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The "Fixes"
It’s not just the Bush tax cuts that expire at the end of the year. The
maximum lending limits at Fannie Mae, Freddie Mac and FHA were set to
expire. The Build America Bond (“BAB”) program is another. They both
have been “fixed”. We kicked the can down the road (again) while no one
was looking.
Way back in 2008 when we were really in a financial crisis there was no
private mortgage market. The banks were all in the crapper and they were
not lending a dime. Without a viable mortgage market there would have
been a complete collapse. The maximum lending limits of the D.C.
mortgage providers were set at levels designed to support the bottom end
of the housing market. In response to the crisis the HERA legislation
allowed for a very significant, but temporary, increase in the statutory
lending limits. Those temporary increases were supposed to be reversed
as of 12/31/2010. They weren’t reversed. They were extended.
These critically important extension of federal subsidies to the
mortgage market were lumped into a number of other fixes necessary to
keep the government moving for another year (Sen. Byrd’s grandchildren
get $197k?). The language that “fixed” the problem can be found at this site. The specific wording is at the bottom, in sections 143-146. There was no debate on this. Washington just passed the trash.
The Bond Buyer reported
on Wednesday that BABs were going to “fixed” as well. The BABs program
is another child of 2008 and the HERA stimulus program. The history is
not unlike the Agency debt limit issue. In 2008 there was not much of a
Muni market left. States were being locked put of the credit markets.
Without capital they could not fund projects. The BABs legislation
created a new security to allow the states to tap a different capital
market. States were permitted to issue taxable bonds. These bonds had
higher yields than traditional Muni bonds as they were not tax
protected. To offset the cost, the Treasury department is reimbursing
the states for 35% of the interest bill. With the federal subsidy the
states were again able to issue debt.
Two years later the Muni market is in much better shape. But it is still
on weak legs and D.C. desperately needs the states to spend money to
support the economy. So the BABs legislation will be extended for
another year. The municipalities are issuing billions of long-term bonds
under the program. The federal subsidy will be doled out for 20 to 30
years as a result.
I don’t think there was much choice in the extensions of the emergency
steps taken back in 08. If mortgage limits were dropped in the key area
on both coasts from the ~$750,000 limit back to the pre-emergency levels
of ~$450,000 the real estate market would collapse. Should that have
happened we would have been in a deep dark recession in just a few
months.
Similarly, we would be dead if the Muni market shut down. If state
borrowers were forced to pay fair market rates for debt, they would not
borrow. As a result they would not spend. Deep cutbacks in key states
would have followed. Unemployment would shoot up in that scenario.
Absent the BABs program a number of states/cities would have been forced
into insolvency.
Folks, we are on life support. We have been since 2008. Nothing will
change in 2011. QE has been extended, the tax cuts will be extended,
BABs and the Agency loan limits are being extended. The IV is full and
inserted into the arm. The juice that is keeping us alive is still
flowing. But make no mistake about this. Without the IV the lights will
go out very quickly. 2011 is the last year for these extensions. When we
wake up to the fact that we are alive only as a result of medicine we
take on a daily basis there is going to be another “event”.
Some say that legislative gridlock is a good thing for the markets.
History suggests this is correct. 2011 may prove an exception to the
rule. There are too many things on the plate.
Speaking of which, enjoy that other plate that is front of you today.
bk
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Not that I expect a reply, but I would like to put this question out there for persons to ponder. My question is how does this end well?
I read a great deal of written debate on this site on the side of 'we are in the shit, and it will get shittier" versus "things are getting better."
I personally have taken the approach of preparation for the things will get shittier, but I digress from my query.
Again, How does this end well? If you believe we are coming out of the shit, then how does this end well. So the stock market has risen, I think there exist enough evidence to suggest the stock market has only gone up as a consequence of the possibly fraudulent actions of QE and its illegitimate children. Again based on the numbers it would take decades to recover the jobs lost in this recent downturn. Further, I would suggest, that based on some non government/wall street manipulated commodities that the recent upturn in the markets is simply inflation. Tomato prices, the second most consumed vegetable (or fruit if it makes you happy to call it that) has seen prices go from US 18 per box to USD 46, a 155 % increase. Pecan prices, one the top growing commodity exports to China has seen price go from USD 1.5 per pound to USD 3.0 this year. This coupled with some other non exchange traded commodities, suggest a real inflation of close to 100 %. The markets inflated about 80 % since the 2009 low. I believe we have to look outside of the numbers and figures presented by exchange activities as all of these are as suspect and open to manipulation as government figures. My point, is that non exchange traded commodities have had their prices double as a result of QE at its bastard children.
