Liberal Fascism and Free Markets

I've been reading Jonathon Goldberg's book Liberal Fascism during the current economic crisis. The book is an eye-opening look at the "religion of the state" as Goldberg defines fascism. Fascists, progressives, and liberals are all one and the same and dedicated to the idea that the government alone can solve all problems, prevent all harm, absolve all sin.

There is no doubt that the real estate bubble was created by the religion of affirmative action. Government intervention (with a push by Obama) in the markets black-mailed banks into loaning money to people that couldn't pay for it. The solution proposed to solve the "crisis" is more government intervention into the markets.

President Sarkozy of France has declared that laissez-faire capitalism is dead. But, truth be told, the fascists have been in control of the markets for most of the past 100 years and the free markets of Joseph Schumpeter have not been allowed to work.

There is wide spread panic that if the Congress doesn't pass this bail-out package we are headed for the second Great Depression. I believe that we need the creative destruction of the free market to wring out all of the stupidity that has been fostered during the past 15 years by bad government policies.

I was happy that the bail-out package failed but I fear that ultimately, politicians cannot do the right thing. Here's a good description and solution to the problem.

P.S. You don't think we have a religion of the State???? Here's a creepy worship song to the Dear Leader.

Root Causes of the Market Turmoil

Based on what I've been able to discern there are two causes to the current market crisis. The first began a decade ago when our meddling politicians decided that the lenders were being racists by not lending to poorly qualified minorities in slummy urban areas (CRA). So the government relaxed lending standards and created tremendous liquidity. This allowed people to refinance property and created two bubbles - first the stock market and second in real estate.

I was able to purchase property because of this liquidity with virtually nothing but my credit score. Some of the property I got was foreclosed when the homeowners couldn't pay after borrowing many times the value of their property. (One property I got for $5k had a $71k loan against it. In truth it was probably only worth $1k, but it was owned by a minority and no one wanted to discriminate by valuing the house at its real value)

The second part of the crisis is due to a FASB accounting practice called "mark-to-market". About 8 months ago I started getting letters from all my HELOC's stating that the value of my property had fallen and my credit line was no longer available. Although property values in our area have increased, suddenly the loans I owed money on were valued at over $100k more than I owed on them. So the big companies like AIG and Lehman had to revalue all of the loans to market value suddenly showing tremendous losses and cutting all market liquidity. It didn't matter if I (and most other homeowners) were still credit worthy and paying off the debt. These firms found themselves stuck.

So the politicians that created this mess are all decrying the "greed" of the Wall Street managers (and no doubt there is greed there). But the truth is that Washington created this mess by trying to interfere in the market.

Credit Crisis Hits Home

I've been using a lease-purchase method to keep my 4 houses filled during the past 2 years. The first people to purchase an option on the first house I had bought 2 years ago decided to buy another property. So I was able to re-lease the property and collect another option payment.

The second couple has been quite religious about paying their rent on time and counting their rent credits in the hopes of buying the house. Their option expires this month and they have been unable to obtain a loan. It looks like stricter borrowing rules from the banks are the culprit. They asked if they could have another year to figure out how to buy the house since they really like it. They seemed really despondent about the possibility that I was going to evict them.

So, I am debating how to structure another option. Do I give them credit for any money they paid or any of the rent credits they earned (my position) or start from scratch (my wife's position)?

At the very least, I won't have to worry about having a vacant property. Despite the current climate of fear being generated by the media and politicians, my properties remain rented out and my cash flow situation seems stable.