Posted by: Greg Huff | January 11, 2012

Wrong “Whys” and Universal Laws

This article was originally published in October 2008 just before the 2008 elections and after the mortgage meltdown that “required” the banks to be bailed out.  I am republishing it now because the old Politically Empowered site is no longer on line and so is not available.  It is, however, still relevant especially in view of the upcoming Presidential election.  GH 

There is a universal LAW that governs human interaction. It is as certain as the laws of physics and just as deadly if it is violated. There are many such laws that involve society but probably the most basic of these is: When you reward bad behavior and penalize good behavior, you get bad behavior.

The corollary is just as true: When you reward good behavior and penalize bad behavior, you get good behavior. #  You can substitute other words for “good behavior and bad behavior”, whether it is “production”, “performance”, “statistics” or “attendance” the concept and result is the same.

When you violate a law of physics, the judgment is swift, final and many times deadly. The universe will maim or disfigure at a minimum if violated.

In sociological terms and time frames violating the above law is just as deadly. It is more painful and far-reaching but unfortunately since it kills over the course of years rather than instantly it is almost impossible, unless actively looked for, to spot the reason or real WHY. Violating this LAW will ensure a prolonged torturous existence to a whole population prior to death.

Government has a specific function that it does fairly well when it sticks to that function and does not delve into other areas where it does a horrible job. Government does well at security of the nation and protection of individual rights. When the government starts wearing other hats it not only abandons it’s basic functions, it is sooner rather than later, actively promoting insecurity AND violating individual rights… but that is another subject.

The Federal government has now committed the people of the U.S. to over one trillion (that is one thousand billion or a thousand, thousand million) dollars to bailing out (or rescuing) the economy. This was due to an economic seizure, which left the financial community convulsing in an epileptic fit. One has to wonder what caused the seizure in the first place.

There are all sorts of supplemental reasons why this happened. The banks and mortgage companies got greedy, reasonable credit requirements were abandoned etc. All of these are wrong “whys”. There is only one “WHY” and that is the twins berthed by the Congress, The Housing and Mortgage Disclosure Act (HMDA) of 1976 and the Community Reinvestment Act of 1977.

The first put the gun in the hand of congress and the second fired the bullet at the heart of the banking system. When the 1976 act found there was lower lending in lower middle-class areas of the nation. And since this could only be discrimination (vilified by the term Redlining) it was mandated by the 1977 act, that banks were to lend into these areas to meet the “convenience and needs of the communities in which they are chartered to do business.”

There have been those such as Aaron Pressman of business week who are saying that this is not the “reason” for the credit crisis.

There are many reasons that came after this initial act of folly. His argument is that it is silly to think that the crisis was caused by a law that was enacted in 1977.

In fact, his argument is the silly one. It is like saying the cause of the last domino falling was the domino before and not the first one to be knocked over or the person causing it to be knocked over in the first place.

No, the 1976 and 1977 housing acts are the basic incident on a chain of events resulting in the mouth foaming, tongue swallowing, eyes rolling up in the head fit.

This brings me back to the Universal LAW quoted above. No matter how well intentioned the Congress was in enacting the 1976 and 1977 bills, these bills rewarded bad behavior.

The real WHY of lack of lending in low-income areas was never found or it was ignored in favor of a “politically correct” handling that was not a solution to the problem. The “solution” created a big problem further down the road with much more dire consequences.

ALL government social programs cause bigger and more severe problems precisely because they reward bad behavior and penalize good behavior. It does not matter how well intentioned the motives are.

The market place will always solve the correct problem if it is largely left alone by government, providing only security, protection of property and from fraud. It is a self-correcting mechanism IF Government wears its proper hat.

We are now about to elect not only a President that will act on Wrong Whys, rewarding bad behavior and penalizing good but we are going to, by all accounts, give him a filibuster-proof Senate and with that (possibly in a few years) a Supreme Court that will further erode Constitutional protections on the size and scope of the Federal government.

God help us if we do. I do not know if we will be able to return from such foolishness.

# Though the concept of rewarding good behavior and penalizing bad behavior is not a concept that is unknown by the world at large, I have never seen it put so succinctly and by anyone better than L. Ron Hubbard whom I’ve paraphrased above.  He stated in Ability Magazine #185 Rewards and Penalties  “WHEN YOU REWARD DOWN STATISTICS AND PENALIZE UP STATISTICS YOU GET DOWN STATISTICS

See also my essay:  Are banks to Blame for the Banking Crisis

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Responses

  1. […] For additional reading on this, see my essay: https://politicallyempowered.wordpress.com/2012/01/11/wrong-whys-and-universal-laws/ […]

  2. […] Dems have much more culpability in it though. You can see my analysis of this in my article Wrong “Whys” and Universal Laws. That being said Krugman thinks government had NO culpability in this and especially not Democrats? […]


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