825 Billion Bailout

Off Topic Politics and World Issues
41

If it’s so easy, why do have so many respected economists who disagree with each other (not necessarily right now, but in general)? I think it’s acknowledged that this is a result of the housing and credit bubbles, but if it were easy, you wouldn’t have so many experts holding conflicting opinions. That’s not even important, though. The more difficult question is what to do about it. If we knew, why wouldn’t we just do and avoid the recession?

Losing more than $2 trillion in home value within a year IS a crisis.

42

[quote]pat wrote:
Ryan P. McCarter wrote:
pat wrote:
Ryan P. McCarter wrote:
For the right-wingers, this is exactly the situation that your policies have created. Privatized gain and socialized loss.

But the corporations shouldn’t have to pay! Then they won’t be able to create any more jobs!

Cooperation’s won’t pay, they just past the cost along in their products and services…They cut costs by cutting jobs. So what good does that do? We, the normal hard working folks still are the ones who pay it in the end.

Putting ketchup on a turd may make it taste better, but it’s still a turd. Raising taxes on cooperations may sound good, but we are still the ones who pay the taxes. Think about it, seriously.

If they raise their prices too much, someone will be willing to sell for less, and unless they want to go out of business, they’ll have to play ball. It’s that thing called competition that neo-liberals get so weepy-eyed over in any circumstance in which they’re arguing for deregulation and privatization. If they lay too many people off, their productive capacities go down, and so does their revenue.

Now mind, I’m not proposing jacking it up to exorbitant rates, but there are a lot of loopholes to be closed.

Your assuming in this scenario that one company would be over taxed and another not so much. Which isn’t the case because it would cause all kinds of anti trust issues and such, hence a company and it’s competition have to be taxed equally. You cannot unfairly tax HP over Dell, or Biotest over EAS…You kill companies that way. Oh the free market will continue, but you’ll be paying more for HP and Dell products, for Biotest and EAS. These people aren’t running a charity, if they aren’t going to make money, there is no point in being in business.[/quote]

I said nothing of the sort. I said there are a lot of tax breaks that certain companies or industries get that should be ended.

43

[quote]Ryan P. McCarter wrote:
dhickey wrote:Wrong. Every recession and the great depression have been analyzed in detail. The cause of the boom is always fairly easy to target. Bad policy to deal with the bust are also just as easy to point out. Economics is not terribly difficult to understand if you take even a small amount of time to try.

If it’s so easy, why do have so many respected economists who disagree with each other (not necessarily right now, but in general)?
[/quote]
like who and about what?

What conflicting opinions?

Because of politics. Most politicians don’t know the first thing about classic economics. Those that may ignore it when it suits their political purposes. This is why we need a very small gov’t. They cannot be trusted to make the right decisions in a majority of cases.

Gaining that $2 trillion in home value was the crisis. Losing it was the correction. You need to read a book on economics. I can recommend a few if you would like.

44

[quote]Ryan P. McCarter wrote:
pat wrote:
Ryan P. McCarter wrote:
pat wrote:
Ryan P. McCarter wrote:
For the right-wingers, this is exactly the situation that your policies have created. Privatized gain and socialized loss.

But the corporations shouldn’t have to pay! Then they won’t be able to create any more jobs!

Cooperation’s won’t pay, they just past the cost along in their products and services…They cut costs by cutting jobs. So what good does that do? We, the normal hard working folks still are the ones who pay it in the end.

Putting ketchup on a turd may make it taste better, but it’s still a turd. Raising taxes on cooperations may sound good, but we are still the ones who pay the taxes. Think about it, seriously.

If they raise their prices too much, someone will be willing to sell for less, and unless they want to go out of business, they’ll have to play ball. It’s that thing called competition that neo-liberals get so weepy-eyed over in any circumstance in which they’re arguing for deregulation and privatization. If they lay too many people off, their productive capacities go down, and so does their revenue.

Now mind, I’m not proposing jacking it up to exorbitant rates, but there are a lot of loopholes to be closed.

Your assuming in this scenario that one company would be over taxed and another not so much. Which isn’t the case because it would cause all kinds of anti trust issues and such, hence a company and it’s competition have to be taxed equally. You cannot unfairly tax HP over Dell, or Biotest over EAS…You kill companies that way. Oh the free market will continue, but you’ll be paying more for HP and Dell products, for Biotest and EAS. These people aren’t running a charity, if they aren’t going to make money, there is no point in being in business.

I said nothing of the sort. I said there are a lot of tax breaks that certain companies or industries get that should be ended.

