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Thursday, February 3, 2011

Four Dollar Rebellion

For those who were not paying attention the last time around, it was not just the pervasiveness of highly leveraged mortgages that endangered the economy, it was $4 a gallon gasoline. I don't intend to let the government off the hook here, because the demand on banks to honor the Community Reinvestment Act of Carter's Administration had a lot to do with it.

The fear of banks to use their own standards for lending money on mortgages began back in the Clinton Administration when Attorney General Janet Reno promised to vigorously enforce the Community Reinvestment Act passed by Carter. The Clinton Administration even sought strengthened powers in order to do so. The threat helped to encourage a lax lending system, but it wasn't until the Bush Administration that the government actively sought to further home-ownership by encouraging lax standards and allowing mortgage lenders to bundle mortgages into Mortgage Backed Securities which fractionalized the mortgages and has led to the fraudulent foreclosures by banks who don't even know how much of the mortgage they own on a given property.

That is all bad enough, and yes, I am aware that the Bush Administration tried to rein in Fannie Mae and Freddie Mac, but I am not exactly prepared to argue out the mortgage mess, except to point out that even with all of these dangerous mortgages floating around the crucial issue did not arise until gasoline topped $4 per gallon and it will do it again.

Those who live in ivory towers might not quite understand that us at the lower levels of society work to make enough money to pay our bills. Once a week, or month, or quarter there might be enough left over to have a beer in a tavern, or go to a movie. Things are even tighter now than they were before the initial collapse. Those of us who have survived are not yet thriving as we were before 2008. Our budgets are tight enough to play a tune on. Just as before, if you take another $200 a month out of that budget to pay for the same amount of gasoline we are already paying for, the system will come tumbling down again, only this time there may not be enough financially stable families to pick up their obligations and move forward. It might just be the end.

Those of us who have spent everything we had on getting debt-free cannot now take a drubbing on our budgets and maintain our homes, the one thing left to be paid off. To be honest, I may not even try. I may take whatever cash I can and just move along. I may take the gold and silver I have converted my savings into and bury it, then stand up and let the vultures have whatever they can get.

It may very well be the dawn of the middle-class rebellion, where we all just walk away from our obligations the way the big banks and brokerages walked away from their debts with government assistance. It is about to get mean.

5 comments:

  1. As Thomas Sowell pointed out, all of those mortgage backed securities where OK until people stopped paying their mortgages.

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  2. $4 gas?

    I'm somewhat connected to the petrochemical business.

    In a short while, we will likely be fondly remembering the days of $4 gas. This largely depends on .gov policies currently pending.

    AP

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  3. AP, that's what makes this worth a rebellion, everything this administration has done will lead to it and, as you say, way beyond.

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  4. I have friend who just told me his house was foreclosed on after making payments for seventeen years. He actually got foreclosed a year ago, but was able to remain in his house until now. When he found out they were going to foreclose last year, he quit making payments. It was either make the house payment or let his 20 plus year old business go down the tubes.

    Mike

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  5. I am also in a Oil Related Business down hear on the Gulf Coast T.L. and even though the price of Oil is Rising there are very few new wells going up. And worse than the fact that this country has not had a New Refinery Built since 1978(I think). Both of these Related Facts are due to Government Regulations, New Regs concerning Drilling due to the Deep-Water Horizon and some of the STRICTEST Regs in the WORLD concerning the Refining of Oil have put this country at the "Mercy" of Countries that are in competition with us or they don't like us at all and in many cases out right Hate us.

    I have been watching the "New Crises" in the Middle East(Egypt)and can foresee a possible melt-down of the entire region happening. If that happens like A.P. says we will fondly remember $4 a gal. gasoline if we are able to acquire it at all.

    If this country don't start drilling now and start building at least a couple of New Refineries we will not be able to come close to meeting our present much less our future energy needs.We also need to utilize more of our coal resources now. We have Coal and Oil/Natural Gas in abundance here at home we could be using until there is Viable Alternatives.Nuclear is one option but it takes 10 to 20 years to build a nuclear facility and we don't have that long to wait before TSHTF.

    Dennis
    III
    Texas

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