This page has been archived and commenting is disabled.

How America's Middle Class, And Future Pensioners, Bailed Out A Generation Of Overzealous Homebuyers

Tyler Durden's picture


In the current Bernanke-Obama-Keynes toxic triangle (defined previously here) economy, blink too long and you will miss the latest bailout.

While 4 years ago, it was America's M.A.D.-hostage taxpaying middle class that had no choice but to fund the trillions in direct Fed cash handouts and guarantees to bail out the banks, in the process saving and preserving the trillions in wealth for America's uber wealthy (the "1%") class, ever since then it has been the government's turn to rescue the country's lower and lower-middle classes (the "47%"), who, with no gun to their heads, decided to splurge during the height of the housing bubble (insurmountable mortgage payments and $0 down notwithstanding) and buy that aspirational McMansion that would make them so much more appealing in the eyes of the next door neighbor (who too could never afford their house in the first place). This has happened courtesy of a progressively more pervasive mortgage forgiveness plan, which has seen the total amount of debt funding a given home purchase shrink little by little each day.

However, since there is no free lunch anywhere, certainly not when a bank's balance sheet is being impaired, like in 2008, someone is once again on the hook for this latest bailout. That someone, not surprisingly, is again America's middle class that lived within its means, that saved money while others splurged, and even put cash away for retirement, handing it over to various Pension investment vehicles.

As the FT explains today, it is now assorted pension funds, or specifically the people whose money is invested in said funds, that will have to "absorb losses on their mortgage bonds holdings" as a result of the ongoing settlements, largely politically driven, to afford the lower classes a 20%, 30% or more forgiveness on the total mortgage. Which naturally will do nothing but keep said irresponsible person in the home for a few months, until they redefault again and again, because it was never a question of how much equity one has in a given home. Instead, it was always a question of disposable income to pay mortgages and other discretionary items: income which is now long gone.

From the FT:

Investors in US mortgage securities have been forced to absorb large writedowns in response to a deal between leading financial groups and government agencies over the “robosigning” scandal.


Mortgage bond investors and US lawmakers had feared such an outcome earlier this year, after reports that a deal was near to resolve accusations that banks mistreated homeowners and wrongfully certified legal documents used to evict defaulted borrowers.


The banks – JPMorgan Chase, Bank of America, Wells Fargo, Citigroup and Ally Financial – agreed to forgive billions of dollars worth of distressed borrowers’ mortgage principal in exchange for waivers from potential liability. On Wednesday, BofA said that 60 per cent of the $4.75bn in first-lien mortgage principal it has thus far agreed to forgive would come from non-government guaranteed loans that were packaged into bonds and sold to investors. Of JPMorgan’s $3bn in forgiven mortgage debt, slightly less than half has come from investors’ holdings, a person familiar with the matter said.

How generous of the banks: to give out handouts to servicing clients, scoring the administration numerous Brownie points (the same administration that bailed said banks out) with losses that will have to be footed not by the banks, but by pension funds. The result - less pensions for those who had saved up enough money to be able to afford such an investment:

Earlier this year, some US senators worried that pension funds would have to absorb losses on their mortgage bond holdings as a result of a settlement meant to punish banks and aid troubled borrowers.


Obama administration officials tried to quell those concerns, first arguing that bond investors would not be forced to shoulder writedowns, then claiming that the “vast majority” of writedowns would occur on bank-owned loans. “Many of us expected a settlement to hold servicers responsible for their misconduct; not a bank bailout settling with other people’s money,” the Association of Mortgage Investors said.

Turns out Obama lied, and probably not for the first time.

And before the indignant reactions surge that this is in some way an ethical condemnation of the poor (or the rich, although we are far less concerned with that accusation), it is not: people, regardless of social status, poor, middle-class, wealthy, will act according to their motivations first and foremost, which are primarily driven around greed, and the various other deadly sins. If given the option to upgrade one's standard of living, and told to not worry about much else, everyone would take advantage. Obviously, the hangover always comes, but that never stopped anyone from drinking the night before.

The problem arises when none other than the government, which is the worst, most corrupt, most conflicted arbiter and enforcer of human behavior, is put in the position of determining how to encourage mass social behavior for the future: this is central planning at its absolute worst.

