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Mortgage-market socialism
Hobbes;
If you have any
Hobbes; If you have any plans to borrow money in the near future, you should be glad about today's takeover of Fannie Mae and Freddie Mac. It will stabilze the finance markets and make money easier and cheaper to borrow. If a car, or a house, are not in your future plans, you should look into your own finances. Thank you, TT: let's hear it
Thank you, TT: let's hear it for actually existing socialism.
I'd call the takeover not
I'd call the takeover not entirely desirable, but inevitable and probably necessary. There are times when government has to be seen doing something; the substance of the action is in some cases less important than the perception. The question now is what the government intends to do with them... that will be revealing. 
The extraordinary move by
The extraordinary move by the Bush administration to step in and guarantee the survival of ' troubled mortgage companies' says a lot about the anaemic state of American capitalism. The Bush administration is effectively nationalising Fannie Mae and Freddie Mac. Such moves by the US authorities undermine the lies that surround much of the hype about the 'enterprise economy' where the market is apparently undisputed king. The move also graphically illustrates that the US (and UK) 'free' market economy cannot operate without large-scale state interference and help. However, having said that, I would not like to appear to be too pessimistic - indeed, in the real world, life goes on as normal and living standards for most of us is continually rising. So, in short, some things are getting much better - but when it comes to credit and banks, things are far worse than we are being led to believe. The game's up.
It's
The game's up. It's official. The free market has to be bailed out (I prefer the imagery of "baled" out) by the taxpayer when it fails. The CEOs who falsified results in order to pay themselves obscene bonuses get to keep the money just like all the middle men and facilitators along the way. Who pays? The home owners who get re-possessed or forced into debt peonage by exorbitant re-mortgaging costs, the small shareholders who have lost their savings (the big fellas will have been tipped off) and the tax payer. And it won't work. The problem has been mis-identified as falling house prices (on both sides of the Atlantic). They are actually intending to make them rise again! We have economies which are based on asset price inflation - a massive Ponzi scheme. Instead of allowing the market to find it's correct level and formulating policy to mitigate the harm which has already been done, they are actually stoking it up again to put off ( and therefore exacerbate) the consequences. It's like having a slug of whiskey in the morning to delay the hangover. Obama should take heart though. It shows the Republicans think he's going to win so they're leaving all the crap for him to clear up.
What does the government
What does the government intend to do with its new toys? That is, indeed, the question. There seem to be (predictably) three schools of thought:
[quote] In one corner in the emerging debate are some senior officials at the
...A second camp consists of Democratic lawmakers who have long defended
Finally, there are the free-market theorists, including some in the While the first and third positions have firm principles in their favor, I think the smart money is on Barney Frank getting his way.
The game's up.
I know
The game's up. I know you'd like to believe that, but it isn't. Government has stepped in to try to help resolve a situation that Government created, by dropping interest rates to unreasonably low levels and holding them there for an unreasonably long time. The system is a lot less vulnerable than those who want it to fall would like to believe, and it will carry on. Home prices are doing what equity prices did not so long ago. They rose too high, then they fell too low. They will eventually find equilibrium. The government move is largely psychological: the perception of action does a great deal to create calm. It's messy, but not nearly as messy as the hysterics among us would like to believe. Hobbes, I think you're probably right, and I think that this is not entirely a bad thing, for now at least.
Quote:The government move
[quote]The government move is largely psychological: the perception of action does a great deal to create calm. [/quote] Ah! Confidence! The notion that Wyle E Coyote can keep running on thin air as long as he doesn't look down and see that there is nothing beneath him. The "magic of compound interest" will of course do the rest. Two problems: Gravity can be suspended in cartoons. In real life it can only be delayed. Your suggestion that equilibrium will be found misses the point. The whole exercise is about preventing that from happening. Falling prices (the rather "messy" as you put it) solution is being treated as the problem and everything is being done to get prices rising again. If it doesn't work then I think the word "messy" will be something of an understatement. If it does work then all it will do is delay the inevitable and make the crash even more painful - sorry, messy - when it finally happens. The second problem is that magic doesn't exist. All compound interest does is force the debtor into even more debt and re-distribute even more of the wealth created by labour into the hands of the (completely unproductive) rentier class. 
