Bloomberg.com

Italian Prime Minister Silvio Berlusconi said political leaders are discussing the idea of closing the world’s financial markets while they “rewrite the rules of international finance.”

“The idea of suspending the markets for the time it takes to rewrite the rules is being discussed,” Berlusconi said today after a Cabinet meeting in Naples, Italy. A solution to the financial crisis “can’t just be for one country, or even just for Europe, but global.”

The Washington Post

The worst financial crisis since the Great Depression is claiming another casualty: American-style capitalism.

Since the 1930s, U.S. banks were the flagships of American economic might, and emulation by other nations of the fiercely free-market financial system in the United States was expected and encouraged. But the market turmoil that is draining the nation’s wealth and has upended Wall Street now threatens to put the banks at the heart of the U.S. financial system at least partly in the hands of the government.

The Bush administration is considering a partial nationalization of some banks, buying up a portion of their shares to shore them up and restore confidence as part of the $700 billion government bailout. The notion of government ownership in the financial sector, even as a minority stakeholder, goes against what market purists say they see as the foundation of the American system.

Breibart.com

Germany called on Friday for a set of global rules to help tackle the global financial crisis, saying it was time to put an end to ad hoc solutions.

"We need global rules for the markets," German Finance Minister Peer Steinbruck said.

Is this all seeming a little end-times-esque?  If we wind up with a truly global economy, or one far more global than we even have now, is it so hard to believe a step or two down the road is a card, and then an implant, that you must have to buy anything? 

Are we watching the foundation laid for the events in the book of Revelation?  Or am I just paranoid?

In an article about how the current financial crisis would affect the two presidential candidates promises, the NY Times demonstrates the real problem without even noticing it.

While first commenting, as I did, that neither candidate could get specific on what promised programs they would not implement or delay as a result of circumstances, the paper immediately jumps in with the absolutely wrong emphasis.

The big issue for each candidate is not spending, per se, but how the crisis will affect their promises on taxes. Mr. Obama has said that he would raise taxes on the wealthy, starting next year, to help restore fairness to the tax code and to pay for his spending plans. With the economy tanking, however, it’s hard to imagine how he could prudently do that. He should acknowledge the likelihood of having to postpone a tax increase and explain how that change will affect his plans. Then, he can promise to raise those taxes as soon as the economy allows.

Mr. McCain has an even tougher job. To be straight with voters, he would have to acknowledge that the centerpiece of his economic plan — to permanently extend the Bush tax cuts beyond their expiration in 2011 and to add billions of dollars of new tax breaks — is impossible. If he went ahead with those plans, the national debt would explode, undermining the borrowing that the nation must undertake to finance the bailouts.

Sounding like some forlorn caller to the Dave Ramsey show, complaining that they could get out of debt if only they could make more money, the Times looks only to the income side of the ledger.  Not content to ignore spending, they specifically rule it out.  But as anyone who’s listened to Dave, or to advice from Crown Financial Ministries, or just about any other financial advisor, it is far, far easier to regulate your spending thanit is your income level.  Now, the federal government is in a different position than most of us, in that they can simply legislate the amount of money they want to come in, but as these advisors will tell you, if you don’t discipline your spending and set good habits in that regard, no amount of income will be enough.  Ever.

Not only does the Times come at this problem incorrectly, it’s ironic that it paints itself into a corner on its proposed solution.  Obama can’t raise taxes, but McCain can’t cut them.  Guess the Bush tax levels are, as Goldilocks might say, just right?

But seriously folks, let’s not forget who’s backward proposal this is; the New York Times.  No one would mistake them for a member of The Vast Right-Wing Conspiracy.  This is a liberal answer to the problem, and it is entirely the wrong approach.  The conservative answer to this are common sense financial principles.

Notice I’m not naming party names.  This is mostly because, while Democrats can spend like a drunken sailor, Republicans have show that they can get about as drunk themselves.  If the conservative, common sense solution is to have a ghost of a chance, Republican politicians have to get back to their conservative roots. 