What is certain, is that by encouraging bailouts, for banks, for billionaires, for deadbeats, for corporations, for anyone who should have engaged in prudent risk management but did not, by encouraging behavior that is beneficial to the individual but destructive to the whole due to the government's own policies, what the government does achieve is enmesh an ever increasing majority of the population - not only in the US, but the entire world - into a blanket of codependence. It doesn't matter if one has led a life of fiscal prudence, or reckless monetary abandon - in the end everyone becomes codependent on everyone else, and everyone is on the hook for the government's infinite goodwill, not to mention monetary injections (which only come from diluting the money in circulation, not from creating new wealth: the Fed's printer has never created one penny of wealth - it merely dilutes it). The only problem with this utopia is that as Maggie Thatcher explained so well many years ago, one day, "other people" run out of money. All money.

At that point the music ends.

Which is why eat, drink and be merry: the government is engaging in a serial bailout of everyone, reckless behavior be damned: there is only reward, no risk, or so the central planners in various government offices: from the Fed, to the Treasury, to Congress, to the Senate and certainly to the White House, believe.

One day this will inevitably end, most likely in a series of mushroom clouds. Hopefully by then it will be "some other generation" picking up the pieces for the current, unimaginably selfish one.


- advertisements -

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Thu, 11/15/2012 - 15:39 | 2985215 Godisanhftbot
Godisanhftbot's picture

 1/2 the Country deadbeat scum, the other half without the balls to tell them to rot in hell.

= 100% farkage.


Thu, 11/15/2012 - 15:46 | 2985251 Alhazred
Alhazred's picture

If we had a gold standard and ended the fed, the theft in the name of the deadbeats would have to be more open.


The more open the easier it is demonized and opposed.

Sign this help create a stir help end the fed

Thu, 11/15/2012 - 15:59 | 2985301 The Gooch
The Gooch's picture

Great fucking petition...

"Go read some books then come back to sign it."

I am guessing the author of this "petition" was smoking herb and eating EBT twinkies in mom's basement.

Thu, 11/15/2012 - 16:16 | 2985398 Larry Dallas
Larry Dallas's picture

A@ the Gooch.

This made me snarf out my coffee. Very funny!

Thu, 11/15/2012 - 18:40 | 2985972 The Gooch
Thu, 11/15/2012 - 19:18 | 2986091 Enslavethechild...
EnslavethechildrenforBen's picture

Cool, the Bankers are completely innocent.


Thu, 11/15/2012 - 18:49 | 2986001 Dr. Sandi
Dr. Sandi's picture

Buy and hold real silver and gold.

And don't put it in a watercraft.

15% appreciation over the past decade is better than the pension funds are doing. So why aren't more of us getting the shiny.

If you GET IT, you'll GET THEM.

Thu, 11/15/2012 - 15:40 | 2985216 mrktwtch2
mrktwtch2's picture

tell us something we dont know

Thu, 11/15/2012 - 15:53 | 2985279 CrashisOptimistic
CrashisOptimistic's picture

Here's something you don't know.  

Want to know why Apple's getting smacked?

Do a search for "goopad".

Thu, 11/15/2012 - 18:01 | 2985824 Rikky
Rikky's picture

Ainol (largest chinese tablet manufacturer) is also creating products at 60%+ cheaper than the IPad with pretty much all the same features except retina display.  do a search on Novo Flame, Hero, Hero II and the closest competitor Captain.  there will always be a crowd of dopes who'll pay 250% more because they want the cool factor that is Apple, but the rest of the world looking for cost value will have no choice but to buy an Android based tablet as the justification for spending literally hundreds more for the same device will be too compelling.

Thu, 11/15/2012 - 15:40 | 2985217 Jonas Parker
Jonas Parker's picture

"EVERYTHING FOR EVERYBODY (and a little something for me)!"

Thu, 11/15/2012 - 15:43 | 2985236 El Viejo
El Viejo's picture

I've often wondered about the things people wish for. In the end we may all get what we really, really, reeeeally want: Silver and Gold. A new house or car or wife or genetic offspring. Some seek power or legitemacy or land or revenge. Some even seek worship. Some just want to be rescued.

Thu, 11/15/2012 - 15:55 | 2985284 AldousHuxley
AldousHuxley's picture

people want what they don't have


human nature.



Thu, 11/15/2012 - 18:52 | 2986007 Dr. Sandi
Dr. Sandi's picture


people want what they don't have

Maybe so, but I still don't want Herpes.

Sometimes you have to prioritize. Get a mortgage, get financial herpes. That seems to be the current message.

And apparently granny's pension fund will pay for both the mortgage and the TARP brand herpes cream.

Thu, 11/15/2012 - 15:40 | 2985220 Dealer
Dealer's picture

No risk of that

Thu, 11/15/2012 - 15:41 | 2985228 BattlegroundEur...
BattlegroundEurope2011's picture


Thats my House in that photo.













