700 Billion divided by 340 million(estimated US population) = ?
Wouldn't this stimulate the economy? No? Maybe? Yes?
Would we all quit are jobs and everything shut down?
What do you think would happen?
It'd put us deeper in debt no matter how it's distributed.
"Some people say a man is made outta mud
A poor man's made outta muscle and blood
Muscle and blood and skin and bones
A mind that's a-weak and a back that's strong
You load sixteen tons, what do you get
Another day older and deeper in debt
Saint Peter don't you call me 'cause I can't go
I owe my soul to the company store
I was born one mornin' when the sun didn't shine
I picked up my shovel and I walked to the mine
I loaded sixteen tons of number nine coal
And the straw boss said "Well, a-bless my soul"
You load sixteen tons, what do you get
Another day older and deeper in debt
Saint Peter don't you call me 'cause I can't go
I owe my soul to the company store
I was born one mornin', it was drizzlin' rain
Fightin' and trouble are my middle name
I was raised in the canebrake by an ol' mama lion
Cain't no-a high-toned woman make me walk the line
You load sixteen tons, what do you get
Another day older and deeper in debt
Saint Peter don't you call me 'cause I can't go
I owe my soul to the company store
If you see me comin', better step aside
A lotta men didn't, a lotta men died
One fist of iron, the other of steel
If the right one don't a-get you
Then the left one will
You load sixteen tons, what do you get
Another day older and deeper in debt
Saint Peter don't you call me 'cause I can't go
I owe my soul to the company store"
Jimmy Dean
Kentucky ex-coalminer and singer/songwriter George S. Davis (1904-1992), when recorded by John Cohen for Folkways in 1966, claimed to have written this song in the 1930s according to Wikipedia....
I understand the reprecussions of not doing anything and letting the foreclosure situation extend damage through the economy....but I'm also interested in letting the vast swathes of people who should have never qualified for a loan pre-1999 clinton policies to get kicked out and put back in an apartment. I think there are PLENTY of WELL QUALIFIED people out there that can take those foreclosed houses over. Yeah, so the banks are going to take a hit on the lost value....so what. I think this is a better solution for those of us RESPONSIBLE taxpayers who didn't bite off more than we could chew. It rewards hard work and good educations.
What bothers me the most right now is how banks through various proxies are trying to pin the blame of this on the Clinton Freddie Mac policies back in the late 90s. Yes, Clinton was an enabler that got Freddie Mac to offer out all of these creative loan strategies to put anybody and everybody into a house....but you know what? Banks could still use common sense not to lend money to people who were in fact dead beats. I think the banks who used common sense will be the ones scooping up the massive failures like Wachovia and WaMu who bought off on all of this free freddie mac money like crack cocaine.
quote:
Originally posted by FOTD
"Some people say a man is made outta mud
A poor man's made outta muscle and blood
Muscle and blood and skin and bones
A mind that's a-weak and a back that's strong
You load sixteen tons, what do you get
Another day older and deeper in debt
Saint Peter don't you call me 'cause I can't go
I owe my soul to the company store
I was born one mornin' when the sun didn't shine
I picked up my shovel and I walked to the mine
I loaded sixteen tons of number nine coal
And the straw boss said "Well, a-bless my soul"
You load sixteen tons, what do you get
Another day older and deeper in debt
Saint Peter don't you call me 'cause I can't go
I owe my soul to the company store
I was born one mornin', it was drizzlin' rain
Fightin' and trouble are my middle name
I was raised in the canebrake by an ol' mama lion
Cain't no-a high-toned woman make me walk the line
You load sixteen tons, what do you get
Another day older and deeper in debt
Saint Peter don't you call me 'cause I can't go
I owe my soul to the company store
If you see me comin', better step aside
A lotta men didn't, a lotta men died
One fist of iron, the other of steel
If the right one don't a-get you
Then the left one will
You load sixteen tons, what do you get
Another day older and deeper in debt
Saint Peter don't you call me 'cause I can't go
I owe my soul to the company store"
Jimmy Dean
Jimmy may have sung it but probably didn't write it.
http://www.fortunecity.com/tinpan/parton/2/sixteen.html
You could give everyone $2,333 of their own money or you could give only people with mortgages $21,000 of their own money.
How would you choose?
Defending the "Congressional Retirement Program" AKA Freddy & Fanny.
http://www.youtube.com/watch?v=YL36nwCSYUM
Yes, giving $2000 to every man, woman, and child in the US would stimulate the economy. Temporarily.
No, giving $700 Billion to the administration to purchase banks and shore up debt would not stimulate the economy as much as it would slow the painful descent. Temporarily.
Fundamentally, the economy has been in terrible shape for years. It has to do with a few things, but beyond the wars fought with borrowed money, and fuel prices rising 300%, and staple foods rising 50% to 75%, this administration failed in one very key domestic area: technology/jobs.
The administration started at the end of the techno bubble and it's answer to the end of that economy was "housing" and "hydrogen cars". "Hydrogen Cars" was a non-starter because of cost, a massed produced hydro car will cost more than a gasoline car to produce, and hydrogen is still projected to be more expensive than gasoline to produce. In other words, yeah it's cleaner, but it will be far more expensive to purchase and to operate even at $4.00 per gallon in gas prices. Hydrogen is not likely to ever be widely used, and hydro car production is not likely to ever create a substantial number of jobs.
The problem with Housing is that it takes a ton of credit. The administration helped deregulate the banking industry further which propped up the housing industry at the cost of bad loans. Yes it created jobs for the short term, and propped up the economy in the short term, but building was bound to outpace demand and it did just exactly that. Coupling that to bad loans, lack of quality jobs, jobs fleeing over seas, cost of basic good inflating: more and more people had less of an ability to pay. And the only "jobs creation" the administration can be credited with, beyond inflation related jobs like in the oil industry, is virtually gone.
The next administration will hopefully put the US back on the electric/hybrid auto track and push for energy diversification. Trade needs to be addressed. It will take a while, but if jobs aren't created any time soon it won't be just the economy that collapses, it'll be the government. We could be fighting immigration by simply being worse off than Mexico.
