When is the chit going to hit the fan? I say there's a good chance of it happening within the next two years. Any predictions?

About any day from here on out is a bonous.

after making it through 2008 I don't believe one is in the offing.

this country is in the business of kicking the can further down the road, and at that we are very very good.

just let them keep printing money and redistributing it, and you keep on paying more and more taxes. the system will likely go on forever.

Could very well be. Depends on how many tricks the Fed can keep pulling out of its bag. I think there has to be an end very soon to these tricks that are merely keeping the financial sector humming (helping multimillionaires and billionaires become even wealthier) but simultaneously wrecking the real economy of the nation.

the panama canal (owned or leased by the Chinese) is upgrading to make room for super ships. apparently the globalization that is occurring is disrupting national economies and causing them to re-structure.

the fact that the UN hasn't converted to a one-world currency just boggles the mind.

and the goldbugs want a crash, so as to show everyone how important hording gold is. why, there's something in this game for nearly everyone.

Ask Mr. Cruz!

Ask Mr. Bernanke or his bosses. They decide.

This!

The fed has run out of tricks IMO and the patient has just so much blood....

It is already on. The police state does 80,000 SWAT raids a year.

Who knows when, but IMO the "It's really slinging it now" moment will come when the Government checks stop coming to the inner city low lifes who have no clue how to make a living and they start roving out past their usual turf to pillage.....

The checks will never stop coming. However, the dollars those checks are redeemed for will steadily purchase fewer and fewer goods, all the while we'll be told by the Fed Gov how wonderful it is that we have a near zero percent price inflation rate ... that based on the annually increasing amount of computing power that one can purchase for one's dollars. Too bad you can't feed your family, run your car, or heat/cool your home with computing power.

The obama admin. and lib\congress have plenty of time and extremely deep pockets (our money). No big rush, like Walt nwalaska says "Crisis - What Crisis??"

The longer we wait, the worse it will be.

True.

In general, Monetary policy can be used to target either interest rates, or inflation, but not both at the same time. Once conditions force the Fed to end their bond buying and raise interest rates to avoid excessive inflation, growth will return to near zero, or we will slip back into a recession. The current causes of our economic problems are Fiscal, over regulation, and just plan bad policy. Until these core issues are addressed the American engine of prosperity will not be fully engaged.

I think the country has pretty well gotten used to the engine running at idle. It's the accepted "new normal" now, so no one is crying about it much anymore. We'll be stuck in neutral until a real conservative gets elected some day.

When Russia or China finally convince the rest of the world to stop using the Dollar as the effective "reserve currency" (esp. with regards to oil), THEN it will hit the fan.

Until this happens, the Fed will just keep printing money for as long as they can get away with it, effectively "inflating" folks out of their earnings and "inflating" themselves out of the debts the US owes other nations.

Given the data presented here on the 'fire it should have happened numerous times over the past few years. Still waitin', still earnin'.

Things wont completely hit the crapper while a dem congress (senate) and dem president are "in charge".

Get a conservative in there, or ave the senate go conservative and start putting up Cons policies, and "suddenly" things will get far far worse.

Ayn Rand predicted this 50 years ago. The producers need to stop supporting the fiction and allow it to crash.
Those of us who lived thru the 50s remember that with 'Dad' being the sole worker (for the ladies, outside of the house) could go to work and support a family of five, pay for a house, save money, buy a car every 4 to 5 years, etc.
That same life style, today, now requires two workers outside of the house.
The American dollar should come on rolls so that we have a choice we can spend it or use it to wipe our butts.

Jim

Ain't going to happen as long as there are oberry supporters and the Fed keeps printing more money for them.

Ironic isn't it that her philosophy was adopted by TPTB in charge of our monetary system. And that the policy decisions derived from this philosophy are some of the prime reasons why we have went from the world's largest industrial giant with the most transparent securities markets in history to what we have now: a damned mess where you can't honestly tell who is solvent and who isn't.

She was a crank. Her followers were sanctimonious and self important windbags. And the system her rantings produced is a god damned disaster.

