoided writing about this situation here for months. But now, it’s getting to the point where it could hurt you. I can’t, in all good conscience, stay silent and let that happen.
Now, I’m well aware that what I’m going to say will be controversial. The truths I’m about to present will be welcomed by many of my readers. Many others will be offended by these facts. For that, I can only apologize in advance — and humbly suggest that if the truth offends you, it just might be a hint that your point of view could benefit from an honest re-examination.
I’m also aware that a few readers will complain that this is another “political” article — and that I should shut the hell up and stick to what I know.
Fair enough: I know this stuff. True, I’m only a high-school drop-out; self-taught in the ways of the world. But had my first immersion in this very early in life.
At the age of 12, I could tell you all about the Hegelian dialectic, the foundations of Fabian socialism and the tenets of free market capitalism. Since then, I’ve devoured the works of Keynes, von Mises, Friedman and many other legendary economists.
Plus, to create the promotions I do every day for financial clients, I’ve spent my life studying and writing about how the economy and the financial markets work. I have to eat, sleep and breathe politics and economics just to do my job.
And although I have, by any measure, passed this 37-year long college-level course in politics and economics with flying colors, I don’t mind telling you that I spent several additional weeks researching and documenting the particulars in this article.
Nevertheless, if it helps, you might try not thinking of this as a political article or even an economic one. Think of it as an example of how a veteran copywriter tackles a complex subject and makes it simple enough and entertaining enough to engage the man on the street.
And no matter who you are, you would do well to heed the suggestions to help you through this at the end of this article.
That said, let’s dive in …
They call this 800-pound gorilla the “Credit Crisis”
— and whether you realize it yet or not,
it is the single greatest financial catastrophe
of your lifetime …
- It has probably already cost you tens of thousands of dollars and crippled your retirement – whether you know it or not: Depending on where you live, this crisis has already slashed as much as 35% off the value of your home. And since home equity is the #1 source of retirement savings for most Americans, it is destroying the retirement dreams of millions.
- It has cost investors and retirees and pension funds hundreds of billions more: Skyrocketing mortgage defaults have killed great American institutions like Bear Stearns, Lehman Brothers, AIG, Washington Mutual and more … caused Washington to take control of mortgage giants Fannie Mae and Freddie Mac … and gutted the share value of nearly every U.S. bank and brokerage. Millions of people who owned those stocks are now hundreds of billions; perhaps trillions of dollars poorer.
- It has launched U.S federal deficits through the roof: The attempt to save our dying institutions has caused the U.S. government to spend $25 billion to rescue Bear Stearns … another $80 billion to save American Insurance Group (AIG) … $200 billion to save Fannie and Freddie … $165 billion on last spring’s stimulus package for consumers … and in the next few hours — a few days at the most — Washington will blow another $700 billion attempting to prevent a financial meltdown that could surpass the Great Depression.
Altogether, that’s more than $1 trillion (one thousand billion dollars!) spent so far in an attempt to fight this crisis … an attempt that may — or may not — prevent, as Treasury Secretary Henry Paulson phrased it recently, “The total meltdown of the entire U.S. financial system.”
- It is crushing the dollar and killing jobs: A global loss of confidence in Washington’s ability to manage the U.S. economy combined with the tidal wave of paper dollars Washington has created to fight this crisis have contributed to the greatest crash in the value of the U.S. dollar in ages and raised the specter of hyper-inflation.
Plus, as banks get stingier with borrowers out of sheer self-defense, this crisis is crushing corporate earnings and share prices. Private investors, retirees, pension funds and institutions have lost more than $3 trillion in the past 12 months alone.
And it has stalled the U.S. economy in its tracks. America’s three largest automakers are now begging Congress for $25 billion to help them survive. Unemployment is careening higher; costing legions of Americans the ability to provide for their families.
- It’s pushing the U.S. economy relentlessly towards what may well be a new Dark Age: With that $1 trillion plus, plus, PLUS being added to America’s skyrocketing budget deficits for 2008 and 2009, there’s a real danger this crisis will also crush the bond market … send interest rates exploding through the roof … and trigger yet another, more intense phase of business failures, stock market losses and soaring unemployment in the months ahead.
And make no mistake:
It’s not over yet. Not by a long shot.
Compared to the losses now being suffered in every part of America’s $13 trillion economy, the $700 billion bank bailout that’s being rammed through Congress is like putting a Band-Aid on a sucking chest wound.
And remember: That money is just to save the banks that have already suffered huge losses from past mortgage defaults. Not even Washington could print enough money to stop the massive NEW tidal wave of mortgage defaults that’s taking shape now.
The monthly payments on more than six million adjustable rate mortgages with an estimated face value of $1.2 trillion are poised to reset in the months ahead. Some of the payments on these loans are expected to more than double. And many of them on homes that are no longer worth anywhere near what buyers owe on them.
That means millions more mortgage defaults are dead ahead no matter what Congress does. Millions more repossessed homes will flood onto the market and homeowners will suffer even more dramatic losses of home equity as the glut of unsold properties hammers the value of our homes into the ground.
And it means even greater pain for those who had counted on that equity to see them through retirement.
It also means that lenders who are fighting for their companies’ lives will have no choice but to continue raising credit requirements … slashing credit limits … and denying loans to all but the most supremely qualified applicants.
And that, in turn, means that every manufacturer, wholesaler, retailer and service business in America is now facing the specter of plunging sales, profits, share prices and in all too many cases, bankruptcy.
As those companies slash jobs or vanish altogether, millions of family paychecks will vanish, too. Nearly every American family is now a candidate for having to live off their savings; many are sitting ducks for bankruptcy and poverty. And every American child and even the as-yet unborn will suffer the consequences and pay the price for decades to come.
But that’s not what really scares me …
What terrifies me … what wakes me in a cold sweat … is that the single most corrupt, inefficient, incompetent and idiotic institution on face of the planet is now trying to “fix” the problem.
And that especially frightens me because, the closer I examine the roots of this crisis, the clearer it becomes that it was engineered almost entirely by the very bumbling buffoons who are now charged with ending it: The U.S. government.
And yet nowhere in the media do I see anyone even trying to uncover the roots of this crisis. What caused it? How can we make sure it will never happen again?
Instead, they simply report that …
- Banks and mortgage companies made loans to unqualified borrowers.
- Banks then sold those loans to Fannie, Freddie and other financial institutions.
- Fannie, Freddie and others then turned those loans into investment vehicles — and sold them to governments, banks and investors both here in the U.S. and worldwide.
- When all those unqualified borrowers inevitably defaulted on their mortgages, these investments crashed in value.
- And when their investments crashed, they pushed institutions and investors who had bought them to the brink – or in the case of Bear Stearns, Lehman, Fannie, Freddie, IndyMac, AIG and many other banks and investment banks, over the cliff.
But nobody I know is asking the obvious question …
“Why did so many smart lenders
make so many stupid loans
to so many people who couldn’t pay?”
It’s clear that lenders granted mortgages to millions of people with no savings or down payment … no proof of income, too little income to qualify and even no income at all … with no assets and with a record for welching on every debt they’d ever incurred; who’d had flaked out on credit cards, auto loans and pretty much every other loan they had ever been granted.
But why?
Why did lenders begin saying “YES” to these abysmal credit risks instead of their standard, resounding “NO”?
Were the CEOs at the helm of these lending institutions merely overpaid idiots who had no idea that loaning money to unqualified borrowers — and worse; to borrowers who had proven time and time again that they would NOT repay — would come back to bite them on the arse?
Or were they simply financial masochists; intentionally bankrupting their institutions and destroying their shareholders’ wealth just to get a cheap thrill?
The answer, of course, is neither. They were simply doing what they were told to do: What Washington forced them to do — under penalty of law.
Here’s the simple, frank truth about this crisis
the mainstream media will never tell you …
Here’s a quick timeline — all easily checkable online:
Gee, thanks, Mr. Carter …
1977: Jimmy Carter rams the Community Reinvestment Act through Congress. It all began 31 years ago when Billy Carter’s brother Jimmy heard that some lenders were “discriminating” against low-income borrowers …
Now, nobody I know has ever accused Mr. Carter of being the sharpest crayon in the box … But he did know one thing: He was by-god incensed — incensed, I tell you — at discrimination of any kind!
Make no mistake here: Oprah was NOT having problems getting loans; nor were most of the millions of other hard-working, responsible minority wage-earners in America.
And it’s not like credit was available to low-income white people with no savings, no down payment and lousy credit histories.
But the facts, of course, didn’t matter to Carter. All that mattered was that someone had used the “D” word, so something had to be done. Political correctness demanded it.
And so, unfazed by the fact that lenders are supposed to be discriminating when deciding who’s a good credit risk — and blissfully unburdened by even the glimmer of an understanding of the catastrophic long-term impact of his actions — Mr. Carter sprang into action.
And in no time flat, Jimmy’s Community Reinvestment Act – “CRA” for short — had sailed through the Democratic Congress.
Suddenly, any lender caught denying mortgages and other loans to low-income people faced serious penalties — including denial of applications to open new branches, to do mergers and acquisitions and other draconian measures.