I'm not a economy major or financial genuis by any stretch, but I am strongly opposed to this bail out garbage.
If we truly live in a capitalist society, we have to let the markets run their course, no matter how painful that can be in the short term.
If these banks go under, won't they eventually be replaced by upcoming smaller banks, who use fundamentally sound lending practices and take less risk?
Maybe F&M Bank would become the next Citibank, am I wrong?
Maybe the luxury brand automobile makers will also suffer, but then wouldn't more people just end up driving a Honda's and Toyota's, rather than Acura's and Lexus'?
Maybe there won't be credit cards with $40,000 limits on them, but such a credit tool was unheard of a few decades ago.
And yet our economy grew back then.
Our economy would shrink now, in the short term, but at least it would gain a solid foothold.
Perhaps we might even find ourselves living in a world where people handle borrowed money in a responsible fashion again, since only responsible people in most cases will be loaned the money in the first place.
quote:
Originally posted by Hawkins
I'm not a economy major or financial genuis by any stretch, but I am strongly opposed to this bail out garbage.
If we truly live in a capitalist society, we have to let the markets run their course, no matter how painful that can be in the short term.
If these banks go under, won't they eventually be replaced by upcoming smaller banks, who use fundamentally sound lending practices and take less risk?
Maybe F&M Bank would become the next Citibank, am I wrong?
Maybe the luxury brand automobile makers will also suffer, but then wouldn't more people just end up driving a Honda's and Toyota's, rather than Acura's and Lexus'?
Maybe there won't be credit cards with $40,000 limits on them, but such a credit tool was unheard of a few decades ago.
And yet our economy grew back then.
Our economy would shrink now, in the short term, but at least it would gain a solid foothold.
Perhaps we might even find ourselves living in a world where people handle borrowed money in a responsible fashion again, since only responsible people in most cases will be loaned the money in the first place.
What you describe would be a world where everything was put in a better, or safer, economic perspective. Our quest for growth, when it's done in measured paces is admirable. When we start injecting steroids, chances are, it won't end well.
quote:
Originally posted by Hawkins
I'm not a economy major or financial genuis by any stretch, but I am strongly opposed to this bail out garbage.
The idea of allowing all these banks to collapse, relies on one over-simplistic notion: our economy is fine, except for the banks (aka the fundamentals of our economy are strong).
Here's a question to ask yourself. How is it possible that the housing industry single-handedly made the banking industry fail? My answer is this: We have failed to diversify our economy, and the only reason this didn't happen quicker is because we allowed the banks to write bad loans. Period.
Our bad loans made this economy at least "appear to be" functioning. What kind of economy were the loans covering up? We aren't fully aware of how bad it is yet.
This is our fault, we over-simplify the economy. We allow industries, we even allow service industries, to go over-seas then we replace them with what? More service industries? We allow inflation to go on running, because if it doesn't, there won't be enough funds in the system to pay the bills. We have no "next-thing" economically. We haven't had that since the end of the tech bubble.
Now we get to pay for our over-simplistic attitudes toward economics. .
Having been a teenager in the Great Depression and have lived almost ¾ of a century since I would have to surmise that it was one of most awaking events of a new nation that was using the saving of the workers lending to others at a high interest rate. We were entering into the fallout of the WW1 of uncontrolled greed which brought about a condition of greed to acquire more assets.
There was an overproduction of food which brought the price to where one could not get $5.00 of wholesome eatable food in a peck sack.
You knew your neighbor and the person down the street; greeting them at the buss stop or passing those walking down the street.
You spent leisure at the park or even sitting y our front yard talking to the neighbors sitting in their yards throughout the block. This was pre-television as well as pre-air-condition which added to outside socialism of neighborhood.
A home could be bought for as little as $600 dollars and many walked away from them because they could not make the payments.
It would seem the great buyout is no more that of a replay of the great depression where the buyout failure is what is best thing that can help this nation.
The height of stupidity in the changing times is purchasing a new city hall for millions of dollars being prohibited from putting the emblem of the city on it defining it as the city hall.
Only proves it's not our building, we're just paying for it for a few years. Five to be exact. We're paying interest only for five years, just like rent.
When KT is gone, it will remain. But, it will soon enough be even a bigger problem than it is today.
quote:
Originally posted by shadows
Having been a teenager in the Great Depression and have lived almost ¾ of a century since I would have to surmise that it was one of most awaking events of a new nation that was using the saving of the workers lending to others at a high interest rate. We were entering into the fallout of the WW1 of uncontrolled greed which brought about a condition of greed to acquire more assets.
There was an overproduction of food which brought the price to where one could not get $5.00 of wholesome eatable food in a peck sack.
You knew your neighbor and the person down the street; greeting them at the buss stop or passing those walking down the street.
You spent leisure at the park or even sitting y our front yard talking to the neighbors sitting in their yards throughout the block. This was pre-television as well as pre-air-condition which added to outside socialism of neighborhood.
A home could be bought for as little as $600 dollars and many walked away from them because they could not make the payments.
It would seem the great buyout is no more that of a replay of the great depression where the buyout failure is what is best thing that can help this nation.
The height of stupidity in the changing times is purchasing a new city hall for millions of dollars being prohibited from putting the emblem of the city on it defining it as the city hall.
Love the blast from the past. Good stuff.
Part of what caused the depression to be so bad was the US gov't was only about 3% of the economy, and the gov't was completely incapable of stopping banks from failing. Now the gov't is about 20% of the economy, and there is no intention of letting that happen again. Not on that scale.
Just about the best thing that can happen now is for Fannie Mae and Freddie Mac to never go back to the private sector. They weren't private to begin with, they were gov't entities. And subjecting those two to the private sector with the inherent greed and need for "deregulation" is in large part to blame for where we are now. The private sector sucked Fannie Mae and Freddie Mac dry, and they pushed for the deregulation which allowed bad loans.
