The Current Crisis Is Part of a Larger Problem
The United States is made up of mostly non natives, many whom have evolved in much different environments. Europeans that have genetic variations towards cool weather have moved to the warm south western and southeastern areas of the US. Others such as Asians have moved from warm, tropical areas to dry desert areas or cool areas of the US.
It is relatively easy for people from people from many different regions to survive in the US because of the business systems created in the past such as the industrial revolution and the agricultural revolution.
The result of this is it eliminated hunting and gathering as well as many small farms. These things helped to increase our population but have created other problems in the process.
In a hunting and gathering society, harmony with the environment was required. Over hunting one year would mean less food the next year, so careful attention must have been made as far as only hunting what was necessary and nothing more.
If mistakes were made, the system would correct itself. If too many animals were killed, the group may have gone hungry the next winter or died. In a hunting and gathering society, there was a checks and balances system in place.
Move forward to today and we see that things are much different.The environment does little to control us. We control the environment. We use enormous amounts of energy and natural resources without thinking much about the consequences. There isn’t much in the way of harmony with nature in the US.
A great example of this is genetically modified corn. The corn plant has been modified to fit the needs of the chemical company that sells herbicide and pesticide. This makes it easier for the farmer to control the environment and to improve yields. (Genetically modified corn now makes up over 60% of the US corn supply).
Little attention is placed on what the GM food is doing to the environment such as the number of insects and wildlife that disappear afterwards. When the corn mixes with native corn breeds such as Mexican corn, it creates monstrous looking corn plants that are so deformed that they have to be destroyed.
Much of the food eaten in the US now is genetically modified food free of long term testing. Some people may possibly experience indigestion or side effects after eating GM food. Much of the processed food in the US has at least two GM ingredients (corn, or soybeans).
If GM foods were not dangerous enough already, they are processed further into corn syrup and hydrogenated oil. Added to these things are preservatives to increase the shelf life. The result of this is increased profits along with record high heart disease rates, obesity and diabetes.
All that seems to matter is now, now now, and consume, consume, consume. Tomorrow is too far away to think about for the US it seems. {mosgoogle left}
Today, the number of people farming in the US is very small and crop yields are very high. Manufacturing in the US has mostly been moved offshore. In the 90′s the current view was that robots and technological advances would make US factories more efficient. However, that never really materialized as companies found it easier touse cheap laber and move factories to China instead.
This off shoring effect has continued into many other fields such as white collar jobs. The result of this is that the same demands to produce, produce and consume, consume have been placed on to the backs of other countriesthat have even less environmental enforcement.
Not only is this a potential for an environmental disaster but also an economical one. Today, many factories are shutting down or are closing in China. Crime and resentment will likely follow. At some point in the future,some of these people may decide to strike or protest. If this happens, shipments of goods may be delayed; a major blow to the US economy as most of our products are made in China.
In the US not manufacturing products ourselves wasn’t really enough. Banks no longer wanted to carry their own loans. Instead, buying them as securities or trading them like trading cards has been the fashion of the times.
Even though many of these loans were done in local branches by bankers, many have decided to sell their loans rather than to carry them. Leading up to the crisis, it seems that many banks chose to earn short term fees by selling mortgages rather than to have to carry them over the long term.
Obviously, many of the bankers must have known that many of the loans were going to be bad at some point based on the financial state of the people getting the loans. The idea of making a quick buck flipping bad loans is what many were doing. At some point they would be stuck holding these hot potatoes but the quick money must have been too overwhelming to pass up.
The idea that a diversified portfolio or mortgage-backed loans could be secure was not a reality. Even if it were possible to look at some ofthe loan info in the basket such as the credit scores of the loans, that would not have been enough.
Using traditional measures such as requiring a 20% down payment, and looking at the total income of the applicant then determining how much he/she could borrow would have been much more effective at creating good loans than giving loans out with little if any down payment without much income.
These traditional measures bring us back to the hunting and gathering era. These people understood their environment intimately. They understood where to get clean water, the movement of the animal herd and many other matters.
The local banker used to understand their clients this way. Local farming communities had banks lending to primarily farmers. They understood the farming business and the risks. Loans were given to those who were qualified using financial measures as well as by using human measures such as intuition. In many cases, long term relationships between the banker and the client would have been common.
More recently what we have seen is an evolution of this system of lending to one that is built less on relationships and more on selling products or loans. The phrase, “think globally, act locally” seems to have become, “think globally, act globally.”
What we have seen from this credit crisis is that there was less focus on the people that are responsible for creating the loans and more on the profits generated from the loans. It took some time, but it is readily apparent that you can’t have one without the other.
Unfortunately, this lesson will not be learned without some pain and we are seeing some of that now.
When the crisis is over, we will most likely see new laws that toughen lending standards and an increase in mortgage-backed security transparency. Consumers will hopefully learn to live within their means and have a more sustainable lifestyle.
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