The Zero-Sum game

When I was a child I was taught that when I made a mistake, the best course of action was for me to admit my mistake and to try to learn from it. Later on, I was taught to be a good student of history, so that I would not repeat the mistakes others might have made before me. Things have changed since my childhood days. They say, we have progressed, but have we really? In the so-called gentler world we live in, it seems that it is always the other guy who makes a mistake. People tell me that we have evolved since my boyhood days. Have we, really?  Is evolving unidirectional? I do not think so. Evolving is bi-directional, we can get better, surely, but we can also get worse.

Two cases in point …

The case of the housing fiasco

During the mid 1990’s our government officials and politicians encouraged us to get a mortgage, never mind that we could not afford one. Lending institutions were pressured to make risky loans, the so-called sub-prime loans.

I remember hearing a politician say on TV that even poor people should be able to buy homes. So, the government pressured lending institutions to make loans to the so-called underserved community, who could not come up with the customary down payment. I remember reading that some loans exceeded the purchase price. Why? With the extra cash people could afford to furnish their new house.

Before the binge buying, to get a loan you needed to be a permanent resident of the United States (green card holder or U.S. citizenship). But, government officials pressured lending institutions to make exceptions for undocumented immigrants residing the country for several years. The economy overheated, prices skyrocketed; the frenzy was on. Not wanting to be left behind, many people joined the buying spree.

With cheap interest rates, many homeowners were encouraged to apply and get home equity loans so that they could pay off their credit cards and avoid exorbitant interest rates. By doing so, they whittled down the equity in their homes, accumulated over several years.

When the bubble burst, the economy went into recession, and many folks lost their jobs, or had their hours cut. Housing prices nosedived in several communities. Those who had little or no equity in their homes just walked away from their loans. Those who had a negative equity scrambled to unload their now over-priced home.

So whose fault was that? Some politicians pointed the finger at the lending companies for creating an artificial market so that they could reap huge profits. Indeed, many financial institutions did just that. Some unscrupulous mortgage salespersons qualified people on flimsy or plainly false information so that they could earn huge commissions. Many accused Wall Street for the greedy, crooked, heartless manipulation of capital.

In hindsight, it was everybody’s fault, not just “them”. Yes, unscrupulous lenders, unrealistic buyers, wedge politicians, and government institutions.  But you cannot be elected for saying that. It is better to point the finger at “them”.

The Greek Case

Progressives and far-left politicians and political economists accuse Greece’s creditors for being heartless and dictatorial. They should have not lent Greece all that money and at those high interest rates. They made huge profits funding the Greek debt. The interest Greece pays, 90% goes to the banks, and only 10% reaches the people. The creditors’ Nazi grandfathers had invaded and occupied Greece 71 years ago.

Never mind that Greece could not spend what they could not earn faster than the creditors could lend. Never mind that the country is broke and cannot pay what it owes. Never mind the endemic habit of most Greeks of not paying their taxes. Never mind a labor market riddled with featherbedding practices and archaic rules. Never mind that people could retire at age 42-45 at full pay (no other country can afford to do so indefinitely). Never mind the widespread corruption.

In hindsight, far-left and far-right might agree that it was not somebody else’s fault; it was “their collective selves”. Greece, after all, has been governed in the last 40 years by the right and the left.

Learning from history …

As I said in the beginning, if we do not learn from history, we are bound to repeat the same mistakes over and over.

·      Countries that cannot live within their means will eventually have to pay the piper.

·      100% or higher, as is the case with California, public pensions will eventually bankrupt the state. Greed knows no boundary.

·      Capitalism without a heart will fulfill Lenin’s prophesy that: capitalists will sell you the bullets with which to kill them. Compassion is not a dirty word; it is a virtue.

·      Playing the blame game is a zero-sum game. For certain issues, the best solution is not necessarily the one that the left or right espouses, but the one that fits the best interest of everyone involved.