Quote: The second problem
[quote] The second problem is that magic doesn't exist. All compound interest does is force the debtor into even more debt and re-distribute even more of the wealth created by labour into the hands of the (completely unproductive) rentier class. [/quote] Those who claim the magic of compound interest doesn't exist have all the assurance of those who've never tried and benefited from it. Compound interest is the means by which people of even modest means become wealthy, albeit slowly over time. Frankly, I'm looking forward to retiring to the rentier class, so please don't rain on my parade. If you started at age 20 with $2k and added $2K each year in a ROTH IRA averaging 12%, after 35 years you will have over $1 million in tax-free retirement savings at age 55. Try it yourself and join me in the rentier class. Meanwhile, your measly $2K provides the capital for companies to grow and employ more workers who invest their own measly $2K, and so on. Capitalism is a beautiful thing...for those willing to make it happen. http://www.moneychimp.com/calculator/compound_interest_calculator.htm
Where's the thin air?
Where's the thin air? Houses exist and they have intrinsic value: people need places to live. The economy rolls on, and even grows, albeit slowly. Goods and services are being produced and sold, money is being earned and spent. "Thin air" was much more an issue in the late '90s, when shares in companies without products or revenues were being bid up to ridiculous "values". That really was thin air, and that irrational exuberance is largely behind today's economic problems. The only place where a crash seems inevitable is in the imaginations of those who desperately want to see one.
All compound interest The notion that labor creates wealth on its own is a bit of a relic, no? Even in industrial economies that one never really worked out, still less in post-industrial economies. Compare the amount of wealth produced in an economy with surplus labor and an unfriendly attitude toward capital (think North Korea) with the wealth created by economies with the opposite conditions (think South Korea). Is the difference not clear? In a post-industrial economy wealth is created mainly by highly skilled and educated individuals, who generally earn very substantial incomes (have a quick look at the pay scales at, say, Boeing, Exxon/Mobil, Microsoft, and other globally competitive US companies). Of course one of the problems of a post-industrial economy is that it's very difficult to create high paying jobs for low-skill work.. there's no easy route around that one, either. It's becoming increasingly difficult to pay middle class American wages to semi-skilled workers to do assembly line manufacturing in the US, because the products would cost more than anyone is willing to pay for them, and that difficulty is only going to incrrease. Only answer I can see long term for a nation like the US is better education, more widely accessible education, and more economically relevant education. I've read that only 30% of the US economy is globally competitive, and that's not good enough. 50% would do; the other half can earn a living providing goods and services to the competitive half. Americans desperately need to accept the reality that the rest of the world is in play, and if they want to succeed they have to compete and make the most of their strengths. I suspect that Britons are in a similar position..
The thin air is in your
The thin air is in your Ponzi scheme economy. I'm afraid your so called post-industrial chimera is fading fast. You refer to the high paid jobs at Boeing etc but they are just as subject to your "market forces" as any other kind of job. I remember the firm I worked for ceasing to recruit programmers in the UK because programmers in India (in abundance because of the foresight of Indian socialist governments) would do the same job for about a fifth of the rate. The same is happening rapidly to the rest of the productive economy. The really high paying jobs in the west are now the ones which move money around for the rich. Totally unproductive for the economy at large (except for a wee bit of trickle down) but advantageous to that tiny group which controls the economy - which is of course why they are highly paid. North Korea is a silly comparison. It's doubtful if Kim Il Sung was much of a communist in the first place but he renounced it as a political system some 40 years ago. No I don't think it's a relic at all. The labour theory of value is unfashionable but totally sound. Wealth is created when people do work (whether by hand or by brain). Capital is nothing more than embedded labour. It's as true now as it was 150 years ago. What has become "a relic" overnight is the idea that accumulating more and more wealth into fewer and fewer hands by some magic makes everyone better off. Mike I wish you well with your project to turn $2000 a year into a million. But I rather suspect that with the long term prospects for the dollar(just like the pound) , it won't buy much more than a second hand car in 30 years time. Perhaps you ought to keep a mixed bag - the yuan looks like a good buy.
does anyone else have large
does anyone else have large chunks of the sky falling outside their window?
Wow. Sucks for them, but
Wow. Sucks for them, but let's hope the market looks at this as a buying opportunity and not the opportunity for yet another corporate bailout.
But who didn't see this
But who didn't see this coming? You'd think that after the tech bubble burst in early 2001 that people would learn, alas, no, greed triumphs once again. If people were so stupid to buy into this market as a way to get rich fast, whether its a morgage or commodity stocks with borrowed money, then I say let them reap what they sow. The chickens have come home to roost.
