Bits Bucket For December 21, 2008
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The Housing Bubble
Examining the home price boom and its effect on owners, lenders, regulators, realtors and the economy as a whole.
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Name:Ben Jones
Location:Northern Arizona, United States
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Dear Mr. Madoff,
Nice Ponzi scheme - well done! You were a sucker however for getting caught and admitting it.
Signed,
- The Fractional Reserve Banking System
Dear Mr. Madoff,
We agree with above. If you had played your cards right you could have even made the scheme official government policy, or even an agency!
Signed,
- The Social Security Administration
Better luck in the next life to all of us.
Singed,
Fannie Mae and Freddie Mac
Oops — signed, not singed —
or maybe it was singed, to promote a spirit of holiday cheer…
Some of their shareholders would probably think singed is more apt.
Don’t you just love the English language? ‘Singed’ could either refer to having sung, or to having burned in a fire. Double entendre potential is immense.
sing sang sung
ring rang rung
drink, drank, drunk.
looks like a real financial industry conspiracy
Vanguard founder on Madoff 12/21 08:37:04
John Bogle on Bloomberg TV just announced he had researched the top 30 investors in Madoff’s ponzi scheme. (Bogle founded the Vanguard Group that currently has around $1.3 trillion in assets.)
He found that 29 out of 30 of Madoff’s biggest investors were large financial institutions that take money from clients and invest it.
Bogle said that Madoff was giving ‘financial incentive fees’ (aka ‘kickbacks’) to these large financial firms for steering the firms’ client money into Madoff’s fund.
Of these 29 financial firms, the biggest one got $190 million in kickback fees last year from Madoff’s fund to promote Madoff’s fund to their clients.
http://sfbay.craigslist.org/forums/?ID=111046323
Wait - all the crooks are working together to fleece the people?! Nah, that can’t be - my broker told me so… now, what time is American Idol on? Zzzzz………
Coming soon to a theater near you…
Yosano Says Japan Needs to Double Sales Tax to 10% by 2015
By Mayumi Otsuma
Dec. 21 (Bloomberg) — Japan needs to double its sale tax to 10 percent by 2015 to pay for pension and welfare needs, Economic and Fiscal Policy Minister Kaoru Yosano said.
The government should begin increasing the tax in 2011 and raise it to 10 percent in increments to avoid damaging economic growth, said Yosano, who has warned against the country’s swelling budget deficit and called for higher sales taxes.
“If the sales tax is raised by 5 percentage points all at once in 2011, it would be too great a shock to economic growth,” Yosano said on TV Asahi today. “It’s obvious Japan won’t be able to sustain pension, medical and nursing care programs without lifting the tax to that level.”
Prime Minister Taro Aso, facing a plunge in approval ratings, has unveiled a series of economic stimulus plans since October to prop up a moribund economy. The government yesterday released a budget proposal that will increase spending next year to a record 88.5 trillion yen ($991 billion) and expand the industrialized world’s largest deficit.
This a smart move. Sales tax (or VAT as it is known in most of the world) does not apply to exports. Thus raising VAT does not hurt Japan’s export competitiveness.
It also does not discourage people from working, saving, and investing, as an income tax increase would.
It is not a coincidence that the US is the only major country without a national VAT, and also has the largest trade deficit.
We have had the on going argument in our fair city for years, and yes if taxes are going to be raised and they will be, I am in favor of it being in the form of across the board sales tax. The bleeding hearts hate the idea with their pathetic cry of it being a tax on the poor. WTH? What taxes aren’t in some way,or other?
We have a tax cap on auto sales, $300.00 max no matter the cost of the car. The auto dealers scream bloody murder every time anyone mentions a change.
Times will be a changing, as they always do.
“The bleeding hearts hate the idea with their pathetic cry of it being a tax on the poor. WTH? What taxes aren’t in some way,or other?”
Not the poor, the seniors, who are exempt from state and local income taxes in our fair city, but not sales taxes. And taxes here, as in Japan, are going up for their needs.
No way those needs get met when Imy generation is old.
The bleeding hearts are too stupid to ask for something smart
Like eliminate NYC corporate and real estate taxes on Con Ed, it would lower your electric utility bill by 15-20%…..no kidding someone figured this out a few years back.
“The bleeding hearts hate the idea with their pathetic cry of it being a tax on the poor. WTH? What taxes aren’t in some way,or other?”
Well, I am pretty sure a negative income tax (like the earned income tax credit in the U.S. tax code) is not.
“Like eliminate NYC corporate and real estate taxes on Con Ed, it would lower your electric utility bill by 15-20%…..no kidding someone figured this out a few years back.”
You assume Con Ed would pass along those savings.
Are you REALLY from NYC?
It also does not discourage people from working, saving, and investing, as an income tax increase would.
Land Value Tax is better than a GST as it falls entirely on the most wealthy and those who have profited most from government spending.
“In my opinion the least bad tax is the property tax on the unimproved value of land, the Henry George argument of many, many years ago” — Milton Friedman
I am all for abolishing the income tax and replacing it with a national sales tax. Or, even better, the states need to take the bull by the horns, eliminate property taxes, raise sales taxes and allocate what part should go to the federal government. Sounds radical, but it isn’t. I’d strongly advise states to do this before the federal government does.
Eff income taxes anyway. They’re a tax on productivity. I can’t believe the howls I’m met with every time I say this.
Not to mention the income tax is used as a tool of social engineering, with the revnoo service required as the de facto collection agency for the FED. Eliminating this tax would get rid of another bloated, confused bureaucracy that doesn’t know its own rules and holds sway over the citizen of the US.
Palmy, I’m surprised you’ve fallen for the Ron Paul argument that the IRS would go away if we abolished income taxes and went to a VAT.
With a high-percent VAT, I see massive opportunities for fraud. It’s very easy and inexpensive now to set yourself up as an Internet “store.” Every savvy individual or family group would do it. You would then get to buy stuff without paying the VAT because you intend to resell it, but gosh, you can never find a buyer at the (very high) price you set. Who, if not the IRS, looks into that kind of chicanery?
+1 big time
A lot of us here would see our taxes plunge as consumption and not production is taxed for once. Of course here in Cook Co. we are already paying 10.25% - so I’ve a head start.
I love the statement that income taxes discourage work and savings. I’m sure there is a threshold where this is true, but it sure isn’t true at current rates or when rates were were 50% for the top brackets. People still invested. You only pay taxes on money you make. It might even encourage a longer term investment approach which would be good for America. Sales taxes will hurt the economy far more than progressive income taxes. Now instead of a regressive sales tax, I would support a carbon and gas tax.
The income vs sales tax arguement is no different than the trickle down economics debate. I think the last 8 years have taught us that trickle down economics does not work.
“I would support a carbon and gas tax”.
You won’t have to support it, you’ll have no choice you will get it. Plus a multitude of others, enjoy!
“Eff income taxes anyway. They’re a tax on productivity. I can’t believe the howls I’m met with every time I say this”.
I love it when they howl, and it doesn’t take much to bring about that constipated look on their faces. It’s especially fun at city council meetings. I expect by this time next years a few heart valves will have blown out on a couple of our city social engineers, and I’ll be there helping them along.
You get what you reward. If you tax production, you get less of it. Income tax is a penalty any way you look at it and terms like “progressive” and “regressive” are social engineering-speak. And yes, there IS a certain threshold at which people figure why bother. It actually is more of a tax on “the poor” than sales tax. After all, why produce if the gov takes from the fruits of production? There is no shortage of charities that make sure “the poor” have plenty of “things” if they need them, tax-free. At least here in the Tampa Bay area. The necessities like food and housing are exempted from sales tax.
The income tax is an oppressive boondoggle with a bloated, inaccurate bureaucracy. As traditional jobs disappear more and more due to globalization, there goes withholding tax, the gov’s ace in the hole. How much easier and less expensive to get taxes from the many businesses that already have a system to collect and submit sales taxes?
Also, sales taxes insure everybody pays. We don’t get taxes, for example, from many illegal aliens and from those who work under the table and from criminals. But all these groups do buy things. It’s really the only way to go.
Yesterday, one of the “Car Talk Guys” was advocating a 5 cent a gallon gas tax while gas prices are low to help rebuild crumbling infrastructure, increase rail service, and fund more alternative fuel research. I’m betting they get a lot of hate mail.
Strange how capitalist-hating exeter is not on this thread. He does not like production, which really is wealth creation.
I favor elimination of tax withholding from paychecks. Phase it in, even, by making estimated tax payable once a quarter instead of once a year. Government spending would drop like a rock in a hurry, as incumbents will be toasted until the spending falls. After the Federal Reserve, I think that mandatory withholding is the biggest scam because it hides from people what they are paying.
http://www.freedomtofascism.com/
Anyone with a serious interest in knowing how the unconstitutional and illegal federal income tax came about, should see the late Aaron Russo’s (director of THE ROSE and Trading Places) astonishing documentary on the subject: FREEDOM TO FASCISM. He tried, fruitlessly, to get IRS officials to show him any actual law that requires people to pay income tax - their response was right out out Orwell’s 1984.
I would favor a Stupid Behavior Tax. Morons who get caught texting while driving, or cause accidents while gabbing on cell phones, would be hit with $5000 fines. Retards who get caught driving down the freeway holding a mattress on the roof of their car (I was almost killed on my motorcycle by one of these), or have unsecured items falling out the back of their pick-up trucks, would have their vehicles confiscated and given to the deserving poor. Etc., until it dawns on people that stupidity carries a price.
You would then get to buy stuff without paying the VAT because you intend to resell it
VAT doesn’t work that way. Domestic buyers always pay VAT to the seller, whether they are businesses or consumers. They recoup the VAT paid when the goods are resold. Businesses remit the excess of VAT received over VAT paid to the government.
VAT is not charged on goods exported. But the home country of the import collects VAT on the goods.
It’s not the same as a retail sales tax.
“VAT is not charged on goods exported.”
That’s how the Europeans and Japanese were able to dump their cars, so that they’d sell here for less than their citizens paid.
“Retards who get caught driving down the freeway holding a mattress on the roof of their car (I was almost killed on my motorcycle by one of these), or have unsecured items falling out the back of their pick-up trucks, would have their vehicles confiscated and given to the deserving poor.”
I’m all for this. Here in WA state, the fines for such have increased enormously after a roughly 4′ x 4′ piece of plywood flew out of the back of a truck on the freeway, and smashed through the windshield of a Jeep, crushing the young woman’s skull. She survived, but is mildly brain damaged, and horrible disfigured. The fact that she used to have model good looks certainly contributed to the outrage.
Last year, I was standing in the driveway of a friends house, when out of the corner of my eye I caught an object hurling towards me. I instinctively jumped out of the way to watch a large tire and rim smash into the back of my parked truck. The culprit was a commercial truck overloaded with seemingly a hundred tires piled up well above the cab, with not so much as even a rope securing them. It pulled over to retrieve the tire. Some meth head got out, and I read him the riot act. The 150 lb tire could have killed someone.
??? If you tax production, you get less of it.
BS a 10% increase in dividend or capital gain or income tax will not stop people from investing or working. History has proven this.
???sales taxes insure everybody pays
BS again, ever hear of the black market. How hard is it for the elite to buy ther luxury boat or art overseas, or to monkey with the books to decrease the perceived cost of the car.
It’s good to have several ways to tax people/corporations because it makes it harder to avoid taxes completely.
If we need to increase taxes I’ll start with getting rid of loopholes that allow Hedge Fund Managers and CEO’s to pay effective tax rates of under 20%. If you get stock, travel, housing, jets ect it should count as income and be taxed at income rates. We’ll never see that because our congress is bought and paid for.
I’d throw in Hollywood - read long ago that there all sorts of wormy provisions about movies that let them push the taxable profits so far out into the future, their grandchildren are dead before the bill comes due. It was in an article that described how someone who wrote a book on which a movie is based can get screwed royally by slick Hollywood lawyers when the royalty contracts are written up.
If you want to understand the policy arguments against the VAT they are not all that hard. Wealthy people don’t spend all their money, or at least they don’t have to if they don’t want to. The truely poor do spend all their money. They need to in order to eat, wear clothes, keep a roof over their heads, etc.
If you have a 10% VAT and a wealthy person who makes $1M a year and spends only $500K and a poor person who makes $15K and spends every penny, then the poor person will pay 10% of his income in tax and the wealthy person will pay only 5%. In tax policy, this is called a tax being regressive (higher rate on people with less money) rather than progressive (higher rate on people with more money).
The general reaction by VAT advocates is that you can exempt items that are essential to basic living - like food -from the VAT. That of course brings you right back to lobbyists yelling for their item to be exempted. Are Doritos essential for life? What about $27 per pound beef from Whole Foods? One of the main arguments in favor of the VAT is that it is easy to administer - it isn’t really as easy as people think (I took a seminar when I worked for a German company) - but that all flies out the window if you allow even one exception. Which brings you back to the higher rates on the poor.
