1 Yoda?

2 That kitteh looks happy.

3 Barack Obama is a stuttering clusterf*ck of a miserable failure.

4 Monty I was wondering what you thought about the combination of facts on the ground that must be driving the Keyneseians nuts:

1) Barry is asking for his second tax cut to spur growth....sure it's the wrong tax cut but Dr. Marx wants another Payroll tax holiday....

2) How can Klugman say that porkulus(when put in concenrt w/Tarp about 1.3 trillion bucks) is "too small" without saying that barry is not asking enough to fire the economy with a measly 300 billion gaslight?

Fun times for the devout I guess.

5 "There are no good guys in this crime story, but killing the banks out of class-war vindictiveness is just stupid."

Full Speed Ahead!

6

7 Germany is bailing out Europe, what could go wrong?

8 I'm getting really tired of Paul Krugman (of course, he's a troll, so I guess it fits).  The incredible hubris that is required even to think that Government can ever do anything which is a net positive for the economy is appalling.  And he believes that "if we just had a little more government, it would all be better!"

Gah!  He makes my teeth itch.

9 That cat looks like Wilford "Diabeetus" Brimley.

10 Well gold is diving, so all must be well ($1821.20 at 0909 EDT)!

11 The problem with the administration is that they don't even understand the Keynesianism they profess. They think every dollar has the same effect as any other on the economy. That a new bridge linking formerly unconnected locales is the same as disability payments.

12 Having now read that Bloomberg article, I can see the lure of the argument, but I think he misses the point (which you make rather succinctly, Monty) that having the Federal Government cover those losses is just asking for more trouble.

I've said since the melt-down began that the correct way to handle it was just to let it all melt down.

Now, I'm not an economist, but I suspect if we'd taken a hands-off approach to the collapse in 2008, kept taxes low, and let the system run its course, we'd be looking at 5%+ growth right now.

13 11 Blaster,

oh it gets even better than that....

they spend a half billion building a bridge connecting two towns that were formerly due to roads 45 minutes apart but are now 5.....

they then think the businesses are "being evil" when they consolidate the formerly necessary two locations to serve the formerly distant towns.....

rather than appreciating the increased efficiency freeing up capital for expansion with the client base suffering little loss of service.

they are clowns

14 Teh Krugman: SPEND! SPEND LIKE THE WIND! Krugman's main fallacy, like that of most Keynesian acolytes, is that he interprets all labor as productive labor; all action as productive action. To him, paying one man to dig a hole and another to fill it in is actually a wealth-generating enterprise. See Monty, The thing that always bothered me about the concept of a "service-based economy" was always the idea that paying for a hole to be dug and then refilled didn't really create wealth. What about paying to sit under a sunlamp in a tanning booth... does THAT "Create Wealth"? What facebook... at the end of the day, do internet social media sites truly "create wealth"? What about a whole host of similar services that came to increasingly dominate our society over the last 20 years? Is it possible that one reason for the the economic doldrums we are in right now is that we spent decades hollowing our wealth-creation economy, substituting the equivalent of hole digging? And that when the economic crunch time, as a result of the government's intervention in the banking industry, the whole structure has started to come down? It's a nagging thought.

15 Monty I was wondering what you thought about the combination of facts on the ground that must be driving the Keyneseians nuts

I think the weak jobs market really has them foozled. They don't understand that it's the overbearing regulatory burden and insane fiscal policy that's killing the jobs market; they insist on thinking it's a lack of aggregate demand. So (in true Keynesian fashion) the figure if they throw out a lot of hot money, it'll get consumers to spending and hence drive production, and thus jobs.

Keynesians worry more about deflation than inflation, and it shows in their approach to the world. Everything they do is aimed at stopping deflationary forces. But in a post-bubble economy, some deflation is necessary. The high-water mark of the bubble is by definition not a baseline; it was an aberration, not a solid economic equilibrium.

And we cannot discount the "social justice" aspect of the current Administration. They are Keynesians, yes, but they are ideologues even more so. They stick to failed economics policies not out of any abstract academic belief in the effectiveness of their plans, but rather a mule-headed unwillingness to give up on their big-government welfare state. You can see this "theory trumps reality" behavior in Teh Krugman, Stiglitz, Brad DeLong, and other liberal economists -- they know, for example, that the "broken window fallacy" is true, yet they persist in trying to find loopholes and exceptions to the rule because it conflicts with their "social justice" driven worldview.