On the other hand,
Quote:
On the other hand, [quote] New Evidence on Taxes and Income The new Census Bureau data on income and poverty reveal that many of the economic trends in this country are a lot more favorable than America's detractors seems to think. In 2007, overall real median family income increased to $50,233, up $600 from 2006. The real median income for intact families -- mother and father in the home -- rose to $78,000, an all-time high. Although incomes fell sharply in the U.S. after the dot-com bubble burst in 2000 (and still haven't fully recovered), these latest statistics reflect a 25-year trend of upward economic mobility. More important, Barack Obama is wrong when he states on his campaign Web site that the economic policies started by Ronald Reagan have rewarded "wealth not work." Based on this false claim -- that the rich have benefited by economic growth while others have not -- he intends to raise tax rates on high-income individuals. [/quote] http://online.wsj.com/article/SB122143692536934297.html?mod=opinion_main_commentaries ...there doesn't appear to be as much doom and gloom as many would like to portray. [quote] America is still an opportunity society where talent and hard work can (almost always) overcome one's position at birth or at any point in time. Perhaps the best piece of news in this regard is the reduction in gaps between earnings of men and women, and between blacks and whites over the last 25 years. Census Bureau data of real income gains from 1980 to 2005 show the rise in incomes based on gender and race. White males have had the smallest gains in income (up 9%), while black females have had by far the largest increase in income (up 79%). White females were up 74% and black males were up 34%. Income gaps within groups are rising, but the gaps among groups are declining. People are being rewarded in today's economy based on what they know and what they can do, not on the basis of who their parents are or the color of their skin. There are of course Americans who live in poverty, as there are very affluent Americans with $25 million yachts and $10 million homes who hold ostentatious $200,000 birthday parties. But the evidence is plain that all groups across the income distribution have made solid gains during the last generation. Taking from the rich through much higher tax rates in order to help the poor and middle class makes no sense intellectually and has seldom worked in practice. Reducing rates, on the other hand, does increase the share of taxes paid by the highest income-earning group. For example, in 1981, when the highest tax rate on the rich was 70% and the top capital gains tax rate was close to 45%, the richest 1% of Americans paid 17% of total income taxes. In 2005, with a top income tax rate of 35% and capital gains at 15%, the richest 1% of Americans paid 39%. We suspect that Mr. Obama will discover that when you put "tax fairness" ahead of economic progress, you produce neither.[/quote] Quote:does anyone else have
[quote]does anyone else have large chunks of the sky falling outside their window? [/quote] I think it's the things holding up the sky that are falling at the moment. The sky will fall when they're all gone. So no need to fret yet Chicken Licken. Not yet.
Quote:does anyone else have
[quote]does anyone else have large chunks of the sky falling outside their window?[/quote]
I don't know about Candace, but around here the chunks were real: Ike just blew through, and much of the city will be without electricity until the end of the week. Thank Allah for public institutions with their own generating systems, or y'all would be deprived of my keen insights and wit
In light of events over the
In light of events over the past few years, I thought I should revisit my old friends on this site. It is good to see that some are still pounding away championing the cause of "freedom and democracy" ( or at least the American version thereof). Of course, if one were an American, one might just be starting to think that somebody up there is not that keen. This century (basically since Georgie and his mates arrived), the Yanks have had the World Trade Centre disaster, the invasion of Iraq disaster, the world financial crisis disaster, the Hurricane Katrina disaster, the Hurricane Ike disaster, and sundry bush-fire and flooding disasters. If I were a Yank today, I wouldn't want to get up in the morning. Imagine going to work and thinking: "My job could be gone today" "The bank where I have my savings might crash today' "The shares owned by my pension fund might be worthless today" "My mortgage on my house is twice as much as what my house is worth today" "Everybody in the world (except Republicans) thinks Georgie is an idiot" "Obama, McCain, Palin and what's his name are the best we can come up with for our next lot of leaders' "The Iraq invasion is costing we taxpayers a fortune and we are getting nowhere'. "All those thieves we installed as the government of Iraq are getting very rich at our expense" "The Taliban are alive and kicking in Afghanistan" "Our country can't afford to provide proper health care for its citizens" "About 7% of the population own about 95% of the wealth in this country" "I can't afford to put petrol in my car" "I had better learn Mandarin so when I start working for the Chinese I can sepak the language" "Why is my government using taxpayers' money to bail out these greedy dishonest thieving bastards on Wall Street?" "Nobody in the world likes an American" "Athletes at the Olympic Games were told to tell the Chinese they weren't American so they wouldn't get stabbed". "osama knocked down the World Trade Centre and we still haven't caught him" Dear oh dear, it has been a bad 8 years hasn't it? Regards