Minor point is that you have to apply it to “services” as well (huge motivation to convert a VAT “item” to a non-VAT “service” if you don’t) and just wait to hear the howling of the doctors, lawyers, accountants, hair salons, piano teachers, day care providers, etc. when you try to do that.
And while there is no reason to believe it CAN’T happen, my recollection is that the countries with VAT’s have them in addition to income taxes, not instead of them. So you can’t look to their VAT levels and be sure that we could keep our rate to their rate. And the people at the seminar said that it took more people to administer the VAT than the income tax, so you don’t even get to kill the IRS. You might even have to expand it.
VAT is what they call it in Europe and I don’t know why we have to compare things to the European way. That’s why there was a little conflict in 1776.
I’m not talking about a VAT, get it? VAT, as you have said, is added to income tax. I’m talking about an NST, ok? There is no need to make it more complex than that. With all due respect, Washingtonian and European “policy” debates have not done much for the US except provide more social engineering.
Of course there’s going to be howling about an NST. Especially from accountants and lawyers, again with all due respect.
No matter what anyone says, it IS easier than income tax, and far less burdensome. And again, the best way is to let the states collect and control it and allocate to the Federal Government. I’m talking about THIS country, not how they do it in Europe.
The “income” tax is basically a war tax, instituted by Abraham Lincoln to fund the Civil War. After which, it was phased out and then reinstituted to fund (wait for it) ANOTHER WAR! And then, seeing as how we MUST be at perpetual war, it never went away. Another reason to get rid of it. And turn taxing control over to the states.
“You know, I would be open to it except for … here’s the problem with the flat tax. If you actually put a flat tax together, you’d probably … in order for it to work and replace all the revenue that we’ve got, you’d probably end up having to make it like about a 40 percent sales tax. I mean, the value added, making it up.”
– The Messiah, in his famous conversation with “Joe” the “Plumber.”
A national sales tax is easier to administer, but much, much more susceptible to fraud. You are relying on the end of the chain retailers to collect 100% the government revenue of the country. You might be able to do it if you eliminated currency and moved 100% to electronic money so the government could scrutinize every transaction. Other than that, the underground economy would overwhelm the taxed one and government revenue would disappear.
The reason the VAT is supposed to be easier to administer is that each person along the chain who adds any value to an item has to pay tax and the only way they can get it back is to charge the proper amount to the next person along the chain. Nice idea in theory, but the German lawyers who tried to explain it to us, told us that the VAT was a gold mine for tax lawyers. Tons of work for them and for the government regulators. And that is with the version that makes fraud hard, not with the version that makes it easy.
Obama doesn’t dwell on the flat tax; he pivots into the reasons for his proposed tax increase on the wealthy.
Here’s a link for a transcript of the entire conversation:
http://www.tampabay.com/news/perspective/article858299.ece
At various times in my life, I have been what would be considered “poor”. And I pay sales taxes, scrupulously. I am in a business where my license and registration with the state makes it perfectly legal for me not to pay sales taxes on items for resale. I pay those taxes anyway. One place where I shop, the clerks, who know me, constantly shake their head about it. Why do I do this? Insurance. If I ever get audited by the state, I’ll go to recover those taxes as part of the process and my accountant will so inform the auditor. At that point, the auditor can figure out if they wish to proceed or harrass someone else where they have a better likelihood of recovering some money, rather than paying it out.
I do know there are people who sell on line and don’t pay their state sales taxes when they sell something in state. Some pretend ignorance that they’re supposed to do this. Ignorance of the law is no excuse.
Wow, you overpay your taxes and call it insurance. Amazing.
“A national sales tax is easier to administer, but much, much more susceptible to fraud.”
Does not compute. Anything easier to administer is less susceptible to fraud. Complexities only add to opportunities for fraud. Again, retailers and other businesses already have systems in place to collect and remit tax. Rather than monitor hundreds of millions of individual taxpayers, there are fewer entities to oversee. Not to mention businesses would be relieved of having to mess with the payroll tax.
“Wow, you overpay your taxes and call it insurance. Amazing.”
If you’ve ever been through an audit, you might call it insurance, too.
Palmy,
Easy to administer does not equal less susceptible to fraud if you have NO way to figure out when fraud has been committed. If you rely on anyone who sells anything to an end user for tax enforcement you are opening up the fraud flood gates. Even if every current retailer is completely honest, the system will attract criminals to it. Imagine the opportunities for people to undercut the honest retailers by not collecting and paying the tax.
Like I said, you could maybe pull it off by making anything other than electronic payments (government can scrutinize at any time) illegal. Still you would have a barter issue.
There just isn’t a simple solution here. Oh, and the income tax is easy to adminster on most individuals. Very easy. Most of the complexity in the tax code comes from taxing corporations on their profits, rather that income. Don’t hear too many people suggesting that one to make the tax code easier to administer.
In the past, I was never a big advocate of the flat tax. After reading Obama’s response, I see he doesn’t have a clue. 40 %? he just does’nt want it. A flat 18 % would be revenue neutral. The outcome; the lower classes would now contribute, housing would never recover, those in the middle class, that are over-leveraged with huge housing deductions would be decimated and the wealthy might pay a little less. Our country would be a little less corrupt.
polly, my position is that you are arguing for which is the tighter noose. Good luck to you and have a Merry Christmas.
Revenue neutral at 18% based on what? 2005 levels of spending when everyone bought Escalades and inflated condos? This is one of my questions about a flat tax on sales.
Even if take-home pay increases by ~25%, people will hunker down and buy nothing — as we saw after 9/11, and as we’re seeing now. The extra take-home pay will go toward debt, or be hoarded. Just like the banks did with the TARP.
Oxide,
I wouldn’tthink it would be too hard to figure out. You’d have to figure out what the rate would have been without the MEW spending. That should be close enough, though it doesn’t take into account a rediscovered need for savings.
To be very honest, revenue neutral doesn’t matter much when there is no prayer of balancing the federal budget. All the revenue neutral talk is from the Clinton years when it looked like there might be way to pay the debt down.
A flat tax is an income tax. I think people, including Obama, are mixing up their revenue streams.
Revenue.
Ding. Ding. Ding.
What revenue?
Job losses at…er…by my estimates 3M?
Yeah, this will end well.
Sigh,
Leigh
I disagree, I think sales tax is regressive, if I am on the bottom rung on socity money wise, more of my income goes to taxes.
I more fond of the idea that if i drive, i pay fees for my licence, tag for my car, and on my gas. If i dont have a car and drive then i dont pay for something i dont use.
Gas tax, at least in part, pays for highways. Even if you don’t drive personally, you gain benefit from the highway system. You can’t reduce everything to a fee.
Polly,
Thank you for all your level-headed and well-informed responses.
I agree with what you’ve posted.
A sales tax is regressive, and difficult to enforce. People would immediately seek a substitute for the dollar (barter) and begin trading in the black market.
If we really want to tax unproductive types, why not raise capital gains to 40% or so? BTW, 100% of my personal income comes from investments, so I would suffer the consequences.
That being said, I absolutely cannot argue against raising taxes on the wealthy and lowering taxes for those who actually produce (the workers who comprise the vast majority of lower and middle-class Americans).
So we should keep the income tax and now add a VAT?
Let PatBuchanan and Ross Perot set up a booth at Port of Long Beach, Portland, Jacksonville and charge an “eqalization tax.”
We have duty to export wealth, what?
“It also does not discourage people from working, saving, and investing, as an income tax increase would.”
And that is why we’ll never have one - it gets in the way of peonage for all.
B-b-b-b-b-b-u-t, I don’t understand(?)
Why can’t they just print the money to pay for those programs? Why are they oppressing their citizens with higher taxes? Haven’t they learned anything from their counterparts across the Pacific? When you get into trouble, just print more money and all problems will disappear!!!
Just what, exactly, is their economic agenda? What possible benefits could be achieved from having a stable currency?
best article about this: http://www.thestreet.com/story/10454087/1/opinion-fed-back-in-the-ussr.html
I hope Benny and the Feds can find the time on their busy bailout schedules to read this sort of article, because it is highly informative. For instance:
Soviet-Style System Hits Home
But our Soviet-style system doesn’t stop with the car companies. There are also the homebuilders. Most of the large homebuilders should have already declared bankruptcy and been liquidated because they are insolvent by any reasonable measure. They haven’t because their lenders are giving concessions and forbearance agreements, and the government is giving them indirect subsidies through buying residential mortgages and forcing down home mortgage rates with money-printing operations.
Homebuilders are now in Washington with their lobbyists trying to get their hands directly on some of your taxpayer money through the Troubled Assets Relief Program (TARP). Once again, in America it pays to have good lobbyists and no morality. This is only happening because there is enormous pressure on lenders and the Fed from the government not to do anything that would further harm the housing market or reduce housing prices.
My question is why? These companies are broken. They are poorly run. There is massive overcapacity in homebuilding. The way to fix that is for more homebuilders to fail. Also, capital needs to be allocated more efficiently to companies and industries that actually know how to make money rather than lose it spectacularly, which is what the big homebuilders have been doing for years.
Who Really Benefits?
There are some good homebuilders and they should survive, but most of them should not. The only beneficiaries of these market manipulations are companies that should go out of business, their investors and their executives.
The employees ultimately will be worse off even if they temporarily keep their jobs because eventually the market will catch up to these companies, and their jobs will disappear. Consumers are not really better off because really the last thing most Americans need right now is to take on even more debt to buy a house.
The focus of average Americans, who care about their long-term financial security, should be generating more sustainable income, saving and investing to protect the value of their capital from a government that is printing trillions of dollars per month in an effort to make Weimar (historically known as one of the worse hyperinflationary governments in history) look like a sound money regime.
Borrowing money to speculate on houses is the last thing we need, and we should not be subsidizing it or the homebuilders that try to keep themselves on life support by playing along with this senseless government policy. The irony of all of this is that by propping up the homebuilding companies, which have no other purpose except to build homes and further increase housing supply, the government is actually further contributing to declines in housing prices. Soviet economics has a way of creating unintended consequences.
Of course, the real hard-core Soviet economics in America favors the financial industry. It was actually very similar in the Soviet Union. Most of the bizarre, money-losing and value-destroying enterprises supported by the Soviet state were also indirectly supported by their government-controlled banks that were basically shills for the Kremlin. Does this sound familiar to anybody yet?
The Fed is following in the storied tradition of the Soviet state-owned banks by fixing the price of money at 0%, or negative on an inflation-adjusted basis, and by handing out literally trillions of dollars of unsecured or poorly secured loans to obviously insolvent, poorly run, inefficient and often corrupt Wall Street firms and big banks like Citigroup(C Quote - Cramer on C - Stock Picks) that have good political connections.
Unfortunately, that tradition doesn’t exactly have a very good track record for creating sustainable economic growth.
No Such Thing as a Free Lunch
The basic problem is that subsidizing poorly run companies that waste capital is not free. Although the Fed and Ben “Commissar” Bernanke would like everyone to believe that there is no cost to printing money and giving it to these banks to prevent them from failing or, more accurately, so they can keep paying huge bonuses to employees and executives, there actually is a very substantial cost to the U.S. economy.
First, printing all of those dollars is causing our currency to once again start collapsing in value. This makes everyone who holds dollars worse off. Second, fixing interest rates at negative levels destroys the standard of living for anyone trying to live on a fixed income from interest, such as senior citizens and many retirees. Third, negative interest rates encourage yet more speculation rather than saving and real investing.
K, Benny and the Feds sounded good, so here it is (apologies to Elton John and Bernie Taupin):
Hey, it’s time for something clever
Now that all us pretty people
Absconded with the wealth in our endeavor
We’ll juice the market something fierce
Cantcha hear me now
We’re gonna print some mad Bennies
Till the press breaks down
Hank, hammer the throttle and forget about cred’
I said don’t chicken out, B-b-b-b-b_Benny and the Feds
Oh so we’re labeled delusional
But baby they don’t know the scene
We’ve got our yachts to cruise, the Hampton’s too
You know we’ve got to maintain liquidity
Bennie and the Feds
Hey it may look wreckless
But we’re not deluded
Ol’ Bennie he aint feckless
We shall survive, our bank accounts strong
Where we fight
The poor out in the streets
Paved with the blood of the throngs
But,but,but… the big three are different than the builders and the banks. Don’t you see the big three supports jobs, union jobs. They’re different than mortgage brokers, wall streeters and bankers. The article forgot one other industry, that’s supported by the gov’t, that’s wasteful, overbloated from a bubble economy and overpriced from easy money; our university system.
we are all socialists now.
we are all socialists now.