My apologies off on a tangent again.
How does this end well, when we have the following:
1)Massive Federal Debt.
2)A government unable to pay its bills.
3)A society that cannot pay its bills.
4)A society that buys more that it sells.
5)A society that does not make money, but instead mainly exist in the fees associated with the transfers of monies.
Be this as it may. I would like to hear from some persons who believe all is well and getting better, and explain to me how this all could end well.
I would be nice to get a clearer perspective of how one might see how this mail order Bernanke Road to Recovery DVD set ends, as I seem to be missing the last DVD in the set.
Domestically, this will end in a Constitutional convention.
If you think that prudent and risk averse Americans are going to silently take it in the ass while fraud, reckless bankers, and politicians steal every penny you are in for a surprise.
Most people I know are livid at the current bailouts of corruption and fraud wrapped in lies like TBTF. States like California, IL and NY will either be the death of the union, or a bloody war. Most people want justice, and justice for this situation will be bloody.
Ever wonder why the TSA is scapegoating for fabricated Al Queda while every man woman and child forfeits their civil rights and privacy for public services?
If you don't see the violence yet, wait until some private security contractor (or SS) gets to sniff your vagina to get a drink of water in a park. It's coming.
Stop worrying. Everything will be fine. Your #'s 1-5 are no problem. We have Ben Bernanke at the helm. He will steer us through these troubled waters. After all, he is a PRINCETON economist for christ sake. If you can't trust him who could you trust? He's looking out for all of our best interests, not just the banks and Wall Street. Ben has the QE, and he has said that this would be the medicine that makes us well again. Just relax and trust Uncle Ben.
That or you could get some extra food stored up (its a good investment, its all going up in price). Some extra fuel (also going up). A plan of what to do when the "real" unemployment hits would be helpful. Something to protect yourself would be useful as well. I don't think things are going to remain tame for a hell of a lot longer. Some gold would be nice too.
Good luck.....
The last DVD in the set was never scripted, filmed, voiced-over or produced, nor was it meant to be. It is left at a cliff hanger, as you'll notice if you look up.
:)
"Kicking the can down the road" is probably the most common socio-economic method of "dealing" with problems in any country that relies on a popular electorate system to choose its leaders. Politicians (and their hired-help in the various agencies - specifically the hand-chosen leaders of these agencies) have it in their DNA to avoid anything that does not aid and abet their re-election. There are exceptions - Volcker's spiking of interest rates back in the '70's to try to tame inflation (it worked)....but these exceptions are far from the norm.
I think now, in the minds of the Fed, they are not so much kicking the can along, but trying to engineer a recovery using time, and the historical evidence that economies typically recover from bad times, whether by attrition, the "normal" business cycle, or a popular war. The Fed is hoping ( and praying) that time and the normal business cycle brings things back to what many (including them) assume as normal: reasonable interest rates, unemployment less than 5%, land and house appreciation, high credit debt per consumers, an up-trending stock market, and a stable bond market.
The other two possibilities....first, "attrition:" this in essence means a total collapse - which can be very slow and painful, or very quick and devastating...and this is not what they want. The efforts to drive up the stock market is grounded in human psychology, i.e., if entities and individuals who are holding cash can see a rising market, and therefore envision profits by entering, it might defeat the conservative "save" psychology that is supposedly, keeping trillions of dollars on the sidelines. This is true to some degree, but is also a practical fallacy... many people with investible cash are not investing in the equities market. Who the hell can blame them? It is not simply a "save" mentality at work here, it is also a "trust" mentality. Many people have decided that investing in the stock market is a zero sum game....with them in the zero seats. Would you rather make 3% on your money in relatively safe bonds, or lose your money due to market manipulation by large players who have been legislated into the luxury boxes by politicians who soak up the money (for re-election of course) from lobbyists who represent these players, while you sit in the cheap seats and need binoculars to see even a glint of how the game is really played? Another group of large players in the market (by total) are people who have now lost their houses, their jobs, their credit ratings, and any reasonable outlook for the future. These people may NEVER invest in equities again, even if they do recover their livelihoods.
