An Economist's Wet Dream

Ok, so I know the title is gross but let me just say that while I know I can be an excessively vulgar person it is not a phrase I myself coined. You see, I have this slightly insane, flaming liberal (which is OK with me) public policy professor who enjoys sprinkling his lectures with nasty sexual references. "An economist's wet dream" refers to the free market in the context of the current economic crisis, as embraced by traditional conservative and/or Republican ideology. After weeks of what felt like wading through a swamp choc full of derivatives and other foreign concepts, today everything clicked and I fully grasped what is happening. I almost wish I hadn't, because now I'm kind of scared. I know alot of people are lost as well, and based on my newfound comprehension I would like to share my point of view and what some possible solutions could be.

What we can take away from the situation that is most important and that would effect young people is the lack of credit availability in the market. Banks do not trust each other, so there is less money for lending. Less money for lending means that auto financing and mortgage approvals are down in conjunction with credit card interest rates being up. This all sounded like a bunch of jibberish to me until I understood that things like this affect your ability to get a car, to afford a credit card, and most importantly to get a student loan to pay for college. That's scary because higher education is expensive and continues to be on the rise, so it may decrease one's opportunities for its pursuit later on. To quickly address derivatices, they are basically investments derived from other credit-market instruments, like backing up securities with mortagages; thus, it is easy to see how when sub prime mortgages are dealt out at high rates when people actually can't afford them, the foundation is unstable and the institution can come crumbling down as it did.

With more homes being dumped onto the markets because of foreclosures, property taxes and revenue decrease, and there is less money for the things property taxes support like education and local expenditures; these revenue losses ultimately result in job loss. Credit is what this country was founded and survives on, and its absence is like the lack of oil in a machine. Until credit markets rebound and people are able to attain it, pressure on the economy will continue to mount.

To bring my point home, laissez-faire conservatives such as presidential candidate John McCain would like us to believe that this downturn is a self-correcting phenomenon; the fact is credit cannot just appear like out of thin air. In my opinion consumer-based fixes, rather than a 850 B bailout package for corporations are needed, and these approaches are likely to be supported by an Obama Administration. The bailout is being added to the national debt (which now looks to be at about 5 trillion dollars, increased by 2/3's over the past 3 weeks), and many conservatives would complain that they shouldn't have to bear the responsibility for taxes that would be used to help people stay in their homes; this is the attitude that got us into this mess. By helping people who are facing foreclosures, we will indeed see a long-term return on those expenditures.

Look, I've never been into economics and all those things that have to do with numbers; like NRM I would venture to say that I have been afflicted with discalculia. BUT, the greater consequence of this situation means that the gap between the rich and the poor will only grow and social programs will have to be cut. Interestingly enough, the economic crisis has helped Obama in states that otherwise wouldn't have been in contention. In the words of my great friend Montana, "Who'd a thunk a financial crisis would help middle America to get over its racism".