That’s just not true.
First of all “socialism” is a broad term, and if you’re not sure, take a trip to China, Cuba, Canada (more of a liberal democracy, I guess) and Finland and you might find some pretty different styles of living and systems of government.
Secondly, taking money collected from the people (or theoretically collected from future citizens) and giving it to large banking institutions and corporations is not socially progressive.
I personally doubt America will ever be socialist, but that doesn’t mean a corruption of government or a union of government and large business is out of the question. We’re entering new territory. This isn’t the cold war anymore.
The big three are different. Any Joe can start a company and build a house. There are many more barriers to manufacturing a car. How likely is it that a new American car company will be created if the big three go. People complain about the fact that America doesn’t make anything anymore. Get rid of cars and manufacturing collapses. I’m for a structured bankruptcy with open bidding for the companies. My guess is Carlyle or some other politically connected Hedge fund ends up owning these companies with full gov financing.
Thank you, Comrade Pressboardbox…
I really shouldn’t make fun.
The USA today really isn’t that different from Russia from 100 years ago, is it? The Russian people then were decent, hardworking people. They just got caught up in a really lousy political system.
I am afraid we are doing the same, now, in the U.S. When hard times occur, the Powers That Be (PTB) are making every effort to hang onto, or reconstruct, the existing political and social structure.
What we need to do, instead, is let the existing political and social structure FAIL. Failure is a very important component of American capitalism. It does its work in brutal, yet efficient fashion. But all of the moves the Fed/Treasury have made over the last 12 months (with the exception of Lehman) have been to deny failure its just desserts.
What we need right now is a little creative destruction…
The Fed seems to have lost sight of the “stable monetary system” objective in favor of creating a command-and-control replacement to free market capitalism with the banking industry in the driving seat.
The Fed
Ben Bernanke’s Failure To Communicate
Joshua Zumbrun, 12.18.08, 06:00 AM EST
The Fed has no road map for talking about its foray into unconventional policy measures. It needs to find one, fast.
It used to be so simple at the Federal Reserve. The Fed’s Open Market Committee would meet eight times a year and at the end of each meeting announce its target interest rate and make some general statements about the state of the economy.
Everyone would plug the new interest rate into their formulas–often markets had already guessed the new interest rate thanks to hints in speeches from Fed officials–and go about business as usual. The Fed knew how to communicate, and–more important–the markets knew how to listen.
Not anymore.
Here is another outstanding article on this subject:
Wall Street Journal
DECEMBER 20, 2008
Essay
Is the Medicine Worse Than the Illness?
The world ran out of trust in 2008 — but there is no shortage of money because the Fed is printing like mad. It’s the wrong approach, with potentially dire consequences, says James Grant.
BTW, there are many very interesting graphs on the Fed’s economic data web page (such as this one) which support the notion that an unprecedented injection of liquidity into the U.S. banking system is currently underway. This reminds me of the account that I was reading last night of the Great Mississippi Flood of 1927, when a levee breach resulted in a devastating inundation of the Mississippi Delta. The banking system is awash with liquidity, yet banks aren’t making many loans. What gives?
Soon you will all be happy.
Supporters of income tax will be happy that income tax will continue, maybe even increase.
Supporters of sales/consumption tax will be happy when a new nationwide VAT is instituted.
Not to forget the grassroots guys, local taxes will be levied on top of the punitive VAT.
For good measure, benefits will decline dramatically.
Get used to it, that’s the only way to balance the books.
Please don’t stop now. The tax whining is gut wrenching funny……. And it’s about to get more hilarious….. I can’t wait to hear all the boo hoo hoo’s down in WhinerTown.
James Howard Kunstler says plenty of change faces modern society, but it doesn’t resemble much of anything Mr. Obama envisions. “The economy we’re moving into will have to be one of real work, producing real things of value, at a scale consistent with energy resource reality. I’m convinced that farming will come much closer to the center of economic life, as the death of petro-agribusiness makes food production a matter of life and death in America — as opposed to the disaster of metabolic entertainment it is now. Reorganizing the landscape itself for this finer-scaled new type of farming is a task fraught with political peril (land ownership questions being historically one of the main reasons that societies fall into revolution). The public is completely unprepared for this kind of change. We still think that ‘the path to success’ is based on getting a college degree certifying people for a lifetime of sitting in an office cubicle. This is so far from the approaching reality that it will be eventually viewed as a sick joke — like those old 1912 lithographs of mega-cities with Zeppelins plying the air between Everest-size skyscrapers.”
“The economy we’re moving into will have to be one of real work, producing real things of value, at a scale consistent with energy resource reality.”
What a bunch of nonsense. We’ll just print our way to prosperity. I am confident our economical & political leaders know what they’re doing. /sarcsm off
I’ve been running my printer all morning, and pushing all the buttons, but for some reason I cannot get it to print me out a nice breakfast sandwich and orange juice. Hm, most unexpected….
I sell a device for $2500 which creates anything you want out of thin air. it looks a lot like a $39 microwave oven, but when you add the ingrediant of “your” imagination it becomes soooo much more. Step up folks, get your very own Star Trek replicator today
Just $2500. Buy today and I will throw in a toaster absolutely free!
“I’m convinced that farming will come much closer to the center of economic life, as the death of petro-agribusiness makes food production a matter of life and death in America …”
So we’re INTENTIONALLY going to reduce productivity in this country?
Hmmm, wait a minute. Reducing productivity would certainly reduce unemployment. Reducing productivity would also bring about price increases which would put an end to deflation.
Watch this trend closely. This could be the real, unspoken goal of upcoming govt policies.
Reducing productivity as a means towards ending unemployment:
Didn’t the Pol Pot regime try this already in Cambodia?
Yup, and we didn’t try at all to capture him. Really sucked that he got to die of old age.
pol pot aka no 1 brother was never tried or prosecuted cuz he still had supporters/fighters and they were needed to run the govt and keep the peace. Punishing those that commited the Red crimes would only have restarted another civil war. he died poor in fear and alone.
I was there 1996. It was like the wild west. Every kid had an AK47 strapped on his back cruising around on his moped. For 100us$ you could get an rpg and cow abd blow it up. Everywhere I went I hired a guide to walk in front of me (land mines). Crazy place.
I was there multiple times 1993-96. Everyone who goes should tour the Tuol Slang prison in Phnom Penh. In the killing fields, I couldn’t walk through the pit area without walking on human teeth and bone fragments. There were still hundreds of bits of brightly colored plaid polyester shirts in the dirt walls of the pits. Hope you didn’t pay for a mine-wary guide for inside the city limits - the mines are all outside of town. We have had a large number of de-mining military people in the country since about 1993-4. Lots of limbless people about in the city.
To me, Pol Pot dying poor in fear and alone is not sufficient. Societies need retribution or they will never believe their country has a valid justice system. Guarantee you we knew where he was all the time, mostly very close to the Thai border, which is the area where he died. Hope he has to drop the soap for Stalin or Mao or Choibalsan.
You’re comparing Obama to Pol Pot? This is bananas.
Also, “The economy we’re moving into will have to be one of real work, producing real things of value, at a scale consistent with energy resource reality”. I think that’s a good point. I am in favour of making productive, real, tangible goods instead of selling bits of paper back and forth. Aren’t you?
I think he was comparing Kunstler to Pol Pot, which is probably also bananas. And it sounds like Kunstler was saying that elevating the importance of agriculture would be an increase in productivity, not a decrease. But it’s hard to tell since there was no link.
Oh, you’re right. Thanks, LVG.
Sounds like the same result as a 35 hour work week, but without the extra time to spend with your family and friends.
It doesn’t matter how productive and efficient your workers are if for each 75 workers, there are another 25 idle workers bringing down the average. There’s some merit in the argument to reduce productivity a little bit for everyone, if only because you’ll have less stressed and healthier workforce. I don’t like using Productivity as a marker anyway. If businesses come to depend on increases in productivity, what will happen when productivity reaches its inherent upper limit?
As for Kunstler’s quote, who said the loss of productivity was going to be intentional? Kunstler’s whole schtick is based on Peak Oil. At the moment farm workers are very productive because so much of the production is oil-based in the form of fertizlizer and machinery. If oil becomes so expensive that this system becomes untenable, productivity will be forced down, when we need more people for the same amount of food.
“when we need more people for the same amount of food.”
Soylent Green?
THE BRIGHT SIDE OF CATASTROPHE
by Bill Bonner
Who can honestly say he isn’t enjoying this financial crisis? It has unhorsed cavalier fund managers …it has turned the masters of the universe into servile waiters…it has made Nobel Prize winners look like morons. The rich…the proud… the pompous…the vain…the incompetent…Wall Street - surely there is a God…an ‘invisible hand’…giving them all a whack on the head!
And there are the regulators too! Under their very noses the biggest scams in history went unnoticed. America’s SEC alone - to say nothing of the countless other cops on the financial beat - had 3,371 employees playing the piano in 2006. If you can believe it, not a single one of them noticed what was going on in the back room. Even after rummaging through Bernard Madoff’s back office twice in the last three years, they still didn’t know. They must have been like pets watching an orgy…with no idea what to make of it, but wagging their tails and vaguely wanting to get in on the action.
Between Tuesday and Wednesday of last week, Madoff’s managed accounts were thrown into a “spiral of horror” said one fund manager. Tipped off by his own sons, the feds went to Madoff’s apartment. They gracefully asked if there was perhaps a misunderstanding. No, replied Madoff, “there was no innocent explanation.” And so, they put the cuffs on him and acted as though they had Lucifer himself in custody.
Bernie Madoff is a giant in his field. He out-Ponzied Charles Ponzi. He out-Princed Chuck Prince. He could have taught the Egyptians how to build pyramids. In the history of high-stakes grifting, he out did them all. A Robin Hood with Alzheimer’s; he stole from the rich. If he’d only remembered to give to the poor he’d be a hero!
http://www.wrisley.com/bonner.htm
“They must have been like pets watching an orgy…with no idea what to make of it, but wagging their tails and vaguely wanting to get in on the action.”
I love this quote. It sort of characterizes members of Congress, for the most part.
Does anyone here know anything about life estates?
I heard a story last night about someone who bought a home from her mother and gave her life rights to live in the house. The home is in foreclosure and she says that they can’t foreclose b/c of the life estate. She’s two years behind on her mortgage.
In googling around, I found that no bank should lend on a home with a life estate (and it is a publicly filed document, easily found out about), but they were doing it. Just another example of greedy lenders failing to recognize warnings…
I think it would depend on when the life estate was recorded.Was probably done after she bought the house so the bank would be in 1st position.I am no expert on life estates.
That may be true, but these people are serial refinancers, so I think it may have been overlooked by more than one bank.
I ran across a post on a forum (from 2005) where an appraiser had questioned a lender on this. He had never seen one before and didn’t know how to appraise it. Shouldn’t there be some type of negative value on one? When he pushed back to the lender, they were insistent that it didn’t matter and they didn’t care about it.
People believe that buy buying a house, they own it. When you buy a house especially 0 down, you are merely renting from the bank. I’m sick of all the SOB stories, poor me. If you can afford to pay a mortgage you can rent like everyone else.
WTF, behind 2 years on her mortgage. So she can live rent free, while the rest of us have to pay.
Just wait till next summer Bobby, this Idiottt will be complaining to some chicky-poo blonde reporter that she has no money to move when the sheriff is at her door ready to toss her stuff to the street….Where did the 2 years of not paying the mortgage money go dearie?
—————————————-
WTF, behind 2 years on her mortgage. So she can live rent free, while the rest of us have to pay
You ignore the social value of punishing banks for making predatory loans. Forget about wimpy lending laws. If a banks loses more than $100k of their capital every time they make a predatory loan, they will stop making such loans.
I’d like to claim they go out of business, but they keep getting propped up ;-(.
That’s why banks aren’t making any more loans, why money is disappearing from circulation, why we are entering the Great Recession.
“That’s why banks aren’t making any more loans…”
Some folks are making loans…&…some folks are receiving them.
Bank of An-Opportunity:
“Let’s see, your mother-in-law is 92?…and your the executor & have power of attorney? Now, let’s see…it says your 39 years old and I understand you want a reverse mortgage on just one of her properties …the 5bdrm in Pacific Palisades or the 2200 sq ft cottage in Santa Monica? You’d like to get it completed by New’s Year? Oh, I don’t see any problem with that.”
Not a lawyer here, however….
Life estates just gives someone the right to do something with a property they sold to you for a period of time, often for life. If you then let it get foreclosed, you no longer have title to it, and the person with the life estate I doubt can just claim first dibs over the bank.
