Cause and Effect..........

Cause and Effect...........
Help me understand...........consequences

For every action there is an equal and opposite reaction. Basic physics, right?
For every action, something happens. We call it cause and effect. When you do Action A, Result A is the natural consequence. Why is something that easy so difficult to understand for our politicians.
Let’s play the cause and effect game.

Cause:

We have to meet globilization head on. We can meet and defeat our free market enemies. We will willingly enter into NAFTA and CAFTA and globilize our economy for the good of the country.

Effect:

Factories are shipped overseas. Jobs are shipped overseas. Americans lose good paying jobs and those jobs are not replaced by other good paying jobs. Instead, Americans are forced into lower paying manufacturing jobs or jobs in the service sector. China, India and other countries are the direct beneficiaries of our largesse. The only people making money? Big companies as they lower their operating costs and increase their profits.

Cause:

Americans lose good paying jobs and find lower paying jobs to replace those jobs, or they may even be forced out of the job market altogether.

Effect:

People find it harder and harder to make their monthly obligations. They can’t pay their house payments anymore, and their credit scores drop precipitously, causing them to be unable to refinance their home.

Cause:

No regulation of the lending institutions in America allows mortgage brokers and banks and others to offer numerous types of low or no down payment loans and even loans for 120% of a home’s appraised value with little or no money down. Many of those loans are made variable with the potential for the borrower’s mortgage payment to increase dramatically.

Effect:

Lots of people buy homes with no equity and no down payment. They have very little invested in the home financially, so when times get tough or their payment skyrockets, they lose relatively little equity and are able to walk away from the homes rather than try to pay increased mortgage payments to save a home that is going down in value. They can’t sell because they can’t afford to pay a realtor’s fee because they have no equity.

Cause:

People start to walk away from their homes and variable interest rates.

Effect:

Banks start a rash of foreclosures. Those foreclosures put a downward pressure on prices in their neighborhoods, when causes home values to decrease and places even more homeowners in a position where they owe more on the home than it’s worth......which causes more people to walk away and more foreclosures.

Cause:

More and more homes enter into foreclosure.

Effect:

Home values plummet. The banks and mortgage companies start to get concerned because their "assets" and "security" are the other non-foreclosed upon homes in the neighborhood whose values are plummeting because of the many foreclosures.

Cause:

With so many foreclosures, many people are trying to buy homes for pennies on the dollar, so they ask the banks to allow a "short sale" where the bank will accept less for the home than what is owed.

Effect:

The banks refuse because they know that they have mortgage insurance through Freddie Mac and Fannie Mae, who will insure that they receive the full value of their mortgage.

Cause:

Banks apply to Freddie Mac and Fannie Mae to collect on their mortgage insurance on all of their foreclosed properties

Effect:

Freddie Mac and Fannie Mae collapse under the weight of the claims.

Cause:

Freddie Mac and Fannie Mae collapse.

Effect:

The federal government steps in to assure that our economy doesn’t melt down, putting 25-100 Billion dollars on the line for a bailout of the private mortgage insurance companies. Then AIG collapses and the feds step in for another $100 billion. Then wall street investment firms collapse and the feds now want to pony up another $700 billion.
Well.....you get my point.

Hindsight is 20-20, but this isn’t rocket science. Just simple cause and effect. The real question is whether there is anybody in Congress or in power generally who can stop the bleeding without a wholesale meltdown of our economy.
I haven’t heard anyone talking about how the globilization effort has cost jobs and started the problems with foreclosures. You just can’t spend years shipping jobs and factories out of the country without affecting the entire economy. And I certainly haven’t heard anyone talking about how the banks refused to sell homes for less than what they were owed because they knew they had mortgage insurance.

Glumly Yours,

Blawgerman