I wish ;)

Thu, 11/15/2012 - 15:49 | 2985263 Alhazred
Alhazred's picture

I was going to say...

I mean, I don't remember renting you a room in my house.

Thu, 11/15/2012 - 17:10 | 2985631 Rathmullan
Rathmullan's picture

Hope that bitch has an elevator

Thu, 11/15/2012 - 20:49 | 2986334 hooligan2009
hooligan2009's picture


Thu, 11/15/2012 - 15:42 | 2985234 sickofthepunx
sickofthepunx's picture

blaming a debt slave for borrowing readily available money for next to nothing is like blaming an alcoholic left in a room full of booze for drinking.


this false equivilancy, when it's the banks that hold the purse strings, is just more supply side libertarian bullshit 

Thu, 11/15/2012 - 16:05 | 2985299 Urban Redneck
Urban Redneck's picture

Sounds simple- don't give any booze to the alcoholics...  The problem is that the state is the entity providing the booze to the alcoholics, and the alcoholics control the ballot box, and by extension the state, SO THE ALCOHOLICS ARE ENTIRELY AT FAULT.

The only solution to let the patient expire, or put the fucker out of his misery before he harms anyone else.

Thu, 11/15/2012 - 17:09 | 2985622 NooooB
NooooB's picture

It's more insideous than that! Even in this article that pretends to express appropriate anger there is an awful lot of painting over. Does no one remember the barrage of commercials and corporate news propaganda oushing people to buy inflated priced homes? George W Bush went on tv to express his concern that not EVERYBODY would get themselves into a home as soon as possible for god sake! It's just not honest to portray homebuyers as just being greedy. They were- but there was more to it than that.

I sat in a mortgage brokers office as he implied ways that I could fudge my income.. I am o.k. with metaphor and my mind went back to Dracula. If you are in a room with a guy staring at your neck salivating, and he starts pretending to be your friend and trying to get you to relax- RUN!!! Has the rest of america never learned this?! I realized I was being groomed for a screwing and I got out of there!

Acting like it's as simple as "home buyers were all greedy" is just as bad as blindly accepting the bailouts. In my experience there were people trying to get into homes that were rapidly being priced out, and shady investors working the system in paralell. Fliping houses as fast as they could all the way up.  Banks and government in collusion to fan the flames like a pimp/rocker party trashing the hotel room. Burn mothafuka burn! These actions now- pushing the used condoms, overflowing ashtrays, and spent cocaine bindles off on the pension funds and the rest of us through the FED. Is just the smearing of shit on the walls to finish the job.

Again, Where is the outrage?!!

Thu, 11/15/2012 - 17:31 | 2985707 Urban Redneck
Urban Redneck's picture

It's a crooked system with myriad perverse incentives for all sorts of participants, but throwing more money at it in no way "fixes" it.  It needs to collapse and be rebuilt, hopefully in a rational fashion.


Who is the largest owner of toxic FHA paper?  The Federal Reserve.  They've gone from asking from for trillions OF TAXPAYER DOLLARS to bail out Jamie Dimon & Lloyd Blankfein, to asking for trillions OF TAXPAYERDOLLARS to bailout BEN BERNANKE.


The situation is making a farce of Greek Comedy.

Thu, 11/15/2012 - 18:53 | 2986009 Dr. Sandi
Dr. Sandi's picture

Nice to blame the Alkies. But the real bastards here are the bootlegger banks, not the drunken sots who bought their product.

Thu, 11/15/2012 - 16:46 | 2985519 Liquid Courage
Liquid Courage's picture

Borrowing readily available money is like Lite Beer for the debt slaves ... the ability to triple-A rate and then pass the ticking parcel along to unknowing suckers via the voodoo art of Securitization is like hallucinogenic Tequila for the 1%. And who makes that legal and how is it in any way Libertarian? I'd say any form of fraud or theft violates the Non-Aggression Principle and is thus Anti-Libertarian by definition.

Thu, 11/15/2012 - 15:45 | 2985246 surf0766
surf0766's picture

We bailed out the baby boomers. Again and Again

Thu, 11/15/2012 - 16:18 | 2985257 williambanzai7
williambanzai7's picture

Don't worry, there's plenty of boomers getting screwed by the same bailout contraption.

Just another minor observation. The stupid assed boomer CEOs running most of the banks could not have done it on their own. They hadnt the slightest clue how all of the financial wizardry designed by people considerably younger than them, worked. This became part of the didnt know nuttin defense that has worked so efficaciously for people like Parsons, Rubin, Fuld etc.

The end result is the same. Everyone else gets fucked.