1992: The Fed drops a bombshell. In what was then heralded as a "landmark study,” the Boston branch of the U.S. Federal Reserve announced that, despite the many pounds of flesh the CRA exacted from lenders who turned down low-income loan applicants, mortgage discrimination was still pandemic in the financial system.
So in a matter of days, the Boston Fed produced a manual for mortgage lenders nation-wide stating, "Discrimination may be observed when a lender’s underwriting policies contain arbitrary or outdated criteria that effectively disqualify many urban or lower-income minority applicants."
“Hey buddy – forget the beer.
You want a HOUSE?”
So what were these "arbitrary” and “outdated" criteria?
“Oh, little things,” said the Fed. “Like the size of the mortgage payment relative to income. And the prospective borrower’s savings or credit history.
“And don’t even bother checking to see if the borrower has any income at all,” said the Fed. “If you do … and he doesn’t … and you deny the loan … you’re a dirty, no good discriminator!”
“In fact, come to think of it,” the Fed mused, “if the applicant has participated in a credit-counseling program, that means he’s now a responsible borrower. Better grant him the loan or you’re toast!”
“Oh. And also? Welfare payments and unemployment benefits are valid income so you’d better include them when qualifying loan applicants.”
And so lenders did what they were told under penalty of law and the surge of bad loans accelerated.
1995: Bill Clinton cranks it up a notch. Thirty-six months later, still alarmed at the “discrimination” the Fed had uncovered and eager to reward low-income voters for sending Bubba to the White House, Andrew Cuomo — Clinton’s secretary of Housing and Urban Development — investigated Fannie Mae for racial discrimination.
He “found” it of course — and quickly proposed that fully HALF of Fannie Mae’s and Freddie Mac’s portfolio be made up of loans to low-income borrowers by the year 2001.
Next, Clinton introduced significant revisions to the Community Reinvestment Act. In testimony prior to the new bill’s passage, Gene Ludwig — Clinton’s Comptroller of the Currency — explained why reform was so desperately needed:
“Fifteen years ago,” said Ludwig, “Congress passed the Community Reinvestment Act. But the CRA has never achieved its full promise.
“The proposed reform package will channel billions of dollars a year in new credit into America’s distressed communities.”
PLAIN ENGLISH TRANSLATION: Hey, lenders! You’re still not giving enough money to people who can’t — or won’t — pay it back. This law ensures that you will!
“Don’t want to give loans to lousy credit risks?
“I’ll fix you!”
Staggeringly idiotic. Right? But wait — the Clinton administration was only getting warmed up.
According to the Los Angeles Times, the president and his Democratic majority in Congress "… mandated that Fannie and Freddie increase their purchases of mortgages for low-income and medium-income borrowers. Operating under that requirement, Fannie Mae, in particular, has been aggressive and creative in stimulating minority gains."
Then, the Clinton administration added the final kicker: Fannie, Freddie and the nation’s lenders would be allowed to turn these subprime loans into securities and sell them to financial institutions and investors world-wide!
Given the fact that Clinton enjoyed a Democratic majority in Congress at the time, it should come no surprise that the revisions sailed through Congress in no time flat.
1999: It’s working! Four years later, with low-income borrowing skyrocketing, an enthusiastic Fannie Mae could be heard publicly bragging about “the end of discriminatory lending in America.”
It even singled out its most shining example: A lender, it said, that worked with community organizers and followed "the most flexible underwriting criteria permitted."
Previously, this lender had made only $1 billion in low-income loans. By 1992, under the provisions of the Community Reinvestment Act, it had loaned $80 billion to low-income borrowers. And thanks to Clinton’s “refinements,” that firm’s loans to low-income borrowers were well on their way to surging to over $600 billion.
“We just did what Congress told us to do. ”
– Angelo Mozilo, CEO Countrywide Financial
So, one might ask, “Who was this virtuous lender that had increased its loans to low-income people a whopping 59,900% in just over one decade?”
You guessed it: It was the very lender whose demise in 2007 turned out to be the first domino to fall in the subprime lending mess: Countrywide Financial.
2001: Bush administration warns of impending doom. In Bush’s first year in office, the White House’s chief economist, N. Gregory Mankiw, warned Fannie and Freddie’s loans to unqualified borrowers and other complications at the two institutions were creating a huge risk for the entire financial system.
Representative Barney Frank (D-MA) denounced Mankiw, accusing him of having no "concern about housing."
The New York Times fell into lockstep with its Democratic masters in Congress, reporting that Fannie Mae and Freddie Mac were "under heavy assault by the Republicans," but that it was O.K. — because these entities still had "important political allies" in the Democrats.
Congressional Democrats dug in their heels and made absolutely sure nothing was done to address the impending crisis.
2003: The Bush administration tries to avert catastrophe a second time. Alarmed by fraud and abuses that had been discovered at Fannie and Freddie, President Bush repeatedly urged Congress to pass a bill increasing oversight on the two companies.
The Bush administration had every reason to be worried: A report by outside investigators had concluded that Freddie Mac manipulated its accounting to mislead investors. Experts were warning that Fannie Mae was not adequately hedging against rising interest rates.
“These two entities — Fannie Mae and Freddie Mac — are not facing any kind of financial crisis.”
Representative Barney Frank (D-MA)
Arguing against Republican attempts to reform the two corrupt mortgage lenders in 2003.
Bush’s Treasury Secretary, John Snow, told the House Financial Services Committee, ”There is a general recognition that the supervisory system for housing-related government-sponsored enterprises neither has the tools, nor the stature, to deal effectively with the current size, complexity and importance of these enterprises.”
After the hearing, two Republican congressmen — Representative Michael G. Oxley of Ohio, chairman of the Financial Services Committee, and Senator Richard Shelby of Alabama, chairman of the Senate Banking Committee — announced their intention to draft legislation based on the administration’s proposal.
”We have seen in recent months that mismanagement and questionable accounting practices went largely unnoticed” by the independent agency that regulated Fannie and Freddie, said Oxley.
But once again, congressional Democrats and their lackeys in the media scoffed at the Bush plan to save Fannie and Freddie. Some went so far as to point at the plan as proof that Republicans hate minorities and poor people.
And Barney Frank (D-MA) now the Chairman of the powerful House Financial Services Committee — the sack of excrement in a suit you see grandstanding on TV as Congress mulls this newest bail-out — denied there was any crisis at all.
“These two entities — Fannie Mae and Freddie Mac,” declared Frank, “are not facing any kind of financial crisis.”
And so, yet another opportunity to avert the crisis that now is — according to Treasury Secretary Hank Paulson — threatening to “completely destroy the entire U.S. financial system” was lost.
The simple truth
Despite everything the Democrats in Congress are telling you now …
Despite all the mindless spin the mainstream media is trying to shove down your throat on the six-o’clock news …
Despite all the talk about how “greedy lenders and incompetent CEOs and lax government regulation” caused this crisis …
Despite the ridiculous claims that only increased government regulation and intensified congressional oversight can end the crisis (regardless of the fact that political regulation and oversight caused it) …
 |
“The Government Did It” “Through the stick of the CRA and the carrot of Fannie Mae and Freddie Mac, the Fed created the mortgage market debacle.” – Economist Yaron Brook |
And despite the lies congressional Democrats and their presidential candidate are telling in an unbelievably hypocritical attempt to hang this crisis on the Bush administration (and by extension, on John McCain) …
The simple truth is, this crisis was engineered and implemented almost entirely by Democrats.
The more frightening truth is, they once again control Congress — just like they did when the laws were passed that created this crisis.
And the terrifying truth to anyone who cares about his family’s financial security is that they will probably also control the White House, come next January.
The CRA — the idiotic law that created this crisis — also made Obama who he is today.
“Why is that so terrifying?” you ask …
Consider this: According to his autobiography, Obama spent his years after college and before he ran for the Illinois Senate becoming an expert in real estate law and fair housing while working as a “community organizer.”
What he was really doing was blackmailing Chicago lenders into throwing money at his low-income constituents. And the club Obama used to bludgeon banks into submission — into granting loans to people with no down payment, no job, no income and lousy credit histories — was called … you guessed it … “The Community Reinvestment Act of 1977.”
Now, to anyone who has even the glimmer of an understanding of how Washington works, it should come as no surprise that Mr. Obama was well-rewarded for his untiring efforts to force banks to throw money at unqualified borrowers — and it should also come as no surprise that those rewards flowed from the two quasi-private companies that benefited most from the explosion in subprime mortgages: Fannie and Freddie.
Recently, we learned that of the hundreds of political contributions made by Fannie Mae over the last couple of years, Obama received the second highest amount — second only to the Chairman of the Senate Banking Committee, Christopher Dodd (D-CT).