Neptune, stop it! You are making entirely too much sense. I'm not supposed to agree with you!
quote:
They weren't private to begin with, they were gov't entities.
Palin... Is that you?
[:O]
quote:
The private sector sucked Fannie Mae and Freddie Mac dry
Why does this quote make me think of Barney Frank...
quote:
Originally posted by Neptune
quote:
Originally posted by shadows
Having been a teenager in the Great Depression and have lived almost ¾ of a century since I would have to surmise that it was one of most awaking events of a new nation that was using the saving of the workers lending to others at a high interest rate. We were entering into the fallout of the WW1 of uncontrolled greed which brought about a condition of greed to acquire more assets.
There was an overproduction of food which brought the price to where one could not get $5.00 of wholesome eatable food in a peck sack.
You knew your neighbor and the person down the street; greeting them at the buss stop or passing those walking down the street.
You spent leisure at the park or even sitting y our front yard talking to the neighbors sitting in their yards throughout the block. This was pre-television as well as pre-air-condition which added to outside socialism of neighborhood.
A home could be bought for as little as $600 dollars and many walked away from them because they could not make the payments.
It would seem the great buyout is no more that of a replay of the great depression where the buyout failure is what is best thing that can help this nation.
The height of stupidity in the changing times is purchasing a new city hall for millions of dollars being prohibited from putting the emblem of the city on it defining it as the city hall.
Love the blast from the past. Good stuff.
Part of what caused the depression to be so bad was the US gov't was only about 3% of the economy, and the gov't was completely incapable of stopping banks from failing. Now the gov't is about 20% of the economy, and there is no intention of letting that happen again. Not on that scale.
Just about the best thing that can happen now is for Fannie Mae and Freddie Mac to never go back to the private sector. They weren't private to begin with, they were gov't entities. And subjecting those two to the private sector with the inherent greed and need for "deregulation" is in large part to blame for where we are now. The private sector sucked Fannie Mae and Freddie Mac dry, and they pushed for the deregulation which allowed bad loans.
The government is corrupted. We have 535 elected persons in Congress, 1 elected person in the White House, and 9 appointed justices who have power over the entire federal government. And you are stating that it is a good thing that the government now controls and manipulates 20% of the economy instead of the 3% it did in the 30s? The government is corrupted because it has too much power, controlled by too few people. Each elected official is an easy target for lobbyists, crooks, etc. That "corporate greed" that is blamed on the free market is enabled through the regulations, deregulations, reregulations, laws, preferences, subsidies, and otherwise MANIPULATIONS of the free market set into motion by that band of a few elected officials.
Yes, greed ran rampant. But you cannot commit fraud on such a grand scale as we are seeing today without a little help from Uncle Sam. They write the rules in Congress. They have failed us, and you are happy that they now control 20% of the economy? Im shaking my head here.
Going further to the root cause of the problem, it goes beyond Freddie/Fannie, regulations, and who said what when. The root of the problem is monetary policy stemming from the Federal Reserve System. This is another entity, like the Federal Government, which has way too much power, and we are seeing its effects now with this collapse in the capital markets. Maybe the Fed was in bed with the Bush administration, I don't know - but whatever the case, interest rates were held artificially low for a long period of time to make the economy look peachy when we needed a correction. Any time it looks like recession is looming, or that prices are coming down, the Fed tried to intervene by creating MORE credit, lowering interest rates, generally making money cheaper. This is an inflationary practice, and its intent is to cover up problems with the economy with paper. It wasn't going to work forever.
There needs to be a correction. Prices need to come down. There will be some pain as a result. It is inevitable. It appears to be happening anyway despite the efforts of the bailout. Too much inflation and easy money was pumped into the system, and it needs to be purged. People will suffer, and wealthy elites at the top got the better end of the deal. What should happen as a result SHOULD be that we STRIP the authority from those in power to have so much control over the financial system. Where malinvestment, overproduction, etc occurred there needs to be a cooling off period for equilibrium to return with prices, supply, demand, and production. The people should be outraged, and not stand for any INCREASES in powers to these same people who got us into the problem in the first place. The more power you give them, the more tools they have to line the pockets of the rich at the expense of the poor and middle class through inflationary practices. They will do this AGAIN, and to a WORSE DEGREE if we allow them to take greater powers.
Nep's right about one thing though. Fannie and Freddie should not have been spun off as a private business enterprise. Or at least if they were, they should have not remained a quasi-government entity.
The whole idea of a GSE seems strange to me. The government should protect us from monopolies, not prop them up. I know, a mortgage lender sure didn't sound like an evil monopoly, but just like anything else, when the pie becomes so large, it attracts corruption. The implied government backing just makes them more reckless.
I was just stating the fact that the gov't is 20% of the economy. And I was also stating the ultimate reason why the "Great Depression" won't be repeated, at least not to that degree, and at least not now.
While I agree in part that the Fed did it's best to manipulate currency and cash flow; I disagree with the concept that this is a market correction. We are on the border of a catastrophic collapse. Whether or not this is a "market correction" is determined ultimately by the gov'ts ability to prevent a cascade of "cash-flow" related collapses. I guess technically, allowing the private sector to implode and reach something near absolute zero could be considered a "market correction". However, I doubt too many people are so faithfully "free-market", that they want to see that happen.
The Fed has been particularly baffled the last few years as many key economic indicators were showing recession, at the same time they were showing a "hot-market". The Fed was increasingly aware that the "bullish" markets of the last couple years were a paradox. They raised rates to try and cool an over-heated market, that by all rights shouldn't have been "hot" at all. Then they lowered rates to try and keep the market from a catastrophic collapse.
I don't blame the fed though. The Fed can only "tweek" cash-flow, they aren't capable of keeping the private sector away from a self-induced implosion. And the Fed isn't capable of keeping the private sector from pushing deregulation through the rest of the gov't.
We are to blame for this crisis. We believed the deregulation rhetoric, we believed the good economic news, we believed the private sector was invincible and always correct. We get to pay for it now.