Thu, 11/15/2012 - 18:53 | 2986015 Dr. Sandi
Dr. Sandi's picture

Boomers are morons. And so are their kids.

May we have the next epithet please.

Thu, 11/15/2012 - 15:46 | 2985250 williambanzai7
williambanzai7's picture


Thu, 11/15/2012 - 16:08 | 2985350 LMAOLORI
LMAOLORI's picture



For that image to be complete it's needs obama's face on it as for Wal Mart they are getting their money's worth

Wal-Mart heir gives $300,000 to Obama super PAC


Thu, 11/15/2012 - 16:20 | 2985371 williambanzai7
williambanzai7's picture

I wonder how much the rest of the Walmart clan gave Romney, as if it matters anyhow.

Their particular role is making sure the little people cannot engage in a viable mom and pop retail enterprise.

Thu, 11/15/2012 - 16:41 | 2985515 LMAOLORI
LMAOLORI's picture



Romney isn't the president if he was we would be talking about him. Hillary Clinton sat on WalMart's board and there is more to WalMart's decisions then meets the eye.

Walmart Targets Unhappy Bank Customers With New Prepaid Card

“The Durbin Amendment to the Dodd-Frank Act sets prices on interchange fees. Wal-Mart avoids these price controls because its new product is not called a debit or cash card.”

So Walmart has found a way to evade a law that Congress passed. Surprise, suprise, suprise! That’s the name of the game. Congress acts, people evade and contributions make everything OK. I’m thinking of all the waivers granted right away from the requirements of Obamacare.

I can’t say I’m a fan of Walmart for a number of reasons not the least of which is all the taxpayer subsidy that they get from WIC and food stamps since they have a lion’s share of that market. Walmart makes their mark-up on those products."

Thu, 11/15/2012 - 18:56 | 2986025 Dr. Sandi
Dr. Sandi's picture

I'll expose this secret about Wal-Mart for the world to chew on.

Wal-Mart is in business to make as much money for the Walton Klan as can be made without any of them being assassinated, being jailed or actually being inconvenienced in any major way.

This is, of course, totally unlike any other large corporate undertaking.

Pass it on.

Thu, 11/15/2012 - 17:11 | 2985640 Shizzmoney
Shizzmoney's picture

This is what, in gambling, we like to call a "hedge"

Thu, 11/15/2012 - 15:48 | 2985258 blunderdog
blunderdog's picture

     The problem arises when none other than the government, which is the worst, most corrupt, most conflicted arbiter and enforcer of human behavior, is put in the position of determining how to encourage mass social behavior for the future: this is central planning at its absolute worst.

Hindsight's always helpful when it comes time to assign blame, but the mortgage interest deduction has been around a good bit of awhile.

Thu, 11/15/2012 - 15:49 | 2985259 orangegeek
orangegeek's picture

For the last four years, the government has engaged in QE-X and has blown trillions (mortgaged the future) and will get little for it in the next four years.


Barry got his re-election and what comes next is going to make Barry wish he lost.


The trend is down and many corps are missing on revenue although some hit on earnings (by firing people) - companies like Walmart.   It is ugly out there and it's going to get far worse.

Thu, 11/15/2012 - 15:52 | 2985275 notadouche
notadouche's picture

And if Walmart can't hit revenues in a rough economic patch then watch out below!!!  Although I'm curious to know where you got info that Walmart fired folks in the last year.  

Thu, 11/15/2012 - 15:51 | 2985260 LouisDega
LouisDega's picture

I dont know about you, But im just happy to be here today

                                                     Thurman Munson

Thu, 11/15/2012 - 16:00 | 2985293 Joe Davola
Joe Davola's picture

Hey, when we meet in hell - throw me the Zero Hedge gang sign, so I'll know whom to blame for making me laugh.

Thu, 11/15/2012 - 15:51 | 2985271 goodrich4bk
goodrich4bk's picture

I don't recommend getting your panties in a twist over this issue.  Had there been no such robo-signing settlement, almost all of the losses would have been born by the pensions holding the mortgage debt.  And those losses would have been much larger but for the various government and Fed programs that have been used in the past four years to prop up housing prices and slow foreclosures.


Thu, 11/15/2012 - 16:27 | 2985446 bank guy in Brussels
bank guy in Brussels's picture

If not « panties in a twist »

how about

knickers in a knot


boxers in a bunch

Thu, 11/15/2012 - 16:50 | 2985539 Liquid Courage
Liquid Courage's picture



smalls in a squall

Thu, 11/15/2012 - 17:13 | 2985643 skipjack
skipjack's picture

No, the securetizing banks would end up the bagholders.  Thanks for playing, tho.