Other Democrats were also well-rewarded for this catastrophic explosion in subprime lending with lucrative jobs at Fannie and Freddie. And four of these former Fannie and Freddie big shots — former CEOs and a board member of these corrupt institutions — have been on the Obama bandwagon since Day One:
1. Franklin Raines, former Clinton administration budget director who earned $90 million in his five years as Fannie Mae CEO, from 1999 to 2004 — has been called by the Obama campaign several times for advice on (believe it or not) housing and the economy according to The Washington Post …
2. James Johnson, former aide to Democratic Vice President Walter Mondale, who earned $21 million in his last year alone serving as Fannie Mae CEO from 1991 to 1998 — was appointed to head Obama’s vice presidential selection committee …
3. Jamie Gorelick, former Clinton administration deputy attorney general, who earned $26 million as vice chair of Fannie Mae from 1998 to 2003 — has been mentioned as a prime candidate for a possible cabinet position in an Obama administration by insiders, and …
4. Rahm Emanuel, former Senior Advisor in the Clinton White House served on the Board of Directors for Freddie Mac where he is said to have opposed every reform proposed by the Bush Administration. Emanuel is credited with being the one man responsible for rallying support for Obama early on among Congressional Democrats.
Take a good, long look at those names and faces: These, along with the aforementioned Jimmy Carter, Bill Clinton, Barney Frank and Christopher Dodd, are the eight people who created this crisis and who profited the most from it — both politically and financially.
Now, their abysmal economic ignorance, political ambition and mindless greed are killing great American companies … robbing millions of their home equity and their paychecks … driving the federal deficit through the roof … and pushing us to the brink of the greatest financial catastrophe in U.S. history.
Plenty more blame to go around
Now, I make it no secret that I’m no fan of either one of the major political parties.
Like Reagan, I believe that government isn’t the solution; it’s the problem. And by studying history, I’ve learned that whenever Washington attempts to solve any problem, it’s a slam-dunk it will only wind up creating two, three or even more far more serious ones.
Even the most casual observer would conclude that as a class, politicians in both parties are notorious for their inability to locate their own arses — even if allowed to use both hands. Until now, we have tolerated them because they — and the massive, bloated, abusive, oppressive government they have created — have been merely a dead weight on us.
Not now. Now, there’s a very real risk that their lust for power, political ambition, corruption and cowardice will cost you your job, your home, and any prospects for a prosperous life.
The ONLY way to limit the damage they do to you, to me and to every other American is to keep Washington on a short leash … prohibit them from dabbling in matters they have no business fooling with … and to strictly limit the size and scope of the government.
“A pox on both their houses,” is my studied philosophy.
So I don’t mind telling you that plenty of Republicans bear guilt for this crisis as well.
Many are guilty of not having the guts to scream bloody murder while these mindless laws were being passed …
Of not taking a stand when Bush tried not once but twice to head off this crisis at the pass …
Or worse; voting with the Democratic majority for laws that elevated populism and political correctness above financial prudence.
And sure: Many CEOs at our distressed or defunct financial institutions are guilty of the same things.
And of extending the same courtesies the government demanded for low-income borrowers to the middle class; luring millions of others into more house than they could afford with no-down-payment loans and adjustable rate mortgages with irresistibly low interest rates.
Plus, the way I see it, there’s no reason why anyone with an IQ larger than my shoe size (11) would invest a penny in mortgages signed by people who had no means or no intent of repaying them.
And of course, millions of Americans are also complicit for allowing themselves to be seduced into taking on more debt than they could ever repay.
But make no mistake: It took two Democratic presidents working with Democratic majorities in Congress to engineer this crisis. Without the disastrous “fair housing” legislation imposed on this country by Carter, Clinton, Frank, Dodd and other Democratic lawmakers, this crisis would never have happened.
And never forget; it was the Democratic Party that killed not one but two attempts by the Bush administration to stop this credit catastrophe before the first subprime lender bit the dust.
This is what happens when hysterical race-baiting and populist politics are allowed to subvert prudent business practices.
This is what happens when despicable politicians are allowed to buy votes from low-income people with laws that endanger your financial survival.
This is what happens when imbeciles — most of whom have never held a real job or have had to make payroll in a company of their own — are allowed to tamper with the economy.
And now, these same clowns
are about to make matters worse
… AGAIN!
Unbelievably, these same drooling morons — the very people who caused this mess in the first place — are now charged with saving our economic system from certain destruction.
Because they are the majority party in Congress, the very Democrats who engineered this crisis — most notably Senate Banking Committee Chairman Christopher Dodd (Fannie Mae’s fair-haired boy and #1 beneficiary of its political contributions) and House Financial Services Committee Chairman Barney Frank (who blocked every early attempt to avoid this crisis) — are running the show.
And if the current state of the presidential polls are any indication, our next vice president — Obama’s running mate, Joe Biden, a loyal Democrat while this disaster was being created in Congress — will be available to break any ties on future Senate votes.
And of course, Obama himself — the self-proclaimed “Candidate of Change” — who has never attempted to change or reform one, blessed thing in his entire life …
Who, much to the contrary, shamelessly exploited Chicago’s notoriously corrupt “pay-to-play” political system for all it’s worth and also built his entire political base on the very law that created this crisis …
… Will soon be lighting up his beloved Marlboros in the Oval Office.
So …
- The next time you hear that your home equity has vanished into thin air and that your house is now worth less than you paid for it; maybe even less than you OWE on it …
- Or find that your credit limit has just been slashed or you get rejected when you apply for a loan …
- Or check your stock portfolio or retirement plan only to find that it’s a mere shadow of what it once was …
- Or discover to your horror that our massive federal deficit has gutted your buying power and driven the price you pay at the supermarket or gas station sky high …
- The next time you hear that a friend or family member has been laid-off, is teetering on the brink of bankruptcy and in danger of losing everything he or she has ever worked for …
- The next time you want to kick the dog because your newly nationalized mortgage or insurance company is suddenly exhibiting all the competence of the U.S. Post Office and the sensitivity of an IRS collection agent …
- And the next time Barney Frank or Charlie Rangel or Joe Biden or any other one of these unrepentant, hypocritical scoundrels tells you he’s raising your taxes because you’re not shouldering “your fair share” of the $1 trillion burden his blundering has saddled you with …
You know who to thank.
The moral of the story:
If you trust Washington to save you; you’re screwed.
If this crisis proves anything, it’s that these people don’t give a good goldarn about you. You’re not rich enough to bail out or poor enough to be given a hand-out.
So you, my friend, are on your own.
There are certain things you can do to protect yourself, though. And with this crisis unraveling at a breakneck pace, there’s no time to waste.
Here’s a checklist I hope will come in handy …
1. Rake in every dollar you can. First and foremost, it is absolutely critical that you do everything in your power to increase your income while you still can. Pull out all the stops in your business. If you work for someone else, work overtime or even multiple jobs if you have to. Sell stuff you don’t need or don’t use. Scrape together all the dollars you can.
2. Save every dollar you can. Guard every one of them like a junkyard dog. You’re going to need them. Go through your family budget with a fine-toothed comb and ruthlessly, unapologetically slash every unnecessary expense. The more you save now, the more you’ll have to see you through when the ca-ca hits the air conditioner.
You might also want to check with a financial advisor to explore ways to cut every payment you have to the bone. Because when the trillions of counterfeit paper dollars Washington’s now creating out of thin air begin working their way through the economy, you’ll probably be able to repay every debt you owe with dollars that are worth a fraction of what they’re worth today.
Also — whether you realize it or not, your single largest monthly expense is NOT your mortgage or your car or your health insurance or anything else. Your largest financial burden by far is the government — the federal, state and local taxes you pay dwarf every other expense you have.
So seeing a qualified tax advisor about ways to make absolutely sure you’re paying the absolute minimum required by law would be a stellar idea. Be sure not to forget your property taxes. If your home is declining in value, you may be able to appeal for a downward adjustment that could save you thousands.
3. Watch your bank accounts like a hawk. Whatever you do, do NOT assume that your bank is safe just because this most recent bail-out proposal is likely to become law.
Most banks have already suffered massive losses. Many are wounded; bleeding; struggling to survive. And many still have huge amounts of toxic loans in their portfolios that are steadily eroding their asset bases even further.
The bail-out is NOT going to replace the money they originally paid to buy those investments — and that means they’ll be booking even more losses as they dump those investments into the U.S. Treasury in the months ahead.
If you have more than $100,000 in a bank, make absolutely sure that no single account at any one bank contains even a single dollar more than the limit that’s insured by the FDIC. If you’re not clear on the rules, check out the FDIC website at WWW.FDIC.GOV
4. Program your business for success in this tough environment. If you are starting a business or are considering expanding your business’ product line, carefully consider this new economic environment when setting your strategy.
Think especially hard about recession-proof products and services — the things people can’t live without. Seriously consider products and services that cater to the very wealthy who are likely to be least affected as this crisis unfolds. Also consider things that might help beleaguered wage-earners, consumers, taxpayers, and other business owners get through this alive.
5. Expect stocks and mutual funds to plunge. If you own stocks — either directly, in a mutual fund or ETF or through a retirement or pension plan — you should seriously consider the risk you’re taking with that money.
Some analysts, including the ones who have been the most accurate in their warnings about this crisis from the get-go, are warning that, with the economy and stock market now as nervous as a hooker at a snake-handler convention, the next chunk of bad news that hits the wires could be the straw that breaks the market’s back.
And please — for all our sakes:
HELP US GET THE WORD OUT!