16

 "Moreover, dumping more money into the system as Krugman recommends, is really throwing good money after bad, and will make the economy inevitably worse off."

The collective progressive left will never understand that their ideology and their economic ideas are EPIC FAIL. 

17 @13. Exactly.

18 The problem with the administration is that they don't even understand the Keynesianism they profess.

No, the problem with the administration is that Barack Obama is a stuttering clusterf*ck of a miserable failure.  Their lack of understanding of basic economic principals is only one symptom of the disease.

19

There are no good guys in this crime story, but killing the banks out of class-war vindictiveness is just stupid.

DOOM Kitteh says, "Class warfare against the banks out of vindictiveness IS stupid.  But the vindictive murder of whatever unholy abomination dressed me in this damn costume will be justice.  Final justice."

20 12 Allen G,

probably....possibly I dunno....the thing is that Bloomberg et al think you can have capitalism without risk or pain.....risk and pain are what keep people from being stupid with their purchasing power....

The idea that barry should be the world's biggest slumlord is appalling....

force the feds to liquidate the foreclosures at auction and let the market decide what the houses are worth.

21 If you subsidize behavior, you get more of it

Draconian taxes on the productive class and free money for the government and welfare classes! What could go wrong?

Wait...why does the productive class keep shrinking?

22

I've said since the melt-down began that the correct way to handle it was just to let it all melt down.

I agree with that.  Bad loans would have cleared much more quickly because banks would have had a reason to do so.  Their bureaucracies are also a hell of a lot more efficient than FHA, HUD, etc. Why?  Because there is profit in efficiency.  If you're a Fed there is job security in slow-walking everything.

I am willing to bet that right now there are a lot of banks sitting on the side hoping the Feds will come up with something - anything - that somehow props up their bottom line for a little while longer.

 

23 I want Barney Frank and his economic illiteracy to pay for this.

24 Posted by: CoolCzech at September 07, 2011 09:14 AM (niZvt)

Those things create wealth in the same way that selling bread creates wealth.

Someone values 15 minutes on a tanning bed more than they value $10 (or however much it is).  The tanning salon values $10 more than they value that 15 (otherwise unused) minutes on their tanning bed.

Facebook most sells its users to its advertisers (remember: if something appears "free" the product is probably you).

The problem with the "dig a hole, fill a hole" model is that there is no increase in value.  The Government doesn't actually value the hole (or lack of one) more than the money it spends.

25 Fiat justitia ruat caelum —MontyEasy to say when the "justicia" isn't going to fall on YOU.

26 Of course we are DOOMED to another Depression when we are currently repeating FDR's mistakes. 

27 15 Monty,

Yeah I am kind of there myself.  I suspect that we are going to see the wealthy suffer when enough 44cent debt on the dollar funny money finally floods the market to make the dollar shed another 10% of its value.  We are on pace to feel the impact in 2-5 years I'd wager....less if they throw another trillion on the fire.

28 CoolCzech at September 07, 2011 09:14 AM Yep, it's like we are just trading wealth back and forth that has already been made. Without new infusions of wealth creation the old becomes stagnant and dies out.

29 What about paying to sit under a sunlamp in a tanning booth... does THAT "Create Wealth"?

It's a service that people are willing to pay for. It's a value-add. You could buy your vegetables from a farmer, and your meat from a rancher, and so on; but it's more convenient to get them from a grocery store. The grocery store makes it faster and more convenient to do something that you could do yourself if you were so inclined; the opportunity cost is the value-add. This is how a "service" adds value: it allows you to better manage your own time and resources, and save money towards the purchase of other things.

Consider your tanning example: lifestyle and entertainment industries are a large part of our economy. Having sun-browned skin is considered attractive, so there is a large demand for ways to get this benefit without having to spend hours and hours marinating in the sun. And what if you live in a cold or cloudy climate? So the demand is there, and in a free market where there is demand a supply will appear at whatever price the market will bear. It's basic Econ 101.

30

The collective left bristle when you call them communists. They are communists. Stupid fucking communists. 

It's tired, it's a failure, but the collective left will never stop trying to push it.

31 Posted by: sven10077 at September 07, 2011 09:16 AM (AEIYh)

I think that's what I said.  I was mostly agreeing with Monty, while understanding the lure (or Sirens' Song) of the premise.

