Thursday, July 10, 2008

You cannot eat a promise

Fannie Mae and Freddie Mac - what funny names for banks. I would love to know where the names came from.

These are the two biggest mortgage holders in the US. And they are both GSE's (Governement Supported Enterprises)...what the hell does that mean...GSE's?? They are private - but not really private because the government regulates and influences them. Ultimately if these two mortgage banks fail - people are saying the Government will step in and bail them out...

Which means...THE TAXPAYERS will bail them out...which means...YOU will bail them out.

These banks share prices have plummeted in the last week...30% yesterday alone...the word from the Wall Street Journal is that there is not enough money to, not even close to enough money, to cover all the loses these banks are realizing from defaulted mortgages (which are the result of ignorant lending and borrowing)....

What's happening is that credit has been overextended and basically been made to look and feel like it's just another part of life - like turning on the water or the heat - credit has been made into a utility...to be expected, with no or simply inconvenient consequences.

When the reality is...in a system based on market exchange, value exchange - it's the value that is the true indicator of a currency - not the currency itself. We are seeing this today with the dollar's decline - just because it says $10 on the bill doesn't mean that your going to be able to by $10 worth of stuff...the value of the paper that the money is printed on is based on a promise of repayment it's based on a perception of prosperity (or in the expanding case of the US dollar - lack of prosperity). Because this system of promises (that's all our system is...a big promissary note of a system where paper money simply represents a promise to pay based on a few factors, like past ability to pay and like current economic conditions) is no longer founded on a phillisophical belief (if it ever was, maybe in the very begining) the promise to pay becomes no different from the promise to take out the trash or the promise to meet a friend or the promise to spend time with your kids...it becomes something to which there are no apparent consequences if one breaks the promise - other than some level of internal strife (possibly, depending on the person).

The reality is that the promise to pay, whether or not we treat it with respect, is the foundation that America has created for the world. And it is the promise that will not be forgotten or forgiven.

And that fact - not forgotten or forgiven - is where we are right now.

The irony in this position is thick and delicious...What started as the most noble and heroic idea - the realization of truth (capitalism) has almost come full circle - currently the economic system we have in the US (and the world) is not capitalism - it's not even close...but yet we go and send our children to die for the word "Capitalism"...Everyone has been fooled because everyone has wanted to be fooled, wanted to be taken care of, wanted comfort of someone else telling them what is best for them.

Where did we go wrong?

we went wrong in thinking that we could have more than we need, without consequence. The equation was hidden to us and we all felt that we could want for the sake of wanting. We have ignored, stifled and made small and weak the phillosophy of our own lives and because of that we have looked outside ourselves for answers and to be taken care of.

It is not a surprise that the economic scam that is our system is failing. It is actually a beautiful thing and a perfect thing...something that became unavoidable the moment that debt was acquired to pay of debt...the moment that we disconnected our forms of recognition of value with only a promise...we said: You give me the results of your hard labor and I will give you a promise...and then we said: A promise is an adequate payment for effort. And then we began to build a society on that premise...and from there you can see where we have come...a promise to pay a promise to pay a promise...and soon enough, as has happened...the fantasy world of promises can no longer sustain. And as we, all of us, look around drastically for something to hold on to, something to believe in, something from which to start again - something from which we can realize our mistakes and start again - We find nothing - because there is nothing there. Nothing but promises. And you cannot drop a promise in boiling water to soften it for your plate. You cannot peel a promise and enjoy it's nutrients. You cannot eat a promise.

And so here we are. Americans...The world...

Capitalism is an ideal like the Earth is a constant...Capitalism doesn't care about promises...the Earth doesn't care about Humans. The ideal that the capitalist system was founded on does not compromise, no matter how many promises we make. The system is correcting itself. The system, based on an ideal, will not compromise...the system is correcting itself and as always there is only one option...How we, as humans, react to that correction.

The correction is upon us and will continue until we humans can no longer view capitalism as an ideal, as something to aspire to, as a greater manifestation of the human condition. The correction will continue, unbiased and without prejudice and the promises that we have all made and the promises that we have made to cover those promises will come due whether we want them to or not.

The only answer is to take care of yourself first. The only answer is live within your means or more accurately BEGIN living within your means, and quick. The system will be fine - like the earth will be fine...it's the humans that are in trouble.

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