Will

PS: About that crash? Honestly fellows... look at oil prices and production. That was the trigger before. In all likelihood no crash happens until we work our way through the oil that can be recovered at this price point. We ~may~ get a recession that is pretty bad but domestic oil is stabilizing the dollar. That is going to take a few years at least to work through.

Never, our hero the zero fixed it.

You can thank LBJ for the seeds of inflation that wrecked the standard of the stay at home Mom.

Between Vietnam and his The War on Poverty, federal expenditures bloomed and the incredible inflationary period began necessitating two income families.

Right.

When Totila The Ostrogoth sacked Rome in 546AD the games continued as well as the food subsidies, at least until the food ran out. I don't see our games or checks running out.

Typical liberal response, blame capitalism for the failures of socialism!

IMO, these are very good economic times for many. Lots of money to be made, if a guy is inclined to do it.

I don't think these words mean what you think they mean.

Randian lunacy was the absolute bedrock of the efficient market thesis. Her followers pursued it relentlessly in their quest to deregulate the financial markets. Off balance sheet entities used to hide losses and market manipulation. Mark to model accounting where banks can refuse to acknowledge reality. Unregulated derivatives used to construct landmines scattered across our financial markets. Securitized loans where at times you cannot find a lawful paper trail to determine who actually ~owns~ the underlying asset.

All of this foolishness absolutely impossible under her pet theory. She was not only a crank she was one of the most harmful cranks in our nation's history. Greenspan, Rubin, Summers, Giethner, etc... all Randians and some of the most harmful monetary figures in world history.

The biggest problem with her idiocy is that she didn't look in the mirror. Her idiotic theories ENABLED the biggest bunch of parasites known to come into power: the modern FIRE economy.

Will

You are a typical lib, you blame industry when you should be focusing on the bankers then the politicians!

You either haven't read a word I typed or have the worst, the absolute fracking worst, reading comprehension I have ever encountered.

Ever.

Will

The bankers and the politicians produce nothing! They are parasites that live off the fruits of productive people.
The industrialist produce products we all use and enhance our lives. They build factories, hire workers...
Business owners are competing in a market that is getting to be more "rigged" everyday by the politicians who are financed by the bankers!
There is a huge problem when the people who handle the money "bankers" make more than anyone else.
Then when the bankers greed overreaches and the common man suffers the politicians step in and bail out the bankers.
Penguin, do you even know what derivatives are and who is dealing in them?

You haven't read one [bleep] word I have written.

There is NO WAY you could have done so and made a post like that. No way.

Let me give you a hint: Ayn Rand and her crackpot theories were behind the policies that enabled those bankers you despise to attach their parasitic snouts to the produce/consume economy. Her followers ARE the parasites!

How in the hell anyone can defend her while attacking the evils of bankers, politicians, and their unholy alliance is beyond me.

Will

Will,
It appears our understanding of Ayn Rand's philosophy is at polar opposites.
My understanding is she promoted free capitalism and industry,and considered the enemy to be the bankers and over regulating, excessive taxing politicians.

It appears so ifubar. And tbh I am not sure that chasm in understanding can be bridged. I would encourage you to google Rand, Greenspan, efficient market theory, etc and see where it takes you.

Believe me when I tell you that there was no more important person in laying the intellectual foundation for financial deregulation than Ayn Rand. And there were very few movers and shakers involved in the financial deregulation movement who weren't admirers of hers.

Even after that endeavour ended in a disasterous financial bubble, cosmic meltdown, and the resluting bailouts of every type and stripe the proponents of this movement refuse to acknowledge the flaws in her theory. There is a difference between clearing away unnecessary regulatory underbrush and depending on the inherent ethics of bankers, politicians, and businessmen to prevent fraud. Hell most of the dyed in the wool believers in Rand refuse to acknowledge that unregulated securities markets can even have fraud.

It is amazing is what it is.

Will

Will,
I admit I haven't studied Ayn Rand's philosophy in depth, just at arms length. I am an Austrian school of economics follower.
Greenspan, Geitner... are Keynesian followers and that it what I believe got us in this mess.

If you've got a few minutes, this is worth watching. There's much more of this interview available on YouTube. Interesting stuff.