Granting someone a life estate is part of property law which is controlled by state law so you can’t really talk about it in general, but, with that caveat, saying that you gave someone a life estate so you can’t get foreclosed on is like saying you gave someone a 30 year lease (for $0 per month) so you can’t get foreclosed on. Sounds ridiculous, yes? I’d guess it is complete garbage.
Except that the elderly mother is sympathetic and a judge might be unlikely to toss her out on the street because her daugher can’t pay the mortgage. Then again, King Lear had a similar problem and it didn’t keep him from getting tossed out into the storm.
“no bank should lend on a home with a life estate”
I think this implies that the life estate was in place before the loan was made. Perhaps the foreclosing is relative to a HELOC delinquency. Otherwise, no due diligence on the lender’s part.
It’s what makes me nervous about looking at foreclosed properties. As I understand it, the seller often or usually will provide title insurance only for the period beginning when they took possession. Very risky, as illustrated here.
Should have said, the life estate was in place and recorded. Timing of recording liens and restrictions is everything, at least in the states I’ve dealt with.
My mom did one of those with her kids. eight years later we are still paying her cap gains tax.
Here’s an article from today’s Charlotte Observer looking back at Wachovia’s ill-timed acquisition of Golden West and its portfolio of toxic California option ARMS.
http://www.charlotteobserver.com/408/story/427887.html
It came back to bite them in the butt, didn’t it?
Hey, how does one access the archives for this blog? And are they searchable? I can’t seem to find a link anywhere..just the “search” field on the right hand side of the main page.
Thanks.
I was considering redoing the HBB member blog.
I turned it into allena’s blog, but now that it’s xmas and
you guys are my clubbies….who wants to be on the blog?
Oly, you must send me your photo. I will build the new site around you!
please join us one and all. I still have all the photos from the meets.
annmoorman at att dot net.
Not sure I understand– is this like a facebook for HBB’ers? Are we going to have links to our “best of” blog posts? Is anything there yet and if so, what’s the link? Please explicate.
i sent ya a photo of my two legged dog…DD.
I wanted to call her Dually, but mrs clue would not have it.
LOL!
Mall report - I had to go to the mall yesterday (there is a post office in the White Flint Mall that stays open until 5 on Saturdays and has limited hours on Sunday - very convinient). The parking lot was crowded, but not completely full by a long shot. Lord and Taylor (I had to use their outside door) was not deserted, but not crowded by any means. The longest line was clearly at the post office, next longest at Mrs. Fields cookies.
Correct me if I’m wrong, but in the last weekend before Christmas, especially when there are only 4 weekends between T-day and Christmas - it should have been a feeding frenzy.
White Flint is upscale. They will definitely suffer. Even in good times (3 years ago), there was nobody in Bloomies. I never could figure out how places like that break even.
Yesterday I went to super Wal-mart and the place was crowded. However, it was a little strange. Lots of people milling around, but not a lot of carts or presents. People were mostly buying groceries, or just a little thing here or there, with only the occasional obvious gift. I expected the wrapping paper and ornament aisle to be decimated, but the shelves were still stuffed with cheap decor as if it had been stocked 10 minutes before.
Who most of you voted for..twice
The “A Home For All” Guy:
http://img183.imageshack.us/my.php?image=ahomeforallmc8.jpg
Ac-cent-tchu-ate the Positive
“Ac-cent-tchu-ate the positive. . . E-lim-in-ate the the negative. . . ” wrote lyricist Johnny Mercer in 1944. Things were pretty gloomy at the time with a war being fought by the United States on two fronts.
Wall Street moguls, commentators, and traders are singing that song right now, directing it at anybody who happens to notice that the nation’s economy is messed up and says so. They got their knickers into a big twist when former Fed chief Alan Greenspan dared to suggest recently that a recession might slide into view later this year. They have rushed to their keyboards and microphones to point out he said “possible” not “probable.” How could he even mention the hated “R” word? You must e-lim-in-ate the negative!
Real estate hustlers accented the positive so vigorously they created a phenomenal bubble that is now in the process of leaking air at a very fast rate. They want us to buy their current line, which is - - “It is true there were some distortions in a few markets, but that’s correcting itself and we’re experiencing a leveling-off and stabilizing in real estate.” This is not true, of course. There’s a lot of air yet to escape from that bubble, and the screams of the losers are being heard across the land. They’re discovering the down side of easy money and credit.
Is it negative to observe reality and say something about it? If you’re on an excursion boat and you notice it’s listing precariously are you being negative by suggesting that passengers climb to the high side and look around for life jackets? Is it somehow un-patriotic to criticize the administration and the U.S. Congress for running up a public debt that future generations must struggle with? What’s wrong with noticing that the stock market has sucked in tons of people’s money and has positioned itself for a sharp correction because equities are grossly overvalued? Can we forever keep stock gambling from correcting merely by saying over and over that the bulls are in charge and the only direction for prices is UP? Is it negative to raise an eyebrow at the millions of dollars of bonuses that Wall Street operatives walked away with last year and wonder how this benefits stock gamblers across the country? We’re not talking salaries and commissions - we’re talking bonuses!
“Eat, drink and be merry!” seems to me to be extremely negative advice, while “Save for a rainy day” blooms with a positive message. Today you’ll encounter lots of TV commercials that will tell you to have fun, spend money, and be happy. You’ll not hear one that will suggest you cut down on the flashy nights on the town and stick some money away as insurance against the inevitable day you’ll hit a rough spot in the road of life. That line of thinking is “too negative” in 2007.
We professional curmudgeons have developed a habit of looking at the world as it is. We don’t buy this business of looking the other way when our political leaders drain the treasury dry and tell us the world will be a happy place if we fork over just a few more tax dollars so they can straighten things out. If the politicos are robbing us we want their game stopped. If the mob is pushing for ruinous socialized medicine we want to push back and take the road marked Privatized Medicine. If a train is barreling down the track toward our stalled vehicle we want to get out and avoid personal disaster. What’s negative about that?
Let’s demand that the chattering classes on radio and television knock off the cheerleading and just deliver the facts to us. We’re grown up and can take it. If the United States is the world’s biggest debtor nation (it is!) just say so and knock off the puffery about “the world’s wealthiest nation with the highest standard of living on the globe.” No nation can borrow itself rich, although borrowing a couple of billion dollars a day can certainly postpone the day of reckoning.
With the confusion about the definition of “positive” I suggest a small revision to Johnny Mercer’s sixty-three year old lyric; “Ac-cent-tchu-ate reality…pro-mote more morality…Latch on to ac-tchu-ality, and don’t mess with Mister In-between.” There, Mr. Mercer! How does that sound?
Great post wmbz……. Its just so annoying when people will not talk about reality . How can anyone get constructive about solving problems is their MO is denial of the problem . Do people think that they are entitled to live in fairy tale world while they wait for someone else to deal with real life . I have seen this mentality my whole life and its enough to make me see red in my old age . Who ever said that real life wasn’t a string of challenges to overcome all the time and that’s the game and the sooner one gets into it the better off they will be .
For me ,dealing with the real true stark reality of life is a challenge that I like to take on ,but the BS la la stuff drives me crazy . That doesn’t mean I don’t like to embellish my world ,but I always know that any thing I have that buffers me from living in the jungle and not becoming prey is a blessing and many times well thought out ahead of time to obtain .
The (money-grubbing) New Age Movement of the ’80s told us that positive thoughts brought positive results, and negative thoughts brought negative results. It failed to mention that someone’s positive lobster dinner would have been a hideous negative for the poor lobster, or that someone’s positive McMansion would be a negative for the poor person or persons who had to clean it. It failed to note that every coin has two sides, and that every positive is someone else’s negative, and vice versa.
When it comes to getting things done for the suffering on this planet, it is those negative enough top notice the suffering who deserve most of the credit. Pollyanna’s are oblivious to child slave labor, homeless animals, and the other “negatives” of life.
Being too negative is repulsive, but being overly positive can be incredibly insensitive and irritating. “Yes, Mr. Jones, your wife did jump off the Empire State Building, but look on the bright side, you won’t have to put up with her snoring.”
Pretending that nothing is wrong rarely changes a situation. If positive thinking could fix everything, no dying celebrity would ever die, thanks to the good wishes and prayers of his adoring public, and there would be no ugly people who only think themselves beautiful. Denying the housing bubble and subsequent crash is stupidity, not magic therapy, but you will never get those hanging on for dear life to admit they’re hanging onto a noose.
Here we go again. It’s a zero sum game only if we play by your definitions.
“or that someone’s positive McMansion would be a negative for the poor person or persons who had to clean it.” So that poor person would be better off with no job?
You missed the point. I didn’t say the person would be better off without a job, and I didn’t say that the poor person was an employee. It could be the owner, saddled with the task of keeping the place up. I used the word in the sense of “unfortunate,” not “poverty-stricken.”
To believe one can wish oneself through life with all kinds of goodies, oblivious to the downside, is idiotic.
And no, there isn’t enough abundance to go around, if only people would think happy thoughts. Millions of animals starve every year throughout the world. Millions of humans die of malnutrition and related diseases. And all the humans who CAN afford to feed themselves and their pets are (often unwittingly) responsible for vast animal and insect suffering involved in the production of food.
Every positive has a negative attached to it, and vice versa. There is no getting around the Laws of Nature, no matter how hard Congress tries. If you can demonstrate separating the positive side of magnet from the negative side, I’ll eat my words.
For those of you, like me, who are in your early thirties, please review Dewey’s observations on real estate. Buy low, sell by 2025. The timing works out well for retirement.
http://en.wikipedia.org/wiki/Foundation_for_the_Study_of_Cycles
http://www.foxnews.com/story/0,2933,195675,00.html
Kinda’ sad that I don’t even wish I were still in my 30s anymore. I think my parents were the last to be able to look on the likelihood of a much better life for their children. Unless voters learn to refrain from voting for incumbents (which, sadly, won’t happen), I believe their quality of life will get worse.
Sorry for such a humbug observation at this time of year.
Unfortunately, I agree with you, Chip.
Still wishing you a Merry Chrismas, none-the-less!
Clearly, this whole problem with “cycles” is due to massive under-engineering of the controlling system gains. If our society was properly damped, we wouldn’t even be bothering to talk about cycles.
When is the last time we elected a controls engineer to be president? Never? Well, there you go!
Well - it’s really not helping that there’s a positive feedback loop in the middle of the system.
Most of you voted twice for the “a house for everyone” guy - right?
http://img183.imageshack.us/my.php?image=ahomeforallmc8.jpg
Nope, the last time I voted for a party candidate was 1984, but I get ‘it’, and the majority have no clue(IMHO). That’s why they move in herds.
P.S. Surely you don’t lay all the ‘blame’ on him. Extremely short sighted if that be the case. Then again most peoples attention span is roughly two weeks, and that’s for important stuff.
Basically, I have never had a good president in my lifetime. But who has? How far back would one have to go, to Lincoln?
http://en.wikipedia.org/wiki/List_of_Presidents_of_the_United_States
Thomas Jefferson.
What about Jackson, the anti-banker?
Reagan. First term. Alzheimer’s was already setting in during his second term.
Jimmy Carter!
Okay, he was in office during some really tumultuous times, but maybe we’d be better off if we had listened to him then?
At least he seems like one of the few presidents who actually cared about this country and was trying to do the right thing. He was also one of our most intelligent presidents.
Let’s see, selling the Panama Canal, bad-mouthing America in all the countries that harbor terrorists, what more could we love “J.C.” for?
Interesting Saturday. Grants Pass is right on I-5, the major interstate that ties
California, Oregon, and Washington together. It also is the nexus for travel to
the California and southern Oregon coast with highway 199. We had three large
RV dealerships and all the major car dealerships. No longer.
The last RV dealership went belly up yesterday and Ford closed the towns sole
dealership. One of the best used car lots, run by a good friend, is closing at the
end of the month. All this is a major blow to the city so it’s going to be interesting
to read Monday’s paper to see how they’re going to slant this.
I went up and talked with Jerry who owned the used car lot and his take was that
all the dealerships will probably close, no one’s buying…period. Everyone is tapped
out and are saving every cent they can for, what they see, as hard times a coming.
Lithia, a huge, publicly traded car sales company, with hundreds of dealerships
nation wide, has closed or consolidated five dealerships in Medford. We expect
to see the few remaining RV dealerships to either close or merge.
If any of you have local observations, please share.
Everyone is tapped
out and are saving every cent they can for, what they see, as hard times a coming.
Should have saved when the grasshoppers were fiddling. Then they could buy those used cars at huge discounts…(hmm…If most people really saved, we would not have this credit crisis in the first place).
It’s my turn to fiddle. I’ve been an ant from 2001 to recently. I find discounts everywhere. I can get whatever I want here in Los Angeles! I should thank the grasshoppers of this decade. They paved the way to where I’m able to live more than an upscale life.