Send this article — in its entirety — to everyone you know. Post it or link to it on every blog, every forum you can think of. Send more links to everyone on your Contacts List and to reporters at the newspapers you read and the TV networks you watch.
Write letters to both of your Senators and Congressperson and urge everyone you know to do the same.
Demand that they repeal the Community Reinvestment Act that caused this crisis (yes, it’s still on the books and still being enforced!).
Tell them you know what they did to cause this crisis.
Demand that criminals in Congress who actually DID cause this crisis suffer at least as distressing a fate as the corporate CEOs they’re scapegoating.
The sooner Washington gets the message that we’re on to them and that we’re not going to take it any more, the sooner things can begin to change.
This is YOUR financial future we’re talking about here. If Washington’s power brokers have proven anything, it’s that they can NOT be trusted to do the right thing until millions of us rise as one and shout “Enough!”
Yours for Bigger Winners, More Often,
Clayton Makepeace
Publisher & Editor
THE TOTAL PACKAGE
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Comment by Daniel Levis — September 26, 2008 @ 3:46 pm
Thanks for having the stones to call a spade a spade old man.
Comment by Clarke Echols (Resident scientist and economist — September 26, 2008 @ 3:50 pm
Clayton,
You’re understating the problem.
I retired from 30 years of corporate employment and rolled my $313K retirement fund into an IRA to keep Uncle from taking half in taxes. Six months later the balance was $580,000.
When I saw one company drop from $150 to $145/share I called my broker to dump my 1000 shares. He told me the analysts at his company in NY (Paine Weber) had the stock target price still at $170 and I should hang on. It was "temporary". When the company went belly up, I got $350 instead of $145,000. The SEC fined P-W $200M for investor fraud. They nailed Morgan Stanley $3B for the same thing, if my info is correct. In two years my $580,000 was dead zero.
The problem is caused by morons named Reid, Pelosi, Frank, Dodd, Obama, and a host of others constantly on the take who have never done an honest day’s work in their puny, parasitic lives. It started with Carter and was exacerbated in the Clinton years. And the ones responsible walk away with $millions in their pockets with the wreckage to their backs. Carly Fiorina was hired by HP and I left. A few years later they paid her a pile to leave after wrecking the company, just as I expected.
AlBore gets filthy rich playing global warming idiots for suckers. They’re just like Nero, fiddling away while Rome burned. Society would be well served if they were tried on various offenses, then shot in the public square for malfeasance. Pelosi likes high gas prices because she wants to "save the earth " (her words, not mine). She would be of greater worth if she donated her carcass to fuel a coal-fired power plant.
The Republicans have plenty of egg on their face too. If they’d stand up and show some INTEGRITY before they go into office, then KEEP it while there, they’d have held control 2 years ago.
I think it was Thomas Jefferson who said if the banks ever got control of the economy, it would be worse than a standing army.
But this I *know*: There is a God in Heaven who’s keeping score and knows where the skeletons are hidden (hiding?). They are mortal. They will die. Judgment Day is not a fable. They will be held to account, and those wronged will be compensated. They would be wiser to recognize that reality and conduct themselves accordingly now, while they can benefit. But if they don’t, they will reap what they deserve, as will all others.
Right is right because it is right. Not because it’s someone’s opinion.
And when a majority of the population chooses what is wrong, that brings destruction on society. It happened in Rome, Greece, Babylon, Egypt, and in the ancient Americas as well as Asia. History repeats. Those who fail to learn its lessons are doomed to repeat them.
And the thumb-sucking pin-heads who avoid political confrontation and productive confrontation with the facts, who hide behind some professed "disinterest" in "organized religion" will meet the same inevitable accountability for their pathetic lives and what they did with them.
Everyone is given the power to choose between good and evil, right and wrong. And those who choose incorrectly cannot escape the consequences, eventual though they may be and later than sooner. But also those who choose right cannot escape the inevitable rewards that come from doing and being right.
Spot-on Clayton.
Let the dogs bark. The caravan moves on. And the seedy, seamy, corrupt, self-serving, self-deluding, self-destructive morons behind the mess will eventually rue the day.
And may those who don’t want anything out of life have fond memories of never having anything…
Clarke
Comment by Joe — September 26, 2008 @ 3:51 pm
Nice sales letter Clayton, especially the bullet points midway through. If you had a newsletter or product that you were selling at the end of it, I would have bought it in an instant.
A couple contrarian questions for you:
1. Would the millions of Adjustable Rate Mortgages that were dished out to anyone with a pulse — even if they didn’t have a snowballs chance of meeting the adjusted payments later on — add to the problem? How about creating mortgages like an interest only mortgage payment for the first 5 years (or more?)
2. Would borrowing massive amounts of money from foreign countries to finance the ongoing war in Iraq negatively deflated the value of the dollar?
3. Would the skyrocketing price of oil and gasoline for a country is heavily dependent on them caused a massive spike in the cost of living, delivery of products and services to the marketplace? Maybe even depress the economy downward towards a recession?
4. Would re-electing a president who took the country from a cash surplus to a cash deficient come back and bite the country in the collective arse? (Think about it: Would you let someone keep running your business who cleaned out the bank accounts and maxed out all of your credit lines within a year or two of starting? Not likely.)
The answer to all four of these questions is a bittersweet Yes.
I agree with Clayton on one thing: we haven’t seen the worst yet. This upcoming election result doesn’t matter much to me anymore: Whoever wins is inheriting the Titantic after it hit the iceberg and has taken on 3 feet of water. Worse, we’re handing them a single leaky bucket to try to bail the ship out with.
McCain and Obama are the best candidates that both parties could come up with to solve the problems of this country? Pretty sad news if you ask me.
As for your arguments about Carter and Clinton messing things up… didn’t Reagan, Bush, and the current President have multiple opportunities to remedy the problem before it started collapsing $700 billion dollar banks like Washington Mutual?
Yep, they did and they didn’t fix the problems either.
Take care,
Joe
Comment by John Deck — September 26, 2008 @ 4:09 pm
This is a must read. I just put it on twitter.com. The least I can do.
This is not a bailout but a liquidity crisis brought on by government management. Once these programs start rolling they are almost impossible to stop becuase of the Obama’ s out there. It steps on their vested interest.
Great piece Clayton
John
Comment by Mike — September 26, 2008 @ 4:10 pm
Thank you for the info. I didn’t know this.
Comment by Sam McMillan — September 26, 2008 @ 4:11 pm
Bravo! Neal Boortz (mothership Atlanta WSB) has also been trying to get the word out. Not near as detailed as you. Thank you.
Comment by Christopher Tomasulo — September 26, 2008 @ 4:24 pm
Great article.
It’s unfortunate that money and law are not elementary education requirements. It would make for a better world.
People intersested in catching up should check out the BAILOUT READER at mises.org:
http://mises.org/story/3128
Comment by Steve — September 26, 2008 @ 4:33 pm
Clayton:
You had me at hello… but lost me when you got obviously partisan and your personal agenda came screaming into the equation.
You are looked to as a highly intelligent and obviously literate voice and counselor. I’ve benefited from, and greatly appreciate, all you’ve given back to us "little folk." Yet.. we’ve also given much to you as well.. patronage and paychecks included.
The current financial debacle is no more a partisan issue than the price of oil. There is much more at the core of this than Democrat or Republican.
You eluded to one of the little publicised or discussed Fabian Socialists and when I read that - I thought to myself "Finally! Someone is going to expose the truth who has an audience that might really be able to give it some momentum." Then…
You dropped the ball and had to go politics. Why?
The current debacle is not Bush, Clinton, Reagan, or Carter.. although they are all part of the problem BECAUSE they never chose to be part of a real solution.
This problem is rooted in greed, power, control, and the center of the entire issue is a fiat system, fractional reserve structure, central banking ponzy scam of macro-global proportions that has spanned generations.
One of the absolute best, although admittedly controversial, books ever written on this topic was "The Creature From Jekyl Island" by G. Edward Griffin. If you really want to get a core understanding of what’s happening, why it is, and where its all headed… at least for a character building and contrarian perspective, not associated with any agenda other than apparently trying to understand the history of the cabal, syndicate and conspiracy that Americans, and indeed the world, have swallowed - hook, line, and sinker.. without questions, then you need to seriously consider this, and several other viable publications, in your arsenal of material helping you to make a non-biased, supremely educated opinion and better, less obviously agenda’d conclusion.
Your advice is highly appreciated.. including the end actions you recommend in your article, thank you very much for taking the time to make these honest, and potentially unfavorable but necessary and accurate recommendations Clayton.
I just can’t see why you took this devastatingly important issue… and added further spin and politics to it, when that is exactly the kind of distraction we do not need in this country at this time.
I’m no fan of the policies or socialist agendas you mentioned in your article or those like them created by any political party myself… it wouldn’t be too hard to put a similarly ugly post together about the irresponsible policies of Republicans that have also contributed to this nations current debacle (looking no further than last weekend; let’s discuss the bailouts and bonuses on Wall Street and whose agendas Paulson or Bernanke, neither of whom are elected officials or representatives having anything to do with Consitutional government, are promoting…) to what end though?