Second...a popular war. Wars are never good. Yes, they can accomplish things, but they always lead to terrible, massive unintended consequences....especially wars that are not financed on the balance sheets of the economy of a country, or in the hearts of a populace. I can understand our initial reasons for entering Afghanistan....but we have not, to any significant degree, accomplished our mission, We have, in some ways, become captive of that country as the British did many years ago. IT IS NOT THE WAR YOU WIN, IT IS THE PEACE THAT YOU ACHIEVE AFTERWARDS THAT MATTERS! Iraq...well, total, criminal insanity. Okay.....you say "criminal" may be harsh...and maybe it is. But, the only other explanation is absolute total ignorance and the complete failure of our government to understand reality and available intelligence. Either way.....this is frightening. But...back to a "Popular" war. Not going to happen unless it involves North Korea. And...North Korea is not looking for a war, they are looking for recognition. Be that as it may, the artillery attacks against South Korea killed civilians...so South Korea is almost duty-bound to react in some (assumed violent) way. We are so invested in South Korea that we are hung by our own balls on the petard of their defense. China is - as usual - sitting on the fence. It will be interesting to see how China reacts if South Korea does retaliate. But, no matter what happens, I suspect that if war breaks out on the Korean peninsula (and I do not think it will), that our entry into it will not be "popular," Americans will wonder why our vast trading partner China, did not diffuse this situation. Now, if this currency battle, and a possible trade war slowly works its way to major importance, then war erupts in the Korea's...then watch out, because the popular enemy then becomes China.
So...back to the Fed and the normal business cycle and time. That is their game. They are pumping trillions into the beast in hopes that they can fan recovery before they have to fight inflation. The problem is, my friends, inflation is already rearing its ugly head. Food prices, fuel prices, cost of services and soon, possibly taxes, are right in our faces and rising. What scares the Fed more than anything, is unemployment, inflation and a popular idea that the system...financial and political and legal, is purposely bent against the 300 million or so of us who have no power, no input, no recourse, and possibly, no future. Bernanke has nightmares about this.
So there we are. The Fed is pumping the American economy with trillions of fiat paper to try to prop it up so that the regular old things that traditionally makes our economy strong might come back into play before they run out of printer cartridges. But, there is a strong counter-culture current out there that is fighting against this. Whether it be savers, people who have been broke by this economy, people who do not trust leadership or American business (financial or otherwise), people who are tired of being fucked over by the powers-that-be, anarchists or gold hoarders or just simple idealists for one party or another or maybe no party...and this counter-culture is having an impact. It is not a revolution yet...and it may never be. But, it is in the mind of those who "run us," and they are scared.
Now, being scared that some normal citizen might knock your door down and drag you out in the street and fuck you over is very real for politicians, beaurocrats and bankers right now. The best way to prevent that is to pump the economy, extend unemployment benefits, keep interest rates low (although that does not work for people who's credit ratings have been destroyed trying to survive this economy), deal with end-user mortgage loans, and maybe have a nice war or crisis that diverts their attention.
They also need to make us think they are fucking the Banksters....not really do it, mind you, but make us think they are. That is what is going on now. They are using the FBI because they have the power to send you to prison...the SEC does not. Hey...they are already looking at "low level" Goldman employees.....what a fucking joke!
The Fed is not, in their minds, "kicking the can down the road." They are kicking the can in whatever direction they can to divert us from the fact that this economy has failed, capitalism as practiced by us has failed. Legislators who we are supposed to trust have used that trust to feather their own nests. Banksters have used to it to become fabulously wealthy, and then when the shit hits the fan, dumped it in our laps at the behest of their hired gunsels in Congress and loaned-executives that watch out for their own interests (Hank Paulson).
I wish there was a way to save this economy without dumping it. But, unfortunately, there is not. Oh, it will be "saved," but, only by the people who destroyed it. Attrition will never happen in this country. The people who can make it happen - our elected officials - are paid by those who do not want it to happen. The only way to dump this system is for the people to do it. And, that is a very difficult thing to do without artillery.
Well, there you go again...:)
Nice post, I like it a lot for an abstract of where we are at.
