‘What Type Of Leadership Are We Looking For?’
A few readers suggested a topic on what we should be expecting from the various governments/institutions in regard to the housing bubble. “I wouldn’t want this to turn into a ‘political’ discussion. Without getting into party stances, what I’m wondering what type of leadership are we looking for as this downturn plays itself out?”
“IE: Full disclosure? A call to conservation? Without bashing those in office, what would you like to see our leaders do?”
One replied, “Our leaders = misnomer.”
And another said, “I would like to see the dollar return to being on some type of standard, such as gold or silver, instead of it leaving it’s exact value up to people’s imaginations. With some of the prices that people are paying for homes, especially when you tack on what they’ll pay in interest, people here don’t seem to think their money is really valuable at all.”
One reader looked at the tax angle, “Now that Fall elections are looming, I wish we could have a thread that skewers all the politicians who have failed either to bank all of the windfall property taxes the bubble generated, or to reduce the millage (rate) to compensate.”
“The electorate is going to be really pissed when, in the middle of all their other coming financial woes, local governments raise property tax rates to support the bloated bureaucracies they bought with the falsely-based revenues of the housing bubble.”
“I’m sure that somewhere, some local governments acted responsibly, but I don’t know where they are. For the rest, throw the bums out.”
What it really boils down to is that the dollar is a debt based currency. It’s not even really fiat currency. A dollar is born and conceived in sin (debt). A dollar does not come into existance except when it is borrowed from the federal reserve or created out of thin air by way of fractional reserve banking. With a system like we have, it’s impossible to pay off all creditors with interest unless we all were to take out new loans.
An incredible amount of credit was created by the federal reserve and the bank of japan and most of that credit found its way into the mortgage market. I’d be shocked if we didn’t have a housing bubble.
As for leadership, there is none. Both parties are corrupt to the core and no one cares since they can drive their H2 with spinners and park it next to their boat at their McMansion filled with plasma TVs all with borrowed money.
Do you think they’re gonna start caring when their ARM resets, they can’t sell their McMansion because they’re underwater by well over their yearly income, the H2 gets reposessed, and they have to sell the plasma TV for gas money?
They’ll start caring and demand that their “leaders” do something about it which they will. They’ll bail out “homeowners” at the expense of creditors which will kill the dollar which will make it impossible for us to import oil. The politicians who always are wishing for us to stop importing oil will get their wish.
Just bring back the “Whip Inflation Now” lapel pins and bumper stickers.
That’s it, I’m going to stock up on cardigan sweaters for next winter. It’s back to Jimmy Carter and the days of malaise. That was real leadership. Not.
Now where’s my shiny disco ball when I need it?
As for leadership, I’ve said it before. Our current leadership (a generalization obviously…not all) are not public servants. They are not in the job for the best interests of the country. They appear to be in it to get their piece of the pie before it’s gone. It doesn’t matter what party, it appears to be the same. There is one way it’ll change, IMO. When we have public servants who are on a pay system that ensures they MUST pass legislation to survive on modest pay after their time in office, we’ll have a dramatic shift. The military is no better currently. How many military folks in the higher ranks are afraid to step on toes due to their future earning prospects once they retire? When a politician runs stating he will take the pay of an O-6 (including the pay, benefits, retirement), won’t accept another job after office, things will change. Until it happens (if it ever does), the same con will go on until it can’t any longer. If that sounds a little too altruistic, then maybe you see my point.
Why would anyone with the ability to perform competently as a legislator want to run for office with those constraints?
If you pay peanuts, you get monkeys.
A person with the ability to do a good job as a national legislator or bureaucrat will be able to make $200k+ in the private sector (legitimately — not as payoff for favors done while in office).
If you want good, smart people to work for you, you need to pay them well and make sure it is in their interest to put your interests first. One key to that is making sure that the job they have is sufficiently attractive that they won’t want to jeopardize it by accepting favors or bribes from others. I say pay’em very well, watch’em like hawks, and fire them at the slightest hint of impropriety — pay them so well they’ll not want to take even the slightest chance of being fired.
what, like Ken Lay? Yah, that works.
Never mind. It’s not just the USA that is rotten to the core. The whole world is. The real power rest in the hands of bankers. These people are the real terrorists and the real criminals. Their incompetence, their corruption are enourmous. Politicians are mere puppets. In the middle ages kings would sometimes burn a couple of bankers like witches. We should start with Alan Greenspan. Take as a joke but I truly hate these people. They are the sole source of the chaos and these bubbles.
When you say both parties are corrupt (and you are not an active participant in a third party) you are saying there is no solution. The fact is one party is in power and they have been stunningly irresponsible. If you won’t hold them responsible, then you are responsible too.
That goes for everything from horrendous economic, tax, foreign policy, environmental and legal decisions.
