Home Forums Hunting & Shooting Hunter's Campfire Economic Crash??

Like, say for instance, the US? In our most prosperous time frame of the mid 20th century when we constructed the middle class?

Hint: This is a trick question.

Will

No post war bubble in 1946?
The "Nifty Fifty" of the 1960's were not part of a bubble?
S&L crisis was not part of a bubble?

I'm glad to see Gus is sharing the good stuff.

The problem with your solution is strong fisted regulation to reel in a few crooked large corporations causes collateral damage to thousands of small corporations. Oh and good luck getting a politician to regulate smarter and not more!
We are bogged down in bureaucracy as it is.

This is the theory of money put forth in the movie Zeitgeist Addendum. Considering it was written and directed by the self avowed Socialist and Athiest, Communist (he also proposed that all natural resources should be owned by a intellectual ruling class) Peter Fresco, I'm suprised an old school Merchantilist like TRH subscribes to his philosophies.

Jimmy Carter gave us Regan and deregulation, we can only hope that Oobie will give us another free market capitalist.

You aren't seriously calling the debt wracked up financing WW2 a financial bubble are you? Seriously? That was US treasury debt that was paid back. Financed through taxation as all wars should be.

Tell me you are pulling my leg.

The nifty 60s? No bubble in sight.

The S&L crisis? I would allow that this was the first crack in the dam. The first real example of how deregulating the financial industry blew up in our faces. Take a financial entity like an S&L with only local history and know-how, allow it to invest in real estate far from their own backyard for the first time ever, don't hold them to typical banking regulations on leverage etc, don't intervene when control fraud goes rampant... BANG! Another example of deregulation in action.

Do you seriously believe that doing away with G-S had nothing to do with the fraud, corruption, and bubbles we are dealing with now? It's a serious question.

Will

Well if that is what you believe I can understand your position a little better. Mine is that "a few crooked large corporations" doesn't even begin to cover our present position.

I honestly believe that mark to market accounting would render each and every major bank in the US (and many elsewhere) insolvent. Without loan guarantees by the federal government and the central bank I see a couple of our biggest banks gone tomorrow. Without federal intervention and central bank largesse I don't see a functioning mortgage market today, 5 full years after the crash. Without a bogus 'bank holding company' designation I don't see a single investment house like Goldman Sachs standing.

Right now I don't see even a semblance of a healthy functioning banking industry in the US. We had a chance to do the right thing and the fact that we didn't should have been a lesson in how the real world operates as opposed to Rand's utopia. Iceland did the right thing and has recovered. We took the Japanese route and will be in the thick of this thing for the foreseeable future.

At least that is how I see it.

Will

Will,
You are making my point, it's the bankers, enabled by the politicians who are the major villains here.
Most corporations just want to make profits and enjoy the fruits of their labor.
You are being used as a useful idiot and playing a dangerous game blaming corporations.

I only blame the corporations that instigate, fuel, and benefit from financial bubbles. You don't see me castigating Ford Motor Company, or Caterpillar, or Red Wing Shoes do you?

There are hybrids like GE who are both a productive company and a parasite at the same time. But by and large I don't blame companies within the old produce/consume economy. They are as much victims of the financial corruption as we are.

Our financial system is as corrupt and dysfunctional as exists right now.

Will

So I guess you've never heard of the "nifty fifty" tech stocks of the 1960's and what happended to them during the 73-74 bear market. By many this is considered the 4rd U.S tech bubble. It was preceeded by the Railroad bubble of late 1800's, the Mining bubble leading up to the panic of 1907, the Industrial bubble of the *20's, and the nifty fifty being the first tech bubble of the 1960's. The bubble of 2000 was actually the 5th US tech related bubble since the industrial revolution.

WWII was financed by a combination of taxation and debt issuance, and at no time since WWII has all us debt been repaid. In 1946 we had 100% inflation, and -10% GDP, so to say we did not experience a bubble is just not accurate.

S&L were actually an example of what happens when financial companies are not allowed to diversify. S&L's were restricted to a small subsection of realestate, and when that real estate bubble when, the s&l's went with them. Local or not, regulation set up that industry for failure.

Yep, Penguin = checkers irfubar = chess

Jump on in T.R.H.; the water's fine. I noted that pages ago...




Not likely.

The racial demographic is profoundly different than 1980. The Latino vote is growing exponentially and it will be tough to beat.
Also those on the gov't dole has increased so drastically we may never see the a Reagan Conservative again due to the 'give me' mentality.

Will,
Now we are getting somewhere. You are getting close. The banks are zombie banks being supported by an infusion of Fed funny money.
I believe you are wrong about the cause of the problem though.
The housing bubble was the final straw that caused the meltdown.

