Saturday, August 4, 2012

Learning from Mistakes

Unfortunately, when I was in School I did not understand the importance of studying history.  This was because I believed that since we could not change what happened why bother.  However, as I get older I have realized that studying history gives us an opportunity to learn from others mistakes so we do not have to repeat them.  We can also observe current events in other countries and learn valuable lessons. 

Unfortunately, our leaders often fail to learn from the mistakes of history and thus continue making the same mistakes.  They also look at what happens in other countries and arrogantly believe we are so much smarter and will be able to do it better.  Let me illustrate with the following examples. 

The main reason for the current economic downturn was the failure of the housing market caused by subprime mortgages.  Many blame the banks for issuing these toxic mortgages but the banks were only doing what the Community Reinvestment act required them to do under law.  This act forced banks to reduce down payments to practically zero and lend to people who were bad credit risks.  This led to the bundling of these subprime mortgages by Wall Street in an attempt to mitigate risk (1).

Many of these subprime mortgages were adjustable rate mortgages with an initially low interest rate.  Borrowers believed that the value of their property would appreciate and they could sell or refinance the property before the interest rate increased and use the equity as a down payment on a conventional mortgage.  However, there was such a demand on the housing market brought on by the easy to secure mortgages that real estate prices were inflated.  Once the boom was over, these real estate values went down to their pre boom levels.  This left the holders of these adjustable rate mortgages with no choice but to default on their loans once their payments went up causing the wave of foreclosures we saw in 2008.  Many of the banks left holding these toxic mortgages went under and the government through the TARP legislation bailed many out. 

The sad news is that our politicians learned nothing from this crisis and are actually proposing another initiative to force banks to lend to low-credit-rated blacks and Hispanics (1).  Not only is this proposal discriminatory since it excludes anyone who is not black or Hispanic, it is a return to the failed Community Reinvestment Act.  The failure of our leaders to learn from past mistakes means history will repeat itself and we will see more foreclosures, bank failures, and bailouts in our future. 

For another example we can look at the recent blackout in India.  This blackout left hundreds of millions of people without power.  Leaders blame the outages on an overburdened power grid (2).  In other words, India’s state run power grid was unable to produce sufficient electricity for its people.  The question is, could this happen here. 

Obama said during the campaign that it was okay for someone to go into the coal business but if they did, they would go bankrupt (3).  It appears that through regulation, the Obama Administration is on track to make this promise a reality.  The Obama led EPA is set to introduce new regulations targeting greenhouse-gas emissions from coal fired power plants.  With coal being the primary fuel used in the generation of electricity in the United States, we could face a situation similar to that in India in our future (2)

The Heritage Foundation recently sent a report to Congress urging them to curtail some of these regulations and save Americas Coal industry and insure the generation of sufficient electricity to meet the needs of the country (4).  We can only hope our leaders will look at what just happened in India and change the direction of our country’s energy policy.

Our job as voters is to remind our leaders of the failed policies of the past as well as pointing out problems in other countries that could potentially occur in our country as well.  If our current leaders will not listen then we need to show them the door in November and replace them with leaders who will learn from past failures and the failures of others. 

1. Tucker, William. And You Thought the Housing Crisis Was Over! spectator.org. [Online] The American Spectator, July 27, 2012. [Cited: August 2, 2012.] http://spectator.org/archives/2012/07/27/and-you-thought-the-housing-cr.

2. Daniel, Frank Jack. India power cut hits millions, among world's worst outages. reuters.com. [Online] Reuters, July 31, 2012. [Cited: August 2, 2012.] http://www.reuters.com/article/2012/07/31/uk-india-blackout-idUSLNE86U01G20120731.

3. okiecampains. Obama Called for Bankrupting Coal Fired Power Plants. youtube.com. [Online] Youtube, November 3, 2008. [Cited: August 4, 2012.] http://www.youtube.com/watch?v=wF7Qm31LIDM.

4. The Heritage Foundation. Heritage Report Calls on Congress to Save Coal. ourenergypolicy.org. [Online] The Heritage Foundation. [Cited: August 2012, 2012.] http://www.ourenergypolicy.org/heritage-report-calls-on-congress-to-save-coal/.

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