Guest Commentary on the "Bailout Fiasco"

I first knew Peter W. Wickham Jr. as The Ol' Grey Ghost, a fellow moderator of a small discussion board. Over our short tenure of moderating the board together, I grew to respect Peter, he reminds me of other men who have been influential in my life.

I have just recently regained contact with "The Ol' Grey Ghost" and asked for his thoughts on the bailout. I share them with you here.

The Recent Bailout Fiasco

At the time of this writing, Congress has worked out their plan to enrich Wall Street further with taxpayers' money and many people are hard pressed to figure out ... well, what to even think about it and a few important questions arise in their minds. One, how did "we" get in this mess and, two, how do "we" get out of it?

How "we," or more correctly, our benevolent government officials got us into this mess is probably the easier of the two and it can all be blamed on "central planning." We humans are too stupid to figure out how to live our own lives and therefore we must defer planning to a few self-appointed experts who have nothing better to do each day than to sit around planning everyone else's life down the crossing of every T and the dotting of every I. What I generally consider the most idiotic portion of this program is that these experts are themselves fallible human beings and are just as stupid as the rest of us if not more so (if you follow the advice of a moron then you might be the bigger moron but if you're forced to follow by law then those who wrote and enforce the law are the bigger morons).

About the time I was graduating from high school (yes, I did) there was a lot of clamoring over some folks who were getting turned down for home loans that they applied for at some prominent lending institutions. These people had bad credit histories, had shaky employment, and wanted to purchase overvalued homes that were situated in neighborhoods that qualified as demilitarized zones. These people also happened to be members of racial minorities and they complained to the government that this was the real reason they were getting turned down. Lending institutions make their money by making loans so they would only be shooting themselves in the foot to refuse to loan to anyone they had good reason to believe would pay them back. But benevolent government officials as they are always in the habit of doing, ordered these institutions to make the loans to these people or they would face being charged with racial discrimination. The bankers balked at this and decided they would just quit making loans altogether rather than lose their shirts by folks defaulting. With a sly wink, the benevolent government officials said everything would be okay since the taxpayers would pick up the tab for any mortgage that went belly up and the race to the bottom was on.

Shrewd businessmen that they were, these loan officers would bundle the questionable mortgages and sell them off as fast as possible (yes, you can sell your "accounts receivable," particularly if there is some interest involved). If you give loans to those who complained and can sell those bundles, then you might as well advertise to get those who didn't complain to come back and apply again and give them loans and so forth. With the availability of easy money, there was a large demand for new homes. When the supply stays the same but demand rises, then the price goes up, up, up. If the price of something appears to be stuck on an escalator, then someone will buy just to sell later for a profit, which in it own raises the demand, which raises the price.

The interest on these loans was mostly tax-deductible while the interest earned from a CD or savings account was taxed. And why save? When the inflation rate (the amount of extra fiat money the government was dumping on the market) is higher than the interest earned on savings, then someone who had money in the bank was losing money and someone who had a loan was paying weak money for the stronger dollars he had gotten earlier. In the end, everybody was paying off one "credit card" with another "credit card" and the government kept issuing new "credit cards."

But eventually the piper had to be paid and now he is set to be paid by people who didn't listen, let alone dance, to his music. Some call what is happening socialism or corporate fascism. Straight and simple, it's just robbery.

Now what can we do? It is said that when there is a runaway train the best and easiest thing to do is stay away from the tracks but if you find yourself an unwilling passenger, then it's best to brace for impact. As for what the government can do or what the government can be forced to do, I would defer everyone to former presidential candidate, Congressman Ron Paul. Dr. Paul (yes, he's an M.D., too) predicted this fiasco just as it has played out and he has the solution but he is just one amongst 540 others who are trying to put their two-cents worth in (and draw 6 bits out) on the bailout and we will probably end up with the government issuing another "credit card" to pay off the other cards, which really only prolongs the inevitable.

What can we as individuals or families do? Stop using debt as a way to pay for regular purchases. If you have long term debt, try to renegotiate now to get better terms. Diversify your investments including even using two banks for checking accounts if you have a two income family, particularly if paychecks are of the direct-deposit variety. Keep a larger quantity of cash secured somewhere that you can physically access at all times of the day and night. Purchase gold and silver which is the global form of real money. If gold and silver are a bit pricey for your family's budget, invest in tools, especially sturdy hand tools. Someone who needs a shovel and has laying chickens will probably trade a few dozen eggs for one of your spare shovels. Buy firearms and learn how to use them. This is one investment that can help protect all your other investments and they can be bartered, too.

Now remember I am a stupid human just as much as the next guy (or gal). Take my advice for what it's worth and adjust as you see fit. You are the one with the boots on the ground in your neck of the woods and it's you and yours that are ultimately at stake. Man has lived through idiotic mistakes like this in the past and we will, unfortunately, have to endure them again in the future. Those who shout that this is the end of the world are just trying to start a stampede and as we learn from studying large predators, they just love to cause stampedes because there's always a lot of fresh meat to eat at the bottom of the cliff when the dust clears.

Peter W. Wickham, Jr.
AKA The Ol' Grey Ghost