And we, as their constituents, have to get out of our entitlement mentality, waiting to see which candidate for whatever office will give us the most stuff.  Otherwise, the road to the presidency will be won by the candidate promising to be the most pandering and the least responsible.  The best thing about our republic is that it is government "by the people", but sometimes it’s the worst thing about it, too.

Short impression of the 2nd Presidential Debate:  Just like the 1st Presidential Debate, but with more walking around.

Not much new ground covered in this debate, even though there was ample opportunity for it.  The questions just teed up the candidates for the same stump speech excerpts we heard last time.  As such, Obama comes out of the debate in the driver’s seat since the pressure for a game changer was on McCain. 

A few notes:

Obama continued to lie about what brought about this financial crisis.  The wheels did not magically start to come off the day George W. Bush sat down in the Oval Office chair, and the party-line votes regarding Fannie and Freddie put the Democrats on the side against regulation of those institutions.  Even Bill Clinton has debunked this line.  That John McCain didn’t even bother to set the record straight on this is a huge missed opportunity, moreso because it was a carbon copy of Obama’s line in the first debate.

If I hear the phrase "fundamental difference" one more time, I’ll scream.

One bit of new ground that was actually covered was McCain’s 300 billion dollar bailout of people who bought more home than they could afford.  I was extremely disappointed in this.  As I said recently, huge federal debt is not the way to fix a problem that is debt-related.  This is a further example of how our politicians have been conditioned to go after votes by offering giveaways because we respond to giveaways.  McCain’s obviously looking to curry favor with those who think the government should protect people from the consequences of their decisions.  This makes as much fiscal sense as allowing me to refinance my car every year at its new, lower value.  No, I incurred a debt that I am morally obligated to pay.  This is another example of the faux "fairness" and class warfare our country has come to accept to a large extent. 

What about illegal immigration?  What about abortion?  What about judicial appointments?  What about a host of other issues that haven’t been touched on in 2 debates?  Mr. Brokaw, you fell down on the job.

If health care is a "right", Mr. Obama, is food now a right as well?  Which is more important; food that you need every day or health care you need once in a while? 

John, John, John…don’t crack jokes.  They really didn’t work.

Obama is suddenly for nuclear power?  I’m sure there were some environmentalist supporters of his who spewed coffee out their noses at that.

Anyway, so much for another debate.  Not very notable, and mostly a rehash. 

Shire Network News #148 has been released. The feature interview is with Australian writer John Birmingham, who has just published a book in which the Left gets it’s oft-stated wish that the world wakes up one day and America is simply not there anymore. It’s called "Without Warning", and we must warn prospective readers, it contains plenty of what  John Birmingham calls "explody goodness".  Click here for the show notes, links, and ways to listen to the show; directly from the web site, by downloading the mp3 file, or by subscribing with your podcatcher of choice.

Below is the text of my commentary.

Hi, this is Doug Payton for Shire Network News, fighting allergies and asking you to "Consider This!"

The story of the credit crisis in America has chased off just about all other story topics from the front page of newspapers worldwide.  The main reason for this is the sudden perceived worthlessness of what are called Mortgage Backed Securities; pieces of paper that give the buyer or lender rights to the payments and interest on one or more more mortgages.  Basically, an IOU used as collateral for another IOU.  And this was repeated over and over, wrapping our financial institutions into a Gordian Knot.  This knot hung in there as long as home values continued to rise.  And there’s the rub; they didn’t and now here we are.

One of the big things that got our banks into this mess was the choice of the Jimmy Carter administration to use government to increase home ownership among minorities.  The Community Reinvestment Act was ostensibly created with the high-minded intention of doing just that, but in order to fulfill that promise, banks were required to write a certain percentage of CRA loans.  Now, in order to do that, they had to come up with some more creative ideas for qualifying for the loan.  "Outdated" ideas like sources of income and, oh, down payments were thrown out.  They were just sooo 1960s.  They were there to limit loan defaults, but hey, the number of people getting a home was on the rise!  What could possibly go wrong with this well-intentioned big government program? 

Indeed.  But getting a home and paying the mortgage are two very different things.