32 A service economy seems to me to founded on the principle that the people that sell shoes made in china to burger-flippers at McDonalds will spend their salaries buying Big Macs so that the burger-flippers can afford to buy shoes, ad infinitum.
Sure sounds like a plan!

By the way, if I can just get the friction down to zero on this one bearing, I will have my perpetual motion machine running by morning.

33 "Let justice be done though the heavens fall."


I don't know WHO I am anymore at September 07, 2011 09:19 AM (iniPz)

Is justice chicken little's middle name?

34 24 Allen G, yes but what we are seeing in the feds playing games with real estate(which is a cornerstone of wealth in this nation) is a form of heinlein's assertion that labor is not in and of itself more valuable than capital from starship troopers and that it is SKILLED labor that multiplies the value of the base material into wealth.....

you have a bunch of maltrained busybodies who are trying to perfect the FDR setting the price of silver at breakfast at random paradigm when they insist on holding this bad paper muddying up the waters on true valuation of the asset....

better to take your bath and loss and move on

35 Posted by: Hrothgar at September 07, 2011 09:22 AM (i3+c5)

It only sounds like that if you assume that the economy is a zero-sum game.

Remember, Basic Economics: Economic transactions add wealth, because each party of the transaction places higher value on what they received than what they provided.  This is true of commodities as well as services.

36 26 Kratos,

all that is missing is the trade war mittens is selling

37 32 Hrothgar,

a service based economy *can* in theory work....

a person sells their services to the productive and invests the cash into wealth....

what we have instead is a hyperaddicted to cheap brick a brack society trying to be the initial energy behind your machine

38 Posted by: sven10077 at September 07, 2011 09:23 AM (AEIYh)

I agree completely.  The correct thing for the government to do is stop mucking with things and back out.  That still doesn't make the idea that government can just fix it any less appealing- no matter how illusory it may be.

See my comment above- I think we should have just let everything melt down in 2008.

39 38 Allen G,

oh I know I remember your position from past dooms....

preaching to the choir is all we have it seems....

the funny thing is this economy has exposed the union boys, and democrats as phony populists and the bankers and hedge fund owners as phony capitalists.

40 A service economy seems to me to founded on the principle that the people that sell shoes made in china to burger-flippers at McDonalds will spend their salaries buying Big Macs so that the burger-flippers can afford to buy shoes, ad infinitum.

That's not it at all. A "service economy" is something of a misnomer: all economies are service economies. After all, production of a good (a car or refrigerator) is done as a service -- I could do it myself, but at vastly greater cost and far lower efficiency than a dedicated factory can. But the same is true of a restaurant meal -- I can cook for myself, but that entails going to the store, paying for the food, going home, preparing it, cooking it, eating it, and then cleaning up afterwards. If my time is valuable (and time really is money), it may be cheaper for me to go to a restaurant to eat because the opportunity cost of preparing my own food is too high.

Is a plumber's service "worth it"? A carpenter? An electrician? A car mechanic? A hairdresser? Many of these "services" are vital to our daily lives. A "service economy" does not denote a trivial economy.

41 Posted by: AllenG (Dedicated Tenther) is tired beyond tired of the trolls at September 07, 2011 09:24 AM (8y9MW)
That may be true, but it seems to me that the value differential is much smaller in a service based economy than it is in a production or commodities based one.
A lot of services are small and local thus more or less easily replaced (I can grill my own burgers cheaper and better than Mickey D), but I can't reasonably make my shoes (and free trade allows China to use slave labor so cheaply that I can't even pay my neighbor to make shoes for me at a competitive price).

42 I'll never understand why old farts would use all their 401k and heloc their property to bail out a grown kid, pay his mortgage, or speculate on more houses, or pretend to be rich.    The young and old together are going down together because they're so sure RE is going to bounce back next year, or the year after.

43 Posted by: sven10077 at September 07, 2011 09:26 AM (AEIYh)

You're still missing it, I think.

Let's say you want to purchase a "service."  Say... a massage.  It'll cost you $50 bucks.  Now, if that massage was worth exactly $50 bucks to you, you'd look around for a better deal (maybe a cheaper massage, or a coupon, or something else entirely to do with that money), but if you didn't find anything, you'd realize that the massage was then worth at least $50.01 to you, and you'd pay your $50.