Funny thing: The warnings of the real estate cheerleaders back in 2005 and 2006 that my rent would go up substantially - never came true. 1 to 2% annual rent increase this decade is not bad. And I know I could negotiate to even bring them down with so many houses empty and for rent. And how about those Series I bonds? 5% annual gains over the same period made renting the intelligent move.
I’m only worried about a sister of mine. Unemployed health care. I’ll be happy only when she finds a job. Her situation is really a downer for me. So I have to try to cheer myself up - by spending my cash!
“Funny thing: The warnings of the real estate cheerleaders back in 2005 and 2006 that my rent would go up substantially - never came true.”
Well, we did ridicule them here back when they made those warnings and so far as I am concerned, we can ridicule them even more today. Our rent this year will stay at the same level it was for the past two years. In a way, that is an increase, if you compare it to the plummeting price of the substitute asset (owner-occupied housing).
While certainly not a RE “cheerleader,” I was claiming back then that rents would rise…and the DID!!!
Our rent was $2,000 for a 4/2 in Coastal North County (San Diego) in mid-2004. After a year, our rent was raised to a pre-negotiated $2,100/mo. A house (model match, but pretty run-down) around the corner rented for $1,975 at about the same time we rented ours.
In 2005, rents really began taking off, and in 2006 another model-match rented for $2,800, IIRC. Then, smaller houses around us were renting for around $2,500-$2,800…and they were rented out within a week or two.
This is a desirable neighborhood with few rentals coming onto the market, so that certainly affects things, but I’ve seen similar rent increases in less desirable neighborhoods.
I also said back then that as we progressed through the bursting of the bubble, rents would decline again as the recession/depression worsened. Rents have been fairly flat since 2005, and prices have barely budged, unfortunately.
Still waiting for prices to drop in the better (upper-middle, not high-end) areas.
BiLA: Are you still doing the DCA thing? Not trying to criticize — just curious.
Yep. And sometime this week I will knife-catch by buying $1250 worth of DODFX. I think that fund distributes its dividend on Tuesday. I got $3,000 of matching contributions for my 2008 401k coming to me in January too. And since I turn 50 in 2008, I will put $26,000 or so of my own contributions into my 401k and IRA.
And no, I did not see my 401k statement lately. Maybe next September (2009) I will take a peek!
oops - turning 50 in 2009.
Then they could buy those used cars at huge discounts…
FWIW, I haven’t seen any of those discounts out this way, even though they aren’t moving.
I find it a little surprising that used car dealers would be closing already. When this current wave of car buying suppression is over, people will buy vehicles again.
I was thinking that they would find used cars more affordable, but maybe we’re in for a big change of new technology vehicles.
The problem is that so many businesses adopted a “just-in-time” model, not just for goods, but for sales! They keep just enough money to cover expenses until the next set of sales comes in, just in time. In other words, living paycheck-to-paycheck.
Used car dealerships could have made a killing if they had kept enough cash around to survive 2-3 lean years, but nope. They couldn’t wait that long. Ditto for furniture stores and the like. In business for 50 years, and two bad years bring them down? Nobody’s thinking.
You have to understand that a used car can be bought without a used car dealership. All you need is a gearhead friend to check out a used vehicle and you can knock off $1k-$2k from the dealership price for a similar car.
Also, used car dealers typically source their cars from either fleets or lease expiries. Both those categories should suffer badly over the coming years.
FSBO used cars may come back. It’s almost impossible to find 3-4 yr old cars w/o going to a dealer. Leasing or maybe too much easy money stopped people from selling their used cars. I wish it would come back, I never trust dealers.
Spent an hour in my fairly large dealership’s showroom Friday, while my car was being serviced. Not one customer came in. All the reps were eager to shoot the bull, so they must be pretty lonely. Sad.
Our 2009 Predictions
Roger Wiegand
Dec 22, 2008
“We think we now have enough data from both the fundamentals and technicals to make some serious forecasts and predictions for 2009. While 2008 was a nasty year when lots of things imploded, they are far from being repaired. Treasury Secretary Paulson told us this week there are no more surprises, which tells me we haven’t even discovered but a small portion of this monster derivative mess. His ripping-off of the taxpayers to the tune of $700 billion is only a warm-up. However, the larger question for traders and investors is what could happen next and when.
In the following report we take the key global economic points and suggest the outcome for 2009.”
-Traderrog
The most important news for 2008 was the destruction of the big global banks’ net worth and their badly wounded ability to conduct normal business and make market-moving loans. Ben & Hank’s bailout only helped the bad-boy banks reliquify themselves to remain somewhat solvent and stay in business. They are doing nothing to extend credit to any business enhancing western or global economies. The 2009 result will be no significant banker lending, taking more bailout money and sweeping additional bad loans of all stripes under the banker’s rug and hiding the rest in back rooms.
The largest surprise in our view was the massive disaster at insurance giant AIG. Despite numerous injections of bailout billions, AIG remains in very serious trouble hanging on by their proverbial fingernails. The 2009 result will be a surprise crash and failure of AIG frightening the world at large causing ripples of failures throughout western and Asian nations unable to conduct business without mandatory insurance policies. Most folks have no comprehension as to the monster fallout this will create. It is in our view literally immeasurable, and this is why Paulson handed them so much money.
Our new president is determined to hand out $860 Billion to One Trillion dollars in a Herculean effort to literally buy a new economic recovery. While some of his ideas are noble indeed the overall plan
will have little effect and Great Depression II shall take hold in 2009 with crashing stock markets in May and September-October 2009. We think the worst of the worst hits in later September 2009.
During the spring of next year we see:
(1) A second larger wave of residential housing mortgage failures; (2) The first big wave of auto loan failures and repossessions; (3) Over $40 billion in credit card defaults, smashing the bank lenders; (4) The first wave of commercial mortgage failures and foreclosures on shopping malls, office buildings and other commercials; (5) And finally, the grand smashing finale of CDS Credit Default Swaps originated with No margin money or down payments! We heard today the total is 500 trillion! I cannot even fathom that number. These five converging train wrecks could take the Dow from a dead cat bounce of 10400-10800 back to 7250, or even 6600, or 5600.
“… Great Depression II shall take hold in 2009 with crashing stock markets in May and September-October 2009. We think the worst of the worst hits in late September 2009.”
Yep. Get your money ready, the stock buying opportunity of a lifetime awaits for those fully armed with cash and knowledge.
What about those of us with 401K stock already? Should we convert temporarily in May to money market or so, and move it back after the capitulation?
You know, for those of us who don’t have $100K’s of cash lying around gathering dust?
You know not to do anything rash based upon forum advice - right? Everyone here knows that -right? I trust most here hold an investment mix based upon their time horizon and risk tolerance, and that they know to keep their fees, costs, fund expenses as low as possible. Making timed purchases of investments within your portfolio in accordance with your portfolio allocation and your time till retirement is about the best way to go. Market timing is almost always a losers game. No one knows what the future holds, but staying diversified, and moving toward a larger concentration of fixed assets as the time we need to draw from our retirement savings nears is the sensible way to go.
I don’t know, moving my 457k monies from equities to a fixed money mkt. account in 12/07, saved me around $90,000-$100,000 in paper losses.
Thank you, I am quite familiar with the textbook talking points of dollar cost averaging, asset allocation, staying below 1% fees etc. Are these the same talking points that use 12% as the default return in their calculators, and assume that I will need 80% of my income when I retire?
In this environment, assuming a year of slightly dropping stock market, or at least of little tangible gain, is not all that risky. I’m not about to move millions of stocks into my mattress. I’m talking about a temporary (6 month) shift of part of an existing fund that is heavy on financial blue chips which may capitulate. And who said I wouldn’t continue dollar cost averaging on top of that? At the very worst, I would be “selling in May and walking away.” There’s not a lot to lose here.
I’ve done nothing yet, and probably won’t anyway. But rest assured, if you think that we (anyone here) blindly falls for get-rich-quick schemes, then you’re on the wrong blog.
I’m turning 50 in 2009. My 401ks and IRAs are 100% into stock mutual funds. As long as I continue working I will continue to “catch the falling knife,” as some of you nay-sayers would call me, and buy stock mutual funds.
Buying stock means you buy part of a company, and in a diversified fund, that means you tend to buy something that is real and has some value. Others of you will just buy gold. I invest in the products of the human brain. The brain will not stop being creative, depression or not.
Ask yourself is there not more wealth in the world in 2008 versus 1908. Is there not a higher standard of living in the developed countries? Are people not living longer, more youthful lives now than in 1908? What we have today is the result of thinking.
Interesting, Bill. The problem I see is that the companies you are buying do not own the human brain. Their human capital– their employees– are free to leave at any time. When and if the economy improves, those employees will have very little sense of loyalty (after the endless rounds of layoffs from 2000 to the present) to keep them from bolting.
True, your companies will benefit from improvements in technology along the way. But, as with the recovery from the Great Depression, the real winners will likely not be today’s established companies, but tomorrow’s startups. It’s pretty hard to find a mutual fund that can identify such winners reliably.
I suppose you never worked in a corporation. You sign an agreement usually transferring royalties, patents, etc. to the company, although that is negotiable. I worked in several corporations over the last 12 years and saw that all the time. The previous 11 years - federal employee. Of course, the federal government gets all royalties in that case.
I agree with you on startup companies. That is why I also allocate 10% of my retirement funds in small company stock funds.
Bill, I’ve worked for plenty of corporations (too many, but that’s another story), and I don’t know that there’s any standard agreement on patents/etc.,
but I presume that if anyone has a really good idea, they’re not going to say anything about it, or at least not work very hard to perfect it, until they’ve left the co. and can profit as fully as possible for themselves.
In any case, I would think patents are a pretty tenuous basis for holding up the stock market, and thus supporting a retirement plan, when the law governing them is fairly confused and in flux. In the past year or two the courts have handed down (quite rightly, IMO) some decisions that significantly curtail patentholders’ rights, especially in the areas of software and business methods.
“You know not to do anything rash based upon forum advice - right? Everyone here knows that -right? ”
Oh great now you tell me
Still in bonds and cash mostly, my house money. But right now I have my 401K at work gunned to 25% of my Gross income all going into stocks Vanguard Total stock and Vanguard International stock. And work also stopped the 3% 401K match and no more raises. Bad times for most companies, Secular Bear market. I’m 48 and hope my 401K money will outlast the bear. My house money I’m keeping safe for a house….. buy at the bottom or as close as I can get. Tricky because it won’t be in Phoenix so I’ll have to move at about the bottom.
And yes I fear hyper inflation but not today.
In 2009 b@ilout-envy will lead to even more walk-aways and other forms of civil disobedience. After many lose their jobs, homes, savings, and hope for their children’s future, they will then lose their minds. This will not end quietly.
500 trillion?…..?
extra zero maybe, but i can’t count that high.
“The 2009 result will be no significant banker lending, taking more bailout money and sweeping additional bad loans of all stripes under the banker’s rug and hiding the rest in back rooms.”
I am frankly amazed with the banking industry’s apparent ability to hide elephants under the living room rug for an indefinite period of time. Of course, by now it is rather obvious that this procedure ultimately creates quite a stench.
Here is a very interesting take on the residential construction situation in San Diego. It sure sounds to me like a winter of discontent for the construction industry, but perhaps this reflects my pessimistic side.
Not mentioned in the article: Without fanfare, the principal newspaper for the city where people used to make a fortune buying and selling each other houses has apparently eliminated its Sunday Homes section. This is certainly a sign of the times if ever there was one.
Building up bravery
Some in home construction are taking a gamble on 2009
By Roger Showley / STAFF WRITER
12:02 a.m. December 21, 2008
Michael Sabourin (left), president of Cornerstone Communities, and Ure Kretowicz, chief executive officer, weathered the rain at their Estates at Stonebridge project in Poway last week. - Union-Tribune
For some San Diego builders, this is not the winter of their discontent.
…
This year is the worst in a long time on many fronts. Sales of new homes through November totaled 3,502, putting sales on pace to reach an all-time low in 20 years of record keeping by MDA DataQuick.
This year, local agencies have authorized 5,015 houses, condos and apartments, also the lowest seen in 20 years by the Construction Industry Research Board.
The San Diego County Building Industry Association board was so devastated by the downturn this year that it canceled its glittery SAM Awards banquet, when builders collect kudos for smart marketing and sharp design. That’s like canceling the Oscars for lack of films to showcase.
Local builder Bill Davidson, a perennial SAM winner, calls 2009 a “kind of goose egg” year, in which he will continue building two North County projects but has only distant hopes of finding new land and financing on which to start something in the second half.
“This is the time when money’s made if you’re in the lucky place and at the right time,” said Davidson, who has been in business for 30 years.
