Posted on 09/21/2008 11:25:24 AM PDT by foutsc
John Derbyshire of National Review Online has written a curmudgeonly piece railing against irrational optimism. It's an entertaining read that is even more apt in light of recent developments. I'm sure the jackasses who wrecked our financial system were full of exuberant optimism and overinflated self-esteem. This hits home with me because, like the author, I do not believe in the perfectibility of man. We are flawed vessels. This brought to my mind William Butler Yeats' poem, "The Second Coming." Things fall apart; the center cannot hold; Mere anarchy is loosed upon the world, The blood-dimmed tide is loosed, and everywhere The ceremony of innocence is drowned; The best lack all conviction, while the worst Are full of passionate intensity.
Derbyshire unloads on the liberals, but I must note that conservatives fall prey to unreasoned optimism as well. Here's the money quote:
Today, however, American optimism has got completely out of hand. A corrective is needed. The corrective must come from conservatives, the people who understand that "human nature has no history." We must revive the fine tradition of conservative pessimism. In this age, optimism is for children and fools. And liberals.
Some children will be left behind. You cannot "remake the Middle East" or "defeat evil." The poor will always be with us. Black and white will never mingle together in unselfconscious harmony. Corporations will not research and explore without hope of profit. Russia will not become Sweden. Forty million immigrants speaking a single language will not assimilate.
He makes a very good point. Conservatives used to be against not just risky schemes, but any "scheme" at all. Proper pessimism would keep us out of dubious overseas enterprises and prevent hundreds of billions of new government spending.
It is not really hundreds of billions in spending, it is hundred of billions in investing. The government will pick up most of these loans at about 60 cents on the dollar. As long as the real estate market does not crash, the US government will likely make out making billions on this deal. Of course the government will get stuck with more than its share of bad loans, it should make out well on the majority of them.
Two cheers for pessimism!
From Michael Oakeshott’s essay “On Being Conservative”:
“Politics is an activity unsuited to the young, not on account of their vices but on account of what I at least consider to be their virtues....Everybody’s young days are a dream, a delightful insanity, a sweet solipsism. Nothing in them has fixed shape, nothing a fixed price; everything is a possibility, and we live happily on credit. There are no obligations to be observed; there are no accounts to be kept....Some unfortunate people, like Pitt (laughably called ‘the Younger’), are born old, and are eligible to engage in politics almost in their cradles; others, perhaps more fortunate, belie the saying that one is young only once, they never grow up. But these are exceptions. For most there is what Conrad called the ‘shadow line’ which, when we pass it, discloses a solid world of things, each with its fixed shape, each with its own point of balance, each with its price; a world of fact, not poetic image, in which what we have spent on one thing we cannot spend on another; a world inhabited by others besides ourselves who cannot be reduced to mere reflections of our own emotions. And coming to be at home in this commonplace world qualifies us (as no knowledge of ‘political science’ can ever qualify us), if we are so inclined and have nothing better to think about, to engage in what the man of conservative disposition understands to be political activity.”
Any moron with money can make money in this market. Both real estate and their associated loans are being discounted drastically because of a shortage of cash.
You want the Government (which could not make a profit on a bordello) to invest hundreds of billions with us picking up the tab if it fails?
Sounds like a sucker bet to me.
It was a bet they had to take. Our economy can not withstand a collapses of the real estate market. Massive bank failures, people losing their nest egg from their home equity, would lead to the collapse of the dollar. As long as this action finally gives banks the confidence to loan again, the real estate market will stabilize and homes will begin to appreciate again. That will mean all these loans the government buys up will become much more valuable. I am not worried about this costing too much.
Thanks for the quote! I wholeheartedly agree.
I agree we had no choice, but my point still holds: Irrational optimism got us into this. Conservatism should be blocking this kind of crap from starting in the first place. "Things fall apart. The center won't hold." Conservatives know this and other eternal truths. Liberals and progressives continually insist there are no eternal truths and thus try to invent reality.
Yes, the local economy suffered for a few years, then got back on its feet, stronger than before, a little wiser as well.
But what the government is doing here is borrowing from Peter to pay Paul. Unless the price of housing goes back up, the paper will be worth less.
Which means the only way out of the mess is to inflate the currency so the numbers line up on paper, because the housing was sold to a 'false' market, people who could not afford it in the first place.
Demand at the prices paid in that marketplace will not materialize because the demand was built out of people who wanted something, but could not realistically afford it. Had other buyers who were able to afford that housing demanded it, they would step in and buy and the bubble would not burst. That isn't happening.
Instead capable buyers who are looking for a more reasonable price are being stymied because the market is not being allowed to correct.
People on this site decry speculation in energy markets as raising the price at the pumps, but a million or so homes in the hands of 'flippers' now dumped into the market will pretty much guarantee that the prices for the distressed properties will not be met without devaluing the currency, so the 'investment' is a loser. In the meantime, anyone who has been frugal and living within their means will see the real value of any savings diminish by the rate of inflation--the real one, not the CPI.
Either way, we pay for the excesses of those who would not live within their means and the profits of a few irresponsible and greedy people who made a fortune writing these notes, as well as the political expediency of legislators and others sucking up to Socialist agitators who used the cry of 'racism' to ultimately harm our economy.
YMMV.
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