To the masseuse, the time and effort required to give you that massage is worth less than that $50.  Again, if it were worth exactly $50, they'd look for something else to do that was worth more to them (or charge a higher price).  Failing to find anything, or to be able to charge $51.00, they'd realize that the time and effort were really worth only $49.99, maximum.

At that point, you would have an economic exchange- your money for the masseuse's service- that would result in (minimum) $0.02 net wealth creation.

That's an extremely simplified example, but the point is this: from an economic standpoint, there is no (significant) difference between an economic transaction involving a service, and one that only involves a physical good.

44

President Barack Obama plans to propose sparking job growth by injecting more than $300 billion into the economy next year, mostly through tax cuts, infrastructure spending and direct aid to state and local governments.

Obama will call on Congress to offset the cost of the short-term jobs measures by raising tax revenue in later years.

 

$300 billion? That's all we need to turn the economy around (I thought we're in a recovery?) With this blockbuster plan the economy ought to be flying high by Friday. Hell, unemployment will drop 3 points over night. All hail Barry, economic genius!

45 Guys, I have to be elsewhere for a while, but the service/production economy discussion has given me much food for thought. 
I do agree that a service based economy is not necessarily a trivial economy, but I think it is less sustainable than a production based one, particularly when the production playing field of our China/India/etc competitors is not level. 
I admit, I am not an economist, but know I need to understand the economy.

46 40 Monty,

exactly......that was what heinlein was getting at and exposes the overall hubris of command economies....

He had been droning along about "value," comparing the Marxist theory with the orthodox "use" theory.  Mr. Dubois had said, "Of course, the Marxian definition of value is ridiculous.  All the work one cares to add will not turn a mud pie into an apple tart; it remains a mud pie, value zero.  By corollary, unskillful work can easily subtract value; an untalented cook can turn wholesome dough and fresh green apples, valuable already, into an inedible mess, value zero.  Conversely, a great shef can fashion of those same materials a confection of greater value than a commonplace apple tart, with no more effort than an ordinary cook uses to prepare an ordinary sweet."
"These kitchen illustrations demolish the Marxian theory of value - the fallacy from which the entire magnificent fraud of communism derives - and illustrate the truth of the common-sense definition as measured in terms of use."

Dubois waved his stump at us.  "Nevertheless - wake up, back there!-nevertheless the disheveled old mystic of Das Kapital, turgid, tortured, confused, and neurotic, unscientific, illogical, this pompous faud Karl Marx, nevertheless had a glimmering of a very important truth.  If he had possessed an analytical mind, he might have formulated the first adequate definition of value ... and this planet might have been saved endless grief.

"Or might not," he added.  "You!"

I had sat up with a jerk.

"if you can't listen, perhaps you can tell the class whether 'value' is a relative, or an absolute?"

I had been listening; I just didn't see any reason not to listen with eyes closed and spine relazed.  But his question caught me out; I hadn't read that day's assignment.  "An absolute," I answered, guessing.

"Wrong," he said coldly.  "'Value' has no meaning other than in relation to living beings.  The value of a thing is always relative to a particular person, is completely personal and different in quantity for each living human -- 'market value' is a fiction, merely a rough guess at the average of personal values, all of which must be quantitatively different or trade would be impossible."  (I had wondered what Father would have said if he had heard "market value" called a "fiction" -- snort in disgust, probably.)

"This very personal relationship, 'value,' has two factors for a human being: first, what he can do with a thing, its use to him ... and second, what he mut do to get it, its cost to him.  There is an old song which asserts 'the best things in life are free.'  Not true!  Utterly false!  This was the tragic fallacy which brought on the decadence and collapse of the democracies of the twentieth century; those noble experiments failed because the people had been led to believe that they could simply vote for whatever they wanted ... and get it, without toil, without sweat, without tears.

"Nothing of value is free.  Even the breath of life is purcased at birth only through gasping effort and pain."  He had been still looking at me and added, "If you boys and girls had to sweat for your toys the way a newly born baby has to struggle to live you would be happier ... and much richer.  As it is, with some of you, I pity the poverty of your wealth.  You!  I've just awarded you the prize for the hundred-meter dash.  Does it make you happy?"

"Uh, I suppose it would."

"No dodging, please.  You have the prize - here, I'll write it out: 'Grand prize for the championship, one hundred-meter sprint.'"  He had actually come back to my seat and pinned it on my chest.  "There!  Are you happy?  You value it -- or don't you?"