Ghost,
Thanks for that link! Very interesting.
It appears my perception of Rand's philosophy is essentially correct? Free markets, capitalism...
The shysters will always have a slight advantage in a free market society, until the rule of law or their reputation catches up with them.
we are a nation of laws, not men.
The liberal collectivism is a cancer that is consuming us and our freedoms.
I am having a hard time squaring Will's perception of Rand's beliefs with her own words??

Personally I agree with Will on the regulation of derivatives. You can't expect them to self-regulate on a perpetual 'money machine' (their term) with the knowledge that a bailout is forthcoming in case the shtf....which is exactly what happened in '08.

Don't take my word at all!

Just read up on Rand's influence on the men who deregulated the financial markets. Read Greenspan's own words on the subject. He, after all, learned it all from the woman herself. They, like her, had the mistaken impression that capitalism as we know it arose naturally. They believed that without interference, as they put it, fraud could not prosper, it could not maintain itself.

Markets fail in the absence of transparency. It is the achilles tendon of all things anarchist. America became stable and produced a high standard of living only after we imposed transparency on the financial markets. The free market alone will not produce transparency. We deregulated our markets which were the most transparent and trusted markets in the world.

Just saying...

Will

Yep, makes one want to "beat the penguin" but what challenge is that? Gnats need love too.
Irfubar, wastin' your time; I went round and round with the earth-bound bird years ago...he. don't. get. it.

I think we have some common ground, I too believe derivatives should be regulated, after all the futures markets function fine and are vital to our commerce.

The answer isn't complete deregulation of the financial markets, that gives the shysters too much control as Greenspan said.
The problem is the regulators don't know when to stop and they actually harm the markets.

The insidious part is were the bankers, industrialist... lobby the politicians for favorable legislation that gives them an unfair advantage in the markets!
The politicians are the common link here.
Through all this main street, the small businessman suffers, and therefore the middle class is being destroyed.

The politicians with the support of the useful idiots are blaming business people for the economic collapse.
The feds have put themselves in the corner and money printing, low interest rates... are devaluing our money.

I believe if our currency collapses the bankers and politicians are most to blame.
Business is just trying to make a profit.
And we do need profit, it isn't immoral as the libs lead people to believe.

I believe Rand was more right than wrong!

Fubar, you perception of Ayn Rand is correct. One of the core's of Rands philosophy is an Economic truism. In instances where the non-producers try to take too much from the producers, they will adventually take their ball and leave. A modern example of this was the civil war in which the realitivly wealth folks of Eritrea broke away from the Ethiopia, and the poor folk of Ethopia lost access to these potential jobs, and tax revenue. In reality American was founded on this Randian principle when we told the British to take the British Merchantile System and shove it.

In America, we see saw this on a smaller scale with middle class flight out of places like Detroit, and the establishment of Suburban communities.

Ha Ha,
Ya its a lesson I probably need to relearn? Arguing with libs is a waste of time! Time you can never get back!!
But good grief our country is in peril and we have to stand up to this nonsense.

Sounds libertarian to me.

Pretty much, DD.

I haven't researched it, but I'd wager Ron Paul agreed with her quite abit.

Well, nothing amuses me up more than a guy who thinks he's smart, he uses the vernacular, the cliches, just the right poignant phrases...and he's still full of sh*t...only he doesn't know it.

All that wealth that was once disbursed among the people fairly evenly via the mechanism of free market economics is now, via the mechanism of crony capitalism, dispersed among financial sector participants, mainly the banks, by means of a purely fiat currency that's constantly inflated. Inflation of a purely fiat currency (which ours has been since Richard Nixon closed the international gold exchange window, i.e., defaulted on our debt to the world) was the means of transferring the wealth from the middle and lower-middle classes to the wealthy and (primarily) super wealthy.

TRH,
Hell, they have convinced people that debt is wealth? wtf

Nothing amuses me as much as watching people try to make excuses when their pet theories are actually implemented... only to fail in the most harmful and destructive way imaginable. Just like we were warned.