Other builders have found a way to survive and expand in the face of retrenchment. KB Home, a publicly traded company, is one of the few that remain in San Diego County, and it has plans for new projects next year.
KB’s Southern California divisional president, Steve Ruffner, said the company will start two projects in Carlsbad and Fallbrook designed with the company’s green theme, “My Home, My Earth.”
“We’ve done very well in downturns with our communities,” Ruffner said. “We think we have more to offer over resales. As we say, you only need a toothbrush, not a paintbrush.”
Another longtime public builder, Pardee Homes, a division of Weyerhaeuser Corp., is planning to open the 147-home Manzanita Trail in Pacific Highlands Ranch in Carmel Valley next spring.
“San Diego is always going to be a desirable place to be,” said Beth Fischer, local division president. “If the financing is available and jobs are available, there will be people who are interested in purchasing homes here. … Those are key, obviously.”
Sharon Hanley, who started her housing career in 1971 selling new condos in Solana Beach, issues weekly reports on new-home sales. She said 181 projects are actively selling while 100 have been suspended, rescheduled or converted to rentals.
“This is the worst year I’ve seen in my years of following the market,” Hanley said. “I think the market will stay about the same as it has been, which is abysmal.”
Promising sign: When the builders (= industry insiders) are saying residential housing is in the worst shape it has ever been, and will stay there for a while, Joe Real Estate Investor is likely to get the memo within the next three years or so.
Good overview of President F@#kup’s housing f@#kup.
http://www.nytimes.com/2008/12/21/business/21admin.html?_r=1&hp
That article really puts much of what has happened in the housing industry over the past eight years into perspective. Take home message:
Top-down, market distorting, centrally-planned command-and-control housing policy juxtaposed against hands-off financial deregulation measures is the recipe for a perfect financial maelstrom of historic proportions.
I thought the first chart kind of ruined that whole thesis, however. The Bush administration couldn’t even keep the home ownership rate-of-increase growing at the rate it had started in the Clinton years.
I should strike the “eight years” from the thesis, as top-down market-distorting housing policy was already in full effect during Clinton’s era.
In defense of President Bush, I predict the heights of market distorting
housing policy social engineering efforts soon to be achieved under the newly elected Democratic President and Congress will put to shame anything that happened over the past eight years.
Based on what? Show me where the “market distorting
housing policy social engineering efforts” of the past (i.e. FHA, GI Bill, New Deal, Great Society) was in any way comparable to what has happened these last eight years. In fact the post war housing market which grew with the help of all those programs you seem to deride was one of the most stable and healthy this country ever had.
According to the most knowledgable folks I know on housing prices (Shiller, Roubini, Stiglitz) there has never been a real estate bubble that compares to this.
Ed,
You have been reading here for a while. Surely you have heard of:
- the mortgage interest deduction
- the Clinton $500K capital gains tax exclusion
- HUD, FHA, FNM, FRE and other government agencies whose missions involve isomg market-distorting taxpayer-funded demand-side stimulus to help people purchase homes that they otherwise could not afford
- government-subsidized mortgage guarantees to help encourage lenders to make loans that would not be financially prudent based on traditional underwriting guidelines
I am sure you could think of a few more ill-conceived housing market social engineering efforts if you really put your mind to the task.
isomgusingI can think of one more, the tax overhaul under Reagan, 1984? I think. Basically, did away with all tax deductions other than those RE related ( mort. int and prop. tax). This has been going on a long time, Ed. And the Dems appear to want to continue the charade.
Presidents can make speaches and ask for favors, but they still are not in the Legislative Branch.
I think I posted this here before, but I have thought for awhile that debt (or lending at low rates) is some of the only common ground that politicians from the left and the right found, and that is partly why it got so massive (and so massive globally).
On the left: low-interest, high availability loans made to low-income types is a gateway for them to enter the middle-class via home and small business ownership. On the right: less regulation of lending and banking institutions is favoured, and allowing people to take on more debt stimulates consumer demand and is popular with many ion the business community. Not that both points of view are not valid, but with moderation, and neither side provided moderation to the other.
This is one of the main reasons that left-right tit for tat is getting on my nerves, even though I do believe that there is a difference between parties and that participation in government is the duty of a citizen (I’m earnest that way
).
“On the left: low-interest, high availability loans made to low-income types is a gateway for them to enter the middle-class via home and small business ownership.”
Sounds great until the onset of an ‘unexpected’ combined recession and foreclosure crisis. But I suppose the situation at hand could be viewed as a wonderful opportunity for top Democratic Congressfolk (some of whom were instrumental in providing incentives for low income families to buy houses they could not afford) to show how much they care by passing foreclosure rescue measures.
I’m not saying either side is correct, just pointing out how low-cost debt fits into their respective ideologies, and why each “side” has had little reason to curb lending.
“there has never been a real estate bubble that compares to this.”
If you exchange “real estate” for “tech stock/stock market” in the late 90’s, you gonna blame Clinton for that??
Bet not.
Blaming one person for it all is about as naive as you can get.
yeah, I am so confused. I thought it was those snobby california realtors taking on a movie star aura. Buy a home and become the gorgeous couple who just jumed into a private jet and ate spa food.
It’s the media who started this mess and the realtors were the talent.
Bush is like the current Dilbert goat theme. Anything bad happens, blame him.
“Post Hoc Ergo Propter Hoc” is one of the oldest fallacies in logical reasoning known to man.
For example: “Warren Buffet has run Berkshire since 2000. The financial crash happened after 2000. Therefore, Warren Buffet is responsible for the financial crash.” Absurd, right?
Substitute “George Bush” and “Oval Office” in the syllogism and 75% of America agrees.
there is the one minor detail in which George Bush headed the executive branch of the world’s mightiest government over the supine corpse of the legislature that whole time, but, yeah, aside from that…
‘It was an opportunity to address the risky subprime lending practices head on. But that was never seriously discussed. More senior aides, like Karl Rove, Mr. Bush’s chief political strategist, were wary of overly regulating an industry that, Mr. Rove said in an interview, provided “a valuable service to people who could not otherwise get credit.” While he had some concerns about the industry’s practices, he said, “it did provide an opportunity for people, a lot of whom are still in their houses today.”’
Thanks to the NY Times editors for reporting this story, in all six pages of delicious details.
History lesson: The most aggressive bully in the room is not often also the smartest guy in the room.
Unheeded Warnings
Jason Thomas had a nagging feeling.
The New Century Financial Corporation, a huge subprime lender whose mortgages were bundled into securities sold around the world, was headed for bankruptcy in March 2007. Mr. Thomas, an economic analyst for President Bush, was responsible for determining whether it was a hint of things to come.
At 29, Mr. Thomas had followed a fast-track career path that took him from a Buffalo meatpacking plant, where he worked as a statistician, to the White House. He was seen as a whiz kid, “a brilliant guy,” his former boss, Mr. Hubbard, says.
As Mr. Thomas began digging into New Century’s failure that spring, he became fixated on a particular statistic, the rent-to-own ratio.
Typically, as home prices increase, rental costs rise proportionally. But Mr. Thomas sent charts to top White House and Treasury officials showing that the monthly cost of owning far outpaced the cost to rent. To Mr. Thomas, it was a sign that housing prices were wildly inflated and bound to plunge, a condition that could set off a foreclosure crisis as conventional and subprime borrowers with little equity found they owed more than their houses were worth.
It was not the Bush team’s first warning. The previous year, Mr. Lindsay, the former chief economics adviser, returned to the White House to tell his old colleagues that housing prices were headed for a crash. But housing values are hard to evaluate, and Mr. Lindsay had a reputation as a market pessimist, said Mr. Hubbard, adding, “I thought, ‘He’s always a bear.’ ”
In retrospect, Mr. Hubbard said, Mr. Lindsay was “absolutely right,” and Mr. Thomas’s charts “should have been a signal.”
Instead, the prevailing view at the White House was that the problems in the housing market were limited to subprime borrowers unable to make their payments as their adjustable mortgages reset to higher rates. That belief was shared by Mr. Bush’s new Treasury secretary, Mr. Paulson.
It is an epic article. Absolutely incredible.
Thanks for the link, PB.
Thanks to edhopper.
Did Bush and Paulson seriously believe that subprime borrowers were the only buyers who would experience a mortgage payment reset? The big boys got caught in the FICO-is-everything trap. In 2006 I had a high FICO and a medium income. Would I have been able to make the mortgage for a large home 6x my income? For 30 years? Of course not.
I knew it, you all knew it, Shiller Krugman Roubini and that other guy knew it. Banks knew it but ignored it. Where was Paulson in all this? Oh, right, at Goldman Sachs.
“Where was Paulson in all this? Oh, right, at Goldman Sachs.”
..getting his millions in compensation to continue the swindles.
shucks we got it wrong and will need another 700 billion right away.
The correct figure is $800 bn. Get your figures straight.
I wonder if Mr. Thomas reads the blog.
Exactly my question!
There are more great articles in this series. I hope the NY Times wins a Pulitzer for their efforts to shine a bright spot light on the culprits who are responsible for the financial catastrophe at hand.
The Reckoning
A Champion of Wall Street Reaps Benefits
Brendan Smialowski for The New York Times
Senator Charles Schumer meeting with Neel T. Kashkari, center, the official in charge of the $700 billion federal bailout.
By ERIC LIPTON and RAYMOND HERNANDEZ
Published: December 13, 2008
“We are not going to rest until we change the rules, change the laws and make sure New York remains No. 1 for decades on into the future.”
— Senator Charles E. Schumer, referring to financial regulations, Jan. 22, 2007
“The Reckoning”
That is a funny way to spell ‘The Wrecking’
In a nutshell, Democratic Sen. Chuck Schumer(NY) pushed for a clear conflict of interest involving the rating agencies. The corruption in the rating agencies allowed the banks to package these bad loans and more importantly encouraged them to write more bad loans. Anyone else want to appoint Chuck Schumer as ‘King Rat’ in the mortgage crisis and subsequent global economic crisis?
Nah, it’s easier to beat up on Bush & Co.
“Anyone else want to appoint Chuck Schumer as ‘King Rat’ in the mortgage crisis and subsequent global economic crisis?”
I guess that leaves the role of ‘Queen Rat’ to Barney Frank?
ROTF
Yes - very apropos this week (A Nutcracker reference I presume right?)
In Somalia, pirates get money, prestige, women
In Somalia, it’s an attractive option, bringing money, prestige and women…
By Shashank Bengali
McClatchy Newspapers
Article Last Updated: 12/20/2008 07:37:07 PM CST
NAIROBI, Kenya — There’s at least one job these days that’s recession-proof, if you can handle shark-infested seas, outrun powerful navies and keep your cool when hostages get antsy.
A pirate’s life in Somalia isn’t for everyone. However, when you consider the dearth of career options there, a pirate’s life starts to look more than cushy by comparison.
“Is there any Somali who can earn a million dollars for any business? We get millions of dollars easily for one attack,” bragged Salah Ali Samatar, 32, who spoke by phone from Eyl on the desolate northern coast.
Hundreds of pirates such as Samatar — zipping around in fiberglass speedboats armed with automatic rifles — have turned the waters off East Africa into a terrifying gantlet for cargo vessels, tankers and even cruise ships. The International Maritime Bureau says 42 ships have been hijacked this year, and experts in neighboring Kenya estimate Somali pirates have pocketed $30 million in ransom.
While their countrymen face the threat of famine, pirates in northern Somalia are building houses, buying cell phones and SUVs, giving relatives hundreds of dollars and winning the attention of beautiful women, who seem to be flocking to the area from miles around.
Shopkeepers charge the pirates a premium for food and khat — a narcotic leaf that Somali men chew religiously — but the buccaneers don’t seem to mind.
And the difference between that and the NYC hedge fund managers is …
The pirating industry is strengthening, while the hedge fund industry is going up in flames.
Right on, puddytat. My post hasn’t shown up yet, but you said everything I wanted to say.
These innovators don’t make political contributions.
oof, nice one.
did anyone else notice how popular the jolly roger became (in fashion and design) this decade? Coincidence?
And the difference between that and the NYC hedge fund managers is:
Somalian Pirate: Arrrrrrrg me matey, thats not a bagette in me pocket.
NYC Hedge Fund Manager: Where’s the @#$#%’in bagholders pocket?
MEOW…..
Here’s a possible solution: http://www.executiveaction.com/opendoors
“Think of us as a McKinsey & Company with muscle, a private CIA and Defense Department available to address your most intractable problems and difficult challenges,” Livingstone said.”
I thought Blackwater already had that market sewn up?
LMAO! How are these guys any different than the Wall Street Mob? Or the Federal Reserve? Or the toll takers working for the foreign companies that now own some of our roads?