Banks didn’t like this added exposure to risk, but they were required to do this or face penalties.  In 1995, during the Clinton administration, the CRA was strengthened.  Now, let me ask you.  Which lending institution led the way from here, writing up many of these higher-risk loans?  Countrywide, a bank who’s recent failure you may have heard about.  Who bought up many of these loans from banks that didn’t want them?  Fannie Mae and Freddie Mac, more names you’ve probably heard in the news just a little bit lately. 

I have a personal blog, "Considerettes", that is linked to in the show notes when I have a segment in the show.  However, I also run a Christian group blog called "Stones Cry Out", where I’ve been discussing this issue.  One of our commenters, a Christian from the left of the political spectrum, said that the CRA is "about justice, and, as such, is a good thing".  That, folks is a naive and dangerous idea.  This is essentially a case of the motivations justifying the means, and utterly ignoring the ends.  (Hmm, I gotta’ work on that phrase.  Needs to be snappier.)  My response to him was that "recession in the name of justice" isn’t a slogan that works for me.  That’s because "the road to recession is paved with good intentions and other people’s money".  (Nahh, that one’s awful, too.  It’ll never catch on.)

Essentially, and to get away from coming up with more slogans, this was a big government program, with good intentions, that was tweaked and tweaked by big government, until we were in such a mess that we had to be rescued by…big government!  Ironically, and sadly, the liberal representative who chaired the committee who oversaw all of this, called it a failure of…the free market! 

Ladies and gentlemen, boys and girls, children of all ages, that’s why voting matters.  More than that, political philosophy matters. I know, I know, it’s sound boring and irrelevant.  "Political Philosophy" isn’t the name of some must-see TV show, nor the latest boy band, nor the national championship team.  But political philosophy matters.  If you care about whether or not your country, the United States or somewhere else, slides into recession or worse, you need to care about it. 

The lessons to learn from this are legion.  Government programs never stay the same size; they get bigger.  Government programs never stay targeted; they get generalized.  Government programs never cost some amount X; they cost more, lots more.  And anyone who tells you that this or that government program will fix everything is mistaken.  It’s not that they are willfully lying.  But you can never know the harm it can cause down the road.  If it fails, it fails in a big way, for loads of people.

If you want to know why I want smaller centralized government and vote conservative, now you know.  That’s my political philosophy, and it matters.  Please…consider this.

("Consider This!" was brought to you by the letters C, R and A, and by the number 700 billion.)

In both debates so far, all 4 candidates were asked which promises and/or programs that they’d proposed would they not be implementing due to the current financial crisis.  I don’t think any of them gave a satisfactory answer to this question, with Obama’s “scaling back” response being the only thing close.

If anything, this credit crisis should be teaching us one lesson: severely curtail borrowing.  Huge debt is killing us.  In the mortgage-backed-securities field, things were compounded when Bank A would take an IOU from Bank B and use it as collateral to get a loan from Bank C.  Repeat this with Bank C and continue until you can hardly follow the trail.

The same goes for the federal government, who, in addition to the national debt already run up, plans to be the final resting place of this toxic debt.  So now all are eggs will be in one unimaginably huge basket.  If the bailout bill doesn’t do the trick and if foreign investors call in their chips, who bails out the feds?

Make no mistake; we are not out of the woods yet.  Sarah Palin mentioned in the VP debate the need for American’s to do their part by not taking on excessive debt.  (Personal responsibility; what a concept!)  This should ring throughout Washington, DC as well.  Spending needs to be cut, deeply and immediately.  A trillion dollars in new programs are not what this nation needs at this moment in time.  Soaking the rich to pay for more big government programs is just kicking the problem down the road.  Soaking businesses to pay for them affects employment and prices in a negative way, so we all get hit by it (promises of aiding the middle class to the contrary).

What I am afraid will happen, however, is that once the current crisis is no longer front page news — when it’s financial concepts that the public doesn’t have time for — the politicians will continue their MO like nothing’s happened.  I wish at least John McCain would get real with this issue, but he won’t any more than Barack Obama will.

And that’s largely our own fault.  Too many of us have the “Ask not what your country can do for your” mentality.  We’re buying the line that if only the rich would pay their “fair share” we’d be out of this mess, but we’ve bought into an incredibly selfish definition of the word “fair”.  We say we want our politicians to tell us the truth, but our vote too often goes to the one promising us more and more for less and less.

