// January 16th, 2009 // No Comments » // My Life, My Thoughts
I don’t know how many of you are familiar with the theories of Entropy, Order, and Chaos so indulge me while I enlighten you.
First of all some definitions
System: a collection of objects that are related and/or interact with each other based on a specific set of rules (Examples: home heating/cooling system, plumbing, the solar system etc. etc…)
Order: the organized symmetry that is observed when objects interact with each other in a balanced manner
Chaos: the lack of balance and symmetry that is observed when objects interact with each other in a random and unpredictable way.
Entropy: The tendency of ordered systems to decay into Chaos
Ok, now that the definitions are out of the way, (they are simplified for all of our sakes)
My head has been really exploding listening to all of the recent opinions about the recession (dare I say depression?) that is beginning to sweep across the nation and even the world! The one thing that I find most unbelievable is that no one is really accepting responsibility for their actions! Everyone seems to be pointing at someone else wanting to shift the blame. At this point we get to see what is really going on in our country.
- An average US citizen, wants to buy a house
- An Appraiser wants to increase the value of a house to improve his business
- A Realtor wants to sell a house and make a big commission
- A local Bank wants to close on a loan and make a fat load of interest.
- An investment bank wants to buy high risk mortgages and repackage them as lower risk mortgage backed securities, selling them at a profit
- A hedge fund is set up to protect the high risk mortgage backed securities in-case a few of them fail.
soooo
- The average US citizen lies about their income so they can afford a nicer house.. overextending themselves.
- The Realtor works out a deal with the appraiser and the seller to reduce the down payment by increasing the amount of the loan to the maximum appraisal value and pretending the seller is paying the down payment.
- The Appraiser gladly raises the value of the house so that the Realtor can make a better commission.. guaranteeing more work and possible kickbacks.
- The Local Bank looks the other way and closes on an Adjustable Rate Mortgage (ARM) that is doomed for failure
- The Investment Bank buys up thousands of ARM loans, slices and dices them to reduce risk and resells them as mortgage backed securities
- The hedge fund artificially inflates the demand for oil by making enormous futures purchases – driving the price of oil ridiculously high assuring plenty of money to protect the mortgage backed securities .
the result is
- The average US Citizen cannot afford Gas for their SUV because of high gas prices and bad spending habits.
- The ARM loan adjusts to the current finance rate increasing monthly payments by hundreds of dollars and the average US Citizen cannot afford their home.
- Thousands of ARM loans go into default
- The hedge fund fails because they only bet that 20% of the loans would go into default and they already paid the investors their dividends
- the investment bank fails because huge chunks of their mortgage backed securities are failing and investors are dumping them at bargain basement prices
- the local bank fails because the average US citizen pull their money out because they have no idea what is going on with the banks!
- the housing bubble pops, Realtor’s and appraisers run out of work.
- Construction dwindles down and contractors run out of work.
- Unemployment skyrockets
- General consumer confidence begins to fail
- Retail begins to fail
- Unemployment skyrockets
- The Stockmarket plummets
- Consumer confidence fails
- The oil bubble pops
- Gas prices fall
- The world economy stumbles.
Ok ok my rant is almost done…
So much of this is caused by greed, It is all about turning a quick buck! and when all the finger pointing is done thousands of families are without homes that they probably could have afforded if they would have done things right.- If the people that should have been there to help them buy a house, would have been honest with them- and told them to buy less and be satisfied. Ultimately the only ones that pay for the entire scam is the homeowners, the folks who bought gas at near 5 bucks a gallon and the taxpayer that foots the bill for a multibillion dollar bailout of the companies that bought the oil and drove the prices up, and sold the mortgage backed securities at a profit.
The cracks are beginning to show in the idealism of capitolism and they are not very pretty. what shows is greed, dishonesty, and irresponsibility. Every little choice to be dishonest for the sake of personal gain added to the enourmous cost that we will pay in the coming years. Entropy is the decay of order into chaos and we have welcomed it with open arms.
So buckle up and prepare to take responsibility for your actions, responsibility can only be avoided for so long before it demands its dues.
Hopefully America will wake up to realize that truth and honesty and responsibility are worth more than a dollar bill. Hopefully… before we must endure the icy embrace of chaos.
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