Wednesday, December 30, 2015

Regulations: The stealth virus that kills the economy

It is not possible to overestimate the chilling effect that regulations have on economic activity.

A vignette

Richard (not his real name) is in his seventies.  He and his wife downsized their house.  They bought a $135K house.  They had $100,000 of equity from the house they sold.  They borrowed $50K because Donna (not her real name) wanted to do $15K worth of nesting, new carpets, drapes, furniture.

Their credit scores are well north of 750.  Their life-long bank gladly loaned them $50K with the $135K house as collateral.

The bank sold the mortgage to recover their capital and to meet the liquidity guidelines required by the government.

Somewhere, somehow, the mortgage became encumbered with a package of regulations and requirements.  The package is a half inch thick of small font, densely written federal gobbly-gook.

Richard made a passable stab at reading these encumbrances....stipulations that he never agreed to or signed off on.  But they now apply to him.  All because he borrowed $50K.

According to Richard, the federal government can take possession of his house and evict him if his vehicle weeps motor oil, even if it was a third party that changed the oil and did not tighten the oil pan plug or oil filter.  He can be evicted even though he has $100K, his only $100K, of money invested in the house.

He can be evicted if a used blister pack of cold medicine is found in the ditch in front of his house.

He can be evicted if he uses a perjorative or "archaic" term in speech, written communication or on the internet.  Of course, the list of terms that are considered perjorative is ever changing.

He can be evicted if heavy metals (like lead) are found on his property.  That is, if he discharges so much as a .22 LR.

You get the idea.  The list is nearly endless.

Richard and Donna saw how the IRS targeted conservatives.  They do not trust the federal government.  Especially frightening to them is that the government can do this outside of the checks and balances of the judicial system.  You can sue them but it will be at least ten years before your case is resolved...and you have to pay rent during that time.

They have choked back on all of their discretionary spending in order to get out from under the $50K  He was downcast as he was telling me his story.  He is not even sure that paying off the loan will remove the encumbrances from the property.  He fears that he is Brer Rabbit and the loan was the Tar Baby.

Imagine Richard and Donna times 5 million.    That does not bode well for the economy.

Richard speculates that the encumbrances were originally targeted at slum-lords as protections for renters.  The paperwork has HUD (Department of Housing and Urban Development) headers.  The SJW decided that normal, constitutional processes were too slow and so they created extrajudicial paths.  Then middle-age spread and bureaucratic sloth made it easier to tack those regulations ontio any loan that so much as cast a shadow on any desk of any federal agency.

"But we would never do that." from a bureaucratic minion is not as reassuring as "But we could never do that."  Why grant yourself the power if you never intend to exercise it?

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