[/quote]

what about tax breaks that individuals get? This is much larger amount of money. Tax breaks are given to buy votes and favors. If everyone shares in the obvious pain, the less likely they would be to vote in tax and spend liberals. I include Dems and Republicans in this catagory.

If only a small portion of the voting public actually pay taxes their votes won’t matter much. As long as a majority don’t pay taxes and many recieve gifts at the expense of the minority tax payer, we will continue to see gov’t spending go up.

Closing loopholes will have the same effect as raising taxes. Jobs moving overseas. They need to tax less and tax evenly, not just close loopholes to tax the productive even more.

45

Seems like “we knew” and choose not to avoid the recession or crisis anyway.

Let’s give loans to people who can’t afford them in the name of affordable housing…I mean what could go wrong…really?

http://query.nytimes.com/gst/fullpage.html?res=9E06E3D6123BF932A2575AC0A9659C8B63&sec=&spon=&pagewanted=1

Here’s the money quote from Dem. Barney Frank in 2003!

"Significant details must still be worked out before Congress can approve a bill. Among the groups denouncing the proposal today were the National Association of Home Builders and Congressional Democrats who fear that tighter regulation of the companies could sharply reduce their commitment to financing low-income and affordable housing.

‘‘These two entities – Fannie Mae and Freddie Mac – are not facing any kind of financial crisis,’’ said Representative Barney Frank of Massachusetts, the ranking Democrat on the Financial Services Committee. ‘‘The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing.’’

Representative Melvin L. Watt, Democrat of North Carolina, agreed.

‘‘I don’t see much other than a shell game going on here, moving something from one agency to another and in the process weakening the bargaining power of poorer families and their ability to get affordable housing,’’ Mr. Watt said. "

46

[quote]dhickey wrote:Gaining that $2 trillion in home value was the crisis. Losing it was the correction. You need to read a book on economics. I can recommend a few if you would like.
[/quote]

Semantics. Seems to be the only thing you have a knack for. A $2 trillion loss is a crisis, you can label the phases of the process however you see fit. The point is, it’s clear that there’s a problem with a system that allows this to happen.

47

I would hope this would be obvious, but when I say “we need to do x,” I don’t mean, “x is all we need to do.” There are of course a whole host of problems to be fixed, but excess taxes on the “productive” is not one of them.

48

[quote]Ryan P. McCarter wrote:
Semantics. Seems to be the only thing you have a knack for. A $2 trillion loss is a crisis, you can label the phases of the process however you see fit. The point is, it’s clear that there’s a problem with a system that allows this to happen.
[/quote]

But the part you don’t seem to understand is that there is no way this $2 trillion loss could have been prevented because it was all based on fake wealth during the boom. In this respect it was the boom that was the cause. It should have been prevented with sound monetary policy. The coming crash is not preventable – in fact, we need it now more than ever.

dhickey, is correct. You need to read a few more economics lessons.

49

[quote]Ryan P. McCarter wrote:
dhickey wrote:Gaining that $2 trillion in home value was the crisis. Losing it was the correction. You need to read a book on economics. I can recommend a few if you would like.

Semantics. Seems to be the only thing you have a knack for. A $2 trillion loss is a crisis, you can label the phases of the process however you see fit. The point is, it’s clear that there’s a problem with a system that allows this to happen.

[/quote]

It’s far from semantics. It’s basic economics. The problem is not home values losing money. It was housing prices inflating by incredible amounts.

What do high prices tell us?
high demand.
How did we get high demand?
A shit load of first time homebuyers that were not qualified previously now buying homes.
How did these homebuyers end up with loans?
Again our good freind increased demand. Demand for risky mortgages.
How did we get demand for risky loans?
Pressure from legislators and activists groups to lend to these people. Let’s call that forced or coerced demand. How about pressure from congress on Freddie and Fannie to buy up these mortgages? Again, creating demand for these loans.

Now we come back around the circle. Many fly by night lendors pushed the envelope to fill this demand for shit mortages. More home buyers equipped with loans they can’t pay for looking for homes further exacerbating the demand for homes.

Get the picture yet.

50

[quote]Ryan P. McCarter wrote:
dhickey wrote:Closing loopholes will have the same effect as raising taxes. Jobs moving overseas. They need to tax less and tax evenly, not just close loopholes to tax the productive even more.

I would hope this would be obvious, but when I say “we need to do x,” I don’t mean, “x is all we need to do.” There are of course a whole host of problems to be fixed, but excess taxes on the “productive” is not one of them.
[/quote]

Taxing the productive is the worse thing you can do for the economy. You can argue that it is necessary but it should certainly keep it to a minimum. If you don’t understand why, you need to read a book.