Side note: I'm still slightly amazed that Bush pushed this bill, and that enough Republicans were behind it. Particularly for the House and Senate Republicans; to be for the bailout bill showed a ton of testicular fortitude.
I'm not saying a zeroing out of all markets is a necessary "correction".
The correction we need to see is the recession that they haven't let happen this decade. We had a little brief one after 9/11 and enron/worldcomm/etc - but the Fed intervened with inflation. Bush had already pumped a bunch of tax rebates (which is just inflation when you are running a federal deficit) into the economy. That was the start of ridiculously low interest rates, which means money is cheap. The market itself just works with the situation the Fed and government create for them, through interest rates, rules, regulations, etc.
If everyone and their brother can qualify for $300,000 when before only a select few could qualify for $150,000, there is a ton of new money being thrown at the housing market, and the prices of houses inflated drastically.
This also drove needless construction, as the growth seemed endless. There has to be a slowdown for the economics to reach equilibrium. The longer we prop up prices, the longer we encourage the construction to continue, the longer we ignore the simple economic problem. There needs to be a recession.
The real collapse would be if the DOLLAR collapses. That will happen when we finally push our inflationary tactics too far. The bailout is a dangerous step in the direction of destroying the dollar once and for all. Once foreigners turn their back on the dollar, the collapse would make what we are dealing with right now look like a walk in the park.
So why not step out of the way, let a painful recession run its course, then proceed forward with more honest economic policies from there? To keep propping up prices with inflation, inflation, inflation puts the very foundation of the WORLD economy at risk, the confidence in the dollar. It also continues the destruction of our economy at home, because we export as much inflation as we can. That means our jobs leave, our production base leaves, etc. When we keep lying to ourselves that the economy is strong by papering over shortfalls, nobody seems to care when jobs go overseas. We just create more consumption based jobs. Eventually we will be a shell of our former selves, with no productivity, only consumers, and mired in debt. A recession will light a fire under our butts to put a stop to productivity drains from exported inflation.
I think a little of that depends on what you mean by "recession." The IMF today said the US is heading into a "deep recession." That's despite the bailout bill, which I don't think anyone expected that to be the "be all and end all" of the economic crisis. If the IMF is saying that, there's a good chance that is true. But, if you think a recession is healthy, I think its probably safe to say that we're extremely healthy now. [:D]
YT- pretty good analysis. Don't underestimate the value of flimsy accounting either which kept confidence up and stock prices artificially inflated in companies which were actually struggling- which basically allowed them to keep borrowing money and disguising it as income.
There are so many elements that have really screwed the pooch on this. In my basal sense, I see it as too many people trying to get wealthy without any real work ethic. Just shuffling paper and trying to time their bets right to make a fortune in a hurry without really having to work for it.
There is no such thing as rapid growth without consequence. A perfect example is the meteoric rise and fall of SEM Group. It was hard NOT to see that one coming.
YT is also right about inflation. Inflation, since 911, has been the most under-reported event in our economy. In some ways it's been subtle, because it doesn't effect those who claim to run the economy, therefore it doesn't get reported as something that effects the economy. I'd suspect inflationary pressures have had an effect to some degree on about 80% of the population. The same 80% of the population that makes up the foundation of our economy through basic consumption.
I've gotten tired of hearing "tax-cut" rhetoric. Right now I'd say the Federal Gov't has been about as fiscally irresponsible as it could possibly have been. It's running on a deficit, in large part because of "tax-cuts". We're borrowing money, adding to the debt, just to operate the gov't. I don't know how much of the Iraq war was paid for out of our pocket, it can't be much. We're inflating currency to keep up cash flow, to offset losses due to ever increasing pools of wealth in the hands of the few. We've allowed our tax system to be flattened, subverted to the benefit of the few.
700 billion for a bailout, that will be borrowed money. We haven't been responsible for own actions in a while, not sure when it's going to start, but it needs to start soon.
Defeating deflation by definition entails the introduction of inflation.... it may take a while and interest rates may remain low for a period of time but the monetization of the massive amounts of soured financial obligations will most certainly lead to an extended period of elevated inflation. Fed chairman Bernanke has clearly stated his goal to use all tools necessary to defeat deflation. It may take a couple of years but the end game is most certainly inflation.
We don't want deflation. We have witnessed the effects of deflation in Oklahoma and Texas in the mid-eighties to early 90's. A third of all banks and virtually all S&L's were closed in this period and real estate values fell precipitously. But while we were suffering from deflation due to the collapse of oil prices the rest of the country recieved the benefit so the pain was limited on a national scale.... we won't be so lucky as a nation if we don't stop deflation in home values. Everyone will suffer.
Yet, while we have more ways to fight inflation, it will be painful as well. The overriding outcome of what we are seeing is that our standard of living is going to decline for an extended period of time....
Fighting deflation in housing with purposeful inflation sounds an awful lot like what the Wiemar Republic did. Sounds dangerous, though the makers of wheelbarrows should be happy.
(http://upload.wikimedia.org/wikipedia/commons/thumb/c/ca/Inflation-1923.jpg/250px-Inflation-1923.jpg)
This lady is fueling a furnace with cold hard cash. It burns longer than the amount of wood it can buy.
Some level of deflation needed/needs to happen to reach equilibrium with parts of the economy that have been warped by excess credit and inflation.
What is happening now is the wealthy elite doing everything they can to hold prices artificially high. And on the other side of the collapse they are making sure they get preferred status in grabbing everyone's assets up for pennies on the dollar (JPMorgan, Goldman Sachs, Berkshire). The problem is, they are the ones in control and we have no say in the matter.
Good discussion in this thread btw, I hope I'm not giving the impression that I am fighting with you.