Hold people responsible or don’t, just stop pretending that since the people you want to like have made a mess of things, that it’s really the system’s fault.
http://www.larouchepub.com/eiw/public/2006/2006_10-19/2006-16/pdf/04-23_616.pdf
PDF article: The Great Leesburg Bust of 2006 shows that “fringe” candidate Lyndon LaRouche, despite his “political extremist and conspiracy theorist” moniker and the cult-like zeal of his minions, at least has a solid grasp of the economics behind the housing bubble. Warning: PDF file, and LONG!
Excellent! What a contrast to the dim bulb currently occupying the White House, or the RE touts and shills in the financial media. My favorite quotes were:
“Some silly people will say I am ‘threatening to talk the economy into a recession.’ Denying the existence of a crocodile already moving about in the children’s bedroom will not make the crocodile go away.”
Sounds like the FBs and RE hacks who blame negative media coverage for lowing their home values.
“The state of Alan Greenspan’s cancerously layered US financial bubble in mortage-backed securities represents a monster which could suddenly bring down the US economy, and could as well set into motion a world-wide, hyperinflationary collapse of the present monetary-financial system outside the USA.”
LaRouche is a Populist posing as a Libertarian, a most dangerous kind of snake. He speaks well of problems, but close examination of his proposed solutions reveals a lot of strong arm tactics and weak understanding of markets.
Does Larouche still say that the Queen of England is a drug dealer?
Sadly so is our Govt too. When we occupied Afganistan we looked hi and low for Ben Laden… Found lots of Herion fields and done nothing. Dont you think a flame thrower would have put a dent in narco-trafficing.
Still there today and no one wants to put a tourch to the popy field.
We truly have lost the war on drugs …
You really think that these crooks in government and banking or business are serious. They are part of the drug business. In Italy 15% of all the businesses are controlled by the mafia! It’s just an estimate. It’s the same thing in the USA. The whole thing is a sham, a joke. The “war on drugs” is big fat lie.
In Afghanistan, when ‘out of work’ muslim poppy growers get bored they take lessons to fly airliners.
It’s always the lesser of two evils that must be chosen, there’s almost never an ideal choice available.
Mind you is right about the Queen. The big Hong Kong Trading House like Hutchison Whampoa, Jardine Mattheson, and the Li Ka Tching family had all the backings of the British monarchy. Queen Victoria and their bunch of anglos hypocrits were the columbians of the 19th century. Today the Brits with their pirates islands in the Carribean, do only laundering. Yes the source of the fortune of the Windsor crooks, anglo-saxon WASP mafia is indeed drugs.
Does Larouche still say that the Queen of England is a drug dealer?
The “LaRouche said the Queen of England is a drug dealer” claim is a typical distortion for the benefit of smug little anal orifices who would rather parrot conventional wisdom than dig a little deeper and draw their own conclusions. What LaRouche actually did was to point out the role of the British East India Tea Company — which was very closely tied to the royal family — and their ignoble role in the drug trade, circa 19th Century. Ever hear of the Boxer Rebellion or the Opium War? The British basically forced opium on the Chinese at gunpoint, as a hugely lucrative venture, and the Crown was deeply witting of, and involved in, the opium trade. A lot of fine upstanding British financial institutions with links to the Royal Family had their roots in the drug trade and the slave trade, among other unsavory activities. So, before you repeat trite mischaracterizations of what someone else actually said, have the intellectual rigor to examine what they said in its actual context.
Remember, “Who the Gods would destroy, they must first declare mad.”
True. I’m a registered Libertarian. The party has distanced itself as much as possible from Mr. LaRouche. Whatever he says is worth whatever credence you give it, but he does not represent libertarian party thought except coincidentally.
I don’t care if LL is right about the bubble. He’s still a kooky freakshow.
Scary times when LaRouche is considered a voice of reason.
Did you actually read what LaRouche had to say, or are you merely parroting what the political establishment and their media manipulators want you to think on the subject?
is that a trick question?
The article by Lyndon H. LaRouche, Jr. on the bust is actually a good read. I didn’t read all of it but it seemed unbiased and fair.
Thanks for posting NoVa RE Supernova
One replied, “Our leaders = misnomer.
Sorry to say, but I work in government. I got into the building and development business because I thought I could make a difference. I was wrong. The so-called leaders in government turned out to be self-serving political hand puppets, for the most part. Don’t get me wrong, there are plenty of hard working government workers (I’m working on Saturday to get a large project out), but for the most part my leaders are scared to do the right thing. In my organization, those leaders will do whatever it takes to keep the bubble inflated. Bubbles are great for jobs, tax revenue, and makes them look really good. Declining revenue + high unemployment = BAD POLITICIAN. This applies from the top level of government right down to the local level. Done ranting= back to work.
I want our leaders to do NOTHING AT ALL!
It was a free market on the way up, let it be a free market on the way down.
No bailouts, no debt forgiveness, no subsidies, no buying up inventory for “affordable” housing!
