Solution: Legalize Falsified Appraisals

Not.

Circa 2005, at some exotic location, I was at a table of top performers for Washington Mutual Loans.  They were all planning their exit strategy from WaMu, into retirement, based on their rate of income, which would never decrease, since housing prices never went down, and it did not occur to them that interest rates might go up, or worse, banks might stop lending (or tighten requirements.)  In any event, they were super-successful based on native talent, and no external forces were going to get in their way.  Every one of them, and it was true, could command a signing bonus with any other bank. Countrywide had approached every one of them. I offered that Washington Mutual would be out of business before any of their dreams could come true, and their options with it.  It was an easy prediction to make, because 100% of WaMu business was based on a false economy, and at some time the boom would bust.  At that point plenty of people were predicting the bust, on solid grounds.  This information was available to anyone who wanted it.  Extremely few wanted it.

Stories about foreclosures being 100% of the market like this were easy to predict.  It will get much worse.  I am no financial adviser, but if anyone asked me, I'd say get out of "paychecks, property and pensions" and into means of production.  Take money from the one and put it into the other.  (Have nothing in stocks or bonds, which is either property or pension). Any tax and penalty hits today will be nothing compared to future taxes and losses.  Better to have $100,000 in beehives on rented land today than $150,000 in a pension.  Have something you trade in.

Don't plan on bugging out, because things are worse overseas, and if it gets bad, it will be easy to blame the American, where you are the only American.  Especially if your income is pension money, and the locals love you for your money, and your money stops coming in, why, they will no longer love you.

One of the most terrifying phrases I ever hear is "John, I think you are right..."  None of us has the whole picture, and I am especially happy to hear from people who disagree.

But for the economy to improve, prices must fall.  Indeed, in a properly functioning economy prices are always falling, as options widen.  So getting out of property pensions and paychecks is an act of confidence in our recovery. It will take at least 30 years to get out of this mess (as long as it took to get into this mess) and that is too long to watch your paycheck, property and pension shrink.  Get over to production, but own it free and clear, so as prices for your items drop too, it is ok, because the prices on everything else is dropping as well.

And another phenomenon is crimes are converted to government policy in due course.  One factor contributed to the housing debacle was falsified house appraisals, a very wide practice during the housing boom.  Appraisals mopped up what "money" was available to the borrower. Q. "What is the appraised value of the house?"  A. "How much money do you qualify for?" Now comes a legislator who desires to make the falsification of appraisals a legal requirement.

After Ponzi made famous his scheme for swindling investors, the United States Government introduced the Social Security program, in design and fact a Ponzi Scheme.  What was illegal for Ponzi, is legal for Uncle Sam.  Madoff did the same and is off to prison.    While Christopher Cox was responsible for policing people like Madoff, and private citizens were demonstrating Madoff was a criminal, the SEC was unable to perceive any Madoff wrongdoing.  There is a very simple reason for this:  Christopher Cox's entire adult life was working for the government.  If governments run Ponzi schemes, they must be good.  In this foggy state, Cox cannot perceive that what Madoff is doing is wrong, since Uncle Sam does the exact same thing.  Government regulators simply cannot tell right from wrong, for the internal contradiction would be overwhelming.

As a matter of power politics the scheme cannot be stopped, but in terms of results the outcome is exactly the same.  People get hurt.  Had Madoff been subject to the market he would have been brought down very early, or perhaps he would not have tried.  But as it was, Madoff could count on hiding behind the morally obtuse (and economically ignorant) SEC to advance his ponzi scheme.  People got hurt.

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