In fact, let’s face it… it has taken ALL of government to ignore the people and allow this, and much worse, to come to pass. It has also taken the peoples, our, acquiescence to allow them to do this damage. In fact, if anyone can be blamed, its "We The People" for being lulled into a hypnotic state of "Duh!"
Still respecting you… and still much more to say, but I’ve got to get back to work… I’m a real estate investor/copywriter who is holding on tight… planning my next move, watching… listening… calculating… hoping.
Just wanted to ask you to consider possibly digging deeper and maybe being more centrist in your arguments… because the obvious, not subtle, agenda of this article you’ve written, what could have been a great service to many, has tainted the value, at least to me, and left a really nasty taste in my mouth Clayton.
With my deepest respect…
Comment by Stewart — September 26, 2008 @ 4:34 pm
Hey Clayton, I am sure glad you went easy on the fools in the government. If I were you I would have been tougher.
I’m afraid this country is led by a high functioning moron, and no one in congress has the intelligence or presence of mind to out-think him. As for your comments about the Fourth estate, well they’d sell their younger daughter for a place at the table.
This election promises to be an unplatble choice between donkey dung and elephant dung. The reality is both these presidental candidates and the dimwits they have chosen as VP candidated are not qualified to be dog catcher, let alone the leader of this country.
I hear the strains of a violin playing in the background as my nose crinkles from the acrid smoke of the American empire burning. I suppose the one bright spot, if you will, is that foreigners are repatriating their dollars as they snap up American infrastructure, buildings, farmland, and other tangible assets at fire sale prices.
Comment by Colin Noden — September 26, 2008 @ 4:50 pm
Thanks Clayton,
I saw this coming over two years ago using technical analysis, but I am shocked at the depth of the problem. I’ve twittered the link and hope that all who visit here do the same. It has to get out fast.
Not only USA but the world is tilting. This is NOT a crisis, it is a profound shift. And the thing that bothers me is that CNN and other "respected" news sources are ignorant, or intentionally misleading America. Trust me, the international news people know what is going on.
How is it that the Country which stands for freedom and individual autonomy is the country whose Government ( and media) feels that the truth must be hidden from the masses? Bewildering….
Comment by Kalidasa — September 26, 2008 @ 4:50 pm
Thanks for this Clayton. I had been wondering what the cause of all this was beyond the great adjustable mortgage scam. Wouldn’t it be great if the country could be run like a business?
Comment by John — September 26, 2008 @ 5:03 pm
Hi Clayton,
Thank you for posting this article; it needed to be said.
A related youtube video:
http://www.youtube.com/watch?v=H5tZc8oH–o
John
Comment by David — September 26, 2008 @ 5:06 pm
Clayton,
Glad you put the effort into this and what you said is the truth as I can say I saw it first hand. It always amazes me that some people can, even after you offer irrefutable facts, still want to blame the people who had their hands tied by others who didn’t agree with the end result.
As a builder of more than 550 homes, I saw first hand this irresponsible lending practice take hold. In 1998, the FHA allowed the down payment assistance programs to be started and they quickly took hold of the mortgage lending industry. The Nehemiah program as it was called, suddenly took all the "A" credit people out of the marketplace because most people wanted to pay nothing down (who wouldn’t!), which left the "B" credit worthy people. Once they were gone, about 1 1/2 to 2 years into the program, we were left with "C" credit people. To my amazement they were qualifying with credit scores of 520, missed payments within the last 12 months, no money in the bank, and I had to even give them money back at closing!
Before this people always found money for the down payment, or they could do sweat equity to get into a house. I never saw one of those people get into a foreclosure situation. When the government took the incentive away from people having to earn a home, that was when the fuel was added to the fire and it became the beginning of the end.
Comment by Malcolm Smith — September 26, 2008 @ 5:10 pm
It’s a well-written article, but I have to disagree with you. The CRA is really much less to blame than you state.As Robert Gordon, an economics prof at Northwestern points out, about half of the defaults in question here are on loans made by mortgage companies not regulated by the CRA.And Countrywide - the first big domino in the chain - has a history of avoiding the CRA. As the California Reinvestment Coalition points out on its website, "Countrywide accepts NO CRA responsibility to engage in community reinvestment activity in California. None."Finally, in their January, 2008 report, NY law firm Traiger & Hinckley LLP flatly states the CRA was a mitigating factor - not a contributing one to the crisis: "Compared to other lenders in their assessment areas, CRA Banks were less likely to make a high cost loan, charged less for the high cost loans that were made, and were substantially more likely to eschew the secondary market and hold high cost and other loans in portfolio."So blaming the mess on previous Democratic administrations and the CRA just doesn’t ring true.If we want to point fingers, I think we’d be more accurate aiming them at the consistent Republican policy of deregulation that began under Ronald Reagan. That’s what enabled all the institutional money to pour into risky investments.I don’t usually disagree with you, but I think you’ve missed the mark on this one.
Comment by Jim Furr — September 26, 2008 @ 5:14 pm
Hi All,
This "situation" is orchestrated and managed by the Treasury Secretary and the Federal Reserve Head along with entrenched bureaucrats and shoved down congresses thought with a meaningless front of "Debate" that will always result in the Treasury and Fed getting exactly what they want.
Be not decieved into thinking that the congress or president or political party had ANYTHING to do with this.
The Fed and Treasury are Pro the Big Money Interests. That is who is behind all of it.
All else is smoke and mirrors - red herrings.
Jim Furr ><>
Comment by Brian Ridgway — September 26, 2008 @ 5:22 pm
Clayton,
I’ve been reading your stuff for a while, and I have huge respect for you as a writer, businessman and as a person.
This is a brilliant article, extremely well-written and very cojone-rich.
An earlier responder to your article noted G. Edward Griffin and "The Creature From Jekyll Island". Perhaps you are familiar and are too wise to stir the waters into mud for the uninitiated, or perhaps you are not familiar, but here is the deeper view, as I understand it:
NONE of this is due to incompetence, and most of it is not the ’simple greed’ it appears to be on the surface. This is a multi-year, long-term, master strategy to ruin the nation, drive us into third-world status and eliminate U.S. sovereignty.
We (the FREE American sheeple) are the only thing standing between the most hard-core internationalists/globalists and their ultimate intent: Their publicly stated goal to wipe out national sovereignty, ‘reduce’ the world population to a few hundred thousand and then give themselves the planet for a personal playground.
The wealth of the American people was a HUGE obstacle to their plan, and -come on, you know this- the central plank of socialism is ‘redistribution of wealth’. Take a GOOD look at where ‘Amerika’s’ money has gone— a really good look. This is an incredibly brilliant, ultra-strategic master-plan to slide the wealth of the American dream right out from under us, as we prepare to usher in the North American Union (which they all publicly deny, but it easily researchable).
Join the Campaign For Liberty NOW. Just google it. Join downsizedc.org and DO IT NOW. Start taking action - or, mark my words- you will soon find yourelf unable to take ANY action.
Not doom and gloom, but ‘keepin it real’.
Brian D. Ridgway
Comment by Michael — September 26, 2008 @ 5:24 pm
Great summation Clayton!
I think the "blood in the streets" scenarion described by Baron Rothschild has finally arrived, so it must be a good time to invest, huh? If this were the USA in 1973 or 1987, I probably would never hesitate since the fundamentals were still sound.
Unfortunately, theses times are more like St. Petersburg in October of 1917. Fundamental shifts are happening in the economy, social security, and government simultaneously . . . a perfect storm that threatens our very way of life!
Comment by Bruce NC — September 26, 2008 @ 5:27 pm
The new political gospel: public office is private graft.
Mark Twain - More Maxims of Mark, Johnson, 1927
It seems that the least capable and most delusional are drawn to politics…where their condition worsens.
When things get bad enough, I sincerely hope that We the People will kick these pigs out of the public trough.
Thanks Clayton
Comment by George Paukert — September 26, 2008 @ 5:33 pm
Clayton,
I agree with every word you’ve said. And, believe it or not, I’ve been talking about a Depression in 2008 for years.
I am in the process of posting articles about how the real estate bubble started and how and why it ended. I’ll have them up on my RoadToWealth.com website over the weekend.
The next president has his work cut out for him. Unfortunately, we have two weak candidates who cannot resolve today’s problems. That tells me we are in trouble.
What can save us? We need to replace all the people in the Congress and Senate. We cannot afford to have politicians with a 7% - 18% approval rating!
But it’s the voters’ own fault. We cannot keep electing the same people as Congressmen and Senators. some of them have been in office 30 - 40 years!
Until we change ourselves and throw the crooks out, nothing will change. We’ll just have more of the same.
Comment by Greg Hughes — September 26, 2008 @ 5:46 pm
Clayton:
Thanks.
Yours is the best commentary on this issue I have read. I hope the entire country finds this article.
Greg Hughes
Comment by Ron Carmichael — September 26, 2008 @ 5:49 pm
Clayton & to everyone reading this article…
Clayton this is extremely powerful stuff and needs to be said…the problem is…this is not time to review the history (as interesting and factual as I found it).
