Psychiatry defines a delusion as “a fixed false belief that is resistant to reason or confrontation with actual fact”.  That is the perfect definition for what is happening to the far left (in which, I of course include MSNBC).

Over the weekend, an MSNBC host, Alex Witt, was incredulous that the mere election of Barack Obama was not enough to stop the dispicable attacks in Mumbai.  The correspondent she was talking to agreed with her.  The exchange, via Newsbusters:

ALEX WITT: You know, John, and it’s interesting because there are many who had such an optimistic and hopeful opinion of things, and you certainly can’t expect things to change [snaps fingers] on a dime overnight, but there are many who suggested that with the outgoing Bush administration and the incoming Obama administration there would be something of a lull in terrorism attacks. There had been such a global outpouring of affection, respect, hope, with the new administration coming in, that precisely these kinds of attacks, it was thought — at least hoped — would be dampered down. But in this case it looks like Barack Obama is getting a preview of things to come.

JOHN YANG: He’s — it’s a rude awakening, a very, sort of, sober reminder of what he’s going to be facing in just a few weeks. And there is some concern also, there had been some concern, that during this period, during this, the transition period, between Election Day and Inauguration Day, that the enemies of the United States, those who don’t care for the United States no matter who’s leading it, would try and test the United States, would try to take advantage of this period, and I think that may be one thing that we’re seeing right now.

WITT: Okay, John Yang there in Chicago, following President-elect Barack Obama’s Thanksgiving Day dinner having been interrupted by all of this news from Mumbai. John, thank you very much.

I realize that I do not live in a perfect world, but I always hope that I live in a world where people are confronted with their mistakes and shortcomings and are able to learn from it.  You have crowned Barack Obama as leader of the free world based on this?!?  The assumption that he would warm the cockles of the hearts of our enemies?

First off, who on Earth has been predicting a lull in terror attacks?  Both attacks on the World Trade Center occurred within several months of a new president taking over, Clinton in February of 1993 and Bush in 2001.  And foreign terrorist attacks have also come during election cycles (Madrid in 2004 and London in 2005).  Anyone who was predicting calm and a winter of love is either not paying attention or, well, delusional.

Secondly, who are these people that are this disconnected with reality?  In the unlikely event any of you happen across this blog on the way to Daily Kos, let me explain something to you: al Qaeda does not care who we elect as president, they want us all dead.  All of us.  Not just the George Bushs and the John McCains, the John Boltons and Condi Rices, but the Barack Obamas, the Hillary Clintons, the Sashas and the Malias as well.  They want every single one of us killed.  Your liberal sensibilities are as meaningless to them as an ant’s menstrual cycle is to you.

If they could, they would come into your house at night, slit your children’s throat and hack off your head with your own kitchen knives.  The only reason that they have not yet is because 2,284,698 soldiers, sailors, airmen and marines have been kicking their ass for seven years.

Congratulations to Senator Barack Obama on becoming the 44th president.

As I have already mentioned, I am concerned about America’s path in the next few years.  Tonight is not the time for warnings or recriminations.  Tonight is the beginning of the process of unifying our country behind our new leader.

I have few requests of Republicans, Conservatives and fellow right wingers of all stripes:

Let’s not do to Obama what the left did to Bush.  The election is over, and by January 20, Barack Obama will be our president.  That is our system, let’s not whine about the outcome for four years like petulant children.  If you cannot respect the man, respect the office.  We are better than the left because of our respect for the rule of law over the rule of men; let’s show it with class and dignity.

Let’s focus our efforts on growing our talent pool and phrasing a rational, coherent statement for the future of the party.  Now is the time to clean house of the Republicans who cost us this election and endangered the Reagan Revolution.  We’re the opposition now, and we need to present a clear, clean and fiscally responsible alternative to the Democrats.  The saddest part of this election is that, even with Pelosi, Reid and Barney Frank as the face of the Democratic party, the Republicans still lost ground.

Rejoice in the small things.  True John McCain lost, but at least American can’t be called racist.  At least now, Iraq, Gitmo, the war on terror, the economy and job loss number can fairly be put on the Democrats.  We cannot count on the press holding Democrats accountable, but Americans will see progress or failure with their own eyes.  Obama won the keys to the kingdom, we will see what his policies do to it.

