ReallyFuckedHomeowner.com

Give a man a fish and you feed him for a day. Teach a man to fish and you feed him for a lifetime. 

                                                                                                                                                   – Chinese Proverb

In dealing with the housing crisis or even the larger economic crisis two things have been happening.  The government has been throwing money at the problem and now they are throwing regulations at the problem.  Let me first start off by saying that this is not a post about whether either of those is right or wrong (both are probably right to some degree).   This is about the fact that that won’t actually protect people from the next big bubble in which everyone, blinded by greed and ignorance, will get suckered again.    That’s because the next bubble is all about something that isn’t covered by regulation.  It won’t be housing, it will be something else (my bet is on “green” stocks in about 2017 or Gold 9 months from next Tuesday).  In short the government is giving everyone a fish in terms of regulation, they are not teaching us how to fish in the form of education.

Don’t believe me?  Well lets see how well governments have prevented bubbles from reoccurring in the past.   To do that check out these stories and articles:

•  ”This Time Its Different” from the New York Times
• Check out 800 years of bubbles in the actual book that inspired the New York Times article
• Ask John Kenneth Gailbraith in his book “A Short History of Financial Euphoria” (what does he know being a mere Economics Nobel candidate from Harvard.)

Well those books go so far back that maybe they were just stupid in the dark ages.  Fine lets go more recently to America where we have brilliant financial minds, computers and Jimmy Dean Sausage-on-a-Stick.

• 1980s – S&L Crisis and the largest single percentage decline of the Dow Jones since the Great Depression.  Out of that came the “Financial Institutions Reform, Recovery, and Enforcement Act of 1989“
• 1990s – Enron, Worldcom, Tyco and the Internet Bubble.   Out of that came “Sarbanes-Oxley“
• 2000s – The Housing Bubble.  Out of that will come something.

So three bubbles and three new sets of regulations and someone still found another bubble that wasn’t covered by the previous regulations (as they have been doing for 800 years, long before computers or Jimmy Dean).  One can argue that the regulations at least prevented the bubble happening in the same area but alas another bubble still happened.

What this means is that the government really should be teaching the American public HOW TO FISH or at least how to smell something that’s fishy because in the end there will be another bubble, followed by another set of regulations, followed by another bubble.  Regulations always arrive to late so you, the indivdual, have to survive on your wits for a bit.

Up until now, however, have you heard anyone in Congress talk about introducing financial literacy into the schools? NO!   Are we worried people won’t be interested?  Au contraire mon frere as you can check out the most popular class at Wellesley which teaches the basics of personal finance.

Is the government producing and distributing basic facts on making large financial decisions to the public? NO!   Maybe they just don’t want to draw attention to how many kids graduate public school and can’t read.

So in short if you don’t get yourself educated you are completely screwed when the next bubble comes along.  If you don’t believe me remember I’ve got 800 years of history, 2 Harvard economics professors (one a Nobel prize nominee), the former chief economist for Bear Stearns (she got out long before “that” happened), and a 24 pack of Jimmy Dean Sausage-on-a-Stick on my side.

And to make sure I end on a depressing note I’m not even sure regulation can prevent the same type of bubble from happening again.  In 1997 the FDIC published a study called “History of the Eighties – Lessons for the Future” in which you can find this little gem: 

Third, the banking problems of the 80s and 90s came primarily, but not exclusively, from unsound real estate lending.  It is instructive to note that the real estate boom and lending fiasco appears to have started in the United States.

…Excess real estate lending, powered by rapidly rising rents and prices, rapidly occured worldwide.  But more than anything else, real esate lending became the fashion, the ‘new’ banking idea of the times.

So PLEASE President Obama, take us to the nearest lake or stream and show us how to cast an economic line as we shouldn’t be the ones taking the bait.  Sure spend some time on regulation but more (or at least some) time on EDUCATION.   The best I can do in the short term is send you to an excellent site called the Khan Academy (look under the “Finance” or “Credit Crisis“ section) which has some great educational videos.