I will leave the strong political stuff aside as I am not an American citizen. I am a soon to be extremely impoverished Brit. We too have been massivley sold ‘down the line’ and with absolutely nothing left in the cupboard. This is after many benign years.
All the political posturing is crap & we have been fooled & robbed blind.
Let’s get to the point.
The message you so clearly spell out is absolutely right…I have been staggered that people could not see the train coming.
I thought I was extremely pessimistic on the outlook, but this is nothing compared to the real situation.
I also urge your readers to TAKE ACTION NOW! This is not a $1 trillion dollar problem. The bailout is not going to work!
This is a calamitous environment and requires immediate action. Try and get your assets out of dollars, avoid TBonds. Go for the safest, most liquid assets you can.
Where that is not possible - HEDGE NOW AT ALL COSTS.
For those of your readers who are more financially active, I would encourage them to look to start trading, there has actually never been a better time. But you need a disciplined, structured approach.
There are ways out of this crisis and great opportunities are already presenting themselves, as I am seeing in the markets.
For instance, the FX markets last week presented some of the greatest trading opportunities I have seen. You may think I am telling you to jump in the fire but I can assure you, this is not the case.
IBy way of backround, I have been involved in the financial markets for 25 years and have been through some pretty hairy moments, but never anything like this.
So, Clayton, good on you for saying what needs to be said. I know you work closely with the guys at Weiss Research. Again, leaving the politics aside, you’re absolutely on the button.
To your readers, I would also urge you to personally take action NOW and tell all your family and friends that they MUST SECURE THEIR FINANCIAL FUTURE. I am not saying this to suddenly join the growing band. I have been warning people since prior to the ’start of the crisis’ last Summer.
There has never been a more important time. This means helping family and friends survive and if possible (which it is) prosper in these catastrophic times.
Watch your money & watch liquidity.
Kind regards & good luck.
Ron Carmichael
Comment by Rick Rakauskas — September 26, 2008 @ 5:52 pm
Thanks Clayton for filling in some gaps. I can’t imagine Australian lenders would accept orders to "lend to anyone with a pulse".
Y’all must be subconsciously thinking of moving down here to Oz too - nice to finally see "arse" being spelled correctly …
Live long. Live well.
Comment by Roberto, from Chile — September 26, 2008 @ 5:52 pm
Bravo! I like dots over ‘I’s.
Many of us in this corner of the world feel politicians should be banned from sunlight altogether, yet the mass keeps electing them to run our countries and run away with more than their fair share.
There’s an old adage stating "people get the ruler they deserve", so any and all efforts aimed at changing the awareness of people so inept, ill-intentioned ones don’t make it to government are welcomed.
Good job.
Comment by Nisha — September 26, 2008 @ 5:52 pm
I just love how one-sided this entire letter is. I guess Republicans had nothing to do with this crisis and it’s all Barack Obama’s fault and President Bush, John McCain and the rest of their cronies, who have been running Washington & Wall Street for the past 8 years or more had nothing to do with it. Yes, McCain postponed (not really) his campaign to go save the country. Well if you believe that, I got some Lehman Brothers stock I’d like to sell you. It’s funny Republicans (of which you are obviously) are always complaining that Obama hasn’t held office long enough but when the crap hits the fan he’s the first one all of you point the finger at. Everyone, Republican and Democrat alike are responsible for this mess. It’s obvious which side you’re on. I just think it’s lame that you use this space to voice such a one sided opinion, but it’s your blog. I’ve said it once and I’ll say it again, white folks are scared to death of a African American man running this country and will come up with anything to keep it from happening. When we get past all the smoke and mirrors that’s what’s really at heart.
Comment by Clayton Makepeace — September 26, 2008 @ 5:55 pm
Thanks for the comments, guys …
Hey, Joe …
In answer to your point #1, ABSOLUTELY! You’re right.
But as I point out, these "creative" financing techniques were born to draw low-income people into the market. And as I think I pointed out later in the article, lenders DID screw up by extending these schemes to the general public.
And what nobody else wants to say out loud is that intellegent, educated middle class people allowed themselves to be seduced by these kinds of loans and they also bear part of the guilt for this.
Point #2: Yes, I agree again. The trade deficit did damage the value of the dollar. Mindless Democrats and gutless Republicans spent too much and had to borrow the rest of the money that our bloated, staggeringly corrupt government needed to pay its bills from "we the people" and from foreigners. So, while the American people were sinking into a debt sinkhole, so was our government.
That said, though, take a look at a chart of the U.S. dollar index and you’ll see that the greatest damage to the value of the dollar — by far — began in August of last year when Washington began throwing money at this crisis.
#3. Yes, again. And someday, when I write an article about energy, I’ll be more than happy to address that point.
But although higher energy prices can slow our economy and even push us into recession as it did in the early ’70s, it’s a stretch to think that they could trigger anything even approaching the massive financial meltdown we’re seeing now.
#4 Rhetorical question. Bush is not running for office.
Clinton had the dumb luck to be elected at a time when the rise of computer technology, wireless technology and the Internet were creating the greatest economic boom since the Industrial Revolution.
Bush was UNfortunate enough to be president when that boom went bust and when terrorists took $3 trillion out of the economy on 9/11.
If you can name one thing Clinton did to create that technology boom (other than choosing Al Gore; the guy who says he invented the internet as VP), I’ll agree that he was an economic genius.
Otherwise, his greatest economic legacy will be signing the international trade agreements that resulted in the dismantling of America’s industrial base and sending millions of American jobs overseas.
Finally, if you’ll check the article again, you’ll see that I mention that Bush DID try to reform Fannie and Freddie in 2001 and again in 2003 — but the Democrats in Congress and the media demagogued the issue and killed the administration’s freform bill.
And Steve, life is politics. If you’ll re-read the article, though I think you’ll notice that, while I do my best to give the lie to Democratic attempts to lay this crisis on the Republicans, I skewer the GOPers as well.
A point I didn’t make that I think is important: These two political parties are only a symptom of the real problem. The real problem began when they figured out they could "buy" power and public office by confiscating liberty and money from groups that wouldn’t vote for them and gave it to groups that would.
That’s why the Democrats passed CRA and that’s the root of most of the corruption and incompetence we see today.
I would take issue with your suggestion that this article is "partisan" simply because it asks congressional Democrats to take responsibility for creating this crisis and blocking Republican efforts to prevent it. I also skewer the Republicans for not having the balls to stop this idiocy before the crisis got out of control.
The crowning riony is that, while Democrats are trying to add MORE money for ACORN to the $700 billion bailout … and as Republicans are finally digging in their heels, the CRA that created this crisis is still on the books and NOBODY has said a word about reforming or repealing it!
Why? Because if any politician suggested such a thing, he’d immediately be labeled a "racist."
As far as me becoming "centrist," I’m far to the left of the Democratic party on issues of personal liberty and far to the right of the Republicans on fiscal issues. I guess maybe, on average, that kind of puts me in the middle. Right?
In the meantime, though, I’m left with voting for the lesser of two evils, or wasting my vote by going with a righteous candidate with no chance of winning.
Is this what the founding fathers had in mind? I doubt it.
Malcom: You miss the point. CRA loans were the first domino: The primer in the cartridge that ignited the powder, propelling the bullet into the brains of these now-defunct financial institutions.
And you’re dead wrong about Countrywide. The company was held up as a paragon of "non-discriminatory lending" as it used the most "flexible" terms possible to increase its CRA lending from $1 billion to over $600 billion. Quoting California fair housing activists and New York law firms can’t change that fact.
As far as regulation is concerned, it’s based on what I think is a silly assumption: That politicians and bureaucrats are somehow better people and more honest than the rest of us are.
I reject that notion entirely. Businesspeople never gassed 6 million jews; politicians and bureaucrats did. Power corrupts; absolute power corrupts absolutely.
Oh — and did you notice that the 200 regulators charged with overseeing Fannie and Freddie never lifted a finger to prevent this crisis?
Regulation is not the answer. More government is not the answer. Getting government out of our lives and out of our businesses is the answer.
Cheers!
Comment by Clayton Makepeace — September 26, 2008 @ 6:08 pm
Hi, Roberto! My first wife is a Chilena. Where are you? Santiago? Vina? Valparaiso? Gorgeous place!
Nisha. Read the article. I’m not a Republican. I’m a Libertarian. Socially liberal; fiscally conservative. This article takes both parties to task. It just lays the blame for THIS particular crisis where the facts say it belongs.
Like you, I’m disgusted with both parties and say so — explicitly — in the article.
And you know what? I would LOVE to see an afro-American man or WOMAN run this country — so long as he or she has integrity and is fiercely committed to preserving our liberties, our right to run our businesses as we see fit, and to keeping government off our backs.
Martin Luther King was right: We should judge people — including candidates — on the content of their character. Period.
So wouldn’t that mean that voting FOR a candidate solely because of the color of their skin … on the basis of race … is also racist? Hmmmm.