I'm not a pro-tax guy obviously, but the problem is more in the spending and not in the taxes themselves. I would agree that, assuming the same level of spending, it is the lesser evil to tax and spend, with a balanced budget, than it is to give tax breaks, spend the same, and run a deficit. Inflation is an invisible tax on the poor and middle class, while the super wealthy are the ones who benefit from the creation of new money. I damn near shed a tear earlier today when I read this article: http://archives.cnn.com/2000/ALLPOLITICS/stories/05/01/clinton.debt/
If Obama would actually say something about inflation and deficit spending, he may actually get my attention. Just calling the other side a failure doesn't win me over unless you understand why they are a failure and what we need to push for to solve that failure. Monetary policy is key, and no one except for the guy who got laughed out of the race in the primaries was talking about it.
I think the idea that "tax-cuts" are "good" for the economy is dead, for now. That will likely change later, people's ability to recollect history is short, but right now we can do the right thing and get back on track. At least as far as our own budget. I'd like to see us get to a surplus again, and do what Clinton didn't do; apply it to national debt.
Politically, what McCain would have to do to get the economy on track is completely unacceptable to the people that fund his base. The cuts McCain is proposing will simply add more debt to the tune of something like 300 Billion per year. I don't see McCain having the ability, and certainly I don't think he'll have the political "mandate", to make the tough economic decisions. Even when he seems to have a "good" idea, I have a hard time believing that he'll have the ability to see it through.
With Obama, we may end up just hating the crap out of him, but I think Obama will make the hard decisions. The ones we may not like. A large part of Obama's base will give him a "pass" on just about anything he can do to rebuild the economy. In a sense, where McCain has every reason to be slow and conventional and perhaps even do nothing in his handling of the economy, Obama has a semi-free ticket to be very aggressive.
I also would like to see Obama steer toward a "balanced-budget" in his campaign. I don't think I've heard either candidate mention that idea. Though, that doesn't really surprise me given the circumstances. The "how" of it all, "how do you get to a balanced budget", can be mightily distasteful. Then again, repealing the Bush tax cuts, which I believe Obama has said he'd do, perhaps that puts us back into surplus. I don't know. Given the Iraq situation, probably not. It'll just get us closer.
I've enjoyed trying to absorb this conversation and convert it into practical language. And that is the problem with presidential candidates who have to speak to a diverse, poorly informed populace. Compound that with the excruciatingly slow process of dissemination through the media and you understand why Obama hasn't spoken about budget balancing, deflation, and elite taxation control issues. Distill those issues into sound bites or bumper stickers and they get attention.
Or even one word like say, "Ayers" or "Domestic Terrorist" or "That One".
Obama's up to his neck in alligators and still trying to explain why the swamp needs drained. Its pretty hard to discuss such things when you're busy fending off attacks on personality, middle name and newly evolving conspiracy theories.
quote:
Originally posted by Neptune
I think the idea that "tax-cuts" are "good" for the economy is dead, for now. That will likely change later, people's ability to recollect history is short, but right now we can do the right thing and get back on track. At least as far as our own budget. I'd like to see us get to a surplus again, and do what Clinton didn't do; apply it to national debt.
Politically, what McCain would have to do to get the economy on track is completely unacceptable to the people that fund his base. The cuts McCain is proposing will simply add more debt to the tune of something like 300 Billion per year. I don't see McCain having the ability, and certainly I don't think he'll have the political "mandate", to make the tough economic decisions. Even when he seems to have a "good" idea, I have a hard time believing that he'll have the ability to see it through.
With Obama, we may end up just hating the crap out of him, but I think Obama will make the hard decisions. The ones we may not like. A large part of Obama's base will give him a "pass" on just about anything he can do to rebuild the economy. In a sense, where McCain has every reason to be slow and conventional and perhaps even do nothing in his handling of the economy, Obama has a semi-free ticket to be very aggressive.
I also would like to see Obama steer toward a "balanced-budget" in his campaign. I don't think I've heard either candidate mention that idea. Though, that doesn't really surprise me given the circumstances. The "how" of it all, "how do you get to a balanced budget", can be mightily distasteful. Then again, repealing the Bush tax cuts, which I believe Obama has said he'd do, perhaps that puts us back into surplus. I don't know. Given the Iraq situation, probably not. It'll just get us closer.
You mean those nasty tax cuts that produced tax revenues above the historical average over the last few years...
I'm fine with increasing taxes. Maybe if we got the bottom 50% of the population to contribute a little more than 2.9% of the overall tax revenue we'd be further along. If we're going to raise taxes it should be across the board.
Why would we deny them the opportunity to do their patriotic duty?
BTW, I think you're right about a balanced budget. I think from now on, a president shouldn't be able to run for a second term if they can't balance the budget in their first term.
quote:
Originally posted by Neptune
Fighting deflation in housing with purposeful inflation sounds an awful lot like what the Wiemar Republic did. Sounds dangerous, though the makers of wheelbarrows should be happy.
(http://upload.wikimedia.org/wikipedia/commons/thumb/c/ca/Inflation-1923.jpg/250px-Inflation-1923.jpg)
This lady is fueling a furnace with cold hard cash. It burns longer than the amount of wood it can buy.
Neptune.... spot on. We currently have a situation where the range of outcomes is VERY wide. If the Fed/Treasury don't do enough we have the risk of a massive deflationary spiral. YT is correct that we need to reduce the "excesses" of leverage but I fear that a "little" deflation is very hard to properly manage. On the flip side, the more money the Fed/Treasury continue to throw at this problem the less that money is worth. We find ourselves in this situation because of the amount of debt we have outstanding. Both personal and public. As we all know, or should, debt magnifies retunrs if you make good decisions yet severely punishes bad decisions.
In my mind, the Fed/Treasury need to come out and state with confidence that they feel they have done enough. It will take some time for the benefits of all of the monetary and fiscal stimulus to work but it WILL work. The markets can be extremely emotional and they can move much faster than the economy and the responses to the stimulus already in place. Hence, the risk that I see now is that the Fed/Treasury/Congress may do too much (as an aside, did I read that Pelosi is now calling for an additonal $165 billion stimulus package and that she may call a special session to get it done?????). Overaction carries many of the systemic risks that underaction carries. It is time to step back, take a deep breathe, and let time pass before we assure ourselves that we have effectivly jumped out of the frying pan and directly into the fire....