"The only way to dump this system is for the people to do it. And, that is a very difficult thing to do without artillery." --Don't need artillery if we can get enough people to "opt-out" of the ponzi-paradigm. It may take longer as they will pump'n'dump to hell to save it, but if we refuse to pay-to-play, it will collapse on itself.
What if most people in the "first" world said "no more" and refused to take on more debt, and when paid down, refused "any" debt for a generation or two? Where would that leave the banksters?
Heck, because I am paying down the last of my debt aggressively (so that I can be free-er), our Thanksgiving dinner was grilled ham and cheese sandwiches, tomato soup, and some garden veggies. I am not poor, I make a standard deviation above the median in the US (which, I guess some would consider poor, but we lack no necessities), but our family has "re-valued" life, and freedom. We are opting-out. No "Black Friday" for us, rather some "bored" games, cheap, good books from the thrift store, some simple food, no TV...it is slower, but one way to dump the system, without artillery.
My intent for "artillery" was kind of a literary bounce-off of what is happenning in the Koreas....in their case, it takes REAL artillery to acheive what they see as their goals, in our case, it is going to take likely more than what is possible (since we as a people are not allowed to own Howitzers). Yes, if millions of people opted-out....that would be the artillery that could force a change in the system. I see people like you doing things that count, but I am sure you know as well as I do that most will just sheeple under and let the Gov spoon-feed them their own version of reality. Kudus to you for your efforts, my friend, but I am a pessimist.
I did get the allusion to the Koreas, still fits as one way out of a depression is war, as you wrote.
Sadly, I am a pessimist as well. Sometimes I get optimistic, but as my son described the 4 am Black Friday morning his girlfriend drug him to at the mall, people aggressive, fighting over parking spots, pushing, shoving to load up on loss leaders...it quickly fades to "wtf is wrong with us?". I had my own moment of "wtf is wrong with me", so I try to not be judgemental.
I just throw ideas out in case they may help a person or two, I know I have learned a lot of wisdom from others, and try to teach my kids a saner way.
Thanks!
If Democrats pass a bill to extend the tax cuts, they don't need to show up in 2012. Obama is currently mulling it over (at least publically) but don't be fooled, he still has a few tricks up his sleeve. There are enough Democratic Senators who won't run again, Reid, Boxer, etc, who will fall on the paper mache swords, and block the extension. remember the thing dies of its own weight, and currently if you think the Dems are rolling over, you may have missed something.
Remember Obama cut taxes, which is something he needs to repeat, and he will. Then of course there are a number of wealthy Americans who support the higher tax rate on top income earners. Photo op in the Rose Garden.
One thing about mixing finance and politics, it creates a wicked hangover.
I call it the "Methadone Market."
The best solution for all of this mess would be the helicopter drop. I don't know why they didn't do this with QE2 (maybe they will yet). A bottom-up approach instead of a top-down approach. Cash-up the peons, enough to fill black-holes at the top, then let the high economic trophic level entities fight it out for survival.
The Treasury would work with the Fed (exactly as it is now for QE2) to fund regular citizens dividends. Logistically this would be no more difficult than sending someone a Social Security payment.
At the end, when carnage at the top end has ensured that only the strongest private and public financial entities have survived, the peons will still be alive and kicking. Pockets of inflation that might result as a consequence are easy enough to control through general or targeted taxation.
Note that this is *not* an Austrian solution.
much as I hate to admit it, you are probably correct.
Hypothetical:
Give every household $50,000- $100,000 "jubilee" bonus, applied first to unsecured debt (credit cards, etc), clean that slate, apply any remaining next to secured debt (cars, toys, HELOCS), any remaining applied next to mortgage as princeple payment.
Banksters get "theirs", proles get relief, and will then do what we do best, consume and run up new debt balances, which send money to banks via interest.... repeat...like fish going again for that worm on a sharpened wire...we just can't resist.
Since this solution has been known for millenia, I am surprised it hasn't been floated out there yet.
I wouldn't do it as a lump sum, rather as smaller, regular dividends. It's more manageable that way and effects can be monitored closely.
The main reason that it's not done is simply that bankers control government and such a plan entails a hit for banks. Politically, it's valuable though; nothing gets the popularity rising more than a cash handout.
The banks would take a hit, yes, but they would get principle back, just would forgo some interest payments until the marketers get busy with the advertising, Apple comes out with the new iSomething, etc.
The money would still get to the banks, just via a non-direct route this time.