GTJ
GTJ;
Facing
GTJ; Facing Problems The US economy is showing strains but will survive. It will survive because it has taken stock and acted. It has done so before successfully every time. There have been 13 recessions since the end of WWII. Each time, doom was predicted and each time the economy bounced back stronger than ever. Let's look at this time and see what is happening. Real Estate: 97% of all homeowners are fine. 30% of all homes are paid for. Most homeowners are in it for the long haul. Market fluctuations do not affect them in the short term. Those who took out sub-prime mortgages constitute 12% of all homeowners. About half of them may default. They should not have gotten home loans in the first place. Corporate greed on an international scale and individuals wanting something for nothing created the problem. They have choked the confidence and the cashflow of the credit markets. That is why the US Treasury has stepped in and stepped in boldly. It is not the first time. The US government loaned money to Boeing and Chrysler in the past to rejuvenate them and made a profit. It straightened out the S&L problems of the 1980's This time, the Treasury will relieve banks of the bad loans which threaten their liquidity. Banks will regain the confidence to loan again while the Treasury disposes of defaulted properties in an orderly manner. That is something which most European governments are not capable of. What it will cost is debatable. The defaulted properties still have value, just not 100 percent. In any case, they will be disposed of. Frankly, someone is going to profit from that. Unemployment? Unemployment has risen to 6.1%. It has topped 10% in most of Europe for years. Europeans would dance in the streets if they could match the US. The Spainish government has offered foreign workers from Africa one year unemployment wages to go home. Bank Deposits? US bank deposits are guaranteed to $100,000. Retirement accounts are guaranteed to $250,000. No one has lost a nickel in a US bank in 70-plus years. Osama bin Laden is alive? Yes, if you call cave dwelling, keeping your head down and watching your lieutenants get picked off one-by-one living. The Taliban: Supposed experts predicted in 2007 the year of the Taliban come back. they did and got wiped out. Attacks by Taliban always fail and leave a mess. No One Likes America? The hacks have always disliked American values. That is nothing new. What is also not new if the fact that America still has the same allies it has always had. Perhaps you're confusing friends with enemies. The US does have three fewer enemies now-- Iraq, Libya and Afghanistan. We'll just have to get along without YOUR vote of confidence. The Future: I would have much more confidence in an experienced problem solver like McCain/Palin to help the US than a PR creation like Obama.
Quote: If I were a Yank
[quote] If I were a Yank today, I wouldn't want to get up in the morning. [/quote] Well...since you're not a Yank, it's pretty much a moot point, isn't it? Your empathy is wasted. Americans are resilient. My apologies. I have just
My apologies. I have just read elsewhere that it is Ms Palin's youngest child who is called Trig. I understand that that child is a Downs Syndrome child. I thought the child named Trig was the one having the baby, and I was playing with the name "Trig'. I certainly did not intend to use the term "troglodyte' to describe a Downs Syndrome child. Even I am not that cruel.
I certainly did not intend
I certainly did not intend to use the term "troglodyte' to describe a Downs Syndrome child. Even I am not that cruel. So it would be quite ok to refer to a a child without Down's syndrome as a trogdolyte? "Cruel" isn't the right word. A better one would start with s, end with d, and rhyme with "cupid". That's coming from someone who doesn't think much of Sarah Palin...
Nope...your post went beyond
Nope...your post went beyond cruel into the offensive category and now its gone. The post was offensive and deleted as such.
an experienced
an experienced problem solver like McCain/Palin Um, TT--I believe I've asked you before for examples of any problems that TOM McCain has solved. I'm still waiting. As for the truth-challenged Governor, the less said, the better.
A Deal;
Hobbes;
I'll
A Deal; Hobbes; I'll study McCain's record of service in the Senate while you work on Obama's. Who will finish first? Palin's record of truth? Another deal. I'll study her record as a chief executive while you study Obama's. There's two easy chores for you. Your welcome. I'm not sure I'd say McCain
I'm not sure I'd say McCain is an "experienced problem solver", but he certainly has experience in participation in problem solving. As I said before, the Senate is not an institution that enables its members to demonstrate individual accomplishment. They can participate, they can lead, they can follow, they can work with others to solve (or create) problems, but anyone looking for individual achievement from a Senator is bound to be disappointed.