Thu, 11/15/2012 - 15:52 | 2985274 lasvegaspersona
lasvegaspersona's picture

Ultimately society will screw it always has and always will. Younger folks will ultimately be able to recover and get on the inflated wages bandwagon (hopefully) but those on fixed incomes will get just what has been promised....a nominal payment that will soon be WORTHLESS!!!

This plan has 'worked' over many cycles. I suggest you opt out of the plan with gold in hand. The reasons are complicated (for why this works) but it always seems to do so. It has something to do with fiat currencies and their natural life histories.

Thu, 11/15/2012 - 19:02 | 2986042 Dr. Sandi
Dr. Sandi's picture

Bang on.

(As opposed to keep on banging, which you may also do if you wish.)

Savers are always the ones who get screwed when the money blows up. It's inevitible, since they're the only ones with anything worth stealing. Pensioners are long term savers, either through their own work or through the their employer.

What has been squirrelled away through work and foresight will, at the end, be dug up by the masked racoon rape gangs.

Same as it ever was; same as it EVER was.

Thu, 11/15/2012 - 15:53 | 2985278 davidsmith
davidsmith's picture

Hasn't it occurred to you yet that the Democrats are trying to create a client class?  As Nancy Pelosi said, "You need us."  They're trying to create a permanent class of people who will starve to death unless Democrats control the government.  Voila!  You can talk about dictators all day long, but you will never understand them until you understand the process by which they created a client base entirely dependent on them.  That's the ultimate guarantee of their power: a client base.

Thu, 11/15/2012 - 16:21 | 2985412 Toolshed
Toolshed's picture

To imagine that the Democratic party has the ability to plan and execute the kind of long term strategy that would enable the scenario you describe is ludicrous. You give the politicians waaay to much credit. Both parties are composed of utterly self absorbed morons. The very best part of this past election was watching Karl Rove's best laid plans blow up in his fat stupid face. Now, there may be some truth to the theory that both parties take their orders from a higher authority, but formulate long term strategic objectives on their own? Well, nothing that has any chance of success anyway.

Thu, 11/15/2012 - 18:05 | 2985844 ForTheWorld
ForTheWorld's picture

To imagine that they don't have the ability is equally as ludicrous.

Thu, 11/15/2012 - 15:53 | 2985280 Der Wille Zur Macht
Der Wille Zur Macht's picture

"Is it my goal to create a uniform distribution of american incomes? Nah nigga, you eva seen a ma'fucking Dirac Delta Function centered about 0?" - Benevolent Ben

Thu, 11/15/2012 - 15:54 | 2985282 Its_the_economy...
Its_the_economy_stupid's picture

"Someday this war gonna end"

Thu, 11/15/2012 - 16:01 | 2985304 Joe Davola
Joe Davola's picture

Don't leave out the part where the PBGC steps in and makes the pension fund whole with another round of taxpayer largesse.

Thu, 11/15/2012 - 16:14 | 2985385 Winston Churchill
Winston Churchill's picture

While you made a valid point about PBGC, add this to the mix.

It was mainly State pensions, and public sector unions that went totally overweight

on those mortgage bonds.Now that losses are getting crystalized on the

MBS,where do you think those shortfalls are going to come from ?

1)Rocking horse manure sales.

2)Property taxes

3)The PBGC.

I'm laying odds on two,those evil 'rich' homeowners don't need the PBGC's money.,

xcepting the union funds of course.


Thu, 11/15/2012 - 16:21 | 2985418 Joe Davola
Joe Davola's picture

The other part of that public sector union circle jerk was the politicians who negotiated outsized pension benefits in exchange for union votes/endorsements, then underfunded the pensions since they were locked into high yield safe MBS's.

Thu, 11/15/2012 - 16:07 | 2985323 falak pema
falak pema's picture

I find it amusing that ZH loves to indulge in Keynes-bashing. His name is now associated with every central planned move from wherever it comes and for whatever motive. 

I won't defend him here once more, as I have done before.

Just remind our ZH forum that the ZH motto : "On a long enough time line..." is inspired by a Keynes quote rendered famous : In the long run we are all dead.

Is there a Freudian aversion that ZH suffers from for its most inspired mentor, who bequeathed to ZH its motto?

Keynesian economists believe that in the short run, productive activity is .... In reality, government loans to commercial banks make up a tiny proportion of the overall .... For Keynes, the fall in income did most of the job by ending excessive saving and ... forces to do it in the long run, because, "in the long run, we are all dead.

