700 Billion divided by.....

[iplaw]

quote:They weren't private to begin with, they were gov't entities.

Palin... Is that you?

[:O]

quote:The private sector sucked Fannie Mae and Freddie Mac dry

Why does this quote make me think of Barney Frank...

[YoungTulsan]

quote:Originally posted by Neptune

quote:Originally posted by shadows

Having been a teenager in the Great Depression and have lived almost ¾ of a century since I would have to surmise that it was one of most awaking events of a new nation that was using the saving of the workers lending to others at a high interest rate.  We were entering into the fallout of the WW1 of uncontrolled greed which brought about a condition of greed to acquire more assets.

There was an overproduction of food which brought the price to where one could not get $5.00 of wholesome eatable food in a peck sack.

You knew your neighbor and the person down the street; greeting them at the buss stop or passing those walking down the street.

You spent leisure at the park or even sitting y our front yard talking to the neighbors sitting in their yards throughout the block.  This was pre-television as well as pre-air-condition which added to outside socialism of neighborhood.  

A home could be bought for as little as $600 dollars and many walked away from them because they could not make the payments.

It would seem the great buyout is no more that of a replay of the great depression where the buyout failure is what is best thing that can help this nation.

The height of stupidity in the changing times is purchasing a new city hall for millions of dollars being prohibited from putting the emblem of the city on it defining it as the city hall.

Love the blast from the past.  Good stuff.

Part of what caused the depression to be so bad was the US gov't was only about 3% of the economy, and the gov't was completely incapable of stopping banks from failing.  Now the gov't is about 20% of the economy, and there is no intention of letting that happen again.  Not on that scale.

Just about the best thing that can happen now is for Fannie Mae and Freddie Mac to never go back to the private sector.  They weren't private to begin with, they were gov't entities.  And subjecting those two to the private sector with the inherent greed and need for "deregulation" is in large part to blame for where we are now.  The private sector sucked Fannie Mae and Freddie Mac dry, and they pushed for the deregulation which allowed bad loans.

The government is corrupted.  We have 535 elected persons in Congress, 1 elected person in the White House, and 9 appointed justices who have power over the entire federal government.  And you are stating that it is a good thing that the government now controls and manipulates 20% of the economy instead of the 3% it did in the 30s?  The government is corrupted because it has too much power, controlled by too few people.  Each elected official is an easy target for lobbyists, crooks, etc.  That "corporate greed" that is blamed on the free market is enabled through the regulations, deregulations, reregulations, laws, preferences, subsidies, and otherwise MANIPULATIONS of the free market set into motion by that band of a few elected officials.

Yes, greed ran rampant.  But you cannot commit fraud on such a grand scale as we are seeing today without a little help from Uncle Sam.  They write the rules in Congress.  They have failed us, and you are happy that they now control 20% of the economy?  Im shaking my head here.

Going further to the root cause of the problem, it goes beyond Freddie/Fannie, regulations, and who said what when.  The root of the problem is monetary policy stemming from the Federal Reserve System.  This is another entity, like the Federal Government, which has way too much power, and we are seeing its effects now with this collapse in the capital markets.  Maybe the Fed was in bed with the Bush administration, I don't know - but whatever the case, interest rates were held artificially low for a long period of time to make the economy look peachy when we needed a correction.  Any time it looks like recession is looming, or that prices are coming down, the Fed tried to intervene by creating MORE credit, lowering interest rates, generally making money cheaper.  This is an inflationary practice, and its intent is to cover up problems with the economy with paper.  It wasn't going to work forever.

There needs to be a correction.  Prices need to come down.  There will be some pain as a result.  It is inevitable.  It appears to be happening anyway despite the efforts of the bailout.  Too much inflation and easy money was pumped into the system, and it needs to be purged.  People will suffer, and wealthy elites at the top got the better end of the deal.  What should happen as a result SHOULD be that we STRIP the authority from those in power to have so much control over the financial system.  Where malinvestment, overproduction, etc occurred there needs to be a cooling off period for equilibrium to return with prices, supply, demand, and production.  The people should be outraged, and not stand for any INCREASES in powers to these same people who got us into the problem in the first place.  The more power you give them, the more tools they have to line the pockets of the rich at the expense of the poor and middle class through inflationary practices.  They will do this AGAIN, and to a WORSE DEGREE if we allow them to take greater powers.