The bill has come due.  Let’s cut up the credit cards and stop spending what we don’t have.  This is the first step to freeing up our politicians to tell the truth.

No matter who you are, the current credit crunch does affect you, even if you don’t have a penny in the bank or a stock.  Never mind (for now) the domino effect of the credit market seizing up, if you vote, it should affect you.

Item 1:  Rep. Barney Frank has called this current crisis two things that are both flat-out lies; a failure of the free market and the result of Bush administration policies.  Frank should, and likely does, know better, since he’s the chair of the House Committee on Financial Services.  There has been video all over the blogosphere, and linked here as well, that show he and his fellow Democrats denying any problems at all with Fannie Mae and Freddy Mac, and now he’s trying to solely blame Republicans.  There’s plenty of blame to go around in both parties, but he’s in a unique position, as committee chair, to pronounce the truth of the matter to us.  Instead, he’s politicizing this huge issue for partisan gain.  If you’re from Massachusetts and you vote, this should affect your vote.

Item 1a: Senator Joe Biden said the same thing about it being all about Bush administration policies.  This should affect your vote.

Item 2:  At the foundation of this crisis is an abandonment of free market principles, not the failure of them.  Republicans have (more often) been the keepers of the free market flame.  (That’s not been a constant by any means, but a good generality.)  The Community Reinvestment Act is a Carter-era program to basically force lenders to give home loans to those who would otherwise not qualify, and the default rate of these loans is higher than normal.  That, along with the Gramm-Leach-Billey act which allowed Fannie Mae and Freddie Mac to write or buy up these loans in a bigger way, released other banks from this higher-risk paper and continued us down the primrose path.  Again, videos highlighted here showed, one of Obama economic advisors Franklin Raines, who at the time of the video was CEO of Fannie Mae, insisted that home prices would always go up.  Now, there is no doubt in my mind that Wall St. greed fueled this as well, but with a government mandate to write high-risk loans, and a (for all intents and purposes) government agency ready and willing to buy them up, this was a recipe for disaster.

The point is, as honorable and as high-minded the intentions were to try to get more people into their own homes, it set more people up for failure.  You can say that the number of foreclosures wasn’t enough to be a problem, yet here we are, the engine of commerce about to seize up over securities backed by mortgages.  This started when Democrats decided that the free market wasn’t working and instituted policies to, in their eyes, fix things.  While it did get many into homes that might not have otherwise been able to, does it really help us in the long run when Congress has to eventually bail us out to try to avoid a recession or worse?  (And the jury’s still out on if the bailout will really do it, or if it’s just a short-term band-aid.) 

Those who think that the free market failed us then, and are now ironically blaming the free market again, are running for President in November.  This should affect your vote. 

It does affect you.  Or it should.

As my wife and I talked about the bailout failure, she wondered if there would be the catastrophe that pundits were predicting would come about.  I mean, some were giving the impression that the next day we’d be in The Great Depression 2.0.  The Dow Jones drop yesterday was a large absolute number, but it was just a little over 6%; less than a third of the percentage drop in ’86.  And over the past week the market has taken wide swings as emotion rather than reason has put it on the roller coaster.

But as the Hitchhiker’s Guide to the Galaxy reminds  us; don’t panic.

There are two reasons not to panic.  The first is that God is still in control, He knows what’s coming, and if we’re trusting in Him we don’t have to worry.  "And we know that in all things God works for the good of those who love him, who have been called according to his purpose." (Romans 8:28)  Those "all things" may not all be pleasant and cheerful, but they’ll all work for good.  Likewise, this doesn’t mean we don’t have plans if disaster strikes — I have a savings account, a retirement account, and I backup my computer; this verse doesn’t tell us not to be careful — but whatever events come our way we need to trust Him to get us through it.  Panic, as human and as understandable as it may be, is a lack of trust.  A good article, "Fearing the Future", is here at Crown Financial Ministries’ web site.  Don’t panic.