I don’t agree with piracy, in any form.
But right now, the Somali pirates and Governor Blagoevich are uniquely poised to be unlikely heros.
No kidding! It sure seems like Blago knows something, something that might make a lot of folks uncomfortable.
it sure seems like Blago knows something
He knows that he is omnipotent and has complete power over time and space. I am under the impression that he is mentally ill and/or a pathological narcissist. Time will tell.
Has anyone found themselves wondering how high seas piracy is flourishing during the same era as “The War on Terror”?
Historians will have a field day with the 00’s.
I remember way back in 2000 when Bill Buckley was ruminating on what the decade would be called - the aughts, the naughts, the double zeros came up as possibilities. Here we are now only 12 months from the end of it and I sure as heck still don’t know the name.
I have. It’s crazy. I thought we got piracy, oh, about 1800 or so.
Also, at what point does everyone smarten up and avoid the area entirely? (I’m assuming that’s possible as it seems like fiberglass speed boats would have a limited range.)
In the early 1800s, the concern was how to catch them.
In the early 2000’s, the U.S. Navy’s concern, apparently, is whining about how they don’t know what they would do with them IF they caught some.
It will be interesting to see if this gets better or worse in the short term.
You don’t catch them, you kill them. This sorta sends a message to other would be pirates.
You don’t catch them, you kill them.
Not allowed anymore - thus the Navy’s conundrum. Every person who shows up with guns in the middle of the ocean to take over a large ship deserves their day in court. After all, it could have been a bad day, or mistaken identity or something.
I can’t tell you how often I’ve found myself with automatic weapons on an ocean going ship on an “accidental” rampage after a day where I just can’t get the kids to listen. (I tie a string around my finger to make sure I “don’t forget” to demand ransom.) I’m sure it’s happened to everyone here as well.
Well, geography is a bit difficult to avoid…
Sound like a revenue generating opportunity for the US Navy. We can now be the world’s bodyguard.
The guards hired to protect merchant ships from pirates use high pressure water to try and discourage the attackers. The pirates use guns and RPGs. Afraid of acually hurting pirates ? I think this is going to change in 2009
So far as I am aware, easy money loans do not easily fit into Santa’s bag of presents.
Dean Calbreath: Home loans, health care top holiday wish list
12:02 a.m. December 21, 2008
After several months of dealing with my kids’ Santa Claus wish lists – Lego sets! Bakugan toys! Disney DVDs! A rocket ship to the moon! – I spent the past week coming up with my own small wish list of items that I hope could magically appear this holiday season.
…
So here goes:
1. A 4 percent mortgage rate. Not just for me. I mean for everybody with the financial wherewithal to pay for it – including people whose home prices are currently upside down.
Just a couple of weeks ago, this wish would have seemed about as realistic as my daughter’s hope for a lunar rocket ride. But these days, with the Federal Reserve’s benchmark federal funds rate flat-lining around zero, a mortgage rate of 4 percent is not necessarily a fantasy.
Last week, some lenders slashed the rates on their 30-year mortgages to as low as 4.5 percent. If we’re lucky, we could see lenders push the rate to the 4 percent mark or even lower.
Currently, such rates are available only to people with sterling credit records who have right-side-up mortgages (i.e., mortgages whose principal is less than the current market value of the home).
But why not broaden it?
If lenders could combine the lure of the 4 percent rate with other measures to reduce or postpone payments on the principal of the mortgage, that could be enough to entice a large number of upside-down borrowers to stay in their homes.
Such a move would help stabilize the housing market by reducing the number of foreclosures. That in turn would help stabilize the economy, which stands on the precipice of the greatest economic slump since the Great Depression. And it would stimulate the economy by putting more money into the pockets of people who refinance their homes.
Mark Goldman, a real estate professor at San Diego State University, estimates that most borrowers could save several hundred dollars a month if they refinanced to a mortgage with an interest rate of 4.5 percent or less.
“That could free up cash flow for consumer spending or increased savings,” Goldman said. “If a ‘refi’ could reduce a mortgage payment by $300 a month for a family, it could improve their financial health and contribute to the economy as a whole.”
When I got married, almost four decades ago, my FIL was making the last payments on his 3% mortgage from the 1950s.
http://www.bloomberg.com/apps/news?pid=20601087&sid=aLRvQBfKvPeM&refer=home
FBI shifts agents from terrorism to probing subprime collapse and Wall Street fraud, years after the horse has left the barn.
The horse died years ago after it was let out of the barn into the pelting rain.
http://www.larouchepub.com/other/2008/3549bailouts_wont_save.html
Latest from Executive Intelligence Review - Why bailouts won’t save the collapsing global economy.
http://www.larouchepub.com/other/2008/3548panic_talk_ph-econ.html
System in Liquidation Panic; Time To Talk Physical Economy (instead of bailing out the speculators).
Excellent articles. Thank you for posting these, as usual!
When will people have enough of this?
AP study finds $1.6B went to bailed-out bank execs
http://news.yahoo.com/s/ap/20081221/ap_on_bi_ge/executive_bailouts
Benefits included cash bonuses, stock options, personal use of company jets and chauffeurs, home security, country club memberships and professional money management, the AP review of federal securities documents found.
How much of the $1.6B went into Charles Schumer’s campaign contribution war chest?
Exeter will say $0, because Schumer is a Democrat.
The hedge fund tax loophole is a crystal-clear example of unjustified privilege. Because of a quirk in the law, the people who run these funds don’t pay taxes like ordinary mortals.
For example, the salaries that pension fund employees receive for managing other peoples’ money are taxed as ordinary income, at rates up to 35 percent. But if that money is invested with a hedge fund — and 40 percent of the money in hedge funds comes from public, corporate and union pension plans — the fees the hedge fund manager receives for his services are mainly taxed as capital gains, with a maximum rate of 15 percent.
The arguments usually made on behalf of this unique privilege make no sense. We’re told that the tax rate on hedge fund managers has to be kept low to encourage risk-taking. But the managers aren’t risking their own money. The only risk they face is the uncertainty of their fees — and as any waitress who depends on tips or salesman who depends on commissions can tell you, most people with uncertain incomes don’t get any special tax breaks.
We’re also told that management fees would rise, reducing returns to investors, if the privileged status of fund managers is eliminated — as if someone with a $100-million-a-year hedge fund job would walk away if his take-home pay fell from $85 million to $65 million.
And we’re talking about a lot of lost revenue here. The Economic Policy Institute estimates that the hedge fund loophole costs the government $6.3 billion a year — the cost of providing health care to three million children. Of that total, almost $2 billion a year in unjustified tax breaks goes to just 25 individuals.
http://query.nytimes.com/gst/fullpage.html?res=9F00E3DA1630F930A3575BC0A9619C8B63
Imagine what happens when Murdoch buys NYT.
Business as usual!
Blagojevich Took Home-Equity Credit Line as Legal Bills Grew
Dec. 20 (Bloomberg) — With legal bills from a federal corruption probe nearing $1 million a year ago, Rod Blagojevich and his wife took out a $104,000 home-equity line of credit on their Chicago residence, real estate records show.
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BWAHAHAHAAHAAAA
Heloc to pay the @#$%in bloodsuckers….@#$%^^’in crooks…
Was he a Countrywide VIP borrower? Please say yes — please, please, please!!!
“When will people have enough of this?”
I think people have had enough of it, but find enough satisfaction in making one-liner b*itchy comments about the other guy’s party/president. That’s not citizenship, it’s just a form of celebrity gossip.
De-intertwining (OK that’s not a word) lobbyist and special interest groups from government requires consistent, patient attention, and is pretty hampered if you treat the situation like a football game where your team just scored a point - booyah! It’s getting old.
Honesty makes a comeback in the WH. Been a long time.
According to the report, Emanuel had only one “pro-forma” courtesy call with the embattled Illinois governor. Also, Emanuel is on tape telling Blagojevich’s chief of staff that Obama would not offer any favors to induce the governor to choose Obama’s favored candidate.
Sources also confirm that Emanuel made the case for picking Obama confidante Valerie Jarrett during at least one of the conversations [with Blagojevich's chief of staff John Harris]. In the course of that conversation, Harris asked if in return for picking Jarrett, “all we get is appreciation, right?” “Right,” Emanuel responded.
I have no idea how long honest people can last in DC but I am rooting for these guys regardless. All this was caught on tape.
A breath of fresh air after 8 years of outrageous corruption at the highest levels.
I see your point about a little ray of hope and all, but a lone instance of not being caught making deals hardly proves its absence. Still, it’s good to at least start with high hopes, and expectations of trickle down honesty.
Some of the old cronies O’b has surrounded himself with may jeopardize this hope. We’ll see.
BTW, do you have any specific examples to support your claim that Bush is corrupt? Weak or wrong policy aside.
“BTW, do you have any specific examples to support your claim that Bush is corrupt? Weak or wrong policy aside.
Are you serious? How about, I dunno, current events? :rofl:
Which current events? some of us, that don’t lean so far left, may not see what seems perfectly obvious to you. The question was obvious corruption, like Blago. I’d say, after reading the article re: Schumer, that Chuckie has GWB beat- hands down.
I’m a moderate, thank you. I know, we’re a rare breed not really represented in MSM, so it’s easy to make mistake us for lefties in this day and age.
You are living through the most corrupt age in American history. Again, I say, how about current events?
SEC?
Justice Dept.?
Torture?
Any of these ring a bell?
Twas duh night before Obamass, when all through the House
not a Pelosi was stirring, not even mouse
The bailouts were hung on Americans with care
in hopes that mahdi Obama soon would be there
The unions were nestled all snug in their beds
while visions of vote scams hung in their heads
With Barack and Michelle in a Hawaiian bungalow
The rest of the world could all cuddle in snow
When out in the world there arose such snow storms
Al Gore even had shivers in his Global Warm
But with all of the heat of Senate seats sold
Barack was quite warm beating back all Rahm had told
With all of the scandal in Barack’s do or dare
It reminded him so of his date with Lawrence Sinclair
When what to his wondering eyes should appear
But Patrick Fitzgerald with new indictments so near
With rattling papers and justice department agents
Barry wondered out loud where his good luck had all went
Phone taps, wire taps, email taps galore
Crimes kept piling up more and some more
Now money fraud! Now vote fraud!
Now fraudulent loans
On indictments! On convictions!
On kickbacks for my mansion home!
From the top of the porch
To the top of the wall
FBI agents everywhere
FBI agents all!
Blagojevich, Rezko, Auchi and ACORN
Questions of Hawaii in where I was born
Crimes upon crimes out of the blue
What is a rich Prime Minister to do
So what if I’m Kenyan and should be in Parliament
I just in low self esteem wanted to be a President
So what if I’m Indonesian and traveled to Pakistan
My passports are hidden can’t you understand
So what if terrorists bribed me and the country is broke
So what if I told Israel to wait to go up in nuclear smoke
So what if I’m a liar it is the season of cheer
Because it is Obamass and your mahdi is here
Ignore the evidence as the media has done
Ignore all the crimes because the election I won
Don’t search too hard for minorities in my cabinet with power
For this is my time, it is the Barack Hussein hour
Forget that my children are too good for public school
We are the first family and in DC to rule
Just think of it all as doing no harm
Sort of like swine in the house at George Orwell’s Animal Farm
So what if the financiers destroyed all the world to get me here
I’m no criminal that should be so very clear
Laws mean nothing for each period and comma
Laws mean nothing as I’m Barack Obama
So excuse me if I investigate all of this myself
And declare I’m innocent with indictments on the shelf
There is no such thing as an Obama crime
So excuse me I’m on vacation and Michelle say it’s pool time
So the mahdi Obama away he did run
Smoking his cigarettes and splashing in the ocean for fun
But the world was puzzled as he called out of sight
“Merry Obamass to me, and to my halo so bright!”
http://www.larouchepub.com/eiw/public/2008/2008_1-9/2008_1-9/2008-7/pdf/08_3507.pdf
[Note: PDF File]
Obama and his coterie a “breath of fresh air”? The media-suppressed scandal of Obama’s ties to slumlord and convicted felon Tony Rezko are just the tip of the iceberg when it comes to Obama - a typical product of Chicago’s corrupt Democratic party machine. Since he has the controlled media eating out of his hand, don’t expect to read too much about these scandals in the MSM, however.
Oh good. I was getting worried that John Stuart and Stephen Cobert would run out of material after inauguration day next year, but your post reassures me this is not the case.
Daily Show Headline: Data Damns Bush Policy
Colbert: Bush Policy Damns Data
either way, Bad Data gets the blame.
-its not whether you win or lose, its how the blame is dated.
it reads better as:
Its not whather you win or lose, its how blame the data.
ok, back to shopping online.
whather=whether.