– Clayton
Comment by Sacramento Steve — September 26, 2008 @ 6:17 pm
Clayton,
Thanks for taking your valuable time to research and present this information. Most of us agree that while what you’ve presented is correct, it’s only the tip of the gigantic iceberg. Allowing Barney Frank and Christopher Dodd to be involved in the solution is a travesty. One of the worst financial decisions ever made in this country was to securitize debt which began with credit card receivables and worked its way to mortgages. Another really bad decision was made when Wall Street started hiring all those PhDs in statistics and mathmatics to create computer models used to slice and dice these securitized loans. And perhaps the absolute dumbest decision was believing that all these s0-called geniuses could eliminate the business cycle and minimize risk with their software programs. The entire financial system has been corrupted by ego and greed. And you are correct . . . we ain’t seen the worst. Keep your informed rants coming. We need more people like you getting on their horses and riding through the streets sounding the alarm.
Comment by Stephen Goodell — September 26, 2008 @ 6:18 pm
Clayton,
I admire your passion on this economic and political calamity. To a great extent I share your concern and point of view. However, I believe our consumer excesses and greed are more widespread than you suggest. I’m extremely concerned. Over the past two years, I became conscious of the number of times I heard, “We haven’t seen this since the Depression,” from top officials in both public and private sectors. Thanks for taking scarce time to bring this treatise to the table. I will circulate it. And thanks for all you’ve taught me about marketing. Stephen Goodell
Comment by Analía — September 26, 2008 @ 6:30 pm
Clayton,
Great you decided to post this. I already emailed it
Comment by karen — September 26, 2008 @ 6:42 pm
Reading and watching the news as well as posts like this remind me of days we all had to practice hiding under our desks in case of nuclear fallout. I remember keeping a box of my favorite things, like that 3 ft. doll I really loved, pajamas, clean underwear, some clothes - all kept by my bedroom door - just in case we all had to retreat to the basement "fallout" shelter. The doll is long gone but I can’t help feel I wish it were simple enough to pack a box and think I’d be safe down in the basement. Yet, the bottom line is we are all in this together - here as well as the rest of the world and somehow it’s up to us - yes, the "WE the People" of the USA and the World to get us out of this. We have been shown by example of all our "leaders" that they aren’t particularly concerned about us, any of us. Wait, I think my "golden parachute" might be on its way -
Comment by Gerold Bigorajski — September 26, 2008 @ 6:43 pm
The current sit is described mostly right, however the analysis is missing a crucial point.
The FED — a consortium of private banks — is printing dollars and lending them to the US government since about 1929, when these same banks manufactured what is known as the 20th century big economic crises. And don’t believe they’re doing so (printing and lending dollars) for philantropic reasons — The US government has to pay high interests for every single buck the FED prints and hands out.
These interests in the past decades have created debts that by basic economical laws can never be paid back as their grand total including compound interests way exceeds the quantity of Dollars out there anywhere on our planet.
You could also state that these guys are owning America — and not only America, as basically every nation on Earth owes them trillions of Dollars, Euros, Yen, Pound or whatever currency in the meantime.
And be sure they decided who was elected for president in the past. And thus they were the guys BEHIND every president since at least 7 decades.
So guess who manufactured the current crises? I know it sounds a lot like conspiracy theory, so just check the facts about the FED given above, call your local representative and ask him whether the above is true or not. Look up the level of governmental indebtedness for any industrial country at Wikipedia or whereever you like and ask the question not answered there: ‘Who borrows all that money?’
Sorry Clayton — it won’t matter very much who will be elected beginning of next year. The decision is to let the economy crash on a worldwide basis, and as the guys having made that decision already own quadrillions they surely have the economic power to push it through. So get ready to meet the probably greatest depression and inflation mankind has ever seen.
Maybe there is an answer to this misery. But I doubt it will be a political one. And it surely will not depend on who’s going to be the next president.
Gerold
Comment by Matthew — September 26, 2008 @ 6:46 pm
Clayton,
Please read, and then re-read response #8. Until you are up to speed about the federal reserve and their complete control of our money, you will not be able to understand the real problem.
We do not have a two party system - that disappeared in 1913. The Reps and the Dems are just a diversion for the real power, which is the monopoly, private, for profit corporation called the federal reserve. It’s not a federal agency nor does it have any reserves, but it is allowed to regulate money supply and set interest rates without ANY Congressional oversight.
They are, and have been responsible for every boom-bust cycle since the panic of 1907. All the while making many trillions of dollars, whether boom or bust, off the backs of us little guys.
In a recent email, Ron Paul so elegantly stated, "F.A. Hayek won the Nobel Prize for showing how central banks’ manipulation of interest rates creates the boom-bust cycle with which we are sadly familiar. In 1932, in the depths of the Great Depression, he described the foolish policies being pursued in his day - and which are being proposed, just as destructively, in our own."
Comment by Steve — September 26, 2008 @ 6:50 pm
Clayton:
Thank you for responding to my comments with well thought out and appropriate rebuttal, none of which sounded in the least bit like the overall tone of your article.
But, instead leaves me feeling like you may not have intended a one sided sales pitch for the GOP, but that you do have valid points concerning the specific events, in particular related real estate and lenders, of late and that these events may have been postponed… or possibly mitigated, if our elected officials had been more intelligent and long-sighted.
There is much more than is being discussed or seen here though, and what we are feeling now is only the tip of the iceberg, if what I understand is correct.
The current events are symptoms… not causes. They are the crop, not the seeds.
What I feel personally, what is so desperately needed, is an understanding of the core reasons for why this, not just the banks and lenders of today sticking their hands into our already drained pockets, not just the social democrats giving away America to the poor and contributing to the systematic elimination of the middle class… but the entire enchalada, the whole house of crumbling cards… happened in the first place…and an intelligent discussion of potential solutions.
"Define the problem… discuss the solutions… shoot the criminals."
Solutions… that obviously do not include a two party system of obvious lackeys and stooges who have their collective puppet strings being yanked by someone else.
Wasn’t it Rothschild who said something to the effect of…
‘I could care less whether Democrats or Republicans are in control, whether the governments are Republics, Democracies, or total Communist Dictatorships… give me the power to print and control the money, and I’ll control them all.’ (paraphrased, not quoted)
Fiat systems… fractional reserve standards… cartels and cabals of government and private businesses disguised as politically opposed but in truth in bed whoring with each other… are at the very seed of this mess.
Democrats or Republicans… two sides of the same coin.. which is being tossed in the air and flipped by the real powers holding them.
Not only here in America either… there is a much bigger play being perpetrated here.
I’d really like to hear others who understand it from it broader perspective, perhaps you Clayton, help us to see what’s really going on… REALLY… and how we, the most free and, when pissed off, perhaps the most powerful, force in our government, can prevent this "evil plan" from coming to full fruition on our watch anyway.
Anyone else for putting personal agendas aside and getting down to the real ogre’s who need to be run out of town at the end of a pitchfork?
Comment by Clayton Makepeace — September 26, 2008 @ 7:21 pm
Steve, I get the sense that you didn’t read the entire article. I think the two of us agree on most things.
Scroll up and find the subhead "Plenty of blame to go around." You’ll see that I place the blame squarely on both parties … on the use of populist politics to steal from one group and buy votes from another. You’ll see that I am NOT a Republican, but a hapless Libertarian who understands that both of the majors are beyond salvation.
And yes, I could go deeper.
I could rant about fiat money and the abandonment of the gold standard.
I could rail against Keynsian economic policies and extol the virtues of Austrian economics.
I could scream about a system that has abandoned the founding fathers’ intent that only taxpayers should be allowed to vote, thus empowering the uneducated and ignorant to vote for politicians who give them money from the public till and who pass measures that force US businesses to shower them with still more.
I could demonstrate how all of these things have contributed to the cancer that’s killing our society, our economy and our nation today.
I could make my case that when the history books are written about the Rise and Fall of the American Empire, future historians will point to these things as the seeds of our demise.
But that would take 1,400 pages. This article is only 13. So gimme a break?
Comment by Clayton Makepeace — September 26, 2008 @ 7:25 pm
Oh — Matthew and Gerold? Same response: Great topics for another day!
Comment by Michael — September 26, 2008 @ 7:28 pm
Hi Clayton,
Great stuff. I really love the line about Jimmy Carter,
"Now, nobody I know has ever accused Mr. Carter of being the sharpest crayon in the box … "
I laughed out loud…
I live in the Seattle area (a.k.a. WAMU Ground Zero)
Come to think of it… about 3,500 people here are about to lose their lives… So now we have ground zero in NY and Seattle.
… I’ve already heard office chatter that foreign short selling has caused this mess…
… but I think this time we only have U.S. government terrorists to blame..
~michael
Comment by Steve — September 26, 2008 @ 7:29 pm
ROFLMO… Too true Clayton, too true.
You Rock and your perspectives are spot on… thank you for helping me to see the deeper you and showing that you had taken into consideration these important facts.
I think I just went from Independent to Libertarian.
My big mouth didn’t ruin any hopes of ever working with you did it? lol…
Steve Odette
Comment by emv — September 26, 2008 @ 7:30 pm
A brilliant read, Clayton - beautifully written and argued even though I feel you are way too soft on Bush and his entourage. Underwriting the seemingly endless "war on terror" has also played a major role here, surely?