The housing bubble was caused by Bill Clinton, Chris Todd, Barney Frank...

They wanted the underclass to be homeowners, I believe they called it the "fair housing act?"
The Fed lowered interest rates...
The banks happily complied, they could off load the bundles of loans to Fanny and Freddy, no worries the politicians said!
Hence the housing bubble began.

I believe they created the housing bubble to cover up the fact they had chased most corporations offshore with excessive corp. taxes, regulation, organized labor, health care cost...
We needed some kind of prosperity, even if it was phoney.
Now we just print money, instant prosperity! Woo hoo.
In the mean time, point the finger of blame at the evil corporations.
The occupy Wall Street crowd loved it!!
Careful who you align your ideology with! hence the reference to "useful idiot"

They created it because they were incompetent idealist.

I would add Phil Gramm and that bunch that sponsored the securities modernization act to that. And the bunch that fought Brooksley Born on derivative regulation. Make no mistake, these things played a critical role.

Far as I am concerned you could do away with all of the GSEs. Freddie Mac? Gone. Fannie Mae? History. FHA? Can them. In the end a good housing market doesn't need these artificial props. But don't kid yourself, they didn't cause the housing bubble. That is another excuse. A libertarians phantom. Neither did CRA.

From the Federal Reserve Board report on the subprime mortgage crisis:

FRB report on subprime[/color]

"Only 6 percent of all the higher-priced loans were extended by CRA-covered lenders to lower-income borrowers or neighborhoods in their CRA assessment areas, the local geographies that are the primary focus for CRA evaluation purposes. This result undermines the assertion by critics of the potential for a substantial role for the CRA in the subprime crisis. In other words, the very small share of all higher-priced loan originations that can reasonably be attributed to the CRA makes it hard to imagine how this law could have contributed in any meaningful way to the current subprime crisis.

Of course, loan originations are only one path that banking institutions can follow to meet their CRA obligations. They can also purchase loans from lenders not covered by the CRA, and in this way encourage more of this type of lending. The data also suggest that these types of transactions have not been a significant factor in the current crisis. Specifically, [color:#FF0000]less than 2 percent of the higher-priced and CRA-credit-eligible mortgage originations sold by independent mortgage companies were purchased by CRA-covered institutions...."

END QUOTE

2 percent... not much traction there.

The reason we don't do away with these gimmicky GSEs is the same reason we don't do away with the mortgage interest deduction: My subsidies are good and your subsidies are bad.

It really is that simple. And you would be surprised how many on this board have argued as you have and then turned around and blasted me for advocating doing away with their interest deduction.

Anyway, a good discussion. I've been posting in between proof reading and passing back and forth a paper I am working on and I enjoyed the argument/distraction.

Have a good one,
Will

I was hoping someone would mention Brooksley Born.

She knew the score but got flattened by the powers that be.

Will,
I must admit I enjoyed the discussion also. Usually people with liberal ideology just annoy me.
I think many thing have contributed to the mess we are in, but buy and large we can see the results of failed liberal ideas before our very eyes.
You mentioned the derivative buble many times and I agree its a huge problem, but it hasn't burst yet. When it does thing will get very interesting.

So you're saying it's ok if I'm only forced to misprice 8% of my portfolio??

It's also important to notice how thin you had to slice the market to get that number. As you also mentioned Freddie and Fannie were a large part of the problem. In November 2000, HUD began requiring Fannie to dedicate 50% of their business to CRA elibible loans. They only way they could meet this standard was to lower lending requrements FOR THE ENTIRE INDUSTRY. Hence it was the CRA that was pushing the lax lending standards, increased securitization, miss priced securities, a housing bubble with no more suckers to attract, the repricing, and the freeze.

P.S. Of course my subsidies are good, and your subsidies are bad, that Chrony Capitalism 101! Yes, we need to mitigate the mortgage interest deduction, but we need to do so slowly to not cause an undue shock to the realestate market.

Yes, all the GSE's need to go away, except for VA loans, cause I'm a veteran, and all my subsidies are good.

Lehman, AIG, Bear Sterns......none of that deflated the derivitive bubble??

Crony capitalism only becomes possible when government presumes to regulate some aspect of the market. At that point, the natural choice for the regulators become leading figures in the industry. After that you get the "revolving door" phenomenon, where said technocrats go back and forth between being government regulators and CEOs in the industry. The irresistible temptation at that point becomes to regulate the industry in such a way as to advantage existing major players to the disadvantage of more efficient competitors, i.e., government imposed cartelism, thus creating an advantage for themselves when they inevitably return to their CEO posts.