My way was tried. We had 60 years of the most transparent and trustworthy financial markets in the world. They were, without hyperbole, the envy of the world. Not a bubble in sight. Glass-Steagall was one of the most elegant and important pieces of legislation ever enacted. TPTB fought for 60 years until they finally took the wounded and much reduced animal out back of the barn and put a bullet into its brain.

I see there is a movement to reenact G-S. I'm 100% in favor of doing just that. You boys tell me you are in favor of that while still being Ayn Rand fans and I'd probably think you are pulling my leg.

Will

Sure. Currency is created in the US by the creation of interest bearing debt. Each time it's done, wealth is transferred from the folks who earn it (sucking the value from their wages, bonds, pension payouts, savings, etc.) to the banks, the government, and the high level cronies attached thereto.

Must be Ayn Rand's fault?

this is so true,, but then the "money" continues on it's journey through the system, cascading, trickling down, flowing like wine, I mean water. like a farmer throwing grain to the chicks, the chicks who come running for the grain gets it. the others, pecking far away for food, just receives a few grains of said yellow gold corn.

think of money as a flow, a process, a bloodstream.

The health of an economy isn't measured by the ability of a certain few to increase the size of their portfolios by moving money around on paper from one financial sector to the other with clever timing strategies. It's measured by real wages, i.e., actual purchasing power, available to be earned by regular workers, and the number of such opportunities available in the job market, which comes down to manufacturing productivity as a nation. That requires small, unobtrusive, and decentralized, government. A return to a level of government activity approximating status quo ante 1913 would be about right.

You don't know what you're talking about. I'm not a Randian, but I've studied her approach to economics, which is essentially classical. The cause of our current crisis isn't classical free market economics, but rather its perversion in the direction of crony capitalism. Crony capitalism can only come about in precisely the sort of heavily government regulated economic environment (where regulators are routinely "captured" by the industries they're created to keep in check) that you (not Rand) advocate.

WELL SAID!

Greenspan et al went wrong when they abandoned the Randian approach to adopt the Keynesian approach to economics and monetary policy.

AP, the 50's were significantly more complicated then that. At the end of WWII, the industrial capacity of the entire rest of the world was in ruins. Europe was devistated, Japan was burned to the ground, and Stalin decided the Soviets should ignore the production of items for consumer production, and focus on military production. So, for the next 15 years, America was the only game in town. During the 1950's we were responsible for 80% of the worlds industrial production. However, after the post-war Asian and Europen economies rebuilt, our share of world industrial production returned to a more normal level.

The 1950's represented a huge "windfall profit" for the US. IMO who SHOULD have preserved the capital to maximize our realitive competative advantage for the decades to come, but as Hatari noted, we squandered it on the "war against poverty" and wrecked the Brenton-Woods Gold/Dollar standard. We began to believe we, as a nation, were entitled to the easy prosperity of the 1950's. As a result we weren't really prepared for the inflation, oil embargo's, and international competative pressures of the 1970's.

In the mean time, our University's were taken over by the draft dodging neo-pacifist socialist liberals. While the conservatives were doing their duty in the jungles of South Vietnam, the liberals were getting student deferments for the duration of the was. Ten years was just right for them to get PHD's and take over the University administration, and alter the course of American thought.

On the regulation of Banks:
1776 was a very important year, for it was then that Adam Smith published his inquiry into the nature and cause of The Wealth of Nations. In it he lays out the few area where regulation is necessary to facilitate commerce, and in this short list, he includes Bank, for it is only when the banking system can be trusted that commerce can flow with the minimum of worry.

To some degree, banks in this country have always been regulated, and that was still true during the melt down of 07/08. Regulation in, and of it self, is not always good, and much of the regulation actually destroyed the free market aspects of one of our largest financial markets, home mortgages. In a true free market, every bank would set their own lending standard, but we'd evolved to a system where all standards were esentially set by psudo govermental orginizations, Freddie and Fannie. This concentration of decision making killed one of the necessary checks and balances in a free market system. Banks were being forced to provide high risk loans at insufficent interest rates, and it didn't take banks long to realize the risk was not worth the reward. Now the CMO was nothing new, they've been around since the early 1980's. What was new was the bank desire not to hold the risk for these new loans, and make their money on a transaction, vs a lending basis. So let's be clear, it was regulation that created the incentive to off load these loans and the bad risk reward potential.