BOK:
I was speaking with a CFP friend the other day and he agreed with you that these measures will work EVENTUALLY...i.e., within 3 to 5 years that most of these investment houses will post record profits because they've been allowed to write down this bad debt.
Unfortunately, as with all crises, we will probably forget the lessons we're learning now. If we are learning lessons at all...I'm afraid we're too busy finger pointing rather than everyone accepting their share of the blame and promising to reform their bad behavior, and that goes for the guy on the street all the way up to the guy in oval office.
iplaw... agreed. Hence my statement earlier in this thread that we are looking at an extended period of time with a lower standard of living. The responsibility, both personal and public, of repaying our existing debt down to more manageable, and prudent, levels requires a reduction in current spending. This will result in fewer retail sales, less eating out, even smaller Christmas'. Many retail stores and restaraunts are going to close... more banks are going to fail and yet, this is the price that has to be paid. Our biggest risk as a society is if we have a mass rejection of our responsibility to repay the obligations we have. Even if you are upside down in your house it does not mean you don't have that responsibility. If we continue to play the victim card we will assure ourselves that we are all the victim. If we continue to blame others instead of looking in the mirror and deciding what we as indivuduals are going to do then we are surely looking at the end of our system as we know it....
quote:
Originally posted by iplaw
BOK:
I was speaking with a CFP friend the other day and he agreed with you that these measures will work EVENTUALLY...i.e., within 3 to 5 years that most of these investment houses will post record profits because they've been allowed to write down this bad debt.
Unfortunately, as with all crises, we will probably forget the lessons we're learning now. If we are learning lessons at all...I'm afraid we're too busy finger pointing rather than everyone accepting their share of the blame and promising to reform their bad behavior, and that goes for the guy on the street all the way up to the guy in oval office.
If history is a good teacher, it's taught us we've learned nothing from our mistakes of the past. [;)]
I couldn't agree more. What is going to irritate me to no end is when the ripple effects like store closings, restaurant closings begin. I'm afraid people won't see it as a positive thing and the blame game will begin again.
Yes. It will be painful, but it IS necessary if we are to learn to behave ourselves fiscally. We can't have it both ways, unlimited spending proping up every business and personal excess while simultaneously reigning in spending and reforming our love of debt.
We need to get back to believing that the borrower is slave to the lender, both nationally and personally.
I though Dave Ramsey was spot on the other day when asked about the current crisis and what these two candidates economic plans will do to our economy. He said that the country is like a patient laying in a bed with pneumonia and the proposals these two idiots are putting forth would be like a doctor suggesting that we cure the patient by giving him a brain tumor and hemroids...
Maybe we will learn, maybe we wont.
All manipulation of the Fed and government aside, there is a very basic doctrine of economics we should go back to. When times are tough, you are supposed to cut back on excesses. Tough it out and only spend what money is necessary. Save, not borrow.
Bush's basic message whenever times got tough, was the opposite. He wanted us to do our patriotic duty and spend, borrow, and consume. When we only engage in economically justifiable consumerism, it strengthens the economy. When we do it beyond our means, it sets the nation as a whole backwards. The parts of the economy he was being protective of with his "go out and spend money" speeches, tax rebate checks, economic stimulus checks, bailouts, and record deficit spending were in large parts the ones that were probably in excess of our means as a result of the unlimited ability to create new money. That's where Bush was wrong.
We would still be the strongest economy on the planet if we only bought what we needed. There needs to be some value restored in saving money. A fundamental change in how we value sustainability over debt creation would also solve many of the problems we argue about here on the Tulsanow Forums. It is reckless monetary policy that makes teardowns and poorly constructed big-boxes seem like a good idea to the movers and shakers today.
quote:
Bush's basic message whenever times got tough, was the opposite. He wanted us to do our patriotic duty and spend, borrow, and consume. When we only engage in economically justifiable consumerism, it strengthens the economy. When we do it beyond our means, it sets the nation as a whole backwards. The parts of the economy he was being protective of with his "go out and spend money" speeches, tax rebate checks, economic stimulus checks, bailouts, and record deficit spending were in large parts the ones that were probably in excess of our means as a result of the unlimited ability to create new money. That's where Bush was wrong.
I agree totally, but you do realize that that is what Obama means by a "tax cut" for the middle class. It's essentially another worthless stimulus check doled out to people who don't pay income taxes in the first place in hopes that they will spend that money on gasoline, goods, etc.
It is true to say that we're seeing record revenues out of the Federal tax system right now. With average inflation, that should almost always be true. With hyperinflation, we could see numbers out of the Federal tax system that are beyond all imagination. The dollar won't be worth much, but there will be plenty floating around, for what it's worth.
Everyone contributes to the tax system in their own way. I'm not sure that raising rates on the bottom 80% of the population is particularly helpful. It might be. It depends on what type of economy we want.
The gov't is trying to prevent or at least slow a cascade of "cash-flow" related collapses. Since most of the companies rely on revenues from the bottom 80%, raising rates there may be counter-productive.
On the other hand, it depends on what type of economy we want. Raising rates on the lower 80% would likely have a serious effect on basic consumption. Yes businesses would likely collapse, yes jobs would likely be lost, yes it would likely contribute to inflation, and yes it opens the door for more gov't intervention. The aftermath of these types of hikes are a little unknown. Not really sure what it would look like, but our economy would be something completely different then.
When billions are cut out of the tax system sending us into debt, the effect is inflationary, and looks very similar to a flat tax hike. In essence, the taxes of the bottom 80% have already been raised. They're certainly paying more, it just takes an indirect path getting to the IRS.
Wow. It's almost as if you believe that those effects on the middle class trickle down, or possibly "out." By taxing the middle class, businesses suffer from reduced revenue because people don't spend as much. On the other hand, by taxing businesses, employment figures and the middle class suffer because an employer is more likely to cut a job or reduce salaries/benefits to cover the difference. Doesn't sound like increasing taxes benefits anyone...other than the government.