Looking on from the UK, where we’re catching a huge and potentially lethal chunk of highly toxic fallout from your side of the Pond, I have to say that it’s truly gobsmacking - not to say terrifying - that your country is led by such corrupt, greedy and incompetent fools. And it’s also pretty galling to have these people ram down our throats at regular intervals the patronising message that the US is the world’s beacon of "freedom" and "democracy" and the "land of opportunity". Yeah, right.
I’ll concede immediately that our own politicians are nothing much to write home about either, but how can it be that Obama and McCain have emerged as the "best" your huge and wonderful country can come up with to take over from the totally discredited and deadly Dubya? And let’s face it, how on earth did he ever get elected - and not once, but TWICE? (Though come to think of it, perhaps the first time doesn’t quite count…)
We in Britain watch what’s happening to your financial system with horror and disbelief while bits of our own follow Wall Street’s lead and unravel at break-neck speed. Many of us are angry that our own politicians also chose to allow an inflated housing market to fuel an era of unregulated and irresponsible lending and cheap credit. I’m among those who have been saying for at least five years that this was clearly unsustainable but my observations generally fell on deaf ears as folk flashed the cash and boasted about the latest "worth" of their homes. It’s no consolation to be proved right.
The frantic wheeling and dealing in Washington this weekend is akin to fiddling while Rome burns, and it may be that this version of capitalism is now very close to its sell-by date. Maybe that’s no bad thing, and out of all this chaos - and whatever the short-term cost - there will emerge a better way for all of us to do business and with it a more equitable world for our children.
Thanks again, Clayton, for opening up the debate.
Comment by Michael — September 26, 2008 @ 7:49 pm
Although as always Clayton, you make strong points very eloquently and even as persuasively as you’re famous for, I too have to take the somewhat contrarian position and point out that your well intentioned "passionate discourse" appears to me to be somewhat akin to trying to take down a diseased tree by hacking at the leaves and limbs, instead of yanking it out by its roots.
I agree with Steve above who pointed out that the real greed and corruption started a long time ago on Jeckyll Island when the unthinkable happened. A private group of rich, powerful and extremely greedy men was given total control of this nation’s currency when the Federal Reserve was created. Of course the Federal Reserve is no more "federal" than Federal Express is.
That was the beginning of the end, and President Wilson knew it when he signed it into law after it was voted through during a rush session of Congress when most members were away on Christmas holiday.
This ominous quote sums it up:
"Give me control of a nation’s money and I care not who makes its laws." ~ Mayer Amschel Bauer Rothschild
This of course also ultimately ushered in the illegal personal federal income tax system to begin to enslave every worker in the United States.
Clayton, please turn your very apt attention and concern on the real causes and the real culprits of where we are today. Take a look at who really runs "the show" and controls everything. Look deeper into the CFR, the Bilderbergers, the members of the Federal Reserve and the like. That’s the cartel of puppet masters that those "in power" take their marching orders from.
Take a deep look at the way the mainstream media (MSM) is also now owned and controlled by members of these groups. Notice how public perception is shaped, swayed and even yes, distracted by the endless barrage of spin intended to keep the masses’ minds occupied with things that don’t really matter, so that the things that do really matter aren’t recognized, let alone acted on.
This whole "meltdown" is more likely the largest intentional transfer of wealth in history, theft by deception perpetrated while hiding in plain sight by the most clever of criminals.
When more people awaken to how they’ve been duped into financial enslavement under the guise of "freedom", perhaps there will be a possibility of a real correction and a rebuilding of the kind of system of government and representation that is truly of the people, for the people and by the people.
Comment by Georjina — September 26, 2008 @ 8:11 pm
Thank God! Finally, someone else who has been watching this fiasco besides me! Least we forget, the’70’s had its own recession (I’m old enough to remember odd and even days to buy gas), as did the 80’s when the middle class all but disappeared because their income level dropped by over 52%. Lucky them, they became the politically correct ‘working poor’.
Don’t forget the ‘Fantasy Island’ of the 90’s, when the dot coms also created a feeding frenzy at the IRS for those dumb enough to take stock options from companies that went bust…some are still paying off liens on ’stock income’ they never received.
It seemed everyone looked the other way as long as it wasn’t happening to them personally. The current crop of Bucket Heads are doing just as those from the past, promise whatever you want but keep looking for a way to get yours before it all goes to hell.
Comment by Mark Hendricks — September 26, 2008 @ 8:16 pm
Excellent Clayton!
I’ve sent this out to all my friends, family, and congressional reps too.
Mark Hendricks
Comment by Joe Derer — September 26, 2008 @ 8:31 pm
"Well done Clayton… you hit the nail on the head.
Fascist Capitalism is what we’ve had for some time.
Clayton do you recall what the Fabian Society logo used to be?
It was one guy holding a globe over an anvel and another guy holding a raised sledge hammer over his head–they would beat the world into submission… and yes Clinton is a member.
Tavistock Institute is another dark place.
Thanks Clayton for your excellent piece.
Joe at AdvertisingCSI@gmail.com
Comment by Alasdair Morgan — September 26, 2008 @ 8:40 pm
Interesting article and lots of info that the media doesn’t talk about as you say. Highly biased though. You can hardly pin the current situation entirely on the Dems.
The vast amounts of money that the Bush Administration has pumped into the economy in the last 8 years to fight wars, etc., plus keeping interest rates artificially low during that period is what caused the housing bubble in the first place.
The Dems may have laid the foundation for this mess, but the Republicans have repeatedly stoked the fire.
IMO, they’re equally as useless and greedy as each other.
Comment by Tim — September 26, 2008 @ 8:56 pm
I look at it this way: I don’t like gun control. The criminals will always have major weapons, and I want to be able to defend myself if someone breaks in to my home, even if it is only a sawed-off .12 gauge. I might die, but I’m taking someone with me.
Comment by James — September 26, 2008 @ 9:15 pm
Clayton as always I enjoy you. I have learned a little more than copywriting and marketing reading your material and those who contribute. There is one fatal flaw in the time line. Bush has had a republican congress up until last year 2007 that contributed to the ills we face today. Which leads me to the same ole conclusions… The Democrats may have opened the door to the sub prime mess but the Republicans profited from it and did not close the door. The Republicans controlled Congress up until 2007 and had the worst President America has ever had. So your time line is not complete accurate or honest.
Comment by John C. A. Manley — September 26, 2008 @ 11:22 pm
This is the BEST big picture description I’ve read — by anyone — summing this all up.
Sadly, this may be the big reason why it’s all spiraling downward, but there are thousands of little reasons, too. I’m not expert, but it seems every time I turn around I read something stupid the US government has done.
Real stupid.
Like GMO crops. Just read how the government had to subsidize farmers $9+ billion dollars, because they were growing FDA approved food that suddenly no one outside of Canada was willing to buy. Third world countries wouldn’t even accept it as a donation.
Or how about how the FDA continually suppresses effective natural products, and strives to keep the population sick and dependent on drugs — a "disease maintenance program."
Right now we are looking at an economically melt down.
I suspect we should be grateful.
The drug companies will fall next.
Otherwise, what kind of country will the US and Canada have, when 80% of it’s population is sick. Already diseases that were rare amongst children, like diabetes and brain tumors are epidemic.
It doesn’t take a genius to realize that society can survive if most it’s population is sick, dying, or dead.
Or maybe it does take genius.
Anyways, difficult times ahead, leading to a purging that will bring a much more balanced future. Let the current system collapse… take the government and all it’s sold-out departments with it.
Time to reboot.
Comment by John C. A. Manley — September 26, 2008 @ 11:24 pm
"It doesn’t take a genius to realize that society can survive if most it’s population is sick, dying, or dead." — Sorry, I meant "can not survive."
Comment by Roy Primm — September 27, 2008 @ 12:23 am
It’s interesting how you left out our current President for the last 8 Years - And a Republican Majority congress for the last 6 years … Isn’t it enough blame to go around or is this just an all or your guys are wrong - and all of my guys are perfect! Hmm?
Comment by Cathy Sutter — September 27, 2008 @ 2:32 am
Clayton, great post. You know where I stand since we talked about this stuff last weekend at Carline’s…
A few comments: Clarke, loved your post. Jefferson’s quote is: "I believe that banking institutions are more dangerous to our liberties than standing armies."
Steve: What do you mean by we don’t need this distraction? From what? According to Judge Napolitano’s book, "A Nation of Sheep," the government is doing a good job of distracting everyone with the video games, celebrity gossip, and sports…well, there’s a lot more. However, I do agree with you regarding the Fed. Creature from Jekyll Island…I’ve read excerpts but not the entire book.
Malcolm: hahahahaha…apparently you did not like the "partisan" views, i.e., cutting down the Democrats, assuming that Clayton is a Republican. His later post reveals that he is not affiliated with either of the two major parties (which we should just eliminate, in my opinion).
Earlier today, I had a lively "debate" with my stockbroker in Pittsburgh, who is a liberal Dem. He informed me that it was the Bush Administration that caused the housing crisis. He got all pissed when I said something about Clinton. Whoops, I was wrong….it goes all the way back to Carter. I’ll be on the phone on Monday and will be directing him to this site.
Back to comments…
Jim: Completely agree with you