But in order to find buyers for these loans, it was necessary for investors to believe they were less likely then they really were. This was the result of inflated rating by the RATING AGENCIES, S&P, Moodies, Fitches. Although the rating agencies were regulated, their regulation was all wrong. In reality, there regulation served as little more then a barrier to entry, preventing new agencies from entering the business, which would allow a wider more diverse range of idea's and create a freer market. Perhaps even more importantly, the Rating Agencies bore no responsiblility for getting it right. If they rated a company AAA on monday, and it went belly up on tuesday, it was the investor left holding the bag, and the agency could not be held liable. In addition, the agencies are paid by the company who's securities they are rating. This created a game, where if a batch of securies could not achieve the AAA status, the agencies would "consult" with the underwriters, for a "fee" (read bribe) to help them increase the ratings. Finally reality set in, and the lie collapsed. In one day, S&P reduced the rating on a group of securities 17 levels from AAA (what the US governemnt SHOULD be) to junk status......all in one day....now does anyone really believe the fundamental of these securites changed that much in one day??? This brought into question the rating of all similar securities, and the short term money markets froze, and the crisis was on. As an interesting side not, not one person from any rating agency has served a single day in jail for their role in the immense fraud they perpertrated upon the peoples of this world. Lets be clear the rating agencies were wrongly regulated creating perverse incentives

When we discuss derivitives and the collapse, people tend to focus on the banks. On the whole banks used derivities to off load much of their risk, but there in another catagory of financial institution that used them to do the opposite, INSURANCE COMPANIES. In this instance the regulation failed to keep up with the pace of the industry . Let me show you what I mean. The largest financial company to go bankrupt in all this was AIG, not a bank, but an insurance company. Just like how banks are required to keep an amount of reserves against the money they loan, insurance companies are required to maintain reserves against the amount of insurance in force. Insuring bonds was nothing new, but what AIG discovered was AIG discovered was that performed the function of insuring bonds, but did so as a "defalt swap" instead of an insurance contract, they could bypass the reserve requirements. This allowed them to leverage the company to a level unimagined by the regulators, and even if they could imagine it, there was nothing they could do, because they were not insurance products. This sytem was again the result of perverse incentives created by the "hit and run" form of compensation called "stock options". The way it was played was for exec to run up the price of their stock as their options matured, increasing their personal profits. This was accomplished by increasing the companies leverage, and hence it's vulnerabilty to market down turns. Their system worked great in an increasing market, but once the credit markets froze, AIG was toast. If you study the origins of executive stock options, you will see they are rooted in their favorable tax status, so once again, it was bad regulation, creating bad incentives, that contributed to the collapse.

In summary, it wasn't the lack of regulation, it was BAD REGULATION that set in motion the financial crisis of 2008.

+1

Right, if you are going to have a centrally planned economy, you need regulators, but said regulator will always be captured, converting the economy into one of crony capitalism. Thus the answer is to abandon that approach which resulted in the need for regulators, i.e., the answer is to abandon the notion of a centrally planned economy.

I never cared for Ayn Rand because she was so incredibly psychically damaged. When she left home she never spoke to the mother again. Broke her heart. She wad a mean, vindictive, controlling utterly hypocritical woman. She hated theistic religion (but not her own religious faith of secular humanism). She thought she was much, much smarter than she actually was. In truth, she is a very minor figure in the history of philosophy and political thought. She contributed very little of substance to the canon of human knowledge. She was a crackpot in so many ways.

Yeah, all her crony capitalism advocacy is to blame.

It's complex. I'm less sure about what is essentially 'theory' than I was 5 years ago.

It is what it is and no real change is on the horizon...so, fuggit.

TRH, you have this backwards. Inflation hurts the lender, not the borrower. If the lender is payed back with inflated dollars, the purchasing power of those dollars is less then if they had not been inflated. Inflation is a tool to steal from the haves, not the have nots.

