My private sector experience: Government is the problem!

In 2005, fresh out of a year at Kanakuk Bible Institute, I knew what I wanted to do with my life: serve the Lord by spreading the Gospel and save my country by protecting the Constitution and exposing the politicians in Washington as the corrupt careerists that they are. I knew that those two callings would not pay the bills, so in the short term I took a job as a representative of Leadership Institute, a conservative organization based out of Washington, D.C. Long-term, I wanted to do something real and lasting that would work for anyone but myself, so I started to think of areas to invest in and start my own business.

For me, a big part of the American dream has always been home ownership and the right to own property. I learned that if a man owned land and property that he had sound investments. In 2005, everywhere one looked there were people buying homes. The homeowners were happy and so were the real estate agents, construction companies, bankers, retailers, and politicians. The prices of homes were continually going up and there was no end in sight.

My brother and I looked at all of this and decided to start our own company in real estate investing. We were very excited. We had all kinds of plans to start small and very quickly have rapid expansion. In 2005, it seemed like the perfect time to invest in real estate and we did!

Very quickly we saw suspicious signs that things were not as they appeared. When securing financing, the banker offered no-doc loans; a real, true no-doc loan; 103% loans; and sometimes 107% loans. All sorts of gimmick loans were advertised that simply did not make any sense for anyone. When the time came to close on a deal for our investments, we were only offered Freddie or Fannie loans. Being the conservatives that we are, we jumped through several hoops just to find a loan that was NOT government-related, costing us expense and time. The bankers could not believe that we would not accept a Freddie or Fannie loan.

I looked at all of this and in mid-2006 I realized it was all fake. The entire housing boom was not real and there would soon be a bust.

I did some research and I discovered that the Federal Reserve bankers and politicians in Washington, D.C., were to blame. They were driving our whole economy off a cliff and hardly anyone saw it coming.

The politicians and bankers never want a recession. So when the dot-com bust happened, the Fed interfered and artificially lowered interest rates, or the price of money. This would make the economy appear to look healthy, but the appearance was achieved only with short-term gimmicks and “smoke and mirrors” that make the problem worse in the long run.

With the politicians’ eager approval, the Fed artificially lowered the price of money, making it next to nothing to the banks. The banks then gladly lowered the price of money to borrowers. This extra fabricated lending caused risky behavior that led to the housing boom.

You see, there was almost no risk (they thought) to the local bank. The Fed allowed other banks to lend banks money dirt cheap. Therefore, when they gave John Doe a loan, the local bank could turn right around and send the loan to Freddie or Fannie or they could sell to a big financial entity that was buying Mortgage Backed Securities.

The FED was financing all this and the banks went full steam ahead under the premise that there was no risk. If there was risk, the Government Sponsored Enterprises would pick up the bill.

This was and IS a recipe for disaster. For the next two years I would tell anyone who would listen that a big housing bust was about to happen. This bust would be worse than any recession we have seen in several decades. During this time, people like Rush were on the air praising the economy and none of my Republican friends were buying what I was saying.

I knew what was coming and I had time to act. On paper my condos had increased in value and I could sell them to some unsuspecting fellow who did not have a clue. But I could not sell in good conscience, and therefore I held on to my investments.

The crash happened and many lost their homes. Even more lost at least half their worth. In the aftermath, far too many looked to Washington to fix the very problem that they created. The politicians did the only thing they know how: they doubled up on what caused the problem in the first place!

Before the crash, the federal government was involved with approximately 30-45% (depending on your definition) of residential mortgages. After the crash, the federal government is directly involved in 95% of new mortgages. Before the crash, the Fed lowered the price of money, through fiat, to below the rate of inflation. This caused risky behavior and huge, huge market distortion. Since the crash, the Fed has continued the practice of lowering the price of money below the rate of inflation.

Before the crash the politicians spent trillions, and after the crash they are spending trillions and trillions, weakening our dollar and lowering our standard of living.

The solution of both political parties has been to re-inflate the housing bubble and do it all again!

In 2006, knowing what was coming, how could I invest in my business further? How could I invest and build my company when my financial fate was directly controlled by Washington and the Federal Reserve? How could I hire people, secretaries, accountants, and incorporate when I knew it was all fake? I often think of how many people would have been hired and jobs created if the government would simply keep out. The government destroys jobs and prevents new ones from being created.

On paper, my properties have lost a third of their value and I have obligations to the bank that are not small. But by the GRACE of God I was one of the lucky ones! Others did not see it coming and they went deeper and deeper and are probably in financial ruin.

In the year 2010, how can I invest in real estate when I know the whole bust is going to happen again, but worse?

With the government involved at this high a level in the housing market, the price manipulation is such that I simply do not know what my assets are worth. With government price controls in effect, none of us know what any of our homes are really worth.

My private sector experience is similar to that of many who are trying to pursue the American dream.

I had a dream to start a business and the government and the politicians interfered with my unalienable right to property and the pursuit of happiness by involving themselves in areas of the private sector in which they legally had no right to interfere. They had no authority to do what they did. Their gimmicks and shortcuts in the economy made it impossible for me to expand my business without relying on them or watching their moves. I could make a great deal of money by gaming their irresponsible charade of playing the boom-bust cycle, but I would be making profits off of unsuspecting citizens and that would be the only way for my business to grow.

Central planning by the federal government does not work and it causes huge distortion in the free market. This ultimately leads to a lower standard of living for the average American.

The politicians have destroyed the assets and wealth of the American people. They are going to try and wish it all away by putting it all on the giant national credit card. Their hope and promise is that another fake Fed-generated boom will ensue and everyone’s house values will magically rise back to 2006 levels or higher. So will everyone’s 401k, they say. This is their plan and this is all they know how to do. It works every time…UNTIL IT DOESN’T…and then what? Every time the fake boom is bigger, as is the real bust, causing a vicious cycle that will lead to economic catastrophe.

Here is where we are headed:

The residential real estate market will collapse again. So will the commercial real estate market. So will the credit card industry. So will the dollar. We will have hyper-inflation and everyone’s standard of living will decrease. The American dream will be in the rear-view mirror. It might not be tomorrow or one year or ten years, but it will happen. It is not about ideology or politics. It is simple math and economics.

We do not have a free market in this country. We have a controlled, fake market that strives to appear free. Without a free market there are no free people.

The way to prevent this is to quit electing Bush/Lugar Republicans and to start electing Reagan Constitutionalists!

It is not too late to stop the politicians and renew the American dream, but "we, the people" must act now. We can no longer wait!