Thanks, TT; it's a
Thanks, TT; it's a deal. When you're researching the Gov, you may find this profile useful:
[quote] According to “Sarah,” a biography by Kaylene Johnson, Palin had got
Palin’s style of governing was unorthodox and at times impulsive.
Taxation Policy
"Obama aims
Taxation Policy "Obama aims to increase federal income taxes for those making $250,000 a year by as much as 4.6 percent. That would restore the rates to where they were in the 1990s. Obama also favors raising the highest rate on capital gains from 15 percent to 20 percent, while reducing taxes for the middle class and those in lower brackets. Emotionally satisfying, but alas, not very smart policy. Unfortunately, the Republicans seem incapable of explaining why..." OK, I'll bite. Why "not very smart"? and why can't the GOP explain? What would be smarter, in your view? I don't buy IM's suggestion that those earning over $250K are mostly "small business owners," since we're talking about federal income tax. A business that can pay someone a quarter of a million dollars annually is no Tiny Tim. The assumption that they deserve more consideration than those making less than $50K strikes me as wrong-headed. Does anyone else find that
Does anyone else find that the proposed addition to the bailout is laughable? (specifically: the wages of CEOs at these banking institutions should be capped at a level no higher than the President of the United States) What moron came up with that one? (Weeping and sobbing, "Those people make obscene amounts of money. They only run a company, while the President runs the entire United States! They should have a salary cap equal to the President's pay!" ) Give me a break. Here's a little quiz for everyone: Who is the highest paid state employee in virtually every state in the US? Pick one. Any one. Who is the highest paid state worker in Tennessee, Michigan, Oklahoma, Texas? Any guesses? "Does anyone else find that
"Does anyone else find that the proposed addition to the bailout is laughable?" Alan-- do you find this more laughable than the fact that the bailout is needed in the first place? Hobbes,
Actually, yes. The
Hobbes, Actually, yes. The need for the bailout is just sad. The cap on CEO salaries is funny. I can't wait to hear Susan Sarandon call for a cap on banker salaries while she gets 12 million for a movie. As far as the need for a bailout... We still have the option of saying "no" and letting things crash for a few years. The world survived a global depression once. It can again. We just have to, collectively, determine the lesser of the two evils: a bailout, costing taxpayers a heck of a lot of money, or the potential for worldwide economic collapse. At present, I have not made up my mind as to which would be worse. "The need for the bailout is
"The need for the bailout is just sad." Not to mention all of those Wall Street folks, having lost billions, lining up to offer their services to Washington to manage the bailout (hefty fees attached). There may be a credit crunch, but there sure is plenty of gall to go around. "At present, I have not made up my mind at to which would be worse" Keep us posted, OK? Hobbes,
"Keep us posted,
Hobbes, "Keep us posted, OK?" I doubt you will lose any sleep awaiting my decision. Alan,
I understand you're
Alan, I understand you're reluctant to support the bailout, but there are good reasons to support it. VP candidate Sarah Palin was recently asked whether the bailout was a good thing, and so I defer to her opinion on the bailout as she has a way with words. 'like every American I'm speaking with, we're ill about this position that we have been put in where it is the taxpayers looking to bail out. But ultimately what the bailout does is help those who are concerned about the health care reform that is needed to help shore up our economy. Helping the-it's got to be all about job creation too, shoring up our economy and putting it back on the right track. So health care reform and reducing taxes and reining in spending has got to accompany tax reduction and tax relief for Americans and trade-we've got to see trade as opportunity, not as competitive, scary thing, but one in five jobs being created in the trade sector today- we've got to look at that as more opportunity.' Sort a makes you think, doesn't it? Hobbes,
Care to take a guess
Hobbes, Care to take a guess at my earlier question? (Who is the highest paid state employee in virtually every state in the US?) Chris,
I am under no
Chris, I am under no illusion that the President (or Vice) is the sharpest tool in the shed. Ever. Nor is that a job requirement. All I ask is that they just point the ship in the right direction. The smartest man we ever had as President was Jimmy Carter. If I recall correctly, he had a PhD in nuclear physics, and he was horrible. The dumbest man we ever had (at least in my lifetime) was Ronnie Reagan, and he turned out to be pretty good (even though I hated what he did to environmental issues). You don't have to be a genius to be President. You do need the ability to surround yourself, take advice from advisors who are. Alan,
I actually like Palin,
