The Three Laws Of Nature
By Henry Lamb
February 2, 2009
Pundits and politicians are regurgitating phrases such as: "the worst since the great depression...; highest unemployment rate since...; largest deficit since...." Few acknowledge that government is the most significant cause of the current dilemma, or that its determined efforts to solve the problem can only make the problem worse.
The underlying cause of the current crisis is government's efforts to repeal the laws of nature.
The first law of nature is: everything changes. The second law of nature is: change forces adaptation or extinction. The third law of nature is: whenever government sets out to repeal these laws, it only makes things worse.
These three laws of nature are validated by history. All the progress made by society since the beginning of time is the result of individual effort and creativity. Government has produced nothing. Government can produce nothing. Government can only limit, restrict, redirect, and generally impede the progress of individuals.
The current mess, for example, is largely the result of government trying to force society to do something that society should be deciding to do -- or not do -- on its own. Specifically, in the late 1960s and early 1970s, a significant number of people believed that all people had a "right" to housing. These people were successful in electing a president and a sufficient number of congressmen to enact the Community Reinvestment Act in an effort to provide housing to all.
Consequently, the government forced banks to make loans to people who would not otherwise qualify. To make sure that the banks would extend credit to unqualified borrowers, the government agreed to buy the risky loans from private lenders through special, government-funded agencies, Fannie Mae and Freddie Mac, which were created expressly for the purpose of guaranteeing risky loans.
In a free market society, these loans would never be made. But government, in its wisdom, guaranteed the loans by providing the money to special agencies. These government-funded agencies then created a thing called a "mortgage-backed security." This "MBS" is a piece of paper that identifies a group of these risky loans and conveys an agreed percentage of the value of the loans to a private investor, at a guaranteed rate of interest, for a specified period of time, for a cash payment of a specified amount. The government-funded agency then repays the investor at the specified rate of interest over the specified period of time from the payments made by the original borrowers.
For years, these risky, but government-insured loans have been repackaged and resold by the government-funded agencies. When the original, unqualified borrowers began to default on their payments, and the government-funded agencies began to default on their payments to secondary investors, the government-funded agencies, as well as the private investors who relied on the credibility of the government-funded agencies, had to descend on the government for unprecedented bailout appropriations to make good the government- guaranteed loans.
This is a classic example of how government's effort to do something it thinks should be done, only makes things worse. Government may have the power to grant a "right" of housing to every person, but it does not have the resources to enforce it.
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