The last 6 months of 2008 will be marked as a turning point in America’s history and its status as an economic superpower. The real estate crash could have been contained had it not been for Wall Street’s unethical packaging of questionable home loans. Those loans were resold to other banks and governments as secure, rated investments. As housing prices corrected in the US, which does occur occasionally, those multi-trillion dollar investments became suspect. Once banks and investors lost confidence in these shaky loan packages, they were effectively worthless. No one wanted to buy them or guarantee them. Trillions of dollars evaporated overnight.  As a result, the global financial system was severely damaged and the world economy nearly collapsed. Someday it will be revealed how near the brink Wall Street pushed us for the sake of a sales commission.

The George W. Bush administration and Congress acted swiftly (pork-barreling nothwithstanding) to shore up the American side of the ledger sheet. Whether the initial $1 trillion was well spent is a matter for economists to debate. It provided a badly needed confidence-booster  and signaled to the world that America would attempt to clean up its mistakes. Since September 2008, trillions more have been pumped into the financial system. As of January 2008 that number stands at approximately $7 trillion. Just to provide some perspective: At 3% interest, that $7 trillion demands almost $1 billion in interest payments per day. At 1% interest, it will take almost a 1,000 years to pay off the debt based on our government’s past performance for loan repayment. America had already piled up $40 trillion in national debt before this most recent debacle.

Given the gravity of the situation and the magnitude of the destruction, it’s outrageous that no one’s been arrested, investigated or even pilloried in the press. Of course, Bush administration officials have been grilled endlessly, but what about the clowns on Wall Street who created this mess? What about Obama’s housing advisor Franklin Raines, who was a key player in the mortgage meltdown as CEO of Fannie Mae? The press has diverted attention away from the people who created this mess to an intense scrutiny of the people trying to clean it up.

What gets lost in all the noise is the hard fact that someone’s going to have to pay down this debt. It doesn’t appear that Wall Street honchos are going to cough up a nickel. Franklin Raines isn’t going to return his $45 million bonus. That leaves average working Americans to pick up the tab. That means a century or more of diminished economic growth, personal opportunity and personal wealth. It means more taxes, more inflation, a drop in the dollar’s value and a drop in our standard of living. And, adding insult to injury, Barack Obama wants to add an astounding 600,000 new government employees to the federal payroll. That’s insane. With pensions and benefits, it instantly adds another trillion dollars to this year’s federal budget, which is already a trillion in the hole. And it adds another trillion every year going forward forever. At what point do the wheels come off this gravy train? It appears that the only thing that can stop our government from spending money it doesn’t have is for the rest of the world to push our government into bankruptcy. And even then, our politicians and bureaucrats won’t be suffering one bit. That will be left to the taxpayer.

Fox News reported that some homeowners are deliberately missing their monthly mortgages payments even though they can easily afford to make those payments. Evidently, they’re hoping for some kind of bailout or readjustment of the interest rate and/or the principal balance. Where did they get that idea? From the banks, insurers and investment houses that have been bailed out by the government for making stupid mistakes. From auto company executives who are asking that the rules of capitalism and a free market system be broken with a government bailout. Even the Gaffmeister himself, VP-Elect Joe Biden, blathered about resetting the outstanding principal balance on home mortgages so that payments totaled no more than 31% of household income. 31% is a rather precise figure. Not 30%, not 32%, but 31%. From what dark recess did he pull that number? How could that possibly apply to the myriad of financial conditions that describe each and every household in the US? This is how central planning works - it indiscriminately applies the stupidest principle across the board.

Now, re-setting what people owe on their homes sounds like a noble gesture. Except that it encourages people to go into delinquency, knowing that the socialists in Washington will come riding to the rescue. Also, what does this do to the homeowners who are living within their means, sacrificing on luxuries so that they can meet their financial obligations? It punishes them. If mortgage balances are allowed to re-set, banks will incur huge losses, much larger than the calamity we’re now experiencing. Banks will tighten credit and raise interest rates to cover their losses. Further, the value of all real estate plunges even lower. The combination will hurt homeowners who’ve been making their mortgage payments and paying their property taxes on time.

The clowns in Washington are trying to help. They don’t know how, so they’re playing with the knobs and levers of government, screwing up the economy further and delaying a rebound. Can they please take a rest?

There are loads of people to blame for the housing collapse, mortgage mess, the credit lockup, stock market losses and structural damage to the world economy. Although they’re related, these are individual catastrophes, each with a free-standing potential to destroy America’s ‘free market’ system. There’s no getting away from the fact that this global problem started right here and that the wealth of other nations and other peoples will be dissipated along with our own. And, they’re not particularly happy about. They will, therefore, exact a price for the stupidity and short-sightedness of a very few Americans which in turn will be borne by all Americans.

But, who are ‘they’? Who shoved their fellow citizens into a morass that may take us decades to backfill? According to Rep. Barney Frank (D-MA), he wasn’t in any way responsible. Neither was Sen. Chris Dodd (D-CT), nor Franklin Raines, or Tim Johnson. But then neither was Chris Cox, Harvey Pitt, Alan Greenspan, Ben Bernancke, John Thain, etc. The list goes on and on. The blame rests with Democrats. The blame rests with Republicans. The speculators, Wall Street fat cats, bankers, hedge fund managers, ratings agencies and who knows is to blame. Unscrupulous mortgage brokers, various financial intermediaries, homeowners, homebuilders and a cast of thousands are also implicated. Like the stock market speculation of the tech bubble, the real estate and credit market speculation was a bubble destined to burst. But no one could have imagined the far-reaching, devastating consequences. But in hindsight, there could have been no other outcome.

Over the years, little pieces of legislation and regulation were added, deleted or amended. A small change in real estate lending policies here, a capitalization requirement there - it seemed innocuous, something that the economy could easily afford. But there were hundreds of incremental changes in a hundred different areas of finance, banking and investment that no one could track, all building on one another. The resulting mess is equally complex. Nevertheless, there is one more shoe to drop — the response to this American-made calamity by the rest of the world. How harsh and painful it will be is anybody’s guess.