I was sore.  First that dirty crack about rich kids - a typical sneer of those who haven't got it - and now this farce.  I ripped it off and chucked it at him. 

Mr. Dubois had looked surprised.  "It doesn't make you happy?"

"You know darn well I placed fourth!"

"Exactly!  The prize for first place is worthless to you ... because you haven't earned it.  But you enjoy a modest satisfaction in placing fourth; you earned it.  I trust that some of the somnambulists here understood this little morality play.  I fancy that the poet who wrote that song meant to imply that the best things in life must be purchased other than with money -- which is true -- just as the literal meaning of his words is false.  The best things in life are beyond money' their price is agony and sweat and devotion ... and the price demanded for the most precious of all things in this life is life itself -- ultimate cost for perfect value."

It is the inherent specialization of skill set in the service of production and the productive that fires an economy....

I cannot do brain surgery like the surgeon, but I can make a better pizza for example or run a logistical pattern analysis or whatever....

the only people who are totally unproductive in a macro economy are those who spend ONLY other people's purchasing power.

47 "The Government doesn't actually value the hole (or lack of one) more than the money it spends."

Posted by: AllenG (Dedicated Tenther) is tired beyond tired of the trolls at September 07, 2011 09:19 AM (8y9MW)

That's an important point, but you haven't taken it far enough. We often assume that government is like any other consumer or producer, but there is no pricing pressure on government. When Obama tosses out money, the various state and federal agencies tasked with spending that cash have no reason to be efficient, unlike real human beings with their own money.

This is a big part of why Keynes was wrong.

48 The collective left bristle when you call them communists.

The leftist agitators embrace their communist banner. As likely as not, it's who calls them communist that either sends thrills up their legs or the same sensation interpreted as bristles. (Like who still uses the "N" pejorative word, let alone "black" in a Romance language, interpreted as artistic/personal expression vs. hate speech.)

The "common values" bipartisan collective left consider the rest of the population rubes for not "getting" with their establishment's progrom to "take out" constitutional conservancy.

49 Fiat justitia ruat caelum

What does that say after the part about fajitas made from Justin Bieber?

50 "Those things create wealth in the same way that selling bread creates wealth. Someone values 15 minutes on a tanning bed more than they value $10 (or however much it is). The tanning salon values $10 more than they value that 15 (otherwise unused) minutes on their tanning bed. September 07, 2011 09:19 AM (8y9MW) But that is a very ephemeral value that disappears overnight the moment people feel they need to save money by lying out on their back porch instead of under a lamp. It reminds me of what my old economics professor said about then-poor (once again poor?) Ireland: that they had a service economy. You pay your neighbor $20 to wash your laundry, and he pays you $20 to wash yours. Ouila!, the economy just "grew" by $40! I can't shake the suspicion that ultimately, true wealth creation that lasts is due to the actual creation of THINGS.

51 Posted by: Hrothgar at September 07, 2011 09:30 AM (i3+c5)

See Monty's comment @40.

Certainly, if the only things our economy offered were trivial services (like tanning beds and Facebook), we'd be in trouble.  But a "service economy" is just an economy that realizes that some people can do the same work faster (and, therefore cheaper) than you can do it yourself.

That some of these services are luxuries is not, inherently, a problem.

Take a look at your Mickey D's example.  Yes, you can cook a hamburger that tastes better than Mickey D's.  I doubt you can do it as cheaply.  Part of the price is setting a value on the opportunity cost of you cooking a burger at home.  Even if you're doing it on an electric griddle at home, you're talking a minimum of 12 minutes or so to cook your burger.  Factor in your trip to the store (to buy the hamburger, the buns, the ketchup, the mustard, the lettuce, the onion, etc. etc.), and the fact you could have been using that time for something else (say, writing a smart-phone app, or making shoes, or whatever).  In many cases, even though the monetary cost might be less to make burgers for your family than to go out to McDonald's, the total cost could easily be higher.

52 Yesterday Rush said that FDR's actions prolonged the depression, and he pondered whether or not Obama was purposely prolonging our recession.  Could it be?

53 I call this game "Three-card Ecomonty."  If you can guess which card is the Jack of Diamonds three times, my business partner, Barky the Booky, will award you a handful of peas.