Agree 100%. But the pressure to help the “American Dream” will be extreme. It will also be misplaced. While a few recent buyers will suffer big, MOST houseowners will only see massive paper gains disappear, no more. Only the foolish flippers will be hurt.
The best thing for housing affordability is to let prices crash. And the most “fair” thing is to NOT tax responsible people who waited on the sideline to help the irresponsible.
I know a fair amount of people who did not buy or sell in the bubble, but cashed in with HELOC’s. They can get hurt too, if they planned on selling in the future since they may be upside down. The equity lending to existing homeowners has been huge the last 5 years.
How is subsidizing FreddieMac consistent with a free market? Keeping interest rates right near zero seems a little bit too free to me. This free market stuff is grand thinking, but realistically we have to understand that we are not there yet.
Well then let me amend my table-pounding thusly: no more government interference on the way down than there was on the way up.
I agree cabin, let the leaders do nothing - that is the best solution. Oh, I’m sure there will be some lame bailout attempt and much hand-wringing, but this economy (and currency) is so highly leveraged, fragile, and fraught with systemic risk as it is, I doubt there could be any meaningful bailout anyway. Not without complete hyperinflation and collapse of the greenback, and what kind of a bailout would that be? Talk about the treatment killing the patient!
There is no such thing as a free market.
Cabinbound — great way to sum it up.
GREAT!!! Live by the sord, die by the sord!!!
Things I’d like to see……
To begin with, regulation imposed on the RE industry that is similar to that which is imposed on securities dealers. We need to put an end to all the misrepresentation, false advertising, decieving sales tactics, over compensation of agents, lack of disclosure, and I could go on and on. It’s riduculous that, with the largest investment that most people will make in their lifetime, this industry has become laughable. (And yes, I would add more regulation to my industry as well)
In addition, I would like to see the interest deduction for second homes, rental properties, and second mortgages used for MEW disappear. All this has done is encourage reckless behavior on the part of the consumer. It would be nice to find a way to only allow the deduction on the original purchase loan, that way any subsequent cash-out refi over the original amount would not be allowed into this deuction. I know this will never happen, though, because the powers that be were encouraging the type of reckless behavior we’ve witnessed to keep this debt based economy alive.
I could go on, and probably will later, but this’ll do for now.
Good solid recommendations, please don’t discount the value of doing the right things. IMO, there will be a public outcry about the appraisal mess, if nothing else.
People continue to cry for more government action to fix the mess that they created in the first place. Regulations, regulations, and more regulations. The best human regulator of all is fear. It is the most powerful emotion. The many asset bubble problems in the world right now can be summed up as being due to two things:
1) Loose monetary policy/fiat currencies.
2) Absence of fear due to the implicit Greenspan put.
People who are fearful, really fearful, of losing money do not engage in such risky behavior. Or, at least, they only do it once in their lifetimes. Let the suckers who deserve it take a very hard fall … we’ll all be better off for it in the long run. Of course, this will never happen. But I can dream, can’t I?
What kind of regulation would you propose for the lending industry?
(1) Higher down payment requirements on non-owner occupied dwellings and investments purchases .
(2) Requirements that borrowers have to qualify on the adjusted up arm rate rather than the teaser rates .
(3) No 100 % loans .
(4) Requirement of PMI on Piggyback loans 80/10/10 or 80/20 or 80/15/5.
(5) Double checks on Appraisals /credit /income /
(6) Have to put 25% or more down on no qualify loans /stated income loans .
(7) Do not allow more than 10% neg per 5 year period for IO and ARM loans .
(8) Require higher down payments for people with credit problems .
(9) Require higher down payments in areas that the appreciation has gone up by speculation demand by more than say 15% in one year ( unless the place was remodled to justify price increase etc. )
(10) Requirement for a second appraisal on any home that has loan request in less than 15 months of a prior purchase or refiance .
(11) Requirement that a report must be filed if mortgage company changes appraisal company or appraiser .
(12) Requirements for a fraud check on any loan application with specific tests .
(13) Higher down payment requirements for applications that show a credit history of over use of credit cards .
(14) Requirement that limits one lender from doing more than 20% of the loans in any given development .
(15) More disclosure requirements on Adjustable loans IO loans with specific examples of payment adjustment potentials and the showing of neg . amort. potentials ,and showing of margins and spreads,in easy to read language ,that has to be signed by borrower .
(16) Reduction of appraisals pursuant to incentives and kickbacks . Seller can give incentives of paying one time closing costs, can buy down loans , pay for repairs etc , otherwise incentives must be reflected in appraisal or disclosed to loan underwriting .
Really, I could go on and on regarding specific underwriting needs which would be specific to different areas ,but in general this is a start . Based on the current underwriting people would think the above requirements are harsh .
After the market corrects maybe Lenders could ease up on some of the above ,but in a declining market the above is necessary .
