Monday, June 15, 2015

Subprime People and Intellectual Bubbles

There are two mysteries that loom above all others, God and person. This is because in their absence there would be no mysteries at all: no humans, no problems. And no God, no answers.

However, in the Christian view, these two mysteries may be reduced to one: persons. Note also that this latter cannot be reduced to first person singular, since the We must be prior to the I if personhood -- which is irreducibly intersubjective -- is our first principle.

For Schmitz, personhood is "a human reality in search of its appropriate name." We have devoted many posts to the subject of how our personhood has become more individuated over the centuries, mainly due to the influence of Christianity (cf. our long series of posts on Inventing the Individual). Under its influence, personhood deepened within the space of "an open intimacy with God" (Schmitz).

"Subjectivity," suggests Schmitz, "is the process of inward uniqueness outwardizing itself." I prefer the term exteriorizing, but I would also emphasize that there are two movements, for the soul interiorizes objects and relationships that speak to its unique idiom. Culture and history are in one sense the exteriorization of the soul, but once exteriorized, become material for interiorization. Or at least they used to, before the anti- and ahistorical left ruined everybody's lives and ate all our steak.

This goes to a rather largish subject, the notion of economic "bubbles." While reading the book Hidden in Plain Sight, on the government-caused economic crisis of 2007-20??, it occurred to me -- no great insight here -- that an economic bubble is ultimately a psychic bubble.

There can be no such bubbles in the biological world, because natural selection punctures them right away. For example, if there is a glut of rabbits, the coyotes quickly take care of the problem. And then, if there is a glut of coyotes, the shortage of rabbits takes care of that problem.

But an economic bubble is a runaway, pro-cyclical event fueled by human irrationality. Well, not exactly, for the players are actually acting rationally based upon the information available to them.

Thus, lenders were under government compulsion to reduce lending standards, safe in the knowledge that government-sponsored coyotes such as Fannie Mae would gobble up their subprime loans like a warren of rabbits. And the GSEs didn't let on that by 2007 over half of all mortgages were subprime (or "non-traditional"), 76% of which on their books (meaning our books, i.e., taxpayers responsible for the left's follies).

Thus, if we dig down to the bottom of it all, we find the government forcing lenders to issue subprime loans. But it isn't really the loan that's subprime, rather, the person receiving the loan. In other words, the real problem is subprime people who are more likely to default on their loans. As such, the so-called bubble was filled with subprime people.

In fact, traditional underwriting focussed on three factors: down payment (loan-to-value), ability to pay (debt to income), and character, i.e., one's "willingness or propensity" to honor debts, as reflected in the FICO score.

It turns out the latter -- "character" -- is by far the most sensitive of the three, and yet, the government forced lenders to ignore it, with (literally) predictable results. For example, the risk of default is 47 times greater with a FICO score of less than 621. But if banks failed to give loans to people with FICOs lower than 621, they would be harassed and accused of racism by government regulators. So, what would you do?

As such, we can't actually blame the bubble on subprime people; or rather, the subprime people are actually bubbleheaded leftists who insist that their fantasies of equality can trump the laws of economics.

I guess that's the point I wanted to get to. It's nice to have all the factual backing Wallison provides, but the real problem is that the left lives in an intellectual bubble inflated by with dreams, wishes, hopes, and more-or-less pure bullshit.

Obamacare is surely a bubble, and Instapundit (among others) has written at length on the Higher Education Bubble. I haven't read the book, but from the perspective we are discussing, the government is creating artificial demand by insisting that everyone should go to college, and here's some money to pay for it and keep you indebted to the government forever.

Thus, college is filled with subprime intellects, and not just the students! If. Only.

Global warming? Bubble. Feminism? Bubble. Keynesian economics? Bubble. What was Obama but a giant bubble inflated by the toxic fumes of the left?


julie said...

Re. the government creating an artificial demand, isn't that pretty much how Zimbabwe reached the point of trading $175 Quadrillion Zimbabwe dollars for $5 American? That and destroying the productive classes, anyway - which we seem well on our way to doing by, say, destroying the livelihood of any person great or small who dares to express a badthought like "Caitlyn is still a man," or "having women in labs can sometimes be difficult, because they aren't the same as men."

Because that's a great example to follow.

I look forward to our children's future of hardscrabble subsistence living. It'll be so great for the environment!

Gagdad Bob said...

Radical environmentalism is predicated on the idea that human beings are a bubble that needs to be deflated down to a billion or less.

julie said...

Yes; so I suppose I should be saying I hope our children will be part of that special, select few deemed worthy enough to be permitted to scrape out that hardscrabble lifestyle, instead of being slated for immediate recycling...

mushroom said...

Truth is so deflating -- so it makes sense that left can never tell us the truth.

We're always operating with incomplete knowledge, but we often have to make the assumption of "good faith" -- i.e., that character will at least average out to be good. When we are deliberately -- and the left would say -- necessarily deceived, we make bad decisions.

And by left I mean not just the usual suspects, but all statists and fascists who protect one another, whether in government or finance.

And yet Krugman was right about everything. He is to economics as LeBron James is to basketball. Why are there still problems in the world if we have Krugman, Obama, and James? Everything should be fixed. (Yes, I know, I'm being unfair to James, lumping him in with those other two losers.)

mushroom said...

College is getting to be like healthcare. The minute we start injecting government dollars into a sector -- and it's always for "fairness" and "compassion" -- we inevitably skew (or screw) the balance of supply and demand. Prices go up because price sensitivity goes down. Taxpayer dollars are Novocaine -- or perhaps nitrous oxide. It's really funny until the high wears off.

mushroom said...

The four horsemen are not what I expected.

julie said...


Ann Kellett said...

Instapundit talks about the error of mistaking the characteristic of a thing with the thing itself. Having a mortgage signifies being in the middle class but giving subprime people mortgages does not make them middle class. Very helpful way of looking at things. (Also good: anything that can't go on forever, won't.)

SippicanCottage said...

There can be no such bubbles in the biological world, because natural selection punctures them right away.

That's because nature doesn't have opinions. Surface of the moon, or Balboa Park: Makes no nevermind to nature.