How the late Don Ho understands the economy better than many economists

Posted: April 28, 2009 in Banking, books, Congress, Consumer Issues, Other young PF sites
Tags: , ,

First, I’d like to lay down the lyrics to a song by Leon Pober, made famous by the late, great, Don Ho.  I really wanted to put a video of Don Ho singing this, but I couldn’t find one that I was jazzed about showing. If any of you brilliant readers can send me the link to a video of Don Ho singing Tiny Bubbles, let me know so I can add it here.

Tiny bubbles (tiny bubbles)
In the wine (in the wine)
Make me happy (make me happy)
Make me feel fine (make me feel fine)

Tiny bubbles (tiny bubbles)
Make me warm all over
With a feeling that I’m gonna
Love you till the end of time

So here’s to the golden moon
And here’s to the silver sea
And mostly here’s a toast
To you and me

So here’s to the ginger lei
I give to you today

That will not fade away


I was asked by a friend the other day why I was so negative on the economy.  Their position was that the economy was getting better because of the stimulus and other tactics by the administration.  The conversation was pleasant enough at first, but I could see that my friend was getting more and more agitated because I just wouldn’t buy in to the idea that anything had changed.

“What about the stimulus?’

“What happens when it has to be paid back?”

“How about them saving the banks?”

“Are they really saved, or are we just having to pay the bill?”

“Well what about GM being saved?”

“Well, what about Pontiac?  Or Chrysler?”

“But people aren’t losing their homes anymore.”

“Were the houses really theirs in the first place?

Had anything changed that makes the houses more affordable?

Who has to pay for that deal?”

So what would it take to get you to believe that the economy was improving?”

That question intrigued me.

What would it take to prove that the economy was doing better?  Well, let’s look at what started the whole problem.  Housing prices were artificially increased because people were taking loans they couldn’t afford to pay back, the banks were signing off on these loans, and everybody believed that real estate prices only go up.  It was called a speculative bubble.

When this bubble finally popped, the banks who had made the bad loans suddenly couldn’t afford to stay in business anymore, and the correction (closing) started.  People who couldn’t afford the house they “bought” were forced to re-evaluate their life choices, with many seeking the comfort and security of renting.

What should have happened, and would have without government interference, is that people who shouldn’t have been pretending that they could afford to buy a house would have left these houses, forcing the banks to take a loss on them.  Then people who could afford a home at a reasonable price would step in and buy the houses for close to their actual worth, and everybody would be happy.  What instead happened was that the banks kept telling people that prices would soon correct, people still lost their homes, but the banks were guaranteed that the federal government would come in to buy these bad loans.  Bad banks stay open, bad tenants are still trying to buy houses they can’t afford, and my grandchildren will be paying money to cover all this.  In the meantime, the government has decreed that banks will not fail.  Certain car companies will not fail.  The economy will not fail.  So each of these classes are becomming smallish bubbles in their own right.  Despite what people might want to believe, you just can’t fix a bubble economy by pumping up other bubbles.

So Don Ho, in his best Barack Obama impersonation (and yes, I know Mr. Ho has passed.  He was way too good an artist to talk about him as if he were dead, and his music still lives on), starts talking about the next thing the government is going to try.

“Universal Medical Care”

Forced Unionization

Global climate

Global economy

etc, etc, etc.

Don Ho’s answer was to sit and contemplate the ocean and the cocktails on the beach.  Until politicians on both sides are willing to stop the stupid posturing and start looking out for the people they have sworn to represent, all we are doing is inflating more tiny bubbles to hide the effects of the last one.

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Comments
  1. It’s clear to me that if government would get out of the marketplace and stick to what is their business in the first place, we wouldn’t be in the mess we’re in. The marketplace is self-correcting. Perhaps not at the “drive-through window” speed that most Americans expect, but it does correct itself.

    Who is giving Polaroid or Kodak a bail out because of the advent of digital technology? Who is bailing out the phone companies because of cell phones?

    Things change and we have to let them change. That’s part of what freedom is all about. When we try to harness the marketplace, we’re really only asking for trouble. It’s a lot like trying to change mother nature – its’ easier to go with the natural flow.

    As long as we keep demanding that someone get us or our employer or our retirement accounts out of trouble, then we’ll keep inviting the government into our lives deeper and deeper. What ever happened to Just Say No?

    Clair

    • Wil says:

      This is spot on! The worst part is, if you take it all the way down to the individual, people understand that there are consequences for action as well as inaction. They understand that not evolving is a path to obsolescence. But for a generation or two, young people have been brainwashed into believing that the government is the only protection they have from the big, evil world. The first kids that went through that indoctrination are now running the world. With any luck, the next few generations will be able to learn better.

      Thanks for the read and for the comment! If you haven’t subscribed yet, I encourage you to do so, and follow me on Twitter as well!

      -W

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