[Conan71]

Nep's right about one thing though.  Fannie and Freddie should not have been spun off as a private business enterprise.  Or at least if they were, they should have not remained a quasi-government entity.  

[YoungTulsan]

The whole idea of a GSE seems strange to me.  The government should protect us from monopolies, not prop them up.  I know, a mortgage lender sure didn't sound like an evil monopoly, but just like anything else, when the pie becomes so large, it attracts corruption.  The implied government backing just makes them more reckless.

[Neptune]

I was just stating the fact that the gov't is 20% of the economy.  And I was also stating the ultimate reason why the "Great Depression" won't be repeated, at least not to that degree, and at least not now.

While I agree in part that the Fed did it's best to manipulate currency and cash flow;  I disagree with the concept that this is a market correction.  We are on the border of a catastrophic collapse.  Whether or not this is a "market correction" is determined ultimately by the gov'ts ability to prevent a cascade of "cash-flow" related collapses.  I guess technically, allowing the private sector to implode and reach something near absolute zero could be considered a "market correction".  However, I doubt too many people are so faithfully "free-market", that they want to see that happen.

The Fed has been particularly baffled the last few years as many key economic indicators were showing recession, at the same time they were showing a "hot-market".  The Fed was increasingly aware that the "bullish" markets of the last couple years were a paradox.  They raised rates to try and cool an over-heated market, that by all rights shouldn't have been "hot" at all.  Then they lowered rates to try and keep the market from a catastrophic collapse.  

I don't blame the fed though.  The Fed can only "tweek" cash-flow, they aren't capable of keeping the private sector away from a self-induced implosion.  And the Fed isn't capable of keeping the private sector from pushing deregulation through the rest of the gov't.  

We are to blame for this crisis.  We believed the deregulation rhetoric, we believed the good economic news, we believed the private sector was invincible and always correct.  We get to pay for it now.

Side note:  I'm still slightly amazed that Bush pushed this bill, and that enough Republicans were behind it.  Particularly for the House and Senate Republicans; to be for the bailout bill showed a ton of testicular fortitude.

[YoungTulsan]

I'm not saying a zeroing out of all markets is a necessary "correction".

The correction we need to see is the recession that they haven't let happen this decade.  We had a little brief one after 9/11 and enron/worldcomm/etc - but the Fed intervened with inflation.  Bush had already pumped a bunch of tax rebates (which is just inflation when you are running a federal deficit) into the economy.  That was the start of ridiculously low interest rates, which means money is cheap.  The market itself just works with the situation the Fed and government create for them, through interest rates, rules, regulations, etc.

If everyone and their brother can qualify for $300,000 when before only a select few could qualify for $150,000, there is a ton of new money being thrown at the housing market, and the prices of houses inflated drastically.

This also drove needless construction, as the growth seemed endless.  There has to be a slowdown for the economics to reach equilibrium.  The longer we prop up prices, the longer we encourage the construction to continue, the longer we ignore the simple economic problem.  There needs to be a recession.

The real collapse would be if the DOLLAR collapses.  That will happen when we finally push our inflationary tactics too far.  The bailout is a dangerous step in the direction of destroying the dollar once and for all.  Once foreigners turn their back on the dollar, the collapse would make what we are dealing with right now look like a walk in the park.

So why not step out of the way, let a painful recession run its course, then proceed forward with more honest economic policies from there?  To keep propping up prices with inflation, inflation, inflation puts the very foundation of the WORLD economy at risk, the confidence in the dollar.  It also continues the destruction of our economy at home, because we export as much inflation as we can.  That means our jobs leave, our production base leaves, etc.  When we keep lying to ourselves that the economy is strong by papering over shortfalls, nobody seems to care when jobs go overseas.  We just create more consumption based jobs.  Eventually we will be a shell of our former selves, with no productivity, only consumers, and mired in debt.  A recession will light a fire under our butts to put a stop to productivity drains from exported inflation.