51

Boy, you’re bending over backward to make this hard. The crisis, to me, is people losing their homes. The cause was the boom. You’re quibbling over little things when I’m trying to draw a conclusion. If this teaches us anything, it’s that we need a little more control over the excesses of our financial system.

I agree we shouldn’t tax the productive heavily. But productivity has historically had little correlation with income. If you don’t understand that, YOU need to read a book.

52

Your confusing cause and effect. People were losing their homes because they borrowed more than they could hope to pay back based on traditional lending standards. Standards were lowered to encourage non-Asian minority homeownership in accordance with CRA standards and government social engineering quotas. As these bad loans were made, an effort was made to securitize(secretize, actually) them.

They were packaged and sold on the margin in the form of credit default swaps. This leverage swelled the actual dollar amount of the bad home loans in the US from $4-5 trillion to $60-70 trillion as the “new rich” overseas bought them as an investment vehicle for their savings. The whole thing collapsed as these bad loan rates started to reset around 2006. In summary, a molehill of bad debt was made into a mountain of leverage. The leverage should have been regulated, as it should have prior to 1929. But too many people were greedy. Traditional lending standards should have been used, but they weren’t in for the sake of (Soviet-style) equal outcomes for every different ethnic group in the US.

Wow. This violates common sense. Orion?

53

Monetary policy works by creating the environment for a renewed borrowing and lending cycle. This cycle would require that the debt to GDP ratio, which is already at a record level, grow even higher. Would such an outcome really be that desirable when the controlling problem of the U.S. economy is too much improperly financed debt?

If the Fed were able to engender an increase in the debt to GDP ratio, this might merely serve to postpone the reckoning of the current debt levels while laying the foundation for an even more vicious unwinding down the road.

54

[quote]Ryan P. McCarter wrote:

I said nothing of the sort. I said there are a lot of tax breaks that certain companies or industries get that should be ended.

[/quote]

No you did not say it, but that’s what is required for competition to take over if some

Ok, but why? Other than hurting that business, what good will it do?

55

[quote]Ryan P. McCarter wrote:
Boy, you’re bending over backward to make this hard. The crisis, to me, is people losing their homes. The cause was the boom. You’re quibbling over little things when I’m trying to draw a conclusion. If this teaches us anything, it’s that we need a little more control over the excesses of our financial system.

I agree we shouldn’t tax the productive heavily. But productivity has historically had little correlation with income. If you don’t understand that, YOU need to read a book.[/quote]

They wouldn’t be if they bought what they could afford and not stretch the otter limits of available credit.

56

[quote]Ryan P. McCarter wrote:

I agree we shouldn’t tax the productive heavily. But productivity has historically had little correlation with income. If you don’t understand that, YOU need to read a book.[/quote]

That is flat out wrong.

Historically income is all about productivity, because capital accumulation as well as specialization only increase wealth because they increase productivity.

57

[quote]orion wrote:
Ryan P. McCarter wrote:

I agree we shouldn’t tax the productive heavily. But productivity has historically had little correlation with income. If you don’t understand that, YOU need to read a book.

That is flat out wrong.

Historically income is all about productivity, because capital accumulation as well as specialization only increase wealth because they increase productivity.

[/quote]

Let’s try a thought experiment.

Does a company pay you more or less for getting more work done in less time? Alternatively, if you make money by the amount of products you sell, how do you make LESS money by producing MORE of them in LESS time?

58

[quote]Ryan P. McCarter wrote:
The crisis, to me, is people losing their homes. The cause was the boom. You’re quibbling over little things when I’m trying to draw a conclusion. If this teaches us anything, it’s that we need a little more control over the excesses of our financial system.[/quote]

Yes, people losing their homes is not good but it was not good for them to get loans in the first place. You need to understand monetary theory first then you will be able to understand what causes booms and busts. This could have been avoided if banks had been forced to be more conservative with extending credit to consumers (i.e, our government would allow providers of bad debt to go broke).

[quote]
I agree we shouldn’t tax the productive heavily. But productivity has historically had little correlation with income. If you don’t understand that, YOU need to read a book.[/quote]

Productivity has everything to do with income. Income is how much of something that is produced. The goods/services that are produced are exchanged using money, the value of which is determined by the aggregate supply and demand of both that particular good and the particular exchange currency. This becomes a part of the companies revenues and workers are paid out of them based on how they are valued by the employer; this is based on their past and expected productivity, both individually and as a whole within a particular industry.

Think about it this way: if you were stranded on a deserted island your income would be based solely on your ability produce the required necessities for your survival. You do not get paid a wage since there is no money and no exchange in this situation but it should still be understood as an income.