That's why I think that the activities of the Federal government should be as minimal as possible. The more we can do for ourselves with our own money the better.
I can balance my own budget. Can the government?
There is no known relationship between taxing the wealthy and job losses. We have had plenty of jobs under much higher taxes than are currently being charged. Conversely, we've had huge job losses during times where less has been charged. Our last two recessions were during periods where the wealthy gained from massive tax cuts, and when our country was taking massive debt.
There is, however, a relationship between taxing the wealthy and inflating the stock market. Very few believe that the previous years market gains were based in technically sound stock.
quote:
There is no known relationship between taxing the wealthy and job losses.
Nonsense. You raise taxes on small business owners, many of whom would be considered "wealthy" under the Obama plan, and they will have no alternative other than to cut positions or reduce salaries and benefits.
Furthermore, increases in capital gains taxes ALWAYS fosters less participation in the market.
quote:
We have had plenty of jobs under much higher taxes than are currently being charged.
Do you have anything to back this up? We have had record low unemployment for the last several years in concert with lower taxes.
http://www.bls.gov/cps/cpsaat1.pdf
Unemployment rates
1951 3.3
1952 3.0 - Lowest rate under Truman
1953 2.9 - Lowest rate under Eisenhower
1955 4.4
1956 4.1
1957 4.3
1965 4.5
1966 3.8
1967 3.8
1968 3.6 - Lowest rate under LBJ
1969 3.5 - Lowest rate under Nixon
1998 4.5
1999 4.2
2000 4.0 - Lowest rate under Clinton.
2006 4.6 - Lowest rate under Bush.
2007 4.6
Every single one of our "record low" unemployment rates, have been under significantly higher tax rates. Also notable, the only time our unemployment rates went over 9% were in 1982 and 1983, under lower tax rates.
Currently, the 2008 unemployment rate is being tracked at about 6.1 by BLS.
http://www.bls.gov/news.release/pdf/empsit.pdf
There is no known correlation between tax cuts for the wealthy, and employment gains.
I think you're reaching too far and drawing conclusions that are unwarranted. There are far more cogs in the wheel than we're discussing.
BTW, I found a great quote from the last messiah of the democratic party vis-a-vis raising taxes and generating revenue.
Our true choice is not between tax reduction, on the one hand, and the avoidance of large Federal deficits on the other. It is increasingly clear that no matter what party is in power, so long as our national security needs keep rising, an economy hampered by restrictive tax rates will never produce enough revenues to balance our budget just as it will never produce enough jobs or enough profits... In short, it is a paradoxical truth that tax rates are too high today and tax revenues are too low and the soundest way to raise the revenues in the long run is to cut the rates now. -- J.F.K.
Man, I miss Democrats like that.
Put kids to work...And start taxing them mega churches.....
I remember back in 1993 my husband and I were trying to buy our first house.
The bank said we qualified for $50,000.00.(I know that doesn't sound like much,but it was a lot to us at that time.) We knew we could not afford the payment on that amount. We really tried to get them to understand that we didn't want to spend that much, but they pressured us the whole way. We were determined to stay under $25,000.00. They said we were crazy. We knew if we bought as much house as they wanted us to, then we would be house poor. We did not want to be that close each month with our money.
We did find a house for $22,500.00 and bought it. We really got the feeling that there were people at the bank and at the realtors office that were angry at us, you shoulda been there, it was not a nice environment. We felt so much pressure to buy something larger, but we did not buckle.
I really think that there are so many people that fell for the crap that the banks "pre-approve" people for, large ammounts and they just kept telling them everything was going to be alright.It was a lie, but the banks and people getting commissions didn't care.
About 3 years ago my sister and her husband were trying to refinance their house. When they intitially applied they were approved for and accepted a fixed rate loan at 5.75%. The finance company tried everything they could to get them to go for a variable rate loan with a 3 year balloon payment. The mortgage guy said "no problem, after 3 years, you refinance, it's so easy, everyone does it" Even to the point that the day they were to close on the new loan, they tried to slip a variable rate loan in on them at the last minute, my brother-in-law stood up and slammed his fist on the table and told the mortgage guy that he had told him several times that he was not going to fall for the variable crap and they better get the deal fixed or they were walking out!
If they would have taken the variable rate loan with the balloon payment, then they would be stuck right now. But he stood his ground and walked out that day with the loan he wanted and saved hiw own butt from the nightmare so many Americans are facing today.
The banks are being bailed out for bad decisions they made on their own. If I make bad financial decisions no-one bails me out!!
I have to suck it up and deal with it on my own.
[:(!]
Our entire worldwide financial system is reliant on credit and the trustworthiness of lenders. If we don't have credit we don't have an economy, period. This crisis has gone way way beyond what individual mortgage holders did or didn't do, and is now at the point where shipping companies can't get enough credit to shoulder the costs of moving goods from one port to another.
Grain Piles Up In Ports (//%22http://www.financialpost.com/story.html?id=866522%22)
quote:
The credit crisis is spilling over into the grain industry as international buyers find themselves unable to come up with payment, forcing sellers to shoulder often substantial losses.
Before cargoes can be loaded at port, buyers typically must produce proof they are good for the money. But more deals are falling through as sellers decide they don't trust the financial institution named in the buyer's letter of credit, analysts said.
"There's all kinds of stuff stacked up on docks right now that can't be shipped because people can't get letters of credit," said Bill Gary, president of Commodity Information Systems in Oklahoma City. "The problem is not demand, and it's not supply because we have plenty of supply. It's finding anyone who can come up with the credit to buy."
If we're at the point where international trade is starting to freeze up, we're in dire straits indeed. And perhaps at a point where we have to ignore moral hazard altogether and just find some way to prop our economy up, including bailing out whoever needs to be bailed out.
quote:
If we don't have credit we don't have an economy, period.
That's a major part of why we're in the mess we're in right now. We must get away from operating in the negative and considering that to be acceptable. But that's going to require something that we don't have, and that's restraint.
We have obligations that were imposed upon us 70 years ago that we simply can't afford to fulfill.