Oh there will be change!! our path is unsustainable.
My greatest fear is they will be successful in blaming capitalism, when the true villain is there socialism/liberalism/crony capitalism...

I don't like her personally, either. Regardless, her economics were sound, essentially classical free market in character.

The disturbing part of it all is,...most people are too ignorant to even have an opinion on the matter.

There's hundreds of thousands of people in the country who have nothing in their wallet but some food stamps, 14 pictures of they baby mommas, and a lottery ticket.

Good luck trying to explain the role of the Federal Reserve to them.

Too silly to comment on. I'd need to be in a far more patient mood.

Being Keynesian had nothing to do with deregulating the financial markets. He did that out of personal conviction. He sat at the right side of that lunatic and got it first hand. Don't even try to tell me that you, 50 years later, have a better grasp of her crackpot theories than someone within her inner circle. I ain't buying it Hawk.

With Randians it is never "Oh [bleep]! That didn't work at all, let's go back and rethink this." It is always "Well if you would let us put into effect ALL of our theories instead of just the ones we've tried, each and every one of which failed cataclysmically, we would all be fine! Trust us!"

What we had prior to the banking deregulation worked! It worked better than any other method that has been documented in human existence! We don't have to rely on the fevered rantings of some objectovist whackjob, we have real live hard data we can learn from.

What we need to do is repeal about a dozen 777 Cat truckloads worth of financial laws that don't have a chance in hell of working individually, let alone in conjunction with each other law, reinstate Glass-Steagall and be done with it. Forget all of this foolishness and go back to what worked.

Jeez.

Will

So true.

With Randians it is never "Oh [bleep]! That didn't work at all, let's go back and rethink this." It is always "Well if you would let us put into effect ALL of our theories instead of just the ones we've tried that failed cataclysmically we would all be fine! Trust us!" smile


You are projecting!
Thats a cornerstone of liberal philosophy "if we just do more it will work"

Deregulating an already centrally planned economy and monetary system isn't free-market capitalism (of the Randian or any other flavor) in the least. It's crony capitalism. Centrally planned economies and monetary systems must be heavily regulated, which is why they always devolve into crony capitalism. The solution is to abandon centrally planned economies and monetary systems.

Listen to him! That is exactly what he, and every other Randian, does when you explain how that foolish wench's theories helped to blow up the world economy.

"Well you need to do away with the Federal Reserve as well..."
"Well you need to do away with this or that or some other piece of legislation as well..."
"Well it would have worked if only you'd try (insert another foolish Randian pet political policy here).

This has been going on for years now after the crash they helped to cause. I don't have to put all those conditions on my recommendations, I have real life proof: They were tried and they worked spectacularly.

But of course I am an independent and don't need to protect an ideology. That makes it a lot easier to be pragmatic.

Will

I'm sorry, Penguin, but you are clearly a variety of leftist, and decidedly so. Nothing you say bears close scrutiny from an historically and/or economically informed perspective. You're smart, but garbage in = garbage out.

As A businessman, if I cheat my customers I won't be in business long. Thats the free market working!
Now if I get the state to enact legislation that protects my cheating, I can do it all I want! What part of crony capitalism don't you get?

I"d like to hear you try sometime.

My way works. End of story.

Your way? Well the stuff we tried that revoked my stuff failed and the only reasons I am getting is that we need to try more.

I'm sorry but in the real live data driven world that I live in the prudent course is to go back to what worked not to double down on a losing hand.

Glass-Steagall worked. Separating commercial banks from investment houses and insurance companies worked. Trade policy that took into account the mercantilism of other countries and protected Americans from it worked.

You can say what you want but my way worked. Your way? So far you can't say that. You can only give me excuses as to why it hasn't.

Will

Free market principles produce prosperity wherever they're tried. The closer the approximation to truly free markets, the greater has been the level of prosperity achieved.

I don't think I am not getting anything.

What I think you are missing is that in large corporations the individual can advocate looting, walk away with millions USD in personal compensation, and when the company goes TU he doesn't care. He already has his why should he?

You cannot depend on business caring about their long term reputation as a deterrent to fraud. The people who run these things get compensated well enough to not care about the long term.