That is the problem, though. We used to have many of these rules, but then eased up. What would be most useful is a solid set of rules that can be put in place and left there.
Mole man , I would keep the tighter policy also ,but fat chance that will happen . If the market get stable you can let up a little on owner occupied good income /good credit buyers, (like some of the blogers ).
Great! Just great. At 43, I am still renting. I’d like to own,but a 45K per anum job in California(Bakersfield) just doesn’t go as far as it used to. Rent and the usual bills eat up over 95% of my income. Saving a 10% down payment is a fantasy. 20% is going to be impossible, no matter how I work the numbers. I have avoided the suicide loans, knowing that no matter what happened, I’d wind up losing. But, How in this game am I gonna win?
I am going to school to get a degree,but those jobs are being off-shored. Besides, seems there are gonna be lots of un-employed RE agents looking at the same jobs, and they already have the degree I am working so hard to get. Even counting on my wife going back to work,I see no more than 65K-70K being the maximum we can put together,per year.And that has to wait until our son graduates from middle school.
So, I ask again. What does a 45K worker/renter in California do? What should I plan to do? I made poor choices when I got out of the Air Force. That affects now, but I cannot go back.
If you cannot save,and cannot buy, What then?
Thunder Eater — I’m not saying this with any malice or sarcasm, but personally, if you cannot tolerate your present lifestyle until you have your degree and your child has finished middle school, maybe you should consider moving. If you make 45K and your wife can eventually make 25K and you have a child in school and you are taking college courses, there is no time or money for anything else at the moment, including any noticeable savings for a down payment. From what I have read in just this blog, California in general is not a place where you will be able to fulfill your dreams until, at least, your child is out of the nest and you have graduated and hopefully improved your salary a lot.
So, why not look at other parts of the country with super-low cost of living? Then find out how many college credits you’d have to give up to transfer. If those seem workable, check out the employment picture in the target area. Keep in mind that in tiny towns, it can be much harder to find a good rental home than in a big city, simply because rentals are not done much. And in a college town, labor is so cheap that both of you could be very hard-pressed to make more than where you are.
If it were me, I’d hang tight, make sure my college major is one that likely will help me get a job in the U.S. (and change it if necessary), and get Mom to spend all the time needed with junior to ensure good grades in school. The minor good news is that many of us think rental prices will come down out there before long, as more and more flippers are hung out to dry — that could influence your landlord to lower your rent.
Chip
Thanks for the advice. I see no malice in your words. I have just gotten on with a major oilfield service co,and I plan to stay with them. The bennies are just too great to go looking for another job.
You have made many points I have thought of myself. After 3-5 years with this co,I have a decent chance to re-locate within CONUS. I’ll keep going to school.
As an Aside,our landlord is an old man(90+) who has been great to us. So far(figers crossed) he has not had to raise the rent in 3 years.
I think that you have good advice there. High cost-of-living places are tough all around unless you are in the very wealthy category or if you have a lot of savings. As difficult as your situation is, would you like the situation of a couple that has twice the income but debt of $800K?
I have some friends that live in Texas and they weren’t making very much but could afford what they needed. The wife got a job with Apache (Oil Services Firm that treats their employees very well). It appears to me that Oil Services is going to be a good area for some time given that the pipeline for new workers has been broken for quite a while and you have a lot of workers near retirement age.
Get rid of the mortgage interest deduction. We don’t need added incentives to create credit bubbles or incentives to buy ever more expensive homes for tax reasons.
How about open auctions for bidding…
Do you still believe a realtor when they will tell you there are other bids..maybe real or fake…They will ask can you go higher on your bid. Some here may be surprised to find that realtor make up bids to drive the price up. Then you have unethical appresials backing the final price.
We got to get rid of this blind bidding…
“It would be nice to find a way to only allow the deduction on the original purchase loan, that way any subsequent cash-out refi over the original amount would not be allowed into this deuction.”
How about, any refi for greater than the original purchase amount is an automatic revaluation for property tax purposes and an automatic change in cost basis for which the homeowner must pay capital gains.
I think that would kill cash-ouot refis pretty quick.
Didn’t the IRS only allow improvements to the property to be added to the interest write off if you take out a equity loan?
Did that rule change were now you can take the write off regardless of what you spend the money on ?
I’m out of touch because I never pull money from my property .
AMEN,nvmtgbrkr,btw, we made a 30 yr fixed in our office last week,40% down.first one this year,9 loan officers in the office.
30 yr fixed: On the endangered list.
15 yr fixed: Extinct
How about requiring that appraisals be based upon a fixed multiple of the rental value of the property?
There was some talk in Arizona about holding on to some of the housing windfall, but it passed as the legislature got excited about spending it.
When the PBS series on the housing bubble ran last year, someone mentioned that we ’should start thinking about retraining all those consrtuction workers.’ Not that the state could manage such a thing, but at some level there should be a discussion on how these thousands of workers are all going to make a living doing something besides building/selling each other houses.
