When a Christmas cracker goes bang! it is only after equal and opposite forces have pulled on it from an opposite direction. To extend the metaphor, the bang is the sound of our economy imploding. But while the media have focussed on one force, the greedy bankers and neo-financial architecture, nothing has been said about the force pulling in the other direction.
This, though, is set to change with American blogger Steve Sailer and economist Stan J. Liebowitz popularising the forgotten cause of the credit crisis: blank slatism.
The last two decades has seen an unprecedented political-economic drive to ignore evidence and treat all humans with absolute equality in all circumstances. Sometimes this is appropriate: for example, in the court of law. In the economy, however, which is necessarily dog-eat-dog, this is a disaster, as this financial crisis has shown.
In Anatomy of a Trainwreck: Causes of the Mortgage Meltdown, Liebowitz argues good business practices were deliberately subverted by politicians who sought to impose a blank slate ideology on the credit markets.
"… in an attempt to increase home ownership, particularly by minorities and the less affluent, virtually every branch of the government undertook an attack on underwriting standards starting in the early 1990s. Regulators, academic specialists, GSEs, and housing activists universally praised the decline in mortgage-underwriting standards as an “innovation” in mortgage lending. This weakening of underwriting standards succeeded in increasing home ownership and also the price of housing, helping to lead to a housing price bubble."
A trend which accelerated under the Clinton administration, in the 1990s banks began writing blank cheques for blank slates. Six-figure sums were given to minorities, people with bad credit records, criminals who had just left prison, and NINAs (No Income No Assets) – most often the same people – simply because they were minorities or disadvantaged humans deserving an equal chance.
Economic sense was considered an after-thought, or worse – simply bigoted. In the end the money did make some people feel better (for a decade or so) and made good political speeches that made the ruling classes appear less bigoted but it didn’t make something as brutally unforgiving as our economic system work better.
While seeding the "diversity recession" meme, Steve Sailer has argued California is the "epicenter" of a housing quake that caused the credit crisis: "My very rough estimate is that half of the American loss in home values so far has occurred in California, with Florida being next in line." In California, according to Sailer’s analysis, Hispanic immigrants were the big recipients of the easy credit mortgages that blew up a massive housing price bubble.
On the logic homeowners vote Republican, continuing the easy credit lifestyle was a convenient truth for a Bush administration that wanted to buy the Hispanic vote (a plan which has now backfired). The figures certainly suggest this was attempted. In the seven years from 1999 to 2006, almost entirely under the Republican Bush administration, dollars to Hispanic Americans increased by a factor of seven.
Across the board, Sailer quotes a contributor who calculated that between 2004 and 2007 $900bn in subprime loans went to whites, who make up 68% US population, while an almost equal figure $887bn went to Hispanics and minorities who comprise just 30% of the US population. To put this in perspective, thirty-six percent of America’s Hispanic population lives in California.
Equality cannot be left to politicians
While equality of humans is a fundamental principle to cherish, and given to all by God, the imperfect nature of the world means equality can never be achieved through the intervention of man.
We cannot become blank slates through an injection of borrowed money. Nobody is left equal by it: the last few decades has seen inequality increasing on an unprecedented scale (partly built on that lie, which the derivative markets were). Everyone, except the already rich, has gotten worse off in an everyday way through the taxpayer-funded bailouts.
So next time when politicians make an effort to increase equality in the economy remember that greed, corruption and loss of wealth of the kind we have recently seen appears to be the result.