Thu, 11/15/2012 - 16:23 | 2985429 Winston Churchill
Winston Churchill's picture

I sort of agree with you.

Unfortunately his name is used by progressives all the time as

justification for things he never advocated.The name is now tarred and feathered,

and is destined for the trashcan of historical infamy.

Just as well his timeline already ran out.

Thu, 11/15/2012 - 16:37 | 2985489 falak pema
falak pema's picture

in 1946! Way before the Fiat train of 1971 took off under Friedmanian flag! 

As everybody knows in a depression we are all Keynesian; except those who are prepared to live 1929 again as if it'll be a Sunday picinic. 2008 was worse that 1929 for one simple reason, they did not nationalise then. They let it fester, on both sides of the pond and they were hi-jacked and blackmailed by GS cabal, who have ruled the Oligarchy roost and made it ten times worse.

Nothing to do with Keynes, its crony capitalism on such a huge scale it would make Stalin blush.

Keynes's strategy as exemplified by the remark posted was for "short term stimulus"....not for QE infinity!

He himself said "thats cheating as we will all be dead if all you do is can kicking and hope for the best! ....precisely what BEN and Greenspan, Friedman's best disciples did for over twenty years! 

Thu, 11/15/2012 - 16:41 | 2985510 TruthInSunshine
TruthInSunshine's picture

Keynes wasn't nearly as batshit crazy as Krugman would have the masses believe.

In fact, Keynes would probably sue Krugman for slander/libel if he were alive today.


As just one link of evidence, check out what Keynes had to opine about the state's attempt to induce inflation (i.e. debase the currency), and contrast it with Paul "I Love Larry Hatheway & His Tolerance for 1000% Inflation" Krugman, PhD has to say.

Thu, 11/15/2012 - 19:04 | 2986056 Dr. Sandi
Dr. Sandi's picture

As King of Batshit Crazy, Krugman has the credentials to recognize his fellow travelers.

Thu, 11/15/2012 - 17:09 | 2985618 Liquid Courage
Liquid Courage's picture

No doubt you're correct that Keynes has been badly mis-interpreted, but I believe his greatest folly was to believe in the existence of a class (his class) of enlightened, angelic beings who could wield the power of elastic currency without being corrupted by that power. Lord Acton was right. Lord Keynes was the Sorcerer's Apprentice.

And I'm not sure what you mean by "the fall in income" doing the job. Didn't Keynes strongly advocate the idea that wages are "sticky" compared to other prices?

Thu, 11/15/2012 - 17:23 | 2985694 falak pema
falak pema's picture

To Keynes, excessive saving, i.e. saving beyond planned investment, was a serious problem, encouraging recession or even depression. Excessive saving results if investment falls, perhaps due to falling consumer demand, over-investment in earlier years, or pessimistic business expectations, and if saving does not immediately fall in step, the economy would decline....

I think this is the sequence that "the fall in income" refers to. A quick government stimulus according to him helped break this sequence and saving used as consumption/investment became a source of increasing GDP.

Fri, 11/16/2012 - 00:14 | 2986761 Seer
Seer's picture

Up arrow for both.

For noting that power corrupts.  And (in addition to providing some educational info, which is always welcomed), for noting that Keynes' real failing what to take into consideration that power corrupts: and, really, anyone who doesn't get this really ought not have any influence.

Thu, 11/15/2012 - 16:08 | 2985353 dolph9
dolph9's picture

America doesn't have a middle class.  Get over it.

America has oligarchs, and serfs who try to "get rich or die tryin"

And then of course they don't actually die, they are kept alive on food stamps, welfare, and subsidized prisons and hospitals.

Fri, 11/16/2012 - 00:08 | 2986746 Seer
Seer's picture


Good to see others avoid all the tired knee-jerk labels and just paint the picture...

Thu, 11/15/2012 - 16:10 | 2985358 Vince Clortho
Vince Clortho's picture

Why not just call it the Bolshevik party and ditch the pseudo-democratic label?


Thu, 11/15/2012 - 17:18 | 2985408 John Law Lives
John Law Lives's picture

Rumor has it that Obumble will soon press for sweeping mortgage debt forgiveness for buyers at the lower end of the spectrum (i.e. $150,000 mortgages and below).

More FUBAR socialism from Obumble...

Thu, 11/15/2012 - 16:26 | 2985437 Sands8oo
Sands8oo's picture

I am one of the struggling middle class.

I went to a military academy to avoid college loans.  I graduated in 2004 and did not buy a house like many of my classmates, insted buying gold, silver and mining stocks.