Finally, keep the faith.  Laissez faire capitalism is still the best, most efficient economic system.  A strong military abroad and fiscal responsibility at home are still keys to American exceptionalism.  Government never solved a problem without creating a bigger one; we need to stay focused and not compromise our message.  Remind each other what these principles mean to us.  Remember that four years of Carter gave us eight years of Reagan.  His heir is out there.

As I and others have pointed out, the polls are suspect.  Most polls that have Obama up by more than the margin of error assume there are far more Democrats that will vote than in any prior election.  The polls suggest that Obama wins the Democrats, McCain wins the Republicans and they split independents.  The only way for Obama to be leading, then, is for there to be more Democrats than Republicans.

This is important because the poll’s “horse race” number (i.e., who voters will vote for) is adjusted to fit this model. For example, if you poll 100 people and 45 say Obama and 44 say McCain, that may or may not be the reported result.  If, out of those 100 people, let’s say 30 identified themselves as Democrats and 30 were Republicans and 40 were independents.  If you believe there are more Democrats than Republicans, you weight the poll, meaning the 30 Democrats get counted more than the 30 Republicans.

Historically, there have been about 3-5% more Democrats than Republicans.  But many polls this year are assuming far more of a difference than that.  The ridiculous Pew poll that has Obama up by 15% is the perfect example.  Below is a chart of the party identification for the last 20 years of Pew Polls.

Year	Republican	Democrat	Independent
2007	25%	33%	34%
2006	28%	33%	30%
2005	29%	33%	30%
2004	30%	33%	30%
2003	30%	31%	31%
2002	30%	31%	30%
2001	29%	34%	29%
2000	28%	33%	30%
1999	27%	34%	34%
1998	28%	33%	32%
1997	28%	33%	32%
1996	29%	33%	33%
1995	31%	30%	33%
1994	30%	32%	34%
1993	27%	34%	34%
1992	28%	33%	36%
1991	31%	31%	33%
1990	31%	33%	29%
1989	33%	33%	34%
1987	26%	35%	39%
Average	29%	33%	32%
Difference		4%
	Min: 25%	Max: 35%
Late October 2008	24%	39%	32%
Difference		15%

So Pew is telling us that it adjusted its actual results to reflect the “fact” that there are 15% more Democrats than Republicans, even though the historical average differential is 4%, and the maximum differential over the last 20 years was 9% (1987).  In fact, even the difference between the minimum percentage of Republicans (25% in 2007) and the maximum percentage of Democrats (35% in 1987) is only 10%, only 2/3rds of the alleged difference this year.

I wondered what would happen if we used Pew’s 20 year average and reworked the poll.  I assumed Democrats go for Obama 90-1 over McCain and Republicans go for McCain 90-1 over Obama (9% are undecided in this poll), and Independents go 47% for Obama and 44% for McCain (these are the numbers that give us the 53% to 38% lead for Obama).  Let’s also lump in “others” with Independents so we have 100%.

If we now re-weight the polls to be 33% Democrat, 29% Republican and 38% Independent (or other), Obama leads 48% to 43%.  A 5 point lead, nearly within the polls 3.5% margin of error.  A far cry from the quoted 15%.

It occurs to me that we have two scenarios brewing, neither of which are good. The first is that Obama wins next Tuesday.  As I pointed out earlier, this is the texbook definition of a parade of horribles. The second option is, with Obama with a (Real Clear Politics average) lead of 6-10% going into election week, Obama loses.

Why is this bad? Because instead of the horrors of four more years of Jimmy Carter, we will have four more years of “You stole the election” along with heaping helpings of “you racist bastards.”

