Thursday, March 13, 2008

How Government Makes Things Worse

Here's a piece from the Boston Globe that takes an interesting look at the mortgage meltdown and the boom in ethanol production and draws one conclusion: It's the government's fault.

Congress, with the President's urging, passed a bill that mandates increasing six-fold ethanol production, in the hope that doing so will decrease CO2 production, but recent studies show that doing so will increase CO2 production, while at the same time causing the poor to starve. Nice.

By the same "We're the government and we're here to help" token, Congress, passed laws that encouraged lending to those who had no business borrowing money, thus causing the mortgage meltdown and ensuing (and still going) credit crunch.

There is a thread of truth in this story, but it's contrived. Ethanol can help in the short term, but it's really only going to cause the next boom in the boom-and-bust business cycle: Commodities.

And poor people are being harmed, as production of corn moves away from its being a food source to being a fuel source.

But I have to strongly disagree that the mortgage mess in which we find ourselves is entirely the fault of government. No.

It's the fault of greedy people on both sides of the transaction, both getting caught up in the speculative frenzy we called the housing boom. As long as real estate increased in value, both sides won.

It was a giant Ponzi scheme. And it worked, as they all do, for quite some time and quite a few people got rich. And the got out.

It's been going on since the dawn of time. There's a reason that greed is one of the 7 deadly sins.

How government makes things worse - The Boston Globe