Don't the bankers trust americans to spend? I mean we have the best marketers in the world, right? The best cleavage on cnbc, who wouldn't give up a few months of interest payments now for a freshly re-stocked pond of fish?
heh...:)
A large dollar bonus to the populace is not the answer. Of course, that depends upon what the question is!
1. Help people get out of debt.
2. Help people incur more debt.
Which one would "help" the system, get us back to "normal", provide for the creation of banking profits? Getting folks further into debt, naturally.
Giving people a big check will allow them to pay down debt and spend a little. That hurts the banks.
Give people a little money and they'll leverage it up by credit card purchases and such.
I had a business where the work was done by contract labor. One of my guys explained it to me quite plainly: "I need big checks, not these little piddly checks. I can't pay my bills with a couple of hundred at a time. I spend the small checks on stuff but my bills go unpaid. I need checks in the thousands to get my butt out of hock."
There ya have it. If the "people" get anything it will be crumbs, dribbled out over time. Sorta like unemployment extensions.
heh, I guess I have problems thinking like a bankster...:)
Japan
Japan
2008...when we were really in a financial crisis... So, I guess MTM is right around the corner?
2008 and parts of 2009 were pretty ugly. Biz was decent this year, but its not CRE sales deals, its loan workouts, foreclosures, etc... I am busy mostly from one big client, but one neighbor who is a plumber is DOA, broke, behind in med ins and mortgage payments. Other neighbor is concrete contractor with small landscape maint biz - the maint biz is keeping his head above water. He is back in teh truck doing grunt work.
The gov't has sucked some people in again - when they wake-up its gonna be lights out. 1929-1830 was a bitch, 1938 was the crusher though.
FYI: FDIC reported data QBP
The third quarter 2010 FDIC Quarterly Banking Profile (QBP) is now available on line. FDIC-insured institutions reported an aggregate profit of $14.5 billion in the third quarter of 2010, a $12.5 billion improvement from the $2 billion the industry earned in the third quarter of 2009. This is the fifth consecutive quarter that earnings have registered a year-over-year increase. Almost two-thirds of all institutions (63.3 percent) reported improvements in their quarterly net income from a year ago, but nearly one in five institutions (18.9 percent) had a net loss for the quarter. The average return on assets (ROA) rose to 0.44 percent, from 0.06 percent a year ago.
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Ask a morbidly obese person who has been told he has to lose weight or die when he wants to start his strict regimen of diet and exercise. The answer will always be "tomorrow."
solution: get out of debt as soon as possible or crash with the system
US nice world.
Tax payer money collection is lessened and still US citizens perceive they are yielding more and more taxes to the bankers. Extraordinary.
I suspect if one day tax collection hit a zero, and the FED is emitting credits more than ever, US citizens will still claim that they are robbed of their US hard earned tax money.
If the fed continues to print $ and hand them to banks in exchange for treasuries, US citizens (and every other holder of dollars) will be robbed.
Bruce,
"D.C. desperately needs the states to spend money to support the economy".
Given that a lot of the states appear to be on their last legs financially, isn't this desire by D.C. whistling in the wind?
DavidC
When the private bids for munis disappear, the Fed will step in and suck up all the bonds that the TBTF states (CA,IL, NJ) want to issue. OTOH, if an economically pint-sized state in flyover territory gets in trouble, Bernanke may just make an example of out them by letting 'em twist in the wind. There ain't no justice, buddy -- there's JUST US.
" if an economically pint-sized state in flyover territory gets in trouble, Bernanke may just make an example of out them by letting 'em twist in the wind. "
Yup, I live in that state...and the non-politician class is starting to think, "so what, f**k'em, and good riddance, didn't need them 4 generations ago, don't need them now"
Isn't it ironic that when Congress raised the mortgage limit in the first place - in a vain attempt to defend property values in the sand states - they fucked the convexity the MBS yield curve and blew up the Carlyle Morons, which, in turn, blew up Bear Stearns?
Ya..there are two parts to this 'keeping the lights on' movement, those who want to find solutions and those who implement the policies..and most of the time, in fact, all of the time, the left hand just doesn't know what the right hand is doing. Sooner or later, one will have to realise, those who implement the rescue tools are more concerned about their very own short-term, the balance sheet, quarterly profit, perpetuating a rigged casino advantage, getting home at the end of the day safe from the unwashed, before doing the necessary work.