Starting Early for 2012 (assuming McCain won’t run for a second term); here is my ideal platform for 2012:

• Government is not the solution to our problems. Whether it’s a financial crisis, job losses, declining home ownership or any other domestic problem, government can only make things worse.  Therefore, I promise not to promise anything.  If you want pandering, see the other party.  I know times may be tough, but government intervention won’t do anything to help, and it will probably hurt.
• I will veto like it’s going out of style. I will use my veto pen at least as often as I sign legislation.  There will be no farm bill, no emergency supplementals, no handouts to corporations, people who can’t or don’t work or anyone else.  I’ve read the Constitution and it allows me to raise an army and provide for the basic functioning of the federal government.  Roadwork, the spotted owl and corn subsidies are not in there.
• Unemployment for all tax professionals. There are people out there who make a fortune every year doing other people’s personal tax returns.  This is absurd.  Only slightly less absurd is that you probably didn’t realize it was absurd until I just said so.  Personal taxes are not supposed to require a professional.  The U.S. Tax Code, with all its regulations, printed in small type on double-sided paper now weighs more than I do.  That’s too much.  The first bill I do not veto will be a comprehensive junking of the old tax code in favor of one that fits on a single sheet of paper.   For example: All income over [the poverty limit], multiplied by 12%.
• Foreign policy. I can’t get us off of Medicare and social security in this generation, but I can promise you this: every spare penny we have in tax dollars will be spent on building the biggest, baddest, pee-in-your-pants-your-terrorist-scumbag weapons systems we can make.  These are commonly referred to as Marines, Soldiers, Sailors and Airmen.  Their pay will be doubled, or as near as I can come to that.  And we’re going to equip them with everything they need.  Wherever there’s trouble, we’ll be there kicking its ass.
• For everything else, you’re on your own. It’s a tough world out there, but we’re strong enough to handle it without a huge, bloated bureaucracy weighing us down.  Some businesses will fail, some industries will dry up, but the system will work better, faster and more efficiently than if the government tries to boss you around.
• The other guy is a closet Muslim.

I was watching the Fox Pregame show in advance of the Giants-Steelers game yesterday.  Michael Strahan, a fantastic player and role model, was breaking down the Cowboys dysfunction.  He said this (or close to it) “The Cowboys have a lot of talent, but they don’t have that one guy who can rally the troops.  That one guys who’s running down the sidelines, saying we’re still in this, we can still win this.”

It hit a nerve, because I realized how pessimistic I’ve become about the election.  One of the wonderful things that about sports is it teaches us, on a smaller scale, how to handle life’s challenges.  They faced overwhelming odds, but in football as in life, 80% of it is just showing up.  They showed up, and they fought their heart out and one the greatest upset in Super Bowl history.  They proved that, in life as well as football, Nobody’s Perfect and Nothing’s Impossible.

So I’ll take a cue from my gap-toothed friend and take a more positive outlook on the election.  In football, the most important game is the first Sunday in February.  Once you get there, the only thing that matters is the final score.  In politics, it’s the first Tuesday in November.  The goal is the same: forget the past and make history.

So here is what we have going for us:

Obama’s true colors are beginning to show.
Obama is a good politician.  It’s hard to survive the grinding, corrupt Chicago political machine without the cold-hearted blood lust that drives most politicians.  But when you’re ahead 12 points in some polls, it becomes easier to let your guard down and let those independent voters see your true colors.  Take, for example, the recent backing of Card Check (the Unionization Plan for America), the Fairness Doctrine (No Free Speech for You) and redistribution of wealth.  This is why Joe the Plumber is getting so much play, as is the interview from 2001 where Obama expresses his regret that the Supreme Court has not imposed redistribution of wealth just as it imposed desegregation.

Obama is ahead in the polls, right?
As others have pointed out, the polls are somewhat suspect.  Obama and McCain are getting the same support from their base (85-90%) and are splitting undecideds evenly (45% each).  The only way Obama is leading by 12% is if you believe (as the pollsters apparently do), that there are up to 10% more Democrats than Republicans.  Although Democrats historically have more registered voters (it helps when fictional registrations like “Jive Turkey” and “Mickey Mouse” are 99.99% Democrat), the largest disparity in recent history was about 5%, not 10%.  That could mean that the polls are biased in Obama’s favor, meaning the polls that show Obama only up by 3% might be accurate (or even those might be too optimistic).