Alan, I actually like Palin, little that I've heard and seen of her, and I don't like that fact that she is being thrown to the wolves. Shame really, McCain tried to use her strictly as a means to an end and she's going to end up being destroyed. I take no joy in that, but the stakes are to high to take pity on her, at least until she's back in Alaska. As far as I can tell, not
As far as I can tell, not one of the four, on the November ballot, is running for President of Mensa. "Care to take a guess at my
"Care to take a guess at my earlier question?" I think not. Where I live, the football coach gets paid just about ten times what the president of the university makes, so I know where our priorities are. Meanwhile, I thought you'd enjoy this letter from yesterday's NYT: I must say that I was initially happy to hear what I thought was a silver lining in this economic crisis: curbing Wall Street executives’ ridiculous, exorbitant pay checks. As someone who is dedicating my life to the nonprofit field, I am constantly appalled to hear of the multimillion-dollar bonuses these execs receive around Christmastime. I am lucky to receive a coffee mug as a gift (which I appreciate greatly). To read that Wall Street lobbyists are scared that pay restrictions “would sap incentives to hard work and innovation, and hurt the financial sector and the American economy,” is almost comical. I have a hard time feeling sympathy for someone who might have to sell one of five luxury homes. And call me crazy, but I work hard and try to be innovative (with limited resources), even though I don’t have a tremendous financial incentive. Maybe it’s time for Wall Street to learn what a healthy work ethic is. Emily Loubaton Chris,
How could you not
Chris, How could you not like a broad who shoots mooses and is photographed on a couch draped with a bear-skin rug? My kinda woman. The only thing better would be if her daddy owned a liquor store. Hobbes,
"I think not. Where
Hobbes, "I think not. Where I live, the football coach gets paid just about ten times what the president of the university makes, so I know where our priorities are." Very good. In almost every state, the big university football coach makes millions, while the governor make a pitance. The football coach is the highest paid state employee by a huge margin. They make millions annually. Yet, a bunch of folks want the "evil banker CEOs" to have pay capped because they make "obscene" amounts of money. Okay, let's do that. Do as they suggest and prevent the evil bankers from making more than the President of the US (about $400,000). Okay... Which banks? Just the ones that got in trouble, or all banks? Just the big banks? Or do we want to include brokerage firms too? Just the banking CEOs or the CEOs of ALL businesses? Are we going to cap the salary of the CEO of Proctor and Gamble? Okay, he now makes $400,000. What about his overseas sales rep that makes 1.5 million in commissions? Are we going to cap Bill Gates' salary? Hell, let's cap Bill Belichick's salary. Or movie star's salaries. Hell, let's just cap all salaries. No one in the country is ever allowed to make more than $400,000 per year ever again. Good plan. "Just the ones that got in
"Just the ones that got in trouble" Why not start there and see what happens? Hobbes,
What do you suggest
Hobbes, What do you suggest we do with the five Executive VPs of each of those companies? You know, the VPs who each make 4.2 million? Is it just the CEO you want to burn, or do you want to burn anyone in the company who makes over $400,00? "Is it just the CEO you want
"Is it just the CEO you want to burn" Burn? Being held accountable for your decisions is "burning"? Oh, please. My liberal heart-strings can't take it. Anyone who's earning over seven figures can take a little heat. As T.E. Lawrence said, holding his finger over the candle, the trick is not minding. I have another quote for
I have another quote for you. This one's from Abe Lincoln: "Property is the fruit of labor...property is desirable...is a positive good in the world. That some should be rich shows that others may become rich, and hence is just encouragement to industry and enterprise. Let not him who is houseless pull down the house of another; but let him labor diligently and build one for himself, thus by example assuring that his own shall be safe from violence when built." "Let not him who is
"Let not him who is houseless pull down the house of another; but let him labor diligently and build one for himself, thus by example assuring that his own shall be safe from violence when built." Interestingly on point, given that we're talking about a mortgage-foreclosure crisis. Would Lincoln have supported a bailout, do you think? What do you think he would have said about this fact: "the average annual CEO pay for top companies in 2007 was $10.5 million, or 344 times that of the average U.S. worker." Back in 1990, it was only 100 times greater. Clearly, those CEO's have been very diligent, building their many houses. Lincoln's advice also made a lot more sense before the founding of the House of Morgan and the discovery of corporate personhood. "You don't have to be a
"You don't have to be a genius to be President. You do need the ability to surround yourself, take advice from advisors who are." alan peterson then we should choose the advisors, and they can pick their moose hunting representatives. Seems fair doesnt it? How else do you know what you're getting. The dumbest man we ever had