I left after my military obligation was over as a Lieutenant (O-3) after serving a VERY turbulent final two years combating a waste of funds issue by a superior officer (O-6) who turned the entire matter into a personal witch hunt into me as a matter of recourse. (She has since retired to another position with full-pension where she receives the same services from the outside consultants she funded during her time in the military for a fraction of the price in her civilian role)

I was fortunate to take a back-office position in early 2009 in a shipping brokerage house where I soon learned I was working as nothing more than a wage slave for a few lucky brokers that still had the long-standing relationships through which 90% of the industry business was funneled.  I was laid off, hired by my competitor in New York city where I made my way to the OTC derivative trading side on the strength of some relationships I made.  I recently left the brokerage side of the business altogether and was offered a client-facing role at a small OTC trading shop in New Hampshire for better pay (and a way better life than I had in NYC)

All along the way, I've rented and continued to save in anticipation of the bottom falling out of the artificially supported real estate market.

In the past year, although my physical gold and silver bullion has kept its value, my mining stocks collapsed in value and I began liquidating to raise cash to help pay expenses as I found my cost of living in Fairfield county CT was basically nearly as much as I made after taxes.

My family and I were lucky enough to buy a farm two years ago in CT and I spent weekends bailing hay this past summer and improving the property.  We now have a rainwater collecter, and solar-powered batterys that run all the electronics in the barn that we built on the property.

I have gotten slaughtered on my precious metals mining stocks and refuse to hold any of them.  If I want to speculate short-term in gold or silver I buy the double-levered ETFs for a short period.  Thats it.

Please be certain, when reading this article - I am one of the poor motherfuckers that was dragged into supporting this giant fucking mess.  I have acquired a large inventory of fire arms, ammunition, physical metals, and I am stocked with fuel  at the family's farm just waiting for this whole farce to collapse.  You can be 100% certain that when the whole thing falls apart, I will be there with said weapons ready to straight fucking shoot in the head any person who tells me I have a duty to help others in need.

I've done enough helping others  over the years - I made all the right decisions - most of which have not paid off in the least.  When this whole thing falls apart, I know who the people like me are and they will be welcomed... all others will be ruthlessly fucking murdered.


Thu, 11/15/2012 - 16:35 | 2985488 Joe Davola
Joe Davola's picture

Investing in mining stocks - Tyler got a bit testy with another poster on that very same subject just yesterday.

Thu, 11/15/2012 - 16:39 | 2985508 Sands8oo
Sands8oo's picture

I saw the Hugh Hendry reference and I couldnt agree more...

People were saying "I can't believe he'd suggest ETFs" - but let me tell you - you cannot have your entire portfolio in physical gold bars and coins - and you cant keep it in mining stocks either - best bet it to make an attempt to time markets with short term ETF purchases, take profits, and buy more physical and guns and farmland.

Mining stocks fucking suck - period.  They all suck - and everyone would do well to get rid of the fucking things.  I used to believe what John Embry and Peter Schiff said - now I say fuck those guys - own physical, speculate in ETFs, and keep waiting for this whole fucked up mess to work its way out.

Fri, 11/16/2012 - 00:05 | 2986737 Seer
Seer's picture

"I've done enough helping others  over the years - I made all the right decisions - most of which have not paid off in the least. "

A couple problems here that folks need to know about:

1) "Keeping score" steals time and energy;

2) You NEVER "help" someone with the expectation of a return, you do so because you WANT to do it: if you expect a "return" then one's mistake is to mis-categorize this as "helping" rather than what it really is- a business arrangement.

If you help others w/o expectations of a "return" (a business payback) then there's a pretty good chance that you'll encounter good karma should you need it: just don't expect it, otherwise you're possibly assisting yourself in a future failure.

Think about it, you're one of the very few people that has a farm and isn't despondent.  And, unlike me, you get to start this with a fresh back.

Be good to your neighbors.  I've only lived where I live for about 20 months and already I have one neighbor who has offered me the use of his backhoe; another neighbor has offered me the use of his log splitter; the funny thing is is that I haven't done anything for either of them other than being friendly (and they see me and my wife works our assess off, so they probably recognizes us as being trustworthy); I have, however, helped other neighbors (one I dropped doing some fence repairs and lept to help push his truck up the road, in the snow).  It's a hard life in the country, but it's a REAL life...

Thu, 11/15/2012 - 16:26 | 2985442 Downtoolong
Downtoolong's picture

And for any pensioner, like those in the Teachers Union of New Jersey, who think that because they had a contractual agreement which guaranteed and protected them from unilateral cancellation or changes by the state once they reached retirement status, think again. When push comes to shove, the government can do anything it wants to, regardless of contract law or any law for that matter. Didn’t you all get the memo? Employment and retirement contracts now only apply to top tier employees at AIG, who were at the center of the mortgage crisis.