Overconfidence breeds complacency (voter edition).
Obama’s supporters are wildly overconfident.  There is already a tendency of young, first-time voters to “forget” to actually vote.  Obama leads in first time voters by something like 3-1.  Every first time voter that doesn’t show up is 3 times more damaging to Obama than to McCain.  If the polls show Obama leading by 12 points going into next week, not a lot of young voters will drag themselves out of bed to actually vote.  On top of that, if you’re leading by 10 points in Ohio, voter fraud might seem unnecessary.  ACORN staffers may actually be limited to one vote each.  It could be another Dewey beats Truman morning next Wednesday.

McCain is still the safe choice.
I believe it was Mort Kondrake that said in mid September, that a minor to midsized economic crisis benefits Obama, but a major one benefits McCain.  Since then, the crisis has gone from “probable bad year” to “possible depression.”  (I don’t believe that, but perception is the issue).  People have seen the Congress spend $700 billion of their money and the market continues to go down, losing over four times that in value.  Most average voters don’t know or care what McCain or Obama did or said about the bailout, what they’re realizing is that Big Government can’t get us out of the ditch it dug.  This benefits McCain in two ways: (1) he’s a check on Nancy Pelosi and Harry Reid’s greedy, money grubbing ways and (2) he’s a calm, tested hand at the wheel.  Obama is neither.

Americans are not that stupid.
Obama cannot be taken at his word that he will not raise taxes on the middle class.  Anyone who believes that was either in diapers during the Clinton years or ought to be now.  His credibility has taken on water and is listing more every day.  Every cry of racism, every dodge and weave of tough questions, every “spread the wealth around”; every “they’re bitter and cling to religion and guns” comment slowly paints him as a and elitist, Chicagoland, race baiting, smooth talking, radical Marxist, anti-military, sit-on-the-pot-until-the-sewer-rats-bite-your-nuts-off, waffling, McGovernite he really is.  I have faith that my fellow Americans will see through this facade and vote McCain.

Some have asked why I think it’s alright to spend $700 billion bailing out banks, but it’s not okay to spend even one dime bailing out people who bought a house they could not afford.  The answer, surprisingly for some, is not that I’m a heartless capitalist with no compassion for the poor (or, if you’re Barney Frank, poor=minority).  It’s all about incentives and accountability.

There are actually three distinct crises going on right now.  They are connected, but each could stand alone without the other.  The first is the housing crisis, the second is the banking crisis and the third is the credit crunch crisis.  Taking them in order:

The Housing Crisis:
What is it? Housing prices are collapsing and (less than 5% of) homes are being foreclosed on.

Who does it effects? Anyone trying to sell a house.

What caused It?  Housing crisis was chiefly caused by Congress’s wanton desire to pander to people who otherwise could not afford housing.  The flood of cheap credit encouraged the market to oversupply the market with new housing.  When the credit began to run dry and some borrowers defaulted, the foreclosed properties added to an already flooded buyers market.  That created a vicious cycle where those who planned to buy a big house with a 2 and 28 ARM and sell it for a profit within 3-5 years found it impossible to sell and impossible to pay the jacked up payment.  They defaulted, and another foreclosed property hit the market.  This, combined with the baby boomers (it always comes back to them) all began to retire and sell the McMansion for a quiet bungalow, swamped a struggling buyers market.

Why money won’t help? As heartless as it may sound, spending money here will make the problem worse.  The best and most efficient way to clean up a buyers market is to let prices stabalize naturally.   If the government jumps in and buys houses, that may reduce supply, but how and when will the government offload them?  If you believe prices are still over-inflated today (they are at 80% above historic, inflation-adjusted levels), a government purchasing program will be “stabilizing” the price at an inflated level: in other words, supporting another bubble that will collapse.  What about McCain’s plan to buy the troubled mortgages and refinance them?  Same thing.  Your sticking people with a new mortgage at a still-inflated price.  You’re just delaying the inevitable.

The Banking Crisis:
What is it? Banks are failing.

Who does it effect? Anyone who loans money to banks.  (Don’t laugh, that includes you if you have a savings, checking or investment account at a bank.)