54 Former Enron Financial Adviser Paul Krugman

55 One thing I would like to see Republicans talk about more is how the mortgage mess started...

Way back in the 90s, liberals including President Clinton, began attacking banks for being too picky in who they gave mortgages to. The left claimed the problem was racism - and threatened to sue/investigate the banks if they did not relent.

They also offered to have the government, in the form of Fannie Mae, buy up a lot of these questionable loans.

The banks agreed and created an enormous real estate bubble as people who had to business buying a house could get a loan that the government would secure.

Well, as we all know, the bubble eventually popped, annihilating our economy in the process.

So, when liberals scream "racism!" they really mean, "give me your wallet" and government intervention is exactly what caused the mess we are in.

56

I've found that what the Krugster and the other Keynesians don't understand (among many other things) is what wealth actually is.

They seem to believe that wealth is static; the reason the US is on average much more wealthy than your typical third world shit hole is not because we produce things that people find value in, but because we've stolen the wealth of the third world.

They don't understand that when you produce a good or service that is valued by someone else, you have created new wealth. It just doesn't register with these dopes. This is why you have such a slew of people that believe you can just pay people to do worthless jobs like digging and filling a ditch. That pointless ditch doesn't create anything of value for anyone. Paying people to perform that service is not creating any new wealth, it is just stealing wealth from actual producers and redistributing it (some of them actually do understand this part, but most do not).

57

Bad loans would have cleared much more quickly because banks would have had a reason to do so.  Their bureaucracies are also a hell of a lot more efficient than FHA, HUD, etc. 

Have you ever worked at a bank?

58 Nah, I actually think Obama is a True Believer. That makes him all the more dangerous.

59 But that is a very ephemeral value that disappears overnight the moment people feel they need to save money by lying out on their back porch instead of under a lamp.

That's true of any physical good as well.  Tofu burgers and "organic" food are all well and good, as long as people are willing to spend money on them.  Those are "products."  As soon as people stop being willing to spend money on them, they're no longer valuable.

Value, by definition, is "ephemeral" and only exists as long as people want to acquire something more than they wish to keep (save) whatever it would cost to get it.

Indeed, even today, far more people lie out in the sun to get tanned than use tanning beds.

60 One thing I would like to see Republicans talk about more is how the mortgage mess started... the fact that Barack Obama is a stuttering clusterf*ck of a miserable failure.

FIFY.

61 Posted by: CoolCzech at September 07, 2011 09:44 AM (niZvt)

Yes, but in a mushy, non-intellectual way. He doesn't have the education and theoretical underpinning of the true believers. He has the "sitting around the table, getting high and talking about how things should be" kind of belief.

62

Barney Frank should be frogmarched out of congress and into jail. Instead, the idiots of MA re-elect the dumbest most corrupt man in congress.

 

63 I admit, I am not an economist, but know I need to understand the economy.

Hey, it's good to be curious, Hrothgar. There are guys out there with Nobel Prizes (*cough*Krugman!*cough*) who don't have the sense God gave a flatworm.

64 OT- You know, the Karl Rove link in the sidebar (where he's complaining about Rick Perry saying that Social Security is a Ponzi Scheme) just isn't as fun without Vic around.

65

The moral hazard in all of this is one of the issues that bothers me the most.  Why on earth should I work and struggle and save only to have the grasshoppers come along and eat the fruits of my labor?  That is, ultimately, the point behind going Galt.  If accomplishment is punished, then why even attempt to accomplish anything?

 

 

66 Seniors in debt ... I heard a guy tell people to load up on debt before retirement when their credit, etc. was best. Then transfer everything to their kids/trust and slowly default in a race between the creditors and father time.

67 Posted by: Monty at September 07, 2011 09:47 AM (/0a60)

I am sick and tired of the abuse. I am successful, have a solid theoretical and practical understanding of competition and the market around me, yet you insist upon insulting me by comparing me to Krugman.

I know Paul Krugman, and he is nowhere near as intelligent as a flatworm.

You will hear from my attorneys.

68 I can't shake the suspicion that ultimately, true wealth creation that lasts is due to the actual creation of THINGS.

Posted by: CoolCzech at September 07, 2011 09:39 AM (niZvt)

But in the long term things aren't permanent either. How long does a physical computer stay in circulation? I have software I use on my computer that is many times older then the computer itself.