[Neptune]

I think a little of that depends on what you mean by "recession."  The IMF today said the US is heading into a "deep recession."  That's despite the bailout bill, which I don't think anyone expected that to be the "be all and end all" of the economic crisis.  If the IMF is saying that, there's a good chance that is true.  But, if you think a recession is healthy, I think its probably safe to say that we're extremely healthy now.  []

[Conan71]

YT- pretty good analysis.  Don't underestimate the value of flimsy accounting either which kept confidence up and stock prices artificially inflated in companies which were actually struggling- which basically allowed them to keep borrowing money and disguising it as income.

There are so many elements that have really screwed the pooch on this.  In my basal sense, I see it as too many people trying to get wealthy without any real work ethic.  Just shuffling paper and trying to time their bets right to make a fortune in a hurry without really having to work for it.

There is no such thing as rapid growth without consequence.  A perfect example is the meteoric rise and fall of SEM Group.  It was hard NOT to see that one coming.

[Neptune]

YT is also right about inflation.  Inflation, since 911, has been the most under-reported event in our economy.  In some ways it's been subtle, because it doesn't effect those who claim to run the economy, therefore it doesn't get reported as something that effects the economy.  I'd suspect inflationary pressures have had an effect to some degree on about 80% of the population.  The same 80% of the population that makes up the foundation of our economy through basic consumption.

I've gotten tired of hearing "tax-cut" rhetoric.  Right now I'd say the Federal Gov't has been about as fiscally irresponsible as it could possibly have been.  It's running on a deficit, in large part because of "tax-cuts".  We're borrowing money, adding to the debt, just to operate the gov't.  I don't know how much of the Iraq war was paid for out of our pocket, it can't be much.  We're inflating currency to keep up cash flow, to offset losses due to ever increasing pools of wealth in the hands of the few.  We've allowed our tax system to be flattened, subverted to the benefit of the few.

700 billion for a bailout, that will be borrowed money.  We haven't been responsible for own actions in a while, not sure when it's going to start, but it needs to start soon.

[bokworker]

Defeating deflation by definition entails the introduction of inflation.... it may take a while and interest rates may remain low for a period of time but the monetization of the massive amounts of soured financial obligations will most certainly lead to an extended period of elevated inflation. Fed chairman Bernanke has clearly stated his goal to use all tools necessary to defeat deflation. It may take a couple of years but the end game is most certainly inflation.

We don't want deflation. We have witnessed the effects of deflation in Oklahoma and Texas in the mid-eighties to early 90's. A third of all banks and virtually all S&L's were closed in this period and real estate values fell precipitously. But while we were suffering from deflation due to the collapse of oil prices the rest of the country recieved the benefit so the pain was limited on a national scale.... we won't be so lucky as a nation if we don't stop deflation in home values. Everyone will suffer.

Yet, while we have more ways to fight inflation, it will be painful as well. The overriding outcome of what we are seeing is that our standard of living is going to decline for an extended period of time....

[Neptune]

Fighting deflation in housing with purposeful inflation sounds an awful lot like what the Wiemar Republic did.  Sounds dangerous, though the makers of wheelbarrows should be happy.



This lady is fueling a furnace with cold hard cash.  It burns longer than the amount of wood it can buy.

[YoungTulsan]

Some level of deflation needed/needs to happen to reach equilibrium with parts of the economy that have been warped by excess credit and inflation.

What is happening now is the wealthy elite doing everything they can to hold prices artificially high.  And on the other side of the collapse they are making sure they get preferred status in grabbing everyone's assets up for pennies on the dollar (JPMorgan, Goldman Sachs, Berkshire).  The problem is, they are the ones in control and we have no say in the matter.

Good discussion in this thread btw, I hope I'm not giving the impression that I am fighting with you.

I'm not a pro-tax guy obviously, but the problem is more in the spending and not in the taxes themselves.  I would agree that, assuming the same level of spending, it is the lesser evil to tax and spend, with a balanced budget, than it is to give tax breaks, spend the same, and run a deficit.  Inflation is an invisible tax on the poor and middle class, while the super wealthy are the ones who benefit from the creation of new money.  I damn near shed a tear earlier today when I read this article: http://archives.cnn.com/2000/ALLPOLITICS/stories/05/01/clinton.debt/

If Obama would actually say something about inflation and deficit spending, he may actually get my attention.  Just calling the other side a failure doesn't win me over unless you understand why they are a failure and what we need to push for to solve that failure.  Monetary policy is key, and no one except for the guy who got laughed out of the race in the primaries was talking about it.