What caused it?  Three things; subprime lending, bad regulations and implicit government guarantees.  Some banks followed through on the government’s promise of “affordable housing”.  Others bought derivatives sponsored by those banks or Fannie Mae and Freddie Mac.  In the first case, banks are mostly on their own.  They made a bad business decision (listening to the government often is).  In the second case, here is where it gets sticky.  First, the government imposed a smart-sounding, dumbass rule called marked to market accounting.  This means that banks that are publicly held have to value their investments at the then current value for which they could be sold.  This is fine if there’s a market.  When the housing crisis started, however, the market for these derivatives collapsed.  No one wanted to buy an investment when they didn’t know if it was a good bet or not.  The investments, however, are not worthless.  They still generate revenue and they still have some nonzero value.  But banks cannot use that value thanks to this marked to market accounting rule.  (Remember, a bank fails when its assets (investments and loans) are less than its deposits.  When one huge portion of its investments are ruled to be worthless, a bank will probably fail).  Second, and this is where the government steps in it, securities issued by Fannie Mae and Freddie Mac had an implicit government guaranty.  Investors believed that, should Fannie or Freddie fail, the government would step in.  It did, but not to the extent necessary to revive the market for asset-backed securities.

Why more money won’t help?  The FDIC now guarantees most deposits up to $250,000.  This should prevent most runs on most banks.  Removing the marked to market rules will also help, as would the complete dismantling of Fannie Mae and Freddie Mac.

The Credit Crunch Crisis:
What is it? Banks are afraid to lend other banks money.

Who does it effect?  Anyone who gets money from banks.  Contrary to the cartoon world view, banks don’t keep gobs of cash in a vault so Scrooge McDuck can swim through it.  If you own a company and bank with your local bank, every Friday you need to make payroll.  You probably have a line of credit that allows you to draw down on each Friday to cut the checks to your employees.  You then pay off the line of credit as your customers pay you.  The bank (say Citizens), however, may not have enough cash on hand, so it will have to get an overnight loan from another bank (say Wells Fargo) .  If Wells Fargo doesn’t believe that Citizens is solvent, it will refuse to lend Citizens any money.  Citizens then cannot lend you the money.  Your employees don’t get paid.  How long will you stay in business with that going on?

What caused it? Two things: the Banking Crisis and Hank Paulson’s failure to save Lehman Brothers.  Had Lehman been saved as Bear Stearns and AIG were, banks would have had more faith in lending money overnight.  There would still be a tightening, but it would not be so severe.

Why more money will help?  Credit markets run on good faith and crave stability.  If the market knew that the government would not allow Lehman to fail, they might react more favorably to a lending request.  Having seen Lehman fail, most banks are being extremely conservative with capital (how much money they keep in the vault) and lending (to whom they lend) requirements.  Injecting more capital into the system will allow banks to take on more risk.  Moreover, unlike housing prices, stock prices are undervalued (just ask Warren Buffet).  The government, for once in history, is buying something at a discount.

One of the really frustrating things about McCain is that he never seems to follow through on the political points, nor does he defend himself adequately against false attacks.  Last night’s debate certainly provided a few counter examples, but here is what McCain should have said:

Ayers
Obama says he was 8 years old when Ayers tried to kill innocent people with nail bombs.  McCain should fire back, “really?  Well I was three when Hitler invaded Poland, but I never had him over for afternoon tea.”  It wouldn’t hurt to add “you sanctimonious bastard,” once in a while either.

Healthcare
Obama and Biden like to point out that the average cost of healthcare is $12,000 and McCain wants to tax it, and replace it with a $5000 tax credit.  Obama even said last night that “For the first time in history, you will be taxing people’s health care benefits.  By the way, the average policy costs about $12,000. So if you’ve got $5,000 and it’s going to cost you $12,000, that’s a loss for you.”

McCain should say “Is that the kind of backwards drunken donkey math they teach at Harvard now?  My plan would tax $12,000, true, but the taxpayer receives a $5000 tax credit.  Let me say that slowly tax credit. Unlike you, I do not favor a 100% tax bracket, so the taxes on $12,000, even at the highest tax bracket would be less than $4,000.  My plan would give taxpayers a net tax decrease of at least $1,000.”