The dumbest man we ever had (at least in my lifetime) was Ronnie Reagan, and he turned out to be pretty good That's right. Did a good job in Afghanistan didn't he? Stopped the commies from introducing universal education and healthcare, helped the warlords to regain their "traditional" power and left it nice and stable. You've never had any repercussions from that one have you? You don't have to be a genius to be President. You do need the ability to surround yourself, take advice from advisors who are. Yup everyone needs a Wolfowitz, Rumsfeld or Cheney - Not forgetting a Paulson of course. Big C,
I was going to
Big C, I was going to provide a few reasons why many people think Reagan will go down in history as one of the great Presidents, but, why bother? So..... In your words......... Yup. I don't buy IM's suggestion
I don't buy IM's suggestion that those earning over $250K are mostly "small business owners," since we're talking about federal income tax. A business that can pay someone a quarter of a million dollars annually is no Tiny Tim. "Small business" in the US is defined as anything under 100 employees. Many businesses in this category actually move quite a bit of money, especially if they're clever with outsourcig and subcontracting and work in high-tech fields. OK, I'll bite. Why "not very smart"? and why can't the GOP explain? What would be smarter, in your view? The assumption that they deserve more consideration than those making less than $50K strikes me as wrong-headed. It's not about "consideration", it's about efficient use of money. People earning over $250,000 (though that's a fairly random marker) generally invest their surplus income. Venture capital investment, one of the most important forms of investing, is legally restricted to "high net worth individuals" (one of those financial regulations that we're told doesn't exist), because of the considerable risks involved. By reducing the surplus income of the wealthy we reduce the total pool of available investment money, and investment is to the economy as gasoline is to an automobile. A dollar invested in profitable enterprise does more for the country than a dollar tossed down the insatiable and staggeringly inefficient maw of the federal government. Taxing the rich is sometimes portrayed as an Robin Hood exercise, taking from the rich and giving to the poor. This is not quite accurate. The US government is not poor. It is richer than Rockefeller's wettest dream or the fondest fantasy of Croesus. It's just not very good at spending efficiently. Capital gains taxes are a direct disincentive to investment, and thus silly. There are already substantial risks attached to investment, why add to them and create a disincentive to do what we want people to do? I wouldn't mind seeing punitive sales taxes placed on luxury goods (though American manufacturers of luxury goods might mind a lot), which would make investment of surplus income a more attractive option. I wouldn't mind seeing higher taxes on certain highly speculative forms of investment, particularly the more arcane derivatives and commodity trading mechanisms. But this has to be done with intelligence, not emotion, and discouraging investment is simply not intelligent. Now somebody will ask me why it didn't work, why "the Bush economy" didn't surge. There are a number of reasons. First, government policy is not the only or even the greatest influence on the economy. The dominant economic factor in the Bush administration, especially in the first term, was the collapse of the gargantuan economic bubble inherited from the previous administration. Economic policy was essentially an exercise in damage control, and seen in this light it was successful: the post-2000 recession was much shorter and much shallower than almost any serious analyst expected. Second, the impact of economic policy often takes years to be felt. If tax cuts spur venture capital investment, for example, it may be a long time before these investments show actual returns. That doesn't mean they aren't worth pursuing, it just means that as with many other economic policies, the impact of tax cuts is diffuse and, because it's combined with the impact of so many other influences, very difficult to quantify. Third, the Bush administration distorted the effect of tax cuts by adopting an extended low interest rate policy. The incentive to invest was there, a good thing, but there was also an excessively strong incentive to invest in a single sector, real estate. This did have a positive impact: home builders and home supply chains did really well for a while, and created lots of jobs and funneled lots of money to the working class (home building is labor-intensive), but ultimately overinvestment in a single sector is not sustainable. Damned if I know. They don't seem very good at explaining anything. Way too much of the
