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Charles Wheelan Is A Big Fat Stupid Idiot

OK, he's not fat. And I suppose that as a person of size, it would be hypocritical of me to bash him for it if he were.

But I stand by the rest of the title. His recent Naked Economist article You Get The Government You Deserve attempts to make
the point that the current problems in the credit and real estate market will  "provide lots of ammunition for advocates of more government regulation".  They may indeed, but they shouldn't.

Wheelan lays out Milton Friedman's theory that most individuals will make rational decisions and then proceeds to tear it apart. He gives a laundry list of all the people who made bad decisions during the housing boom...people who borrowed too much, banks that loaned to the wrong people, people who sold and bought bad mortgages. And certainly a lot of people did stupid things. Wheelan strongly implies that more government regulation would have prevented these stupid decisions.

There are at least three problems with Wheelan's arguments. The first is, he never spells out exactly what kind of government regulation he has in mind. Does he want more restrictions on who can borrow money? Does he want to limit the use of ARM's? He doesn't say.

The second problem is that he completely ignores the role of the Federal Reserve in creating the problems. Their easy money policy helped create an environment where everybody and his dear Aunt Sally was plunging themselves into debt. He makes some snide remarks about Ron Paul, but Ron Paul's monetary policies might have helped us avoid the current crisis.

Finally, Whelan ignores the fact that most people did not make stupid decisions. Most homes are not in foreclosure. The national average, according to this pessimistic article, is 1%. (Interestingly, this figure was damn hard to find on Google...a search on keywords percent and foreclosures just gave me a zillion articles on percent increase in foreclosures...I had to use the phrase "percentage of homes in  foreclosure"). When I applied for my own mortgage back in early 2003 when the rate cuts began, the banker asked me if I wanted an adjustable rate mortgage and my immediate response was "Why on earth would anyone want that?". I knew that interest rates would go back up eventually and wanted no part of an ARM.  It wasn't rocket science.

I didn't want to take that risk. On the other hand, there are some things I do with my finances that are risky. I  trade stocks (fairly successfully) and options (much less successfully). I even buy the occasional powerball ticket.  I keep a close watch on how much money I risk on these things so I don't lose my shirt. I don't want government regulations getting in the way of doing these things just so people with less judgment won't get themselves in trouble. Besides, if they have less judgment than me there is no hope for them.

 Responsible people should not be kept from taking calculated measured risks just to keep less responsible people from hurting themselves. That's why  individual freedom  and  personal responsibility are good things. It's sad that I have to explain that.