Negative Ads
McCain keeps saying that the ads would not be so negative if Obama would have agreed to the townhall debates.  Fair enough, but this is getting old and it’s pretty thin to begin with.  Instead, McCain should say, “Look, I’m sorry if you cannot take criticism well.  I know you’re unaccustomed to it, as the media has given you a free ride over the past two years.  Now, I may lose this election, but the American people need to know who it is they are electing.  If the media won’t address these issues of character, judgment and whom you chose to associate with, I have to.  Today there is a story in the Washington Post claiming that AT&T and Verizon did favors for me by putting up cell towers on my ranch.  Are you kidding?  Obama has acknowledged ties to ACORN, Fannie Mae, Freddie Mac, Antonin Rezko, William Ayers and Jeremiah Wright, and these people are investigating cell phone towers in Arizona.  If you’re going to be president, Senator, you need to grow a pair.”

Recently, many commentators in the mainstream media here in America and abroad have gleefully announced the death of Capitalism and Conservatism.  We are to believe that the Reagan Revolution has been routed like Ewoks without Luke, Leia and Han.

Conservatism and Capitalism, I can assure you, are both alive, though not so well.  These twin pillars saved America and the free world from feckless impotence of Jimmy Carter and the very feckled and potent ambitions of the Soviet Union; they will not crumble in the face of Barney Frank, Barack Obama, Nancy Pelosi or any other mental midget on the Left.

Conservatism, while not dead, is homeless.  It was run from its home by Republican greed, avarice and incompetence.  I don’t agree with John McCain on much, but we do agree that Republicans came to change Washington, but Washington changed Republicans.  Spending has run unchecked, earmarks and wasteful programs have run rampant.  These new toys have led Republicans to lose their way and compromise their principles.  Perhaps four years in exile will focus the party’s attention and lead to meaningful reform.  It will at least lead to new blood.

Capitalism is not dead, but it has been framed for murder.  Capitalism did not kill your 401(k), Barney Frank did.  Had he, Chris Dodd, Barack Obama and others not allowed (nay, encouraged) two government created behemoths to flood the mortgage market with billions in subprime loans, everyone would have been better off.  Housing prices would have stayed low, banks would have stayed solvent and retirement accounts would have stayed fat.

Laissez faire capitalism remains the most efficient economic theory.  Consider the following: whom would you trust to advise you and negotiate a transaction on your behalf: Warren Buffett or Nancy Pelosi?  Donald Trump or Barney Frank?  Michael Milken or Mark Foley?  Those who have the mental tools to understand the economy make money.  Those who don’t, run for office.  It is the nature of our world that some politicians will be among the dumbest, least informed, greediest, most incompetent of us.  Almost everyone else will do better things with their talents.  This is not to say every politician is completely out of their depth, but I would not bet on a majority of them being smarter than my dog.  The less the government interferes with your life, your business and your finances, the better.

Nonetheless, it is not yet time to “go John Galt.”  This is not the beginning of the end of our way of life, it is end of the beginning.  Together, we have destroyed slavery, fascism, communism and socialism.  Our task now is to destroy modern liberalism.  We must destroy political correctness and nihilism before it destroys us.  We will overcome the soft bigotry of lowered expectations and restore accountability and common sense to the economy, the legal system and the government.

Conservatism and Capitalism are wounded, but they will return stronger than ever.  Patience is a virtue; capitulation is a sacrilege.  In time, we will see the end of the Democratic majority and the Obama administration.  In time, we will see an end to the forced charity of “patriotic” taxes.  We will see the last welfare check cashed.  We will see an end to the tortured twisting of the words in the storied document that governs us.  We will see a government that knows its limits, recognizes its enemies and aids only its allies.  We will see a strong, proud America leading the world, the entire world, into a free, peaceful and democratic future.  We will once again be a shining city on a hill.

Below is a chart depicting the real and inflation-adjusted (median) average price of a home in the United States from 1975 through 2008.  You can clearly see the housing bubble developing, beginning in 1997.  The historical, inflation adjusted price of a home is about $150,000.  During the 10 year period starting in 1997, housing prices nearly doubled, peaking about two years ago at 183% over the norm.