I for one would like to see road repair and alot of new roads were possible .
I’d imagine that they’d just go back home to Mexico…
1) I too think that the tax exemption for second homes needs to go. My BIL just bought a big bus motor home so he could deduct it on taxes. Of course it was financed by taking out a HELOC.(he also has boat, Harley and a new Prius to go with four other cars)
2) Educate public on home mortgage tax deduction. Spending $4 to deduct $1 of a declining asset doesn’t work for most.
3)Over a certain lending limit say 35% (mortgage payment/gross monthly income) hold the mortgage company (not dischargeable by BK) liable should the there be a default on the property.
BTW: on my morning walk there were 5 new houses that went up for sale on the same short street. A sixth has been on the market since Dec. and is now on its third RE (now Remax). They had reduced the price several times, then relisted it higher than the first time. I didn’t check the price today because the sprinkler system flooded the area of the box.
1) I too think that the tax exemption for second homes needs to go.
I’d like to see the mortgage deduction disappear on ALL housing. That will help lower housing prices. It will also get rid of a highly regressive tax break. House owners are far wealthier than renters. No need to help out this bunch.
David Learah?
Follow the leaders?…
I’m not party bashing (I have no affiliation anyway). Just supplying a link. It may have already been posted - sorry if so. http://tinyurl.com/jhpws
Growing up my parents were Democrats…a product of a Dem area…as time went on, they felt the party abandoned their family values and working middle class base…they turned Republican, feeling the GOP would better support traditional family values and give some relief to the working middle class. The truth is, we need a 3rd party to save this nation, before the Dems and Reps drive us into 3rd world status in 50yrs. I studied history in college, and I want a guy like the ones who signed the Bill of Rights or Constitution to be my leader. The government is out of control and does nothing to serve the people anymore. It only feed off the people and serves itself. That is why those guys 200yrs ago talked about limited goverment, and local controls and especially a small federal goverment. Todays monster was inseminated starting in 1905 with the income tax and grew right throught the LBJ bs of the 60s. Now look at it. We all need to stop bickering about left and right and move towards what America was meant to be. I feel there are so many liberals on the blog scene who only bash Bush, and don’t realize that the Liberals they worship are also destroying what matters to them. I am so glad to see primaries going on that are challenging incumbents, and if more incumbents don’t get voted out, we will see the rise of a 3rd party that will take 20-40% of control in the next 20years. The boiling point will be 2008-09, and how the elections and economy are doing then. Our nation is on the brink of social and economic breakdown, but he latte sipping, NYTimes reading crowd is just as oblivious, as the Dually Driving meatheads in the heartland. I want my country back, the one where we were united as americans, and family mattered, life was about keeping up with your son in the backyard touch football, and not about keeping up with the yuppie Jones’s
Great comment. I totally agree. I watch Lou Dobbs and it’s so nice to see someone concerned for the middle class.
Yeah for the middle class!!!!
And then you vote for somebody like Bush that gives lower taxes to higher incomes and fundementally trashes the middle class! Good work America! And the morons in Canada, do the same thing. That’s the problem with Conservatives. They hate the middle class. Right or Left leaning anyways, they always hate the middle class. I think the middle class is fundementally stupid. Look at the type of leardership these morons vote for. Bush is good example. Adios to the middle class. Adios to me. Bubbles destroy first the middle class.
Phuck - If you “…want a guy like the ones who signed the Bill of Rights or Constitution to be my leader…”, then your only choices at the national level, generally, are the Libertarian Party and the Constitution Party. Both work for minimal government — basically a goal of rolling back layer upon lay upon layer of government that has been applied like coats of paint over the years. Downside is that by their nature, members of these parties dislike politics and it is difficult to find people to run for office, since it is truly a civic duty to them, as in the old, old days. As a practical matter, both try to affect major-party platforms by trotting out the truth at inconvenient times and to support the small number of party members who do run.
There are outstanding exceptions, such as Dr. Ron Paul of Texas — one of my contemporary heroes — who ran as a Republican but really is libertarian — his writings appear regularly on Lew Rockwell’s Libertarian/Auctrian Economics Website.
An example of “outing” main-party politicians: Here in Florida I rail against both Tom Gallagher (R) and Bill Nelson (D) for their asinine proposals to socialize property insurance in this country. I will stand on street corners to do so. They want you, outside of Florida, to pay, at the point of a gun, to offset losses from hurricanes in Florida. That is a state problem, not your problem. And please don’t come to me for money for flooding in NH or earthquake rebuilding in California, either. If you can’t afford the commercial insurance to protect yourself satisfactorily from such a loss, then by definition you do not belong there.
Phuck off. You wanna see the problem in this country look in the mirror. You bought into the free lunch republicanism….everybody will pay but me, but I will still get all the neat stuff I am used to.