I think with your washing example, your problem is that you haven't created any wealth because the two people are performing the same task - it is the same as the notion of hiring people to dig and fill in holes.

But, let's suppose we have a guy that writes software and a guy that washes laundry.

The software guy makes say $40/hour. The lauyndryman charges $20/hour.  If the software guy sends his laundry out, and uses that hour to write software, he's earned $20 - and presuming his salary is a true reflection of value, he has created $20 worth of services for the economy.

Of course with taxes this gets much more convoluted. If the software guy is paying 50% in taxes, the software guy now makes no money in sending his laundry out to be done since he will only earn $20 with that hour either way.

The government has just killed a job...and $20 in wealth creation for the economy as a whole by "making the rich pay their fair share."

69

DOOM is no longer a kick-ass video game series or a crappy movie-adaptation of said series - it is now a way of life! 

70 Yesterday Rush said that FDR's actions prolonged the depression, and he pondered whether or not Obama was purposely prolonging our recession. Could it be? Not unless he's got some amazing plan to pull out of this electoral nose dive he is in.

71 Yes, but in a mushy, non-intellectual way. He doesn't have the education and theoretical underpinning of the true believers. He has the "sitting around the table, getting high and talking about how things should be" kind of belief. I'm going to respectfully disagree with you on that. Obama has been surrounded by hard core communists and marxists since he was in diapers. When he talked about fundementally changing America, a cold chill ran down my spine. He means what he believes. The only think stopping him from the purging Ayers reccomended is the millions of American homes armed like a mexican drug lord's compound.

72 The left now is trying to redefine "working people" as union members.  They were successful years ago in redefining that term to mean pretty much anyone who actually didn't do any work and now they want to do it again.  It would be nice if we could redefine the term "unions" to equate to say, tape worms.  The tape worms of society.  Or maybe, the vampire bats of society.  Or instead of calling them by a specific creature, how about the bloodsucking parasites who are destroying the economy and the country through their insatiable appetite for taking.  That works.

73 Posted by: alexthechick at September 07, 2011 09:49 AM (VtjlW)

And the thing that Rand didn't get was that the point was to be the best person you can.  She also believed that anyone who didn't achieve success failed because of a failure of morals- there was no room for misfortune or "a bad hand" in her world.

Sometimes we work, knowing that others won't appreciate it, to be an example for others to follow, and a bulwark for those who can't always help themselves.

The difference between me and Government is I want that all to be voluntary.

74 43 Posted by: sven10077 at September 07, 2011 09:26 AM (AEIYh)

You're still missing it, I think.

Let's say you want to purchase a "service."  Say... a massage.  It'll cost you $50 bucks.  Now, if that massage was worth exactly $50 bucks to you, you'd look around for a better deal (maybe a cheaper massage, or a coupon, or something else entirely to do with that money), but if you didn't find anything, you'd realize that the massage was then worth at least $50.01 to you, and you'd pay your $50.

To the masseuse, the time and effort required to give you that massage is worth less than that $50.  Again, if it were worth exactly $50, they'd look for something else to do that was worth more to them (or charge a higher price).  Failing to find anything, or to be able to charge $51.00, they'd realize that the time and effort were really worth only $49.99, maximum.

At that point, you would have an economic exchange- your money for the masseuse's service- that would result in (minimum) $0.02 net wealth creation.

That's an extremely simplified example, but the point is this: from an economic standpoint, there is no (significant) difference between an economic transaction involving a service, and one that only involves a physical good.

Posted by: AllenG (Dedicated Tenther) is tired beyond tired of the trolls at September 07, 2011 09:32 AM (8y9MW)

Good explanation of why the economy is not a "zero-sum" game.  I learned this when I read Thomas Sowell's books and it changed the way I thought about everything.

75 true wealth creation that lasts is due to the actual creation of THINGS

There is also the reality that the production of "things" is getting more and more automated. The human component is an ever-shrinking part of the manufacturing sector. We're probably not far from a time when we will have at least a basic "replication" facility -- put raw materials in one end, get a finished product out the other. Nanotechnology, 3-D "printing", new materials like graphene and super-strong lightweight alloys...all are going to continue to drive down the cost of manufactured goods. Even the Chinese are now finding that robots are cheaper than humans in many cases.

Our technology is racing ahead of our ability to integrate it into our cultural and sociological frameworks in many ways.