The second is that panic makes us do foolish things that calm consideration may warn against.  We react instead of respond to the events of the day.  Take the fuel shortage hitting my neck of the woods.  If every car in metro Atlanta were to top off their tank on the same day, we’d have a fuel shortage even if all the stations had gas to begin with.  But, true to (human) form, when we heard that hurricane Ike slowed the flow of gas into the southeast, and the governor said not to panic, Atlanta did anyway.  Worried about gas lines and higher prices, Atlantans created and implemented a self-fulfilling prophesy.  If folks with 7/8th of a tank all hadn’t decided to top off during the same few days, we may have been able to ease through it.  There would have been some disruption, no doubt, but not to the point where some folks trail gas tankers to their delivery locations. 

The stock market lost 6% yesterday?  Then today’s the day to jump in.  Other people panicked and bailed out of the market, creating bargains.  Some folks have dumped stock of companies that aren’t going to be affected, or affected little, by this situation, so their stocks are now artificially low.  This podcast episode from Crown Financial Ministries deals with this specific issue.  (And I recommend picking up the feed in your podcatcher of choice.  Good advice all the time.)  Don’t panic.

But could we actually wind up in The Great Depression 2.0?  Only God knows, and that’s not a cliche.  Whether we experience some pain now or if we kick the can down the road, it’s still all known to God.  Trust Him, and don’t panic. 

In the first Presidential debate, Barack Obama used the line more than once that this credit crisis we’re in stems from policies that "shredded" regulations, and that assumed that regulation is "always bad".  But that characterization is simply not true, and in the cases of Freddie and Fannie, which are government sponsored enterprises (GSE), government oversight is especially required.

First of all, GSEs are a non-free-market concept, contrary to Rep. Barney Frank’s assertion that this credit crunch is a failure of the free market.  It is a government program to target certain sectors with cheap loans.  Overall, it has been fairly successful, but it is not a free market issue.  This is government stepping in to deal with a situation it wants to see changed.

The second issue is that when Democrats pushed Freddie and Fannie to create what became known as the subprime mortgage market.  That was the subject of the previous video I posted on this subject.  It became the late-20th-century version of "a chicken in every pot" promise.  Everyone gets a home!  Well, not really.  Everyone gets a mortgage, including some who couldn’t afford it.  But Freddie and Fannie took this mandate and went wild.  It was essentially a big-government solution being administered by a big-government program; again, not a failure of the free market. 

During this time, Republicans realized that more regulation of these types of loans and the securities backed by them was required, but Democrats did not believe there was a problem.  Those were their words; not a problem.

Roll the tape, and listen to their words.

So Obama’s sweeping contention that Republican consider regulation "always bad" is demonstrably false.  Less regulation is a hallmark of conservatism, true, but where it’s required, especially in a government program, it should be done.  But Democrats, when faced with tightening the purse strings on a constituency that they claim for themselves, will see no evil.  Being for the little guy does not mean setting them up for failure.  It’s partisan politics, pure and simple.

And by the way, where’s the MSM on this?  Quiet as a mouse.  FactCheck.org’s checking of debate facts is silent on this issue.  The objectivity on this issue is pointing out some glaring blind spots.

Update: Roger Kimball gives the roots of this crisis a closer look, with suitable linkage.  Short and sweet, but informative.

This is a 10-minute video that sets the Way-Back Machine to 1995 and documents, with quotes, news articles, charts & graphs, how we really got into this mess.  It also notes who contributed to it and who tried to stop it before it happened. 

Keep your mouse on the Pause button.  It packs a lot of information into those 10 minutes.

Yes, there could be profits made with the taxpayer-backed bailout funds for the mortgage-backed securities.  The government would be buying them at a discount, likely, and most folks don’t default on their mortgages. 

So who should get the profits?  How about, oh, the taxpayers?  It’s only fair; they (we) took the risk, they (we) should get the benefits.  But Washington Democrats, true to their view that any money in their vicinity is theirs (not the taxpayers), are already trying to lay dibs on it to fund other government programs.  They can’t even try to help the economy without sneaking in what amounts to a 20% tax.

Thanks, guys.