Now the bill is about to come due and you want to blame the NYT…You ignorant piece of $hit.
True.
Look in the mirror.
But…..
There is always a free lunch.
Steal from the neighbour or the taxpayer.
Find an ennemy and make a war.
Our only hope is campaign finance reform. Only millionaires can become Governors, Senators, Presidents, etc. The average person who would represent the interests of the average Joe has not a chance in hell because he/she cannot compete financially. Elections are bought and sold in this country plain and simple. I just find it hard to believe that we don’t hear more public outcry regarding big business lining the governments pockets and vice versa. How is it that in the year 2006 we can have a President and VP engaging in blatant war profiteering with literally zero accountability?? This is outrageous. Forget relocating to a different zip code, I am thinking a different country…
Which one is better?
I’ll let you know if I find something… the world unfortunately seems to follow our lead no matter how bad our habits… Maybe i’ll find a nice Canadian woman and get married and enjoy dual citizenship and other perks like healthcare for a change since the appendix burst last year nearly bankrupted me…
How is it that a democratic country containing so many smart folks with great ideas is ruled by apparent morons?
I had been worrying about the Diebold voting machines signaling the end of democracy….but I’m starting to think our democracy has been hacked for several decades.
I’m becoming convinced that change is going to require more than voting.
Publicly fund for federal candidates.
Public funding for federal candidates.
How is it that a democratic country containing so many smart folks with great ideas is ruled by apparent morons?
Long periods of good times breed apathy.
Well Russia too, is filled with “intelligent” people and look how the place was runned. Start by being YOURSELF a leader, and stop being sheep programmed by these SOB in the media. This is what is slowly dying in the US: the spirit of independance and critical judgement.
And what is the biggest threat? Quasi fascist autralian bandit like Rupert Murdoch and FOX TV makes me hate the USA. When I happen to look at this piece of junk, I start to despise the US and I know we are all in big danger.
Leadership starts with YOU!
* Determine all members of congress taking money from GSEs and running interference against OFHEO’s attempt to regulate the criminals at the GSEs.
* Require all loan documents to contain payment scenario examples based on possible interest rates (I hear they have the things called computers that are good at computing numbers).
* Abolish the Federal Reserve
* Regulation of real estate shills
With regard to the comment that property taxes will be increased by local governments due to the “increased buereaucracy resulting from the housing bubble”, in California property tax revenues should have increased significantly during the bubble years. The infamous Prop 13 provides that property taxes are capped at 1% per year of assessed value. The assessed value only changes when the property is sold. So, given that people have been buying homes that were assessed at a fraction of their previous value, this represents a huge boon to the State.
Whether or not they make good use of this money is another matter entirely.
Peter B — “Whether or not they make good use of this [property tax] money is another matter entirely.”
I guar-an-tee you that they did not. The only good use, above the small amount to cover inflation, of any increase in property tax revenue generated by the sale of an existing home is the retirement of the debt of the taxing authority or saving it for the future. Think of politicians as ticks — there’s your answer.
The people don’t want bad news. They elect people that give them what they want. The politicians grab what they can for themselves while they are in there. They keep postponing the bad news and the day of reckoning. Well, they’ve done a pretty good job so far at postponing the misery but the bad news is busting at the seams to get out. All this wasted time building crappy houses and crappy cars and crappy debt is going to bite us all in the butt very soon now. I just love all the sheeple who mock the bad news prognosticators. Just a sign of the times. Nothing to see here, move along.
Local woman was trying to put together a “good news” only show. It didn’t run very long, although a lot of people agreed with her it was needed. Interesting thing was, she isn’t American but Swedish.
Most soccer moms I interact with glaze over at any attempt I make to discuss economy or market forces. Some I think understand it but are uncomfortable talking about such things…..not in front of the children, you know. Must permeate the “Barney (the Dinosaur) ” world we’ve convinced them they live in.
“Leaders” should do absolutely nothing. It is not government’s place to interfere or to try and “improve” the economy.
Chicote — I’ll second that.
I’m an economic history buff and have done a lot of reading about what has preceeded in the US over the last 200 years.
It’s popular to bash the Federal Reserve, and I agree they have done some really stupid things in the name of the politicians currently in power (of both parties over the years).
However, if you read history, you will find that before the Fed the country had huge economic swings with devastating depressions, especially in the late 1800s and first decade of the 1900s. I’m not sure we’d want to return to that. The Fed was created to smooth things out, protect the currency (yeah, that’s a good one!), and aid in economic recoveries.
As to the gold standard. Yes, it prevents the government from ‘printing money’, but it also keeps the economy from growing as rapidly as it can and makes economic recovery from downturns much more difficult. As always, things are much more complex than they seem at first glance. There’s a good reason for the current system, it just isn’t being used wisely.
