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The Mortgage Bailout Reality Written on April 25, 2008 Look around at what is going on in our nation and the rest of the world, and you can easily see that we are moving into a period when We the People must seriously question our leaders’ actions. Accepting their proposed solutions has clearly not led us to our desired outcomes. So we must pick apart their solutions by understanding the principles behind them and knowing why and whether they will work. One proposed solution to our current economic challenges is the mortgage bailout. But what is its purpose, and will it actually work to fulfill that purpose? The mortgage bailout has both a social purpose and a more personal purpose. The social purpose is simple: to avert a total economic meltdown. There are many aspects to the harmful effect that rising mortgage defaults can have on our national and global economy, and we will cover some here. First, there is a chain of loans that runs throughout our economy and if the mortgage defaults rise too high and too fast, the impact on our economy will be unlike anything we’ve experienced since the Great Depression. In an economy that is based on an increasing pile of debt, when someone can’t pay off his loans to a second person who then can’t pay off his loans to a third person who then can’t pay off his loans to a fourth person (and so on), people who expected money to be there have their security blankets taken from them and may even have to scramble just to get by. Some say that we can handle this consequence because we have spread the risk, but spreading the risk when the risk has continued to increase means that the whole system is at risk! Without going much more deeply into economics (check out my book Thriving at the Brink of Disaster for more information about the psychology behind our economic mess and what you can do about it), let me briefly explain that our money system works like a pyramid scheme (thus we have a pyramid on our dollar bill). It is a game of hot potato where people pass along debt, and the last one holding that debt (meaning the last one who has taken on the responsibility of giving a loan) is often the one with the most to lose when the string of I.O.U.’s finally snaps. Why? They have no one to pass the buck to (nor should they even try to!) They cannot default because they did not take out debt. Instead, they were part of the agreement that put someone else into debt. The problem for every one of us is that when all of this money is wiped out of the system, those people who were depending on the money to be there might end up in dire economic straits. And at the very least, they will no longer be consumers of nonessential products. That means a loss of business, which means a loss of jobs, which means even more people defaulting, and so on.
We are all part of this system, and when its well-being is so fragile and on the verge of collapse, you can be sure that we all have a vested interest in solutions that help those who are on the edge of a personal collapse. That leads to the more personal reason for the mortgage bailout. The idea that someone with a desire that is so meaningful and universal as having a home – for themselves and possibly family – would all of the sudden be without that home because of the faltering of the larger system is something that we can all feel something about. Of course, there is the idea of personal responsibility. There is the idea that they could have seen it coming and planned accordingly (though the people with the best view of the economy – the government and corporate CEO’s – certainly didn’t broadcast the clear issues that they probably saw coming long ago). Yes, personal responsibility is important. But so is understanding and helping others in need. We all have had times when we missed the writing on the wall, when we were unaware of what was coming because we had no experience or knowledge of it, and when we had to depend on others for help so that we could learn and grow as a person while we got back on our feet. And the personal reason for the mortgage bailout is also a spiritual reason for those who believe in God. Do you think that God created this Earth for people to be born without a place to live (or at least the land and resources to build a place to live). We did something important by coming together into societies. Instead of fighting over the resources that we needed to survive and thrive we made a commitment to learn to make use of them for the benefit of all as well as to put together all of our talents to be more effective at doing so. The question we are still trying to figure out is how exactly to work together most effectively. So the social, personal, and spiritual reasons for the mortgage bailout seem very compelling. But having a reason doesn’t necessarily mean you have the right method for fulfilling that reason. The question is: Will it work? And the answer is… it depends on how we do it. If the mortgage bailout is created from the same principles that got us into this mess, then it will simply exacerbate the problem by feeding into the cause of the problem. If we choose new principles as the basis for creating the bailout, then it has the potential of the solving the problem closer to its source (or at its source). This article is not meant to elaborate on a plan that I think will work because I believe that we must all think for ourselves first instead of simply grasping for others’ solutions. But I will propose some ideas that might be worthwhile to think about… First, the mortgage bailout can certainly help people remain in their homes as long as the underlying economy that supports their ability to earn money and pay stays strong. But if the bailout increases our debt, then we are just adding to the problem and the economy will worsen. If debt is our problem (and it is), then we must have a way of decreasing our debt. The fact is that the bailout will have to be paid by someone. The question is by whom and through what means? If you think about it simply and logically, in the end, the only person who can pay off a debt is a person who is not in debt. And certain countries and certain individuals are currently not in debt. In fact, many people who are not in debt are the ones who are owed money. Simple logic then tells us that, in order
to pay off the debt, wealth must transfer from those who don’t have debt to those who do have debt. How can that happen? Well, there is a bit more than what I will present here (and I will present it in future articles and in a future book), but let’s just mention some of the typical ways that have been used in the past to transfer wealth: 1) people with debt produce things for the people they owe in order to pay off the loans; 2) people who are wealthy are taxed to help pay off the debt of others; 3) people who are owed money simply cancel the debt and forgive the loans; and 4) people in debt sell what they own to those who they owe in order to pay off the loans. One way or another, the debt will have to be paid off, wealth will have to transfer, and the economy will have to adjust to the new prices that will come as a result. It’s inevitable. The only question is how. Will we do it proactively, fairly, and effectively… or not? You can help. You can help our economy adjust by doing whatever you can to facilitate the three inevitable trends that are mentioned above. You can also make sure that policies like the mortgage bailout plan are done in such a way that they, too, facilitate the three trends mentioned above. Or you can choose not to help. In the end, we always reap what we sow – individually and collectively.
To understand our economic challenges and what we must do, you can purchase the book Thriving at the Brink of Disaster at: www.inspiringrevolutions.com/thriving.php
To begin applying these ideas to your life, answer the questions below: - When in your life have you made an honest mistake and been left in a whole because of it? Who was there to help you, and how did it assist you in getting back on your feet and rebuilding a foundation of personal security to depend on? - While you were being helped did you learn from your mistake? Did you turn ignorance into knowledge? Did you learn new skills to make yourself more able to handle life’s challenges? - Have you ever helped someone else in need? Did you simply give them a handout, or did you also help guide them to the knowledge and skills that would help them use your handout to become independent of you? - In your relationships, do you keep tabs of what you do for them or give to them? Do you like to know what someone “owes you?” If you do, then do you find a way that they can use their talents, their own unique gifts, to “pay you back?” - If somebody’s lungs were “in debt” in their relationship with the heart, would the heart be smart to leave the lungs without the resources that they need? How could they handle the situation to make sure that the integrity of the whole body is not compromised?
- If you were the heart and you were well off while the lungs were struggling, would you see the value in helping them? Would you understand that the lungs were necessary for the whole body to survive? - When in your life have you been a part of a group where every individual depended on the others to live out and thrive in some greater purpose? - What principles did you learn from these experiences in terms of how to make sure that the needs of the group and the needs of the individuals are all taken into account? - Where in your life are you practicing those principles? Where in your life are you NOT practicing those principles? - What prevents you from doing so? What choices can you make and what actions will you take to do so now?