So, what happened in the late 1990’s that could have caused such a bubble?  Some Democrats point to Gramm Leach Bliley, this is because these people are either idiots or naked opportunists.  As I pointed out earlier, GLB has cushioned the blow from this crisis as it allows healthy banks to bail out (i.e., buy) struggling investment banks and vice versa.  Some banks (Wells Fargo, Goldman Sachs) were not so incredibly stupid to invest in a bubble twice in one decade.  In addition, GLB was passed in 1999 when the bubble was clearly already underway.

In 1995, however, Democrats decided they wanted to encourage home ownership among people who, frankly, could not afford it.  We heard speaches about “everyone has a right to affordable housing.”  The government authorized and encouraged Fannie Mae and Freddie Mac to issue subprime loans.  Subprime loans are loans to borrowers with “subprime” credit, usually meaning a FICO score of less than 620 or 660, depending on the lender.  In order to have credit score that low, the borrower probably either (i) missed two or more payments in the last year; (ii) declared bankruptcy or been foreclosed on recently, (iii) really pissed of one of the credit rating agencies.  Put simply, a subprime loan is a loan to someone who probably cannot pay it back.  (I know, I’m being mean or racist, but frankly, if you’re going to ask that I pay for your mistakes, you can expect me to point them out.)

As an aside, note that the peak was in 2006, two years before the current crisis.  Why?  You can thank the 2 and 28 ARMs.  These are Adjustable Rate Mortgages where the borrower pays interest only for two years, then the payments jump (sometimes by 200-300%) for the remaining 28 years.  Why would anyone agree to that?  They expected housing prices to keep going up.  “Honey, we’ll pay interest only for two years, then sell the house at a profit!  What could go wrong.”  There’s a reason some people have a 620 credit rating.  The banks, on the other hand, reasoned that, “if they default on the mortgage, we’ll foreclose and sell the house at a profit.”  There’s a reason some banks fail.  The point is, if you bought a house two years ago and took a 2/28 ARM, the reaper came calling this year.  When you couldn’t pay, the bank foreclosed, adding tons of cheap housing to an already overcrowded market.  That, combined with the baby boomers retiring (and looking to sell that four bedroom colonial for a two bedroom bungalo) precipitated the bursting bubble two years ago.  Once the housing bubble burst, banks had two years of interest only payments until their problems started.  Now, not only are banks not receiving all of the mortgage payments, they also cannot offload the houses on which they foreclose.

The irony (and thus the title of the post) is that this behavior, forcing banks to make risky loans, is what made owning a home such an unattainable goal.  Congress decided that we need more home ownership, so what happened?  The price of homes went up.  (This is known to some as the Law of Supply and Demand.  To others it is a fact to be avoided at all costs.  I’m looking at you Barney Frank).  Had Congress left well enough alone, the prices may have peaked, as they did in the late 1980s, but certainly nothing like the spike we saw over the last 10 years.  Put simply (for the benefit of Congress, especially Mr. Frank), had they done nothing, more people would have owned homes at lower prices.

Lesson learned, right?  No.  Saturday Night Live may have gotten the message, but Congress is still struggling with reality.  No harm, though, right?  I mean, it’s not like they can make the same mistake again, right?  No.  Now they’re clammoring about how everyone needs affordable healthcare.

Barring a major collapse or a terrorist attack, Barack Obama will be the next president.  He will be aided by a Democrat-controlled Congress, and soon enough a Left-leaning supreme court.  For his ascention, we can blame John McCain; for Congress, we can blame Republican leadership who allowed corruption and greed to infect the Reagan Revolution.  But looking forward, here are some predictions for the coming four years:

Free Speech

The Fairness Doctrine will be re-enacted, driving radio, the last bastion of conservatism, Leftward and, ultimately, into bankruptcy.  President Obama will encourage prosecutors to investigate “unfair, biased and untruthful” comments about government policies.  Conservative bloggers and talk radio show hosts will quietly slip away, and Daily Kos and the Huffington Post will become “mainstream.”  Fox News ratings will initially climb, but President Obama will again deny them access and will continue to slander the network until it becomes marginalized.  If things get really bad, “Sedition” will rejoin the lexicon.

