No, not what you think.
For the first time in recent memory, the S&P 500 composite closed lower ($805) than the spot price for one ounce of gold ($856).
I was flipping through the program guide on our satellite TV system tonight, and discovered yet another post-season college football game: the GMAC Bowl. Pressed the info button, and quickly decided that I couldn’t care less about either Tulsa or Ball State. But as I prepared to search for a different program, a thought flashed through my mind:
GMAC? That GMAC? The one that’s lost an estimated EIGHT BILLION DOLLARS over the last two years, and just last month reorganized itself into a bank holding company so it could tap SIX BILLION DOLLARS of federal bailout money?
That GMAC? That GMAC has coughed up untold millions of dollars to sponsor a bowl game, and now deigns to approach us, the taxpayers, with hat in hand?
And it’s not just GMAC. Taxpayers for Common Sense nails all the other bailout recipients that are sponsoring similar events.
Some time back, I joked to a friend that I wondered if we’d see the “Bankruptcy Bowl: Presented by Citi” from Pasadena on January 1st. Looks like we’re getting that, plus much more.
I’m starting to get the same feeling that comes over me when I’m at the supermarket, and the person ahead of me at the checkout line has a large cart full of junk food — and then pays for it with food stamps. And then whips out a wad of cash to pay for their liquor and cigarettes. The analogy isn’t perfect, but it’s the same visceral revulsion at the sense of being fleeced, and of being taken advantage of by someone “gaming” the system. No pun intended, but the term really does fit.
I tried watching some of the bowl game, but I had to turn it off.
God help this country.
I think Mrs. Yeoman Farmer and I have figured out how we’re going to weather the upcoming financial crisis: get our family farm reclassified as a bank! Then we will be eligible for, oh, a few billion dollars from the Fed.
Or maybe we should call ourselves an auto manufacturer. I’ve done so much work on my own old cars, I sometimes feel like a car company. Looks like “car companies” are going to be getting a pretty good chunk of change, too.
God help this country.
UPDATE: After publishing this post, I went out to check the mail. Once again, my mailbox was stuffed with credit card offers. And a couple of weeks ago, I had my ultimate “would you like fries with that?” moment. While finishing up a phone call with our bank about a completely unrelated issue, the customer service agent pointed out that I was eligible for a $50,000 auto loan…and was I interested in buying a car? No, I replied. And if I was, we’d probably get something cheap and second-hand, and pay cash. (I couldn’t imagine ever spending anything in the ballpark of $50k for a car.)
Okay, but the fifty grand is there if you want it, the agent assured me.
I thanked him politely, and wrapped up the conversation. But couldn’t help asking myself…where are all these frozen credit markets?
And how much of our current financial mess is due to people accepting loans they really had no need for, when a more basic house or car would’ve done perfectly fine? When we bought our first house, the bank told us we qualified for about twice as large of a mortgage as we ended up using. We would’ve loved a larger house, but the only way we could’ve paid that larger mortgage was to send Mrs Yeoman Farmer back into the workforce. It’s becoming clear that during those same years, many other people were making different decisions than we were about debt. I suppose we can only hope that the current dislocations help people choose to prioritize differently in the future. A lot of us may not have any other choice.
Well, it’s official. With today’s bailout vote, the country is now officially on Hayek’s Road to Serfdom. And I wonder what will ever be able to pull us back.
Kudos to our congressman, Mike Rogers, for voting the right way on this atrocious assault on the free market. And to Senator Debbie Stabenow, who cast perhaps the first vote that I’ve agreed with. No doubt she and I opposed the bill for different reason, but I’ll take my political allies pretty much any way I can get them.
I need to organize my thoughts before I say much more, or anything that might be taken the wrong way. Went out for a good ride on my road bike this afternoon, cranking up and down some hills, and that cleared my head a little. But I need more of that before I say much else about what’s happened to this country and what’s becoming of our freedoms.
For now, I think this succinct summary of Hayek’s book sums up most of what I’m thinking:
Hayek’s central thesis is that all forms of collectivism lead logically and inevitably to tyranny, and he used the Soviet Union and Nazi Germany as examples of countries which had gone down “the road to serfdom” and reached tyranny. Hayek argued that within a centrally planned economic system, the distribution and allocation of all resources and goods would devolve onto a small group, which would be incapable of processing all the information pertinent to the appropriate distribution of the resources and goods at the central planners’ disposal. Disagreement about the practical implementation of any economic plan combined with the inadequacy of the central planners’ resource management would invariably necessitate coercion in order for anything to be achieved. Hayek further argued that the failure of central planning would be perceived by the public as an absence of sufficient power by the state to implement an otherwise good idea. Such a perception would lead the public to vote more power to the state, and would assist the rise to power of a “strong man” perceived to be capable of “getting the job done”. After these developments Hayek argued that a country would be ineluctably driven into outright totalitarianism. For Hayek “the road to serfdom” inadvertently set upon by central planning, with its dismantling of the free market system, ends in the destruction of all individual economic and personal freedom.
Hayek published this book in 1944. Sounds like it could have been written literally last week.
Following up on yesterday’s post…another day of supposedly frozen global credit markets, ready to cut off capital flows and shut down businesses. And what does my mail bring?
1) From [NAME OF CREDIT CARD COMPANY] Small Business: 0% APR on purchases and transfers until January 2010!
2) From [NAME OF OTHER CREDIT CARD COMPANY]: Rewards for Professionals! 0% APR for 12 months. 3% back on eligible business expenses. No annual fee!
Again, I realize that credit marketing efforts are separate from the actual granting of credit. But I’ll believe we’re in a global credit market freeze when I stop finding these things in my mailbox every single dang day.
This is addressed to those who argue that the 451-page monstrosity working its way through the Congress is not really a “bailout,” but rather a “purchase” of “assets” that will always have market value, because real estate is always worth something. Putting aside the philosophical questions about whether the government has any business intervening in private transactions, or whether such interventions only encourage future moral hazards, I’d like to bring a more practical issue to your attention:
You’d better hope that these exotic packages of mortgage-backed securities don’t contain many properties from Saginaw, Michigan like the one that just sold on Ebay. I suppose $2.20 is technically more than “zero,” but I’d wager it’s a whole lot less than what was owed on any mortgage. And, while you’re at it, better check for anything in Detroit — like the house I blogged about a few weeks back, that sold for one whole dollar.
And while the government is going on a shopping spree for new “assets,” maybe their next purchase should be all those unsold cars that the automakers have been sitting on. After all, those will have value some day, too, right?
Don’t laugh. I bet some legislator from Michigan will propose an “unsold auto asset” purchase next week.