We're in deep and I don't see a way out.
quote:
Originally posted by iplaw
quote:
If we don't have credit we don't have an economy, period.
That's a major part of why we're in the mess we're in right now. We must get away from operating in the negative and considering that to be acceptable. But that's going to require something that we don't have, and that's restraint.
We have obligations that were imposed upon us 70 years ago that we simply can't afford to fulfill.
We're in deep and I don't see a way out.
Credit is the foundation of capitalism, Ip. It's based on investing (loaning) capital for a return on that investment (loan). Pretty much everything back to the renaissance is based on credit (trace mercantilism and trade to the rise of corporations). Actually, now that I say that, credit has been debated since biblical times. You know, usury?
quote:
Originally posted by we vs us
quote:
Originally posted by iplaw
quote:
If we don't have credit we don't have an economy, period.
That's a major part of why we're in the mess we're in right now. We must get away from operating in the negative and considering that to be acceptable. But that's going to require something that we don't have, and that's restraint.
We have obligations that were imposed upon us 70 years ago that we simply can't afford to fulfill.
We're in deep and I don't see a way out.
Credit is the foundation of capitalism, Ip. It's based on investing (loaning) capital for a return on that investment (loan). Pretty much everything back to the renaissance is based on credit (trace mercantilism and trade to the rise of corporations). Actually, now that I say that, credit has been debated since biblical times. You know, usury?
Credit is NOT the foundation of capitalism. Competition is. You can run a business without credit, just as you can run your personal finances without debt. It just takes more patience and restraint.
Debt can be leveraged by creative business people, but it can be a dangerous and unforgiving tool.
I'll agree it's got a certain function in capitalism but disagree about it being "the foundation" of capitalism. This is worth reading from Oct. of '05 when tougher bankruptcy laws went into affect.
http://www.monthlyreview.org/mrzine/wolff151005.html
Original capitalist principles weren't based on 30 year debt, nor over-inflating entire economies with an overage of credit or debt.
Let me slightly revise what I said. Debt is one of the main components of capitalism. That's why that "capital" is there. It's all about lending it, borrowing it, and leveraging it. Investing it. Free markets are also part of capitalism, and private ownership of the means of production are another. But leveraging capital for growth and riches IS most definitely a cornerstone of our economic system. If every business had to wait until it had enough money to make a complete investment, our economy would come to a total standstill.
Investment (which is another way of saying credit and debt) is an undeniably good thing. I'm a little stunned I have to tell you two free marketers that.
There is good news on the horizon. By changing the weight of the paper we print the $20 Dollars promise notes on we are able to print 11 of them where we were getting only 10 on the same amount of paper.
Recent articles of the billions of dollars being transferred to the Mexico banks by the workers in the US should alarm the people as it could indicate a run on the banks like forced their closures in the 1930's. During this administration the National Debt has doubled. The debt/taxpayer ratio in our money system is possible beyond repair. The once value of the dollar to foreign currency has disappeared. The billions of dollars in bundled mortgage's is being called for through the Stock Market by these foreign investors, as they see the clasping of the dollar by our production resources being outsourced and our bloated government salaries being received by a ever expanding bureaucracy. The working taxpayers that are provided W2 and 1099 forms will disappear as the job losses increase thus the National Debt will become as the Mill
Stone around our neck and will become a hindrance to future generations. We like to think we are the smartest people on this planet and refuse to acknowledge there are smart people in other places that anticipate our recession can be turned into another Great Depression as we are forced to step down from our plateau as the leading world power. The Markets wound indicate we have been striped of the Midas touch. Whether history will be repeated is not a flip of the coin as many high paid employees of the working public are assuring them that it is only printing more promissory Federal notes and passing them around is only their solution to securing their own turf.
The same condition exist today was in existence in the 1929-33 area. The only difference the population was rural which created an abundance of food. It is time to tighten our seat belts because the touchdown may be little rough.
I wouldn't be surprise if farm subsidies ended up being important. In one way or another.
I think it was back in 2003 or 2004; US became a net importer of agricultural products. That's an odd position for us to be in, and historically it's a bad sign. But part of it is global economics, part of it is domestic production.
Subsidies depend on the price of basic agricultural products. If we see significant price hikes, we may have to produce more to keep prices down: that equals subsidies to gear up smaller farms for higher production. Corporate producers have no interest in lower prices, and lower prices have the tendency to wipe out smaller farms. If we see a significant decline in prices due to the economy, we may have to produce less to stabilize both corporate and small farms: that equals "Great Depression"-type subsidies, where people are paid for not exceeding production quotas. Except for maybe big corporate producers, it's in no ones interest for small farms to fail. And it's in no ones interest for prices to dramatically change, one way or another.
Family farms are the "diverse" part, the "flexible" part of our agricultural production economy. They're also largely ignored. For many small towns, small farms are almost their sole source of incoming revenues. And like private businesses, their existence has a stabilizing effect on our economy.
QuoteIplaw quoted; I'm fine with increasing taxes. Maybe if we got the bottom 50% of the population to contribute a little more than 2.9% of the overall tax revenue we'd be further along. If we're going to raise taxes it should be across the board[quote/]
As you are aware the taxes are collected with W2 forms, which the worker is required to justify whether he has the responsibility to get back any overcharges. The non-taxpayer wears a $1000 dollar suit and $500 dollar shoes which is exempted as not suitable for street wear. He rents his clothing to play golf in as well as everyday wear because they are uniforms, not suitable for street wear.. He uses in portfolio revenue bonds issued by trusts, that's interest is tax exempted; does off shore banking beyond the scrutiny of our tax laws, while living in an off-shore estate.
I have gotten letters say saying they have foreign clients with cash dollars wanting to buy my property. (this is our home lands they want to buy)
The side of the fence one stands on to count the contributions in the centuries old tax system, that has fail, is like the other empires who even required its citizens to report in person to be included on the tax rolls. SS, with its many exemptions is our nearest approach, to identify only a small portion of the taxpayers.
Who's taxes should we cut ?