Here, Here. Took the words right out of my mouth.
I've said it before and here it is again: so long as the gov keeps the working class comfortable with their Apple gadgets and heated, over-appraised homes the masses will be content to shake their fist at the tube....while paying out both sides of their nose for a debt they did not incur and certainly ought not to be responsible for. Big Sam is smarter than the PIIGS' governments- he knows to provide just enough meat on the bones we are thrown to discourage an uprising.
"so long as the gov keeps the working class comfortable with their Apple gadgets and heated, over-appraised homes"
While their kids have to compete with the Chinese and Indians for work, whose wages will never be high enough to support any of the overinflated houses.
Had we let the banks fail....
Depositors would have been whole via the FDIC.
All the CDS's would have simply been settled.
"There'd a been no lending", but nobody's lending now anyhow...moot point.
New banks would have taken the place of old failed banks.
Nobody except the credit unworthy want to borrow, anyhow.
The banksters wouldn't have gotten the bonuses they did not deserve.
The country wouldn't have been bled dry with TARP, etc.
Pensions of folks whose companies went belly would have been absorbed by the PBGC.
The Greenspan put would not have morphed into the Beranke put and officially sanctioned Moral Hazard would have been in part, curtailed.
The Fed would not have become engaged in Central Planning fiscal policy decisions trying to ad hoc pick winners and losers.
Wouldn't have a boat load of Zombie banks.
Many of the main financial campaign contributors would have disappeared. (Tough shit, everybody)
So, now what's the plan?
That there is only the option of kicking the can down the road again, is Not a Fucking Plan.
Raising taxes, having the Innocent General Public pay for the fuck-ups of the Government, Regulators and Bankers is Not a Fucking Plan.
Halting the plague of officially sanctioned corruption fucking over the common citizenry is a Plan The Hydra must be terminated, for reinforcement of standard answers only perpetuates the demise of civilisation as we know it.
Let Creative Destruction Reign. Let the Stabilizers already Built into the System Work as Designed. Have the Regulators Regulate, not Protect the Regulated. Out with the Bad, in with the New.
Or at least the gist of it.
Yeah, but how does this get set in motion? Like you, I'd like to know what to do, i.e. what's the plan.
Explain to everybody whose interested in a clear calm logical manner what has gone wrong, the policy errors and appropriate responses. Encourage them to spread the word resulting in a hew and cry arising from the populace that the policy makers cannot fail to hear. The last election cycle was a mere beginning.
TPTB must be made aware that they shall be removed from the public trough unless significant changes are made.
Further ideas such as an abolition of campaign contributions.... viz; accepting them is illegal, placing the representatives in a lower self interest mode, as well as dozens of other principled ideals addressing the disease, not the symptoms.
The point is to get others interested in actively pursuing the same objectives.
It is a process of attraction of the ideas, not selling them.
And it all must be done in a peaceful, law abiding manner.
That's what I do. That's why I am writing this.
Right on. I'm sick of this BS that we "avoided" depression by the government borrowing trillions on the public's account and the Fed lending trillions of freshly made dollars backed by the full faith of the republic. What we did is avoid holding all our economic failures accountable, and instead held everybody mutually responsible for paying for their losses.
If we had let capitalism work, wiped out the losers and started fresh, yes there would have been a sharper contraction, more layoffs and a decline in real wages in 2008-2009 but we would be bouncing back by now at GDP growth rates in excess of 5%. Instead the economy is weighed down by the burden of indefinite public commitments to keep home prices and various other kinds of asset prices inflated. People who are paying too much for food are being told that it would be a disaster if food prices fell. People who are paying on a badly underwater mortgage are being told that it would be a disaster if they defaulted, moved into a cheaper rental, and saved the difference. The US economy is sick from all the "rents" (in the economics sense) that are built into the system and which the government is doing everything possible to protect.
Good perspective, term of art, "rents."
The longer we prop up the falsehoods, the worse it will become. Time to just pull the plug, take the medicine and be done with it. And as you aptly point out, should that have been allowed in the first place, we would be enjoying 5+% real GDP growth rates and expanding employment roles.
Did you see the comment by the Chinese chap, that in order for the dollar to prevail, America must abandon its entitlement society? Interesting perspective to say the least.
