Email Ken Stallings   The Value of Morality

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There is a well worn truism that to give a man a fish feeds him a day but to teach him to fish feeds him a lifetime.  Upon this truism is a foundation that people have an ingrained desire to provide for oneself.  Without this principle, all social advance collapses.  It is upon morality that self-reliance is founded.

Morality is more than a religious expression.  In fact, regardless of one's religious values (or personal rejection) morality matters.  Such basic morality cuts across political values, or at least it must.  Telling the truth and acting in sincere good faith isn't optional, nor is it appropriate only when the business moment allows for it.  In fact, for the reasons leading to our current recession, it is when business most suffers immediately for integrity, that integrity becomes most urgent for long term survival.

The lion's share of the current recession is rooted in the absence of basic morality.  Modern society has created a wholesale excuse for dishonesty and unethical behavior in personal life and business decision making.  We titter upon the edge of outright economic depression because of the collapse of financial institutions that for too long played loose and fast with rules designed to ensure long term viability.

Political decisions were made to extend home loans to very risky creditors because home ownership to citizens of marginal incomes created political capital.  It was a hallmark of a successful economy trumpeted by politicians on both sides of the party aisle.  Home ownership rates soared, which would have been a true foundation of economic expansion had not a large portion of those new homeowners been enticed with untenable adjustable rate mortgages.

The balloon burst when real estate values finally ebbed from the soaring increases of 2005-2007.  Annual home values launched at 50% to 100% increases.  This ushered in the home "flippers" who's primary source of income was to gobble up homes by the dozens in pricey markets using the lowest possible interest rates.  Then these pseudo owners would sell the homes for 20% or more profits after a few months of holding the loans.

The sale proceeds paid off the mortgage and left the owner with a tidy profit.  It worked until home values reached such a ridiculous level that the market priced itself out of reach of even upper middle class families.  These flippers suddenly saw their scheme unravel and to answer they stopped payments to save their liquid capital.  Even homes rented out to families making their monthly rent payments defaulted on their mortgage payments.

This forced innocent families to be evicted from homes they rented faithfully while the owners shamelessly accepted each month's rental check and pocketed the money.  Rank dishonesty as this ushered in the financial collapse.  Suddenly the two federal home loan guarantee agencies were flooded with defaulted loans.  The result was a flood of foreclosed properties in an already ebbing real estate market.  Laws of supply and demand turned a slight downturn in real estate values into a hemorrhage of property values.

Suddenly even home owners with fixed rate mortgages and perfect payment records were gobbled up in the real estate scourge.  Natural cycles of business transfers (ironically hitting military members harder than most) put millions of citizens in an upside down home market, owing many thousands of dollars more on mortgage principle than the home was worth.  A flood of short sales resulted, further depressing the market.

Banks were not able to handle this tidal wave of debt.  Insurance corporations who underwrote the loans were heavily hit and the need to stabilize such giants as AIG resulted in the initial wave of federal bailout plans. 

Add in outright investment scams and the financial markets lead the nation into an emergency that engulfed corporations good, bad, and average into a dearth of good credit and millions of honest employees suddenly out of work.

In response, a good idea has run into basic problems.  What began as an initial effort at shoring up financial and insurance companies has surged into trillions of dollars of federal spending with no limit, extended to open palms pointed toward Washington DC.  Worse, none of this money is real.  It's all a further expansion of national debt.  The expansion of interest as a percentage of the annual federal budget has exceeded the entire annual cost of the Global War on Terrorism and will expand further!

If no one steps up to purchase this debt then the federal government has little option but to print the money and incur inflation in the middle of recession.

This sordid tale returns us to the initial truism.  It is past time for a return to old fashioned and wise values of integrity, self-reliance, and basic honesty.  Government cannot be a savior.  It should exist merely to protect and defend the Constitutional laws of the land to ensure individual freedoms for all citizens.  But if government attempts to become all things for all people, then it truly becomes inadequate for all purposes, including those purposes for which it was created from day one.

Despite nine years of war against terrorism, fought on two fronts, the annual defense budget remains at a peacetime level of less than 5% of GNP.  In the history of the United States, this represents a near low.  In a severe money crunch our federal government is reneging upon its core obligations in order to inadequately handle obligations it took on much later and was never intended to assume.

The party will soon be over and the hangover promises to be long and painful.  Let us hope we rediscover the values that built our nation soon enough to limit the pain to something our children can actually tolerate.

-- Ken Stallings

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