@#$%in keyboard always screwing up !!!
Its not whether you win or lose, its how you place the blame.
Went to the Miracle Mile on Long Island which is a all high end stores like chanel, gucci versace etc and it was empty on the The staff which is usually snooty was kind of very sheepish in announcing the sales. This place has ample parking the last two weeks i pass by.
Roosevelt Filed Mall was packed as the sheeple was busy picking up crap for their dear ones. Looks like the rich are smart and can see what is coming or are more affected by the delevearging as they are the ones with assets while the sheeple dont care as lonfg as they have a job which may not be for long.
Associated Press study summary on incentives given to bank executives in 2008:
“The total amount given to nearly 600 executives would cover bailout costs for many of the 116 banks that have so far accepted tax dollars to boost their bottom lines.”
..better to divert the public’s attention to the hourly pay of UAW workers than focus on the millions in incentives paid out to bank big wigs whose banks reaped all that federal bailout money.
You don’t think people might be outraged at both?? That someone can’t comprehend both sides are to blame?? Is some of that elitist arrogance that gets thrown around here rubbing off on you too??
“You don’t think people might be outraged at both??”
Sure, it’s easy
But, sometimes I feel like outrage about mismanagement at the top is supposed to be justified by stupid decisions by waitresses and strawberry pickers who bought 1/2 million dollar homes. A sort of “we all got a little bit crazy, and everyone was being greedy” sort of justification. To me there is a difference between a dumb “FB” and corrupted government official, or a company that structured itself in a dangerours way, with lots of bonuses in the meantime. The differences to me are: knowledge/education and scale of intent. The strawberry picker is the thug who issues a hit, not a mafia don.
I don’t support bailing out underwater mortgage holders, and some will suffer real hardship as a result of their bad decisions. Unfortunately, the world isn’t fair, and some will slip through unscathed and some people who were “good” will lose out.
I do support a serious criminal investigation of people and organizations who deliberately set out to profit from this mess, especially if they held a position in which they were paid handsomely to avoid or regulate such a mess.
Agree 100%!!!
Not to mention the $200BN fed money some hedge funds just received.
A quick scan on Google News shows this is only being reported in the foreign press.
http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/3870089/Protectionist-dominoes-are-beginning-to-tumble-across-the-world.html
Depression-wracked countries are throwing up protective trade barriers in a throwback to the 1930s - how long before US labor unions succeed in imposing stiff tariffs on imported cars, forcing us to buy Detroit’s poorly-engineered and shoddily constructed offerings?
I don’t consider most of Detroit’s offerings poorly-engineered and shoddily constructed. Your bias is showing.
I do. There are some gems out there, such as the Chevy Malibu. But EVERYTHING currently made by Chrysler (Chrysler, Dodge, Jeep) is absolute garbage.
Then go out and buy your precious Toyota while you can.
i baby my Toyota Matrix. It’s a 2003 model and I have under 48,000 miles on it. I expect to keep it another 8 years. Practical and has great MPG for an all-wheel-drive compact utility vehicle.
Also, if it’s made in the US by US Workers (Toyota, et al have factories here), are they imports?
Are Gap clothes Thai? Are Apple products Chinese?
I think they are just assembled here ?
US TREASURIES:
coupon Maturity Price Yield
3-Month 0.000 03/19/2009 -0.01 / -.01
-that battle cannot be won……ever.
if gold breaks out of 890, its goin to 1100, wont matter if the US dollar hits 83 on the index.
-We are nearing the crossroads of what is money and what is a claim on money, what is productive capacity and what should be produced, what is necessary and what is needed.
http://www.bloomberg.com/apps/news?pid=20601068&sid=adT53aLupWiY&refer=home#
this’ll blow your hair back.
… members of the ownership society (especially high-value human capital ownership)
PB got stuccod
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I am gonna take this one out of context. I have been, as has mr hoz, bearish on US bonds and US dollars.
FPSS
I suggest you read some Hayek.
—-
The problem to Orwell was: “Capitalism leads to dole queues, the scramble for markets, and war.”
—
http://en.wikipedia.org/wiki/Friedrich_Hayek
“PB got stuccod”
Maybe so. Could you offer a clue of what you mean by this?
‘Building on the earlier work of Mises and others, Hayek also argued that while, in centrally-planned economies, an individual or a select group of individuals must determine the distribution of resources, these planners will never have enough information to carry out this allocation reliably. The efficient exchange and use of resources, Hayek claimed, can be maintained only through the price mechanism in free markets (see economic calculation problem). In The Use of Knowledge in Society (1945), Hayek argued that the price mechanism serves to share and synchronize local and personal knowledge, allowing society’s members to achieve diverse, complicated ends through a principle of spontaneous self-organization. He used the term catallaxy to describe a “self-organizing system of voluntary co-operation.”
In Hayek’s view, the central role of the state should be to maintain the rule of law, with as little arbitrary intervention as possible.’
I happen to agree with these views, and lament the fact that the present generation of economic leaders appears to be moving in the opposite direction towards more top-down, command-and-control economic governance which is doomed to fail. How would politicians be able to raise campaign funds without employing arbitrary intervention on behalf of their contributors?
PB,
I like your posts today.
Thanks, Bill. I decided to swear off attack posts after Jas and I got a little over the top a couple of days back.
Obama’s on vacation in Honolulu - heard a phrase “in front of his beach front home…” Woah! So he has a $1.4 million mansion in Chicago and he has another home? How many more homes does he really have? I have NO home. So since Obama wants to spread the wealth around, why does he not give up one of his houses?
“I have NO home. So since Obama wants to spread the wealth around, why does he not give up one of his houses?”
I don’t think he said he wants to spread his wealth around
More likely he wants to spread your wealth around.
But the MSM did not say that. It only took digging to find out that the Messiah is an elitist. Another ambitious priest of the temple of Syrinx, as the Rush song “2112″ would label.
BIL, do some research before you go on your Obama bating routine. He RENTED a vacation home in Hawaii. What’s it to you anyway?, you’re loaded, or so you tell us at every opportunity.
Correction:
Obama owns one $1.4 million house and I am renting a small apartment.
He wants to spread the wealth around. Why doesn’t he give up that pricey house or share it with renters?
SO THERE!
BFD, you’re loaded and rent, and lord around your wealth. All you do is crow about how much of a killing you’ll make when you’re the last miser standing with your mountain of cash. And why don’t we examine your sainted Bush’s housing arrangments?
Phhhhhhhhht!
http://www.chicagotribune.com/news/chi-obama-hawaii_for_webdec21,0,7654156.story
You might want to read up a bit
He is renting the property
Shortly after President Hu Jintao said China is “losing competitive edge in the world market”, we saw a move towards export subsidies for the steel industry and a dip in the yuan peg - even though China already has the world’s biggest reserves ($2 trillion) and the biggest trade surplus ($40bn a month).
—-
How much advantage does it take for the Dragon to destroy itself?
Gary Gygax, passed in ‘08….
This was linked to the White House story above, has it been posted?
http://www.nytimes.com/2008/12/19/opinion/19krugman.html?_r=1&partner=rssnyt&emc=rss
Op-Ed Columnist
The Madoff Economy
By PAUL KRUGMAN
Published: December 19, 2008
“Yet surely I’m not the only person to ask the obvious question: How different, really, is Mr. Madoff’s tale from the story of the investment industry as a whole?
The financial services industry has claimed an ever-growing share of the nation’s income over the past generation, making the people who run the industry incredibly rich. Yet, at this point, it looks as if much of the industry has been destroying value, not creating it. And it’s not just a matter of money: the vast riches achieved by those who managed other people’s money have had a corrupting effect on our society as a whole.”
(I am sorry for the ugly link).
I think my last post will take a while to show up, but there are 2 other bits in the Krugman op-ed that I thought were good, and speak to points on the bucket today:
“At the crudest level, Wall Street’s ill-gotten gains corrupted and continue to corrupt politics, in a nicely bipartisan way. From Bush administration officials like Christopher Cox, chairman of the Securities and Exchange Commission, who looked the other way as evidence of financial fraud mounted, to Democrats who still haven’t closed the outrageous tax loophole that benefits executives at hedge funds and private equity firms (hello, Senator Schumer), politicians have walked when money talked.”
and
“We’re talking about a lot of money here. In recent years the finance sector accounted for 8 percent of America’s G.D.P., up from less than 5 percent a generation earlier. If that extra 3 percent was money for nothing — and it probably was — we’re talking about $400 billion a year in waste, fraud and abuse.
But the costs of America’s Ponzi era surely went beyond the direct waste of dollars and cents.”
I like “Ponzi era”.
Wall Street executives still fly in corporate jets:
http://news.yahoo.com/s/ap/20081222/ap_on_bi_ge/meltdown_corporate_jets
The hypocrisy of Congress is limitless. Where were Barney and the boyz when Wall Street was sliding in the door for handouts 20+ times the size of Detroit’s?
Quote from link:
NEW YORK – Crisscrossing the country in corporate jets may no longer fly in Detroit after car executives got a dressing down from Congress. But on Wall Street, the coveted executive perk has hardly been grounded.
Six financial firms that received billions in bailout dollars still own and operate fleets of jets to carry executives to company events and sometimes personal trips, according to an Associated Press review.
Financial Times
Leader’s tricky challenge of saving US from hell
By Chrystia Freeland
Published: December 18 2008 20:14 | Last updated: December 18 2008 20:14
…
The lowest common denominator is the consensus that, as Harry Truman once put it, “the president has the power to keep the country from going to hell”. A right-wing administration crafted a $700bn bail-out of the banking sector under the compulsion of that emergency imperative. If the Big Three Detroit automakers eventually do wheedle a Christmas rescue package out of a Republican White House, it will be thanks to this the-house-is-on-fire argument. And if President-elect Obama manages to win day-one approval for his possibly trillion-dollar stimulus plan it will only be if the country, and those filibuster-empowered Southern Senators, really have been persuaded that national damnation is the only alternative.
Robert Reich, Bill Clinton’s Labor Secretary, says Americans suspend suspicion of the government in tough times: “When the economy is in severe crisis, the public wants government intervention – it distrusts the private sector more than it distrusts the government.”
Sell your stocks now or get priced in forever.
Wall Street Journal
December 22, 2008
Investors Lose Faith, Pull Record Amounts
Rank-and-file investors, who likely account for half or more of all U.S. stock holdings, are losing faith in stocks just as in past, long market downturns. Investors withdrew an estimated $72 billion from stock funds overall in October.
Right on schedule. It’s as if they are following a script.
Get your cash ready to buy into the Final Flush that will occur in a year or so.
Wall Street Journal
* REAL ESTATE
* DECEMBER 19, 2008
Home Front
Hawaii’s Highest End Slows Down
Demand softens for two exclusive gated communities; buyers say, ‘I want a deal’
Dumb prediction: Prices of black gold will keep falling as long as new production exceeds available storage capacity, given the collapse of demand.
Promise of Opec cuts fails to stop oil price slide
By Chris Flood in London
Published: December 21 2008 19:50 | Last updated: December 21 2008 19:50
Investors delivered a vote of no confidence in Opec last week when oil prices fell by their most in almost two decades even though the cartel decided to curb production.
Oil prices fell 26.8 per cent last week to $33.87 a barrel, down 77 per cent from the record peak in July, the steepest decline in history. Since the $100-a-barrel level was reached for the first time on January 2, crude has dropped 65 per cent, on track for a record annual decline.
Opec hopes that the supply cuts agreed last week will stabilise the oil market, but has already said more reductions could be considered.
This letter does not get into it, but I would guess the Fed has done incalculably immense damage to the real economy by training all of us Pavlovian dogs to gamble on the effects of their money market manipulation.
Wall Street Journal
* LETTERS
* DECEMBER 21, 2008, 8:54 P.M. ET
Fed Would Do Better If It Had Single Goal
Looking at the wild swings on the graph of the federal funds effective rate over the years (”Fed Cuts Rates Near Zero to Battle Slump,” page one, Dec. 17) made we wonder what that graph would look like if the Federal Reserve was focused only on maintaining price stability.
Undoubtedly, if the Fed weren’t busy exacerbating economic cycles, this chart would be much less dramatic. But then the wizards in Washington wouldn’t have a chance to play hero, and the politicians would have so much less to do. Such a pity.
George Petkovich
Atlanta
Is exacerbating business cycles really part of the Fed’s mandate? If so, they are doing a heck of a job. The volatility the current liquidity tsunami generates should suffice to keep the Obama economics team in perpetual rescue mode for at least the duration of his first term in office.
Is exacerbating business cycles really part of the Fed’s mandate?
Yes. You just won’t find that written down anywhere.
If you’ve read “The Creature from Jekyll Island’” you’ll know exactly what I’m talking about.