Pull the plug, bear down and be done with this fanciful charade masquerading the looting of the common man. Last time I checked, officially sanctioned looting of the middle class was not writ in America's Manifest Destiny.
I agree with most of what you said, but this one I have to ask how you come to this conclusion:
"should that have been allowed in the first place, we would be enjoying 5+% real GDP growth rates and expanding employment roles."
Poeple need to get over the notion that we can grow in perpetuity. That smallish-looking 5% means a doubling in about 14 years. Look around you, do you really think that in 14 years (reference being 2007?, meaning that 14 years would place it at 2021) we could double EVERYTHING? We just experienced a blowout due to excessive growth.
The 5% I refer to is what has been experienced historically during periods exiting recessionary periods. In fact, usually there are also some quarters displaying 7 or 8%, but only some. I used the 5% as an indicator of potential more robust growth, nothing more.
It is terribly important to keep in mind that the post-war long term trend growth rate in the domestic economy has been approximately 2.5%.
Several factors of late have likely had an impact not only on the trend, but recovery's experience. First, the increase in regulatory and tax uncertainties has held back potential hiring significantly. Second, the stimulus programs (CfC, etc) merely transfer consumption amongst quarters. Third, over the past decade, we may have well begun to assume that growth rates were higher than trend for 2 reasons; the net impact of the computerization of the economy, while initially enormous, will at the margin, diminish. And then, the debt binge we've been on.... well, we can all fill in the blanks, there.
Responding to a system deleveraging itself by adding more debt subsequent to the binge does seem to be like treating the patient whose been poisoned, with more of the same whilst expecting a miraculous recovery.
A binge?
Very strange analogy...
So for you, transfering wealth for a fractional amount of it from one player to another is a poison?
In my little delusional world, I perceive consuming as an activity many enjoy practising. I know no civilization that managed to achieve something without increasing its consumption capacity.
It might be a poison to people who are transferred wealth from, not to people who are transfered to.
Are you implying that being able to transfer vast amount of oil for only one fraction of it as a payment is detrimental?
Woooooo, such duplicity.
Lets start a reality show: I am a consumer on debt, I am touring the Bahamas, eat at fancy restaurants, rent rolls royces/ mansion on the hills, throw parties every night... Please get me out of my hell, help me to cut my permanent default on debt scheme so I can switch back to normality, that is rummaging piles of scrap...
My bet is that people in this reality show will like to find a way to maintain the permanent default scheme, not to cut it off.
Nice, nice but unreal.
Debt is simple: that is bringing into the present an act of consumption that is thought to get enabled in the future.
Quite easy and can be sustained as long as the act of consumption in the future can exist.
Now what if the act of consumption in the future does not exist?
That is when the debt can not be repaid, that is when the act of consumption brought into the future cannot be compensated in the future.
People who are aware of the act of consumption brought into the present does not exist in the future engage in Ponzi scheme.
What we have done is as the following: we characterized regions of the world that have had the resources to support x acts of consumption. In order to get them to enter the debt scheme, we've promised them that in y years, they will be enabled into X+Xpc acts of consumption.
In reality, we've been transfering the X-Xpc acts of consumption and let them enjoy the Xpc acts of consumption in order to maintain the scheme.
Therefore the debt has been defaulting on for decades now, the acts of consumption were are performing now are unlikely to be repeated in the future.
Ending the default process would not have bettered the economy, far from it.
Ending the default process is like telling to a guy who is living off extorting the weak and farming the poor that ending his extortion scheme will leave him better off.
You can discuss all daylong whether or not the weak or the poor would fare better or worse without the pressure of the extorter/farmer. What can not be discussed is whether or not the extorter will get better or worse. The answer is plain: that is always worse. Ask your local pimp, drugs dealer, no matter his/her intelligence, they are perfectly aware of this fact.
Bruce, I think there is almost 100% certainty the limits and programs will be extended well into 2012, maybe even 2013. Home prices are still out of touch with disposable income and need to drop another 20-25% across the board, while household debt needs to be paid down much much more. This will take, my guess, 2 years.
On top of that next year we will have an election cycle coming into full swing. No politician, especially in the WH, would dream of facing the music during this time frame. We are in for the long haul. The Euro is going into the crapper and Ben can print all he wants for a couple more years as flight to (the least) "quality" is predictable, even if it blow debt to GDP all the way to 50%. Institutional investors don't give a shit, they just their money to not disappear.
