Day: Saturday, January 31, 2009

Blood still boiling

Posted by Chief Blogger – 31 January, 2009

If Rudd wants to wage an ideological war then let’s have it. Hawke and Keating in the 1980s were smart enough to recognise the failings of socialism, Rudd hasn’t arrived at that point yet. He wants to take this country back to the Whitlam-Fraser years of stagnation and heavy government intervention. Malcolm Turnbull is well placed to take the fight to Rudd and his neo-socialist mates and win. History is on our side.

Now in the past I have not been a great fan of MT, but on the economic front MT gets it right and knows what he is both saying and doing. Unlike Rudd, MT has made it in business. In the US the Republicans are facing a similar neo-socialist challenge, from Obama and the Democrats. Former Governor and presidential candidate Mitt Romney - who like MT has also made it in business – had the following to say about this neo-socialist challenge:

The difference between us and the Democrats is this: they want to stimulate the government, and we want to stimulate the economy.

And the same applies here in Australia. Rudd is about increasing taxation and regulation to strengthen the hand of government, while the Liberals are about reducing taxation to stimulate the economy, i.e. helping individuals and families. The issue is about providing people with the right incentives to invest, employ and spend to get the economy going again. This means reducing taxation, getting rid of regulations that protect special interests (unions, ALP funding sources, welfare lobbyists) and controlling excessive government spending. Let Rudd argue why he wants to protect the government and MT can argue why he wants to protect individuals and families through economic prosperity underpinned by free market economic liberalism. I’m confident MT can win.

Cold War II

Posted by Chief Blogger – 31 January, 2009

As we all knew from the very beginning, Rudd mislead voters about his economic persuasion. He is no economic conservative, but a hard-core socialist determined to undermine the efficiency of free markets with odorous government intervention in the form of higher taxes and over-regulation. Writing in the hard-left Monthly magazine, Rudd had this to say about the recent economic downturn:

…it falls to social democracy to prevent liberal capitalism from cannibalising itself…

Nothing could be further from the truth. It is depressing and infuriating that the PM does not understand the main causes of the recent economic downturn. Government intervention in the US mortgage market is the main cause, even Bill Clinton (though not without blame himself) admitted as much last year as he chided his fellow Democrats for blocking his attempts to solve the problem. The same happened to Bush. Social democrats in the US Congress are the main culprits here, not so-called free market neo-liberals.

At the moment I am living and working in the US for a top 30 US Bank. My bank did not make any of the sub-prime loans which have been the cause of so much trouble. With good reason too. These so-called NINJA loans – no income, no job and no asset loans – were issued by Banks because of Congressional regulation, to people that never had any hope of making the repayments. These NINJA loans were pushed by the most extreme social democrats in the US Congress – House Financial Services Committee Chairman Barney Frank and Senate Banking Committee Chairman Chris Dodd – to boost rates of home ownership amongst minorities. They sought to achieve this through wholesale mortgage financiers Fannie Mae and Feddie Mac – which are government business enterprises able to be manipulated by their political masters for special interests. This was backed up by the so-called Community Reinvestment Act, or affirmative action for mortgage lending. Even the left-wing Boston Globe has admitted this:

…the Community Reinvestment Act, empowering regulators to punish banks that failed to “meet the credit needs” of “low-income, minority, and distressed neighborhoods.” Lenders responded by loosening their underwriting standards and making increasingly shoddy loans. The two government-chartered mortgage finance firms, Fannie Mae and Freddie Mac, encouraged this “subprime” lending by authorizing ever more “flexible” criteria by which high-risk borrowers could be qualified for home loans, and then buying up the questionable mortgages that ensued.

All this was justified as a means of increasing home ownership among minorities and the poor. Affirmative-action policies trumped sound business practices. A manual issued by the Federal Reserve Bank of Boston advised mortgage lenders to disregard financial common sense. “Lack of credit history should not be seen as a negative factor,” the Fed’s guidelines instructed. Lenders were directed to accept welfare payments and unemployment benefits as “valid income sources” to qualify for a mortgage. Failure to comply could mean a lawsuit.

NINJA loans would have never made it in a free market, but the market was not free. It was clouded by special political interests to the final detriment of everyone. The last thing Australia needs is more government intervention when excessive intervention was the main source of the problem to begin with.