[Neptune]

I think the idea that "tax-cuts" are "good" for the economy is dead, for now.  That will likely change later, people's ability to recollect history is short, but right now we can do the right thing and get back on track.  At least as far as our own budget.  I'd like to see us get to a surplus again, and do what Clinton didn't do; apply it to national debt.

Politically, what McCain would have to do to get the economy on track is completely unacceptable to the people that fund his base.  The cuts McCain is proposing will simply add more debt to the tune of something like 300 Billion per year.  I don't see McCain having the ability, and certainly I don't think he'll have the political "mandate", to make the tough economic decisions.  Even when he seems to have a "good" idea, I have a hard time believing that he'll have the ability to see it through.

With Obama, we may end up just hating the crap out of him, but I think Obama will make the hard decisions.  The ones we may not like.  A large part of Obama's base will give him a "pass" on just about anything he can do to rebuild the economy.  In a sense, where McCain has every reason to be slow and conventional and perhaps even do nothing in his handling of the economy, Obama has a semi-free ticket to be very aggressive.  

I also would like to see Obama steer toward a "balanced-budget" in his campaign.  I don't think I've heard either candidate mention that idea.  Though, that doesn't really surprise me given the circumstances.  The "how" of it all, "how do you get to a balanced budget", can be mightily distasteful.  Then again, repealing the Bush tax cuts, which I believe Obama has said he'd do, perhaps that puts us back into surplus.  I don't know.  Given the Iraq situation, probably not.  It'll just get us closer.

[waterboy]

I've enjoyed trying to absorb this conversation and convert it into practical language. And that is the problem with presidential candidates who have to speak to a diverse, poorly informed populace. Compound that with the excruciatingly slow process of dissemination through the media and you understand why Obama hasn't spoken about budget balancing, deflation, and elite taxation control issues. Distill those issues into sound bites or bumper stickers and they get attention.
Or even one word like say, "Ayers" or "Domestic Terrorist" or "That One".

Obama's up to his neck in alligators and still trying to explain why the swamp needs drained. Its pretty hard to discuss such things when you're busy fending off attacks on personality, middle name and newly evolving conspiracy theories.

[iplaw]

quote:Originally posted by Neptune

I think the idea that "tax-cuts" are "good" for the economy is dead, for now.  That will likely change later, people's ability to recollect history is short, but right now we can do the right thing and get back on track.  At least as far as our own budget.  I'd like to see us get to a surplus again, and do what Clinton didn't do; apply it to national debt.

Politically, what McCain would have to do to get the economy on track is completely unacceptable to the people that fund his base.  The cuts McCain is proposing will simply add more debt to the tune of something like 300 Billion per year.  I don't see McCain having the ability, and certainly I don't think he'll have the political "mandate", to make the tough economic decisions.  Even when he seems to have a "good" idea, I have a hard time believing that he'll have the ability to see it through.

With Obama, we may end up just hating the crap out of him, but I think Obama will make the hard decisions.  The ones we may not like.  A large part of Obama's base will give him a "pass" on just about anything he can do to rebuild the economy.  In a sense, where McCain has every reason to be slow and conventional and perhaps even do nothing in his handling of the economy, Obama has a semi-free ticket to be very aggressive.  

I also would like to see Obama steer toward a "balanced-budget" in his campaign.  I don't think I've heard either candidate mention that idea.  Though, that doesn't really surprise me given the circumstances.  The "how" of it all, "how do you get to a balanced budget", can be mightily distasteful.  Then again, repealing the Bush tax cuts, which I believe Obama has said he'd do, perhaps that puts us back into surplus.  I don't know.  Given the Iraq situation, probably not.  It'll just get us closer.

You mean those nasty tax cuts that produced tax revenues above the historical average over the last few years...

I'm fine with increasing taxes. Maybe if we got the bottom 50% of the population to contribute a little more than 2.9% of the overall tax revenue we'd be further along.  If we're going to raise taxes it should be across the board.  

Why would we deny them the opportunity to do their patriotic duty?

BTW, I think you're right about a balanced budget.  I think from now on, a president shouldn't be able to run for a second term if they can't balance the budget in their first term.