Thu, 11/15/2012 - 16:30 | 2985454 slackrabbit
slackrabbit's picture


Ok, most of you ZH’s have hear ‘slacks rant’ before and so are bored shitless

But here is goes one more time

I said exactly this in 2004 in one of my last MBA classes in 2004.

I said the property market was going to nuke world wide (and I was in New Zealand where this joke  is still going up); and that when it popped it was going to get ugly,

Naturally I was laughed at. 

I said, the next stage will be mysterious ‘arson attacks’ on foreclosed building  to reduce housing supply and to claim insurance by the banks (which was done in the 1920-30’s…and old Mob tactic).

Guess who will claim that insurance, who the insurance companies will be, who Won’t be investigating amd who will be shorting them?

Yea a perfect short, an insurance company bailout and a  ‘conspiracy theory’....where have we seen this before!!!



Thu, 11/15/2012 - 16:36 | 2985498 TruthInSunshine
TruthInSunshine's picture

Larry Silverstein was able to receive payment 4x over (I think 4x, but I need to verify before absolutely committing) from his multiple insurance policies on WTC in the wake of 9/11.

Insurance policies are contracts, so it doesn't matter if one policy has already fully indemnified/made whole a policy holder, and additional policies must also pay out for casualty losses in accordance with their terms.

Of course, just try and get that same coverage on any property today, since acts of terrorism, Sandy-type losses, etc. have all but been eliminated even if one is willing to pay a massive premium.

Wait, what did you say? I was rambling. Sorry.

Thu, 11/15/2012 - 18:15 | 2985876 slackrabbit
slackrabbit's picture

Yea exactly,.

But remember, Ben said 'he was very angry, when he had to bailout AIG'. Yea right!

The  law applies, but only to little people...

Thu, 11/15/2012 - 19:07 | 2986064 Dr. Sandi
Dr. Sandi's picture

Ben would have been a little more 'angry' if it was coming from his personal savings account.

Thu, 11/15/2012 - 16:51 | 2985543 adr
adr's picture

I bought a 1400 sq ft home built in 1929 for $130k in NE Ohio. I didn't go nuts and I didn't overspend. I'd like to refinance because it will save me about $175 a month, but I can't. With so many foreclosure sales on the books, the appraisers now say my house is worth $120k.

Thu, 11/15/2012 - 17:03 | 2985598 Stuck on Zero
Stuck on Zero's picture

You're lucky.  In California that house would have sold for $759K and would now be worth $345K.


Thu, 11/15/2012 - 18:19 | 2985894 slackrabbit
slackrabbit's picture

"1929 for $130k  in NE Ohio."


Holy Cow, What'd your buy brother, the Taj Mahal? ;-)

Thu, 11/15/2012 - 18:18 | 2985895 Bicycle Repairman
Bicycle Repairman's picture

This is an old strategy that the 1% has used many times before.  Buy off the peasants with trinkets and squeeze the middle class.  In the USA it was last used in the 1970s.

Ask yourself this:  who funded and promoted Karl Marx?  Who funded and promoted Hitler?  What did their strategies have in common?  The squeeze.


Thu, 11/15/2012 - 19:42 | 2986157 Seer
Seer's picture

"ever since then it has been the government's turn to rescue the country's lower and lower-middle classes (the "47%"), who, with no gun to their heads, decided to splurge during the height of the housing bubble (insurmountable mortgage payments and $0 down notwithstanding) and buy that aspirational McMansion that would make them so much more appealing in the eyes of the next door neighbor (who too could never afford their house in the first place)."

I call BS.  Yeah, sure, there are some abuser buyers out there, but let's be clear exactly who it is that actually CONTROLS/DICTATES whether these things can occur- THE BANKS!  NO ONE PUT A GUN TO THE HEADS OF THE BANKSTERS AND TOLD THEM THEY HAD TO MAKE A LOAN!

As always, the poor and mostly defenseless are made the scapegoats.  Four years on and the real culprits not only have padded their pockets, but they've also been given a stay-out-of-jail-card for free.

Thu, 11/15/2012 - 20:49 | 2986330 disabledvet
disabledvet's picture

"moral hazard" succinctly presented as well. "so who won the election then"? clearly the people still being bailed out. hence "the importance of the fiscal cliff." one day son, "this bailout is gonna end."

Do NOT follow this link or you will be banned from the site!