Monday, June 09, 2008

I have an idea: let's deregulate! Everything will be better!

I was relatively young when I began learning the fundamentals of economics; and the notion of supply and demand was a very easy idea to grasp.

It's very simple: if you have a little of something and a lot of people want it, then you can charge a lot of money. If you have a lot of something nobody wants, then you can't charge very much for it (if anything).

Some products have an finite supply, even if we do not know what that finite number is.

Oil comes to mind.

Oil is the product from which gasoline is refined.

Gasoline is the lifeblood of the American Nightmare (formerly known as the American Dream).

The American Dream had something to do with getting a spouse, purchasing a home in the suburbs (with a conventional mortgage that was protected by federal laws), a garage or driveway at that house, a couple of kids (who could be educated in your local public school), and a car or two to get to and from work, the supermarket, etc., and gasoline to fuel those cars.

Purchasing a house is no longer as simple as it might seem. A huge percentage of hard-working Americans do not qualify for a conventional mortgage. You know: you borrow $250,000 at 6% interest and pay it off over the course of thirty years. This was the way America was built, bought, and sold. It worked very well -- we created an entire modern nation on this premise. These days, however, most families are sold a house for $500,000 at an initial interest rate of 6% to be paid over the course of thirty years; then, suddenly, three or five years into the deal, the interest rate nearly doubles to nine, maybe 10 or 11%, even as high as 15%.

Now, the bank (or the mortgage holder) was making really good money at 6% and could become very wealthy in the business of selling mortgages at 6%; but they no longer have to do that. They can make any rules they want now, and consumers can either take it or leave it. The result has been many, many, many foreclosed mortgages, families abandoning their slice of the American Dream and beginning new lives as characters in the American Nightmare.

You see, the financial industry that sells mortgages has been deregulated, so that it can grow and flourish, and from that deregulation will come more competition and lower profits and more opportunity for all Americans. Just ask Ronald Reagan, Bill Clinton and all the other supply-side apologists and they will explain to you that it is better to have things this way, it's better for America like this. The American Dream can be redefined and re-engineered to succeed in a deregulated market place.

Somehow these politicians believe that it is better for a family to purchase a home they can afford for three years, then have it become unaffordable, fall behind on their mortgage, stop paying their bills, fall into foreclosure, abandon their home, and then try to find a new place to live. Bill Clinton must be able to explain to you exactly why this is better for America. He is a big fan of deregulating the financial industry, so he must have an explanation about why this is better. Just ask him.

Families that do not lose their homes in this mortgage morass have the joy of trying to afford their commute to and from work, to and from their kids' schools, to and from the grocery stores, and to and from the gas station.

Now that the average cost of gasoline is $4.00 a gallon, many Americans can ill-afford their commute.
[I]n the Mississippi Delta, some farm workers are borrowing money from their bosses so they can fill their tanks and get to work.
Rural U.S. Takes Worst Hit as Gas Tops $4 Average

Four dollars a gallon!

Remember, the energy business is an industry whose deregulation was going to bring lower prices, more competition, better service, more opportunities, and higher wages for its workers. Just ask Ronald Reagan, he'll tell you. This was his promise to us! If we chose deregulation, we would live in a land where milk and honey flowed in the streets, a chicken in every pot, the end of the welfare state, full employment, opportunities for everyone!

We are a quarter century into the promises of Reaganomics and never in the history of our nation has our economy, our prospects, our standing in the world, or our future planning looked more dismal.

Capitalism has been destroyed by the very people who promised us that deregulation would save us.

Supply and demand, the basic tenet that makes capitalism . . . well, makes it capitalism, has no impact on reality anymore.

There are millions of empty homes on the market from coast-to-coast, the supply far outweighs the demand, yet prices remain ridiculously high, and mortgages harder to get.

Gasoline continues to be refined and there is no indication that there is any shortage of oil. There is plenty, its cost is just being artificially increased.

Banking and energy are two industries we deregulated with the promise of a brighter tomorrow and never have things looked bleaker.

1 comment:

alfalafool said...

I think the justification for mortgages that are apt to explode after a couple of years fits right in with this disposable culture we live in. Who ever lives in one place for more than three or five years anymore? Hardly anybody even keeps the same job that long. We are all supposed to think like businessmen and consumers. Buy! Sell! Eat! Throw out the trash! Buy some more! Eat it up or sell it off! Whatever you can't get rid of by eating or selling, chuck it! Why hang on to anything when nobody believes there is any kind of future anymore.

The economics of oil are just unfathomable. The supply is thought to be bottomless but the prices are set to keep on climbing till oil itself becomes currency. The demand seems just as limitless. We'll pay whatever we need to rather than give it up. Any shortages we've heard about so far have actually been purely manipulative lies - spread in order to raise prices. At one time the OPEC countries would stop drilling to keep the demand high.

Now they don't even bother cutting back production to justify whatever price they want. This country along with the OPEC-kers sit on kazillions of barrels of it, kept in reserve for "emergencies" and they keep on drilling and drilling while the price goes up and up and... The monetary gains balloon into the most obscene profits ever while we spend twice as much on gas as we do on groceries and rent. They break one record after another and each time they top their own best yet and collect the highest profits ever seen in the history of capitalism. Those words somebody once put in GW Bush's mouth were exactly right: we are addicted to oil. Not that he thinks there's anything wrong with it.