Financial Markets

Reeling from the recent subprime collapse, Wall Street will struggle for several years.  With their pay and benefits curtailed by Congress, Wall Street firms will be unable to hire or retain talented executives.  Those who do take the jobs will be tempted to make money in other, less ethical ways.  Goldman Sachs and Morgan Stanley will merge into the banking sector and the innovative products and ideas that put America at the forefront of finance will dry up.  Some firms will move out of New York, or significantly reduce their presence.  Without the tax revenue from these firms, New York City will begin to collapse as it did in the 1970’s.  The city may be nationalized.

The Broader Economy

Without risk taking on Wall Street, the credit crunch will tighten.  Firms will have little or no incentive to take large risks, and any rewards will be taxed mercilessly.  Several large corporations will fail.  If the government steps in, intervention will be used as an excuse to raise taxes again, just as Clinton did in the early 1990’s.  Layoffs and unemployment will become common place as American companies struggle to meet the demands of President Obama and his union-endorsed wish list.  Higher corporate taxes and increased labor demands will drive manufacturing jobs off-shore.

Taxes

Obama will raise your taxes.  At first, he will work with Congress to avoid a squeeze of the middle class.  Ultimately, we will be told that taxes are not being raised, we are merely returning to “pre-Bush” levels.  We will also be told that, most Americans will “pay the same as they did under President Reagan.”  This will be a lie, but it will be unchallenged by the press.

Energy & Environment

Offshore oil drilling will be blocked.  Obama has already said that he does not object to $4 per gallon gas, only that the increase occurred so rapidly.  Under the guise of “Global Warming”, oil and gasoline prices will steadily increase as windfall profits taxes and other taxes are passed on to the consumer.  Congress will pass stimulus bill after stimulus bill to offset the cost of heating oil in the winter, and gasoline prices in the summer.  Redistribution of wealth will become a reality.  Meanwhile, $7 per gallon will be the new normal.  What the government doesn’t spend in stimulus packages, it will use to distort the market for alternative energy sources.  These new projects will make Ethanol look like a brilliant idea.  (Incidentally, the next four years will set cold temperature records.  Crops will fail and the price of food will skyrocket.  We will be told that this “climate change” is due to human activity.)  If owning an SUV is not strictly illegal, only Hollywood elites and politicians will be able to afford them.

Terrorism & Foreign Affairs

We will suffer a major terror attack on U.S. soil within the first two years.  This would likely be the case in a McCain administration, but the response will be markedly different.  The Obama response, if there is one, will embolden al Qaeda, who will move from hiding in Aghanistan to ruling Pakistan.  Iran will continue to grow in strength and President Obama, will indeed meet with Ahmedinijad or his successor. Russia will invade Ukraine or Latvia and NATO will fail to react.  Obama will call on the UN to impose sanctions, which they will not.  Our image in Europe will at first grow, but the Obama bounce will be fleeting.  As America’s status as a superpower wanes, we will become West England: tolerable to much of Europe, but not included in their reindeer games.

Healthcare

Obama and Congress will enact comprehensive healthcare reform.  Premiums will first fall, then rise as health insurers begin to first compete with a government program, and then the government program becomes all consuming and yet irrelevant.  There will, indeed, be two Americas as there are two UK’s when it comes to healthcare.  The broader population will be covered by Obamacare, a form of Medicare and SCHIP on steriods.  The premiums will be next to nothing, but the covereage will make people long for HMOs.  Instead of arguing with your insurance company (who can be bullied by the market, Oprah, 60 Minutes and others), you will have to argue with a government bureacrat for whom accountability is as foreign a concept as quantum chromo dynamics.  The rest of America will continue to pay for health care through their employer or directly.  The coverage will be better, but the lack of competition and the government program will raise prices.  Good doctors will become harder to find as government mandates, malpractice claims and insurance headaches drive smart people out of the profession.  Without a profit motive, new drugs are fewer and further between.

Social Issues

Gay marriage will become the law in all 50 states, either by federal fiat or through the Full Faith and Credit Clause.  Whether you agree or disagree, the issue will inflame opinions just as Roe v. Wade has for over thirty years.  A new Supreme Court case will enter the public lexicon, just as Roe did.  Abortion will also continue to be a contentious issue.  Crime and unethical behavior will grow and a “malaise” will infect the country.