Housing crisis all over again?

There's an old saying that goes something like this: "Those who do not learn history are doomed to repeat it." Makes sense, right? We need to learn from past mistakes. Even things that happened hundreds or thousands of years ago can teach us valuable lessons about economics, human nature, warfare and politics.  It's really important to be able to learn from the distant past.

Then again, there's also some merit to paying attention to things that happened, oh, four or five years ago, too.

See, President Obama wants to push banks to make loans to risky borrowers.  Based on even a brief glance at the past few years, this is obviously a Very Bad Idea.

Now, why is this a Very Bad Idea?  Take a look at the housing bubble and bust from 2007-08.  The housing market had become a tremendously inflated bubble thanks to two policies.  The first of these is the artificially low interest rates created by the Federal Reserve.  Guess what's happening right now?  In an effort to stimulate the economy, the Federal Reserve is... wait for it... creating artificially low interest rates.

Oops.  This by itself is a recipe for disaster, but the next policy makes it worse.  During The Bubble, one of the policies enforced by the government was forcing banks to provide those artificially low-interest loans to people who were very risky borrowers with low credit ratings.

This sounding familiar?  That's exactly the policy that the administration wants to pursue.  Now, I dislike the strangely popular "blame Bush for everything" tactic, but in all fairness the policies that created the housing bubble and subsequent bust were Bush policies.  What baffles me is the fact that Mr. Obama insists on following this same course.  I know history repeats itself, but I honestly did not expect it to happen this quickly.

The deeper issue, of course, is the idea that the government can "stimulate" the economy at all.  Our system is a pseudo-free market - that is, it's technically capitalist, with everyone being more or less free to trade as they see fit (free market) but with such absurdly heavy government involvement (socialism, progressivism, whatever) that it's definitely not an actual free market; the proper term is corporatism, or, if you like loaded words, it would be technically accurate to call ours a fascist system.  When the government decides to "stimulate" the economy in whatever way, it invariably results in distortions in the market, creating false demand and generally resulting in unnatural developments.

The result?  Because we don't have a full socialist (everything is government-owned) economy, the market will correct what's happening.  Those bubbles?  Yeah, they bust, making things even worse, and when they bust, it gets blamed on the free market, which in turn results in increased regulations that stifle growth, as well as policies like Mr. Obama's proposed ideas, which cause still more bubbles, which then bust, and so the cycle continues, as history endlessly repeats itself.

As an aside, it should be noted that when America's economy was stable, it had no central bank.  In the years between central banks, it was stable.  Every time a central bank showed up?  Boom-bust cycle yet again.

I've decided that my new criteria for supporting a presidential candidate will be looking at their knowledge of history.