Way too much of the discussion of this bailout, particularly that surrounding executive compensation, seems to assume that the Wall Street firms being bailed out created the crisis. That's simply not true, though they did have a part in it. Responsibility is distributed. The federal government has to take a large chunk of blame, for creating the incentives that supported the bubble and failing to respond when it became clear that a bubble was forming. Borrowers, many of them quite affluent borrowers who were borrowing for speculative purposes, took ridiculous risks, and in many cases walked away from loans they had the capacity to pay simply because they weren't going to make a profit on the deal. A good chunk of responsibility belongs here. The mortgage brokers and local banks who actually made the loans made some pretty shaky moves. Many mortgage brokers in particular have already gone under, they will not be bailed out, they are too small to matter. Many are or will be under investigation. Much of the responsibility belongs at this level. The Wall Street firms that bought up and packaged the debt are the ones who ultimately took the hit financially, but their main error lay in assuming that lenders and borrowers were doing their job, as they had in the past. That assumption may have been viable early on, but by 2005/6 it was clearly not. Still, this level carries less causative responsibility than the other 3. It may be satisfying and politically expedient to blame the crisis on "Wall Street", but it doesn't really make much sense. Executive pay caps may be viscerally satisfying, but what impact will they have? A lot of CEOs are going to bite the dust, it's almost an American corporate ritual to dump the head when things go wrong. They will bring in new teams, and they will be looking for executives who specialize in restoring distressed corporations. There are people like that out there, but they don't work for $400k a year. If you want to bring in a good fire control team, you have to be prepared to pay plenty, it's not a pleasant job or an easy one. All you achieve from capping salaries is to provide the means to restore financial viability but make it impossible for the companies to hire the kind of management that they need to achieve financial viability. Seems to me that if you're going to pour a few hundred billion into a company, you want that company to hire top talent to go with it. Capping salaries feels good, but it doesn't accomplish anything. Here's an interesting
Here's an interesting argument against the bailout, from a thoroughly capitalist perspective... http://tinyurl.com/4nk35z While America's leaders dither over how best to right their country's finances, the invisible hand of the free market is creeping in to do the job without the benefit of hundreds of billions of taxpayer dollars. In the past week, two big financial players with access to cash have invested in rivals under pressure. Jamie Dimon's JPMorgan Chase late Thursday agreed to take over ailing Washington Mutual for $1.9 billion and the assumption of a lot of questionable mortgages, while earlier in the week, Warren Buffett's Berkshire Hathaway (nyse: BRK - news - people ) put $5.0 billion into Goldman Sachs, arguably the strongest of the remaining standalone brokerage houses. (See " Once Again, JPMorgan Mops Up The Mess" and "Buffett's Big Goldman Buy") The Wamu deal is especially interesting because it did what the proposed $700.0 billion bailout is supposed to do: got somebody to pay for unloved mortgage assets. But it did it without taxpayer money, instead wiping out Washington Mutual's common stockholders and probably owners of its preferred shares and bonds as well. It also will do away with the damaged bank's management. Market reaction could be instructive. Even though JPMorgan Chase (nyse: JPM - news - people ) is selling stock to finance the deal, investors bid its shares slightly higher on Friday morning, adding 11 cents, to $43.60. Also of note: the overall market, reacting to the biggest bank failure in American history, was down just 0.7% at midday, as measured by the Dow Jones industrial average. Investors obviously did not see the failure, nor the uncertain prospects for the bailout, as the end of the world. Some regional banks were showing severe losses, notably National City and Wachovia, down 44.7% and 21.9%, respectively, but bigger banks were only slightly lower or, in the case of Bank of America and Wells Fargo, higher. JPMorgan Chase (nyse: JPM - news - people ) and se |
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[quote] The federal takeover of Fannie Mae and
Freddie Mac is aimed at preventing a "serious risk to the financial
system," which is "critical to our overall economy," Treasury Secretary
Henry Paulson tells NPR.
The Bush administration on Sunday said
it was taking over Fannie Mae and Freddie Mac, the troubled mortgage
companies that play a key role in the U.S. housing industry. The
administration said it would funnel billions of dollars in taxpayer
money into the companies to help keep them afloat.[/quote]
Towards the end of the 19thC, a number of big-city mayors were accused of fomenting "sewer socialism" because they held that cities should fund, own and control critical infrastructure like sewer systems and power-plants, rather than leave those projects to entrepreneurs.
Now the Bush Administration proposes a full government takeover of the two largest mortgage companies in the US, arguing that not to do so would imperil the worldwide financial system. Creeping socialism? should Freddie and Fannie be allowed to fail, let the chips fall where they may? Pragmatic management or cave-in to the whiners?