Homo Imbecilus

Gal-with-newspaper

I somewhat follow the news to see what’s going on in the world — it’s usually manageable in small doses. I also read/listen to a lot of history, to keep things in perspective and to understand what we humans are like. My main reaction is to laugh that we use the term sapiens (wise, intelligent) to describe ourselves. Homo imbecilus seems more appropriate.

It certainly is true that the present U.S. is a lot different from the one I grew up in. For instance, then if you wanted to buy a house you made sure you had a good down payment and could make the commitment of regular mortgage payments. You never bought a house bigger than you could afford. Nowadays that’s hard to do.

According to the Wall Street Journal, used homes are difficult to buy right now — investors have bought most of the bargains and the people owning the rest of them are trying to wait until prices rise before they sell. But builders are having a boom time selling more expensive new homes, even to people with little savings or with spotty credit histories. How do they do it? They make it easy to borrow the money. In many cases they have their own mortgage departments and arrange for loans with little or no down payment. But isn’t that risky for the builders? Not always. 50% of the loans are guaranteed by the federal government, so the builders will get repaid in any case.

But doesn’t that mean the government is encouraging the very behavior that started our economic crisis in the first place? Well, yes. But if the new owners default the government can always print more money and presumably deal with the consequences later. Homo imbecilus is the only explanation I can think of. What do you think?

Thanks to Evan, Mike, Rummuser, Dixie, Cathy and bikehikebabe for commenting on last week’s post.
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8 Responses to Homo Imbecilus

  1. Mike says:

    Unfortunately, the government doesn’t have any of the constraints that businesses have. If a business fails to manage what it’s supposed to be doing, then it doesn’t last long. Mismanagement of government programs or government sponsored programs only results in bloated bureaucracy. There is little or no accountability for results – at least from what I’ve seen.

    I do not understand the concept of buying a home, or anything else, that is beyond one’s ability to pay for. If there are no adverse consequences for defaulting on loans, then society ends up having to deal with the results in the end– and the adverse consequences have to be there for the companies who gave out these loans to begin with.

  2. bikehikebabe says:

    Jean, please run for President. You could get us on track. No joke!

  3. Evan says:

    Behaviour makes sense in context.

    Workforce insecurity and poor security of renting means that people are less likely to save for a deposit. They will take out a mortgage as soon as they can.

    This is the situation in Aus. Quite different in the US I guess.

  4. Jean says:

    Mike,
    “If a business fails to manage what it’s supposed to be doing, then it doesn’t last long.” But don’t forget the government bailed out a lot of firms that were “too big to fail”. That means those firms can take huge risks and reap in the profits when things go well. When their bets fail the government acts as a safety net. Now the government is acting like a safety net for the builders who are selling homes that are too big for some people to afford. It distorts the market and rewards risky behavior.

    bikehikebabe,
    Thanks for the confidence, but what torture that would be! I would be horrible at something like that. I’ll stick with my toys.

    Evan,
    It makes sense for the buyers and builders, but not so much for those of us backing the loans.

    Andy and I have been lucky renting. Our apartment isn’t fancy but we’ve been here since 1974. Our landlord is in his 80’s, I think. Don’t know what will happen if he dies.

  5. Cathy in NZ says:

    I don’t know the situation here in NZ at all; have absolutely no money to buy a house, let alone service a loan and so so.

    I know there is news all the time on the homefront but it’s not needed to be analysed or accessed by me :-)

  6. Jean says:

    Cathy,
    We’ve always lived in apartments so I don’t think you’re missing that much. As I’ve said, our apartment isn’t fancy, but it’s a carefree way of life.

  7. Rummuser says:

    I am not qualified to comment on your nation’s problems, but I quite like the idea of Homo imbecilus being applied to our politicians and bureaucrats.

  8. Jean says:

    Rummuser,
    Yes, no country is free from idiocies.

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