What is needed is responsible behavior by those in power…and as we have seen, that frequently doesn’t happen.
Ken,
I disagree with things being more complex. It was all created by humans. How complex can it be? More complex than building a rocket, the human brain, the gas turbine engine? It is finance after all. When it’s honest, it is a piece of cake. When there is dishonesty, it becomes very difficult to “smooth” things over. The booms and busts during the gold standard were due to the same thing now. Banks lending more money than they had gold to back it up. When people come looking for the gold and there wasn’t any, it just became complex. How do you explain that one with honesty? We are doing it again, go figure. This time, there really isn’t anything in the till. Not even paper money backing paper money. In hindsight, I guess you’re right. This one is going to be very “complex”. At least the folks given the keys are going to have to make it seem complex. If you can’t convince them….confuse them.
Ken — “As to the gold standard. Yes, it prevents the government from ‘printing money’, but it also keeps the economy from growing as rapidly as it can…”
By this, you are saying that (never-ending) fast-as-possible growth is always good. But you don’t explain why.
Just the EXISTENCE of the federal reserve means that there is no free market. I mean, how can you have a free market when the commodity itself that is used for exchange isn’t determined by the free market?
I’m still unconvinced that the fed can control the money supply. Before I write anything else, however, I’d like to preface this by saying that almost everything I know about economics and the history of economics I learned from reading this blog and things people have linked to from this blog, so I welcome some opposing views. I would like to read a really good argument for central banking and fiat currency. But, back to the topic…
As I understand it, central banking is based on the idea that the value of money can be set by controlling the supply of money and the interest rate at which it has been lent out. This actually seems to work out okay for the most part, if those in charge of the central bank have some self control.
However, part of the weakness of this system is that the actual value of money becomes too complicated for anyone to understand. When a currency is created, the issuer needs to fix its value against something that people believe has a real value, such as an existing currency or gold. I don’t believe that any currency can be fiat straight out of the gate, it needs to wait until prices for things have been set with it. Now instead of determining value based on gold I can say my $5 can buy a little less than 2 gallons of gas, or a combo at Wendy’s.
The problem here is that determining the value of money is really complicated because that $5 can represent any number of products, all of which can increase or decrease in value independently for any number of reasons. This of course leaves the doors open for people to play all sorts of games, including the CPI and wealth redistribution in the form of inflation.
I think that after having a fiat currency for a while, people slowly forget what the actual value of their money is, resulting in such economic inefficiencies as speculation and paying people to spin signs. I think of currency as a battery that stores work, and gold backed currency seems to hold its charge better.
The FED is money supply. They control it with 3 methods: 1) Interest rate they charge to member FED banks (the discount window), and thus very short term loan rates, 2) Open Market operations - basically buy and sell US debt, and 3) Reserve Requirements.
Of the 3, Reserve Requirements is what really controls the money supply. If the reserve requirement is 10%, each time a bank gets $100, it can lend out $90. When that $90 ends up in another bank, they can lend out $81. And so on, ie the fractional reserve systems. In the current environment, the reserve requirements are essentially zero, which means (more or less) infinite credit is extended. Thus a credit bubble, ie stock market, housing, commodity bubbles, etc.
The Open Market operations are the second most effective means. Buy govt bonds (i.e. drive the price up) and the interest rates will go down. Sell bonds, and the interest rates will go up. I have no idea how much the Fed manipulates the bond market, but I suspect it’s more than people think. For example, if newly issued US govt debt is not bought by investors, foreign or domestic, for a favorable interest rate, does the Fed “buy” the bonds by printing up the money, handing it to the US gov, and then hold the bonds?
At least with a gold based system and a reasonable reserve requirement, the fractional reserve system can’t get too far out of hand, like it is now.
I think there should be a major change in the lending laws. There should only be non-recourse loans. Let the lenders make the loan with the house as security and if the borrower does not pay they get the house and thats all. I think this would make them a little more responsible in how they make loans and what LTV they will do. If the house ain’t worth it, don’t loan the money.
Well, one way ro look at it is why change things? If the housing market does crash (I think it will), how does that affect most people? I’d bet maybe 75% of home owners aren’t going to move or sell. Most of them can make their mortgage payments, didn’t someone post that 25% of owners don’t even have a mortgage? As far as credit cards go, although the average balance is quite high I’ve read that maybe 1/3rd don’t use them, maybe another 1/3rd pay off the balances each month, leaving the remainder in deep trouble.
So maybe 25% of the population financially goes down the tube. So what? The remaining 75% will just look the other way. Congress hasn’t cast an eye this way in the past 20 years, why would anyone expect them to do differently next year?
Until there is a complete, absolutely total collapse will people start looking around. But even then they’ll probably still vote for good ol Bob next time around. You know, like the no bubble here kind of thing. Those other politicians are crooks, but Bob why he is a straight shooter, been in office 10 terms, helps us out as best he can except when he keeps getting blind-sided by those thieves he has to deal with there in Washington day-in and day-out.
