Congress Says: This Way to Chaos -- Or Else

It's simple really. Not long ago Thomas Sowell expanded on an observation made by two Russian economists that hit the nail on the head.

From Investor's Business Daily:

Nikolai Shmelev and Vladimir Popov said: "Everything is interconnected in the world of prices, so that the smallest change in one element is passed along the chain to millions of others."

What does that mean? It means that a huge increase in the demand for ice cream can mean higher prices for catcher's mitts, among other things.

When more cows are needed to produce more milk to make ice cream, then fewer cows will be slaughtered and that means less cowhide available to make baseball gloves. Supply and demand mean that catcher's mitts are going to cost more.

[snip]

If everything is connected to everything else in a market economy, then it makes no sense to have laws and policies that declare some given goal to be a "good thing," without regard to the repercussions, which spread out in all directions like waves across a pond when you drop a rock in the water.

Case in point: a relatively modest 5% increase in the demand for U.S. housing led to a huge increase in financial suffering across America, thus:

Our current economic meltdown results from the federal government, under both Democrats and Republicans, declaring homeownership to be a "good thing" and treating the percentage of families who own their own home as if it was some sort of magic number that had to be kept growing — without regard to the repercussions on other things.

We are now living with those repercussions, which include the worst unemployment in decades. That is the price we are paying for increasing homeownership from 64% to 69%.

How did we get from homeownership to 15 million unemployed Americans? By ignoring the fact that there was a reason why only 64% of families owned their own home. More people would have liked to be homeowners but did not qualify under mortgage-lending standards that had been in place for decades.

Politicians to the rescue: Federal regulatory agencies leaned on banks to lend to people they were not lending to before — or else. The "or else" included not having their business decisions approved by the regulators, which could cost them more money than making risky loans.

Mortgage lending standards were lowered in order to raise the magic number of homeownership. But with lower lending standards there were — surprise! — more mortgage payment delinquencies, defaults and foreclosures.

This was a problem not only for banks and other lenders, but also for those in the business of buying mortgages from the original lenders. These included semi-government enterprises like Fannie Mae and Freddie Mac, as well as Wall Street firms that bought mortgages, bundled them together and issued securities based on the anticipated income from those mortgages.

In other words, all these economic transactions were "interconnected," as the Russian economists would say. And when the people who owed money on their mortgages stopped paying, the whole house of cards began to fall.

Now our ACORN-saluting Congress have declared government-run health care for all to be a "good thing" and are treating the tax burden of providing "health care" to every person who resides in--or enters--the United States as some sort of magic number that must be kept growing — without regard to the repercussions on other things.

Meanwhile, state tax receipts are showing the steepest decline on record, one in 10 Americans (9.8%) is out of work, one in 2 (54%) of Americans under the age of 24 is totally unemployed and will continue to be unemployed because job openings for everyone--in all regions of the country--are decreasing, the dollar keeps depreciating, and our national debt has now grown to exceed $516 thousand per U.S. household, whether or not anyone in that household pays taxes.

The philosopher/historian Will Durant once observed that "civilization begins with order, grows with liberty and dies with chaos." If that observation is correct, then we'd best get busy protecting and expanding the remnants of our liberty, because chaos will not be a happy place.

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