I agree wholeheartedly about crony-capitalism. My point would be that by adopting Rand's idiocy you make it easier for that type of system to coalesce under the guise of deregulation and laisse faire. My take is that in this world we need to concentrate on better governance not more or less governance.

Will

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.

Crony capitalism only becomes possible when government presumes to regulate some aspect of the market. [/quote]

Then please explain how the derivative market took down the American economy.

You clearly have no clue as to mercantilism if you think my straight-up free-market economics bear any similarity to it. The Zeitgeisters aren't free market advocates, either. Try again. Hint: you should look to folks like Mises, Hazlitt, Rothbard, and Hayek, if you're seeking to identify my influences in economics.

Certainly the Fed will attempt to keep our Dictator in Chief propped up by digital money. At some point, the $85B monthly will have to be accounted for. Looks like if Bernanke goes, Yellen will continue the monthly "digital heroin" to Wall Street.
At any rate, the Fed will continue to keep our historic POTUS
afloat with free money to the wealthy.
However, as can happen, the old "black swan" can land at an moment and turn this fragile "recovery" into a disaster.
But wait, we HAVE a swan approaching......its called the Patients Protection and Affordable Care Act.
The bottom line to all this is NOT what minutia the boys are debating above here.......we are in a bigger bubble than the "tech bubble" and the "housing bubble", only not many want to admit it.

I don't understand all the political crap or what makes all this economic stuff work. I'm a sinner but all I know to do is pray to Jesus to take care of my family and our country. I have a hard time wrapping my mind around a lot of this. They want our guns they want to make us solely dependent on them cause they know what we need better than we do, they want to control everything we do and they have people working on it 24 hours a day. How do we deal with this without stressing about it all the time? I think about this stuff all the time.

Seal,
It is a lot to take in and very stressful!
My best advice to you is to become self sufficient, take care of you and your loved ones, engage in critical thinking, don't believe the B.S. of others.
Many have an agenda that only serves them, beware of them!
Deal honestly with others and in good faith. The world revolves around good people doing the right thing! Trust your instincts.
And prepare my friend, a little extra food water, security... is wise and prudent.

Much of the digital money created by the Fed since 2008 is serving to replace the destruction of capital that occured during the various financial bankruptcies, and the devaluation of housing, and the various markets. As a result, this has been largly a reflationary, vs inflationary event. With housing prices in may area returning to their pre-bubble levels, and markets hitting all time highs again, IMO it's an indicator that if the Fed continues with a policy of Monetary Easing, we will move into an inflationary enviroment.

When the velocity of money increases we will have extreme inflation.
Right now much of the money printed is sitting in the banks balance sheets to make them look stable.
When that flood of money is released and when when the trillions of dollars held overseas comes flooding home because we have lost the worlds reserve currency status, hang on! Our false prosperity will come to an end.

Talk about spin.

Philosophically I like Hayek, and his Road to Serfdom is dead on, but wow, could his writing style be any worse? After 1929 Keynes lost his edge, but at least he's readable. Of couse Hayek studied under Mises, and was University of Chicago School of Economics at the same time as Milton Friedman.

In reality we agree upon more then you think, I just think there are easier, less disruptive way to accomplish your objectives.

Not at all. It was the failure to reflate that contributed to the length and depth of the Great Depression. Part of the purpose of money is to create a STABLE measure and store of value, both inflation and deflation can be equally destructive to these objectives.

Yep:



Oobies killed the velocity of money. Of course open market operations are not a one way street. If it were to pick up again, the Fed would quietly reverse course, selling bonds as the velocity increased.

Spot on posts AS.

Penguin has an equivocal view of market economics as corrupt intrinsically. He is govt/union oriented.

Central planning is a flop where you find it and a breeding ground for corruption. Private industry tends to do what it has to, to survive. Even derivative wrapping.

There is a legit role of govt law enforcement with regard to good ol fraud but that is very hard when they are in bed with the crooks.

Not a supporter but is it OK for me to make money in the mean time?

Absolutely, need to make the most of the situation. This is especially true if we move into a real inflationary enviroment. Then you won't be "making" anything, but just preserving your purchasing power.