Davey Jones — my kind of cynicism!
I suppose the question “What type of leadership are we looking for?” is basically suggesting that if we were to have a leader who implements hard common sense solutions (Republic style government) instead of social democrat solutions (vote-based), what kind of solutions are these?
Here is my list: Severe spending cuts with 10 year sunsets on all government agencies that are not even mentioned in the U.S. Constitution. And there are hundreds, such as Center For Disease Control, NASA, and so on. Coupled with that: A sell off of the properties of the biggest landowner tn America - The U.S. Government. Thirdly, and 3 years into the severe spending cuts, implement a flat income tax as the only tax on income, and by law, drive the tax down to 0 over the 10 year spending cut sunset clause. By starting on the third year, the proceeds can go to pay off the federal debt. Finally, rely on tariffs to pay for the essential government services, and there are no more than five of them: national defense, a justice system, and the infrastructure to support them. Above all, allow private companies to set up mints and compete as legal currency. This will effectively put us on a hard currency standard of some sort.
I personally do not like democracy. Democracy is two wolves and a sheep deciding on what’s for lunch. That’s how America got into this mess. Most Americans do not want to be responsible for themselves. They spend more than what they earn. The politicians running our country are a reflection of the American public. We get what we really are (for the most part). Big fat overspenders.
Bill in Phoenix. Good post. While It is too late in the evening for me to sort out the workability of private mints with differend “hard” currenciesyou and I pretty much follow the same track — the more we revert to the United States that was envisioned by our country’s founders and clearly spelled out in the Federalist Papers (I’ll bet that fewer than 1% of government-school children in the U.S. today have read them).
Ben — thanks for the chance at a soap box on this topic today!
You don’t get to sort out the workability of a private mint - the free market does that on its own. Unless you don’t believe in a truly free market.
Some great suggestions here, especially the ones that address the root of the problem: distortion of all markets due to Government intervention.
The intervention starts with rubber money, and proceeds through every manner of market distortion via a byzantine tax code - a tax code full of subtleties that are clearly meant to escape the attention of mere mortals. This crazy-assed system perpetuates the transfer of wealth from the poor to the rich, since only the latter can hire expensive accountants.
I’m convinced a hard money standard is coming back eventually in this country. Unbacked fiat money has never worked for long, historically speaking. Either we voluntarily bring back hard money, or market discipline forces us to adopt it.
Here we go — live, so to speak:
Use surplus to hire cops, firefighters, mayor says
[Orlando Mayor] Buddy Dyer wants the city to put $109 million into safety services instead of cutting the tax rate.
Mark Schlueb | Sentinel Staff Writer
Posted July 8, 2006
From OrlandoSentinel.com
http://tinyurl.com/nplos
Screw Buddy Dyer. Give the money back to the taxpayers.
The only kind of goverment system that stands a chance is one that passes the stress-test of corruption. There are plenty of real-world examples where many types of governmental systems have gone rotten (from capitalist to communist) because of the architects of such systems refuse to recognize the corrosive effects of greed and power hunger.
My beefs with libertarianism are the same as those with communism - they have never and will never hold up in the real world — let the mythical “free market” reign and we guarantee freedom to the most corrupt and ruthless; let the “power” go to the masses and the ruthless will claim to be acting in the masses’ name.
If you want to have a game that works, you have to have rules that work and referees with teeth, and figure out what fair play means.
We’ve almost got it here with representative democracy and a strong judiciary. What we need is a way to promote a fair market with strong penalties for thievery. We’re not there yet.
Any ideas?
Good post, Housegeek.
Although I’m a cross between a Libertarian (personal freedoms) and Socialist (WRT essential goods & services), I think the “free market” thinkers aren’t really looking ahead to what the eventual outcome would be. The theory is that money and resources would flow to the most productive, but I do not think it would work out that way in reality. As Housegeek said, if there is no govt with “teeth” the most corrupt, powerful and greedy will take over and ensure the bulk of the goods goes to them. There is a reason why all the long-standing, “successful” civilizations have some form of socialist govt (even the U.S.).
Imagine, if you will, what the world would look like if 80%+ of the population had no healthcare, no job security, no resources, no pension/retirement, etc. I believe you would end up with a very unproductive, sick, desperate group of people who would resort to any means necessary to feed and care for themselves and their families. Imagine a couple who have a child with a potentially fatal disease. This couple has no healthcare and no savings. There is a medicine for $20,000 which could save their child’s life. What do you think they will do? I am a very law-abiding citizen, but if I had to make the decision between the life of my child or respecting the property of a “rich” person, guess who wins? In a world without government and fairly generous social safety nets, there would be such a high crime rate, the rich would live in constant fear for their lives.
Theories are nice, but we must look ahead to what the long-term consequences would be.