But isn't everything likely to "disappear"? Not just yours and mine, but everyone's?
no no no... i bailed out *my* part of the titanic!
(heh - i love that line...)
Bruce, the only people NOT still in the crapper are the people who took the crap on our heads, wiped, and went back to the party. They are buying themselves luxury items and paying Lil Kim to sing at their 9 year-old's birthday. Their institutions, however, along with the governments they control, are in the crapper with us. That means more of them are going to have to take a dump very soon. I presume you don't believe in trickle-down. I hope you are not arguing that once they are through partying, they will reach down into the toilet and pull us all out of the muck.
We are on life support. Deep cuts in key states are happening, my friend. Deep cuts in key countries are happening. Austerity measures are going to ensure pain for a long time. There is going to be another event. The mistakes of 2008 all the way through to QEII and beyond guarantee that. But you don't see the things that were done in 2008-9 as mistakes, and that is where you are deeply wrong. All policy makers did was begin fomenting lies about the depth of the problem, the depth of the collapse, and begin covering up what was truly needed to fix it. One way or another losses have to be realized. A quick death is better than losing a 20 year battle against terminal cancer. What was needed was a deep, dark recession, with the causes clearly understood by everyone, followed by a reckoning, and fundamental changes. The economic damage needed to be felt deeply by the architects and profiteers of the schemes that collapsed and shat upon the world. The fraud upon which the house of cards was built needed to be exposed and the people responsible held accountable.
None of that has happened.
" There is going to be another event. The mistakes of 2008 all the way through to QEII and beyond guarantee that."
Yep. Going to be terrible.
This is where you people get it wrong. The mortgage market was not frozen in 2008. The non-profits, CU's were lending, and Hud was backing those loans, I know my son bought on right at the bottom, and his credit is less than stellar, and the rates he got were very good. The corporate banking sector was jammed up, and there's the rub. What did any of this have to do with Main Street? A year before the financial crisis SB lending dried up, and still is, because the non-profits aren't allowed in there. Why aren't they in there, [they should be] because corporate America wants the cheap money to play their games, and they don't like competition..
Thanks for that ref to Babs, I am very interested in why my city is cutting essential services, and handing out corporate welfare, using eminent domain, and buying property, at the same time. Now I know. The financial crisis was a power grab by Wall Street, with a gun to our heads, martial law in the streets. All this solutions do (forget kicking the can down the road, that's a euphemism for kicking our ass down the road) is consolidate government power, and corporate influence. But its nice to learn a bit more about how they're doing it.
Re "consolidate government power"
Oh-oh, I think you've got it. Sounds familiar.
http://www.youtube.com/watch?v=vEJdeWvGIZU
Got it wrong?? Then please explain why Fannie, Freddie and FHA have been more than 95% of the mortgage market over the past two years. There is no private market.
I don't doubt that your son got a loan. Look through and you will see that this loan was bundled up and sold to Fannie as all the others were.
you just made my point, unless you don't consider the CU's a private market. They orginated the loan, Hud backed the loan, and it's a nice loan too, which has a reset clause that drops the rate when the market drops. More to the point about BABS here's the byline on the clip of this interview, point being municipal governments are handing out corporate subsidies (which is an unfair business practise, but who cares) sometimes at the ratio of nearly 1:1 to the businesses operating expenses. He used for example Cabela's. This sort of activity is Anti-small business, and it creating an insane disparity between municipal operating budgets and discretionary or redevelopment funds. It underlines two things: governments role in bailing out Wall Street, while Main Street is in a full blown depression. And second it reveals the further empowerment of the Fascist Business model. This is not kicking the can down the road, this is policy, and it's flat ass wrong. But your idea that somehow mortgages were not being originated in late 2008 is a misconception, if you consider non-profits, regardless of where the paper landed, whatever Hud does with their loans, otherwise the CU holds the paper. CU's are not involved in the after mortgage market.
The rich, thanks to government handouts, are getting richer at everyone else's expense. At least that's what David Cay Johnston claims in the book Free Lunch: How the Wealthiest Americans Enrich Themselves at Government Expense (and Stick You with the Bill)
You just made Bruce's point--how many of those loans could the CU have made, without the HUD guaranty?