76 Monty- I really enjoy the daily updates. As one who has played by the rules and saved a quarter of my income since 1992, I was disturbed to find the dollar lost 40% of its value since 2001 since the Bush-Obama debacles. What is the best place to track this?

77 Posted by: Oldsailor's poet at September 07, 2011 09:52 AM (ZDUD4)

I am not suggesting that Obama isn't a true believer. I think he is. But he is not an intellectual. He is not well educated. He does not understand the sources of his beliefs. He is a mushy-headed dilettante with no intellectual rigor to back up his ideas. That doesn't mean that he isn't pursuing those goals aggressively. It just means that he is stupid and intellectually lazy.

78 43 Allen G.,

not to be a dork we're havinga friendly doom chat but I think it is you who are missing it....

Hrothgar speaks to it some....

when you say:

Let's say you want to purchase a "service."  Say... a massage.  It'll cost you $50 bucks.  Now, if that massage was worth exactly $50 bucks to you, you'd look around for a better deal (maybe a cheaper massage, or a coupon, or something else entirely to do with that money), but if you didn't find anything, you'd realize that the massage was then worth at least $50.01 to you, and you'd pay your $50.

You are discussing valuation of a service ie "price" and utility cost....

the massage is priced at 50 bucks I compare prices to quality and determine if the service is worthy the surrender of my purchasing power to attain....

To the masseuse, the time and effort required to give you that massage is worth less than that $50.  Again, if it were worth exactly $50, they'd look for something else to do that was worth more to them (or charge a higher price).  Failing to find anything, or to be able to charge $51.00, they'd realize that the time and effort were really worth only $49.99, maximum.

The masseur  developed the skill and is selling their service for the 50 bucks, the labor involved is rented for the duration of your session.....

what the masseur is selling/leasing is the time invested in developing the skill....

the product being 'sold" is not really the massage it is their time....

in the real world nobody sells their time for less than it is worth.

At that point, you would have an economic exchange- your money for the masseuse's service- that would result in (minimum) $0.02 net wealth creation.

That's an extremely simplified example, but the point is this: from an economic standpoint, there is no (significant) difference between an economic transaction involving a service, and one that only involves a physical good.

No no no.....the exchange of purchasing power in and of itself is NOT wealth creation.....

wealth creation is the the acquisition of material to sustain lifestyle or create a cashflow....

the massuer's storefront if owned is wealth....her towels are wealth her sign is wealth the money the client gives her is income....she makes the decision to either use that income ie voluntarily surrendered purchasing power for goods or services the client had granted others to invest in wealth or surrender for goods and services she needs at that time......

the potential for wealth creation is always the surrender of purchasing power for the promise of future results....

until somebody makes an investment and sees either loss or gain there is no "wealth" there is an exchange.....

for example....

the client is so impressed with the massage that the client decides to surrender part of his own assets or purchasing power to allow the masseur to advertise gaining access to more potential income....

that note the client holds to get back the loan is "potential wealth" at that point because it represents purchasing power surrendered for a tangible asset-the promise of future return with some factor of risk.....

the interest the masseur would pay for the borrowing of the client's surrendered purchasing power is unearned income for the client a liability for the masseur.....


the "wealth" involved in the transaction between masseur and the client is involved in the activity the client engaged in to attain the cash to pay the masseur.....

say the client is a coal mine owner the "wealth" to get the cash at that point is the exploitation of a long term asset held by the miner....

the coalmine is the wealth.....

of course the catastrophic failure of the entire model of a service economy right now is the feds are actively trying to destroy wealth creation and harvesting due to regulations and squeezing the margins for the liquidation of wealth generating cash flow by their tax rates.

79 Keynes was wrong about a lot of things, but he was still a lot smarter and more sensible than his followers. What Keynes actually said about paying men to dig and fill ditches was that "it would be better than nothing, but it would not be a sensible way to stimulate the economy." Also, by 1942, Keynes was beginning to have second thoughts about big public works projects as a stimulus , because he thought it took the government too long to get out of its own way. (I read this on Greg Mankiw's blog, I think). Keynes died in 1946, which meant that he didn't live to see how his theories would work in a post-war , non-deflationary economy. He was a fairly pragmatic, flexible person--if he had lived longer, I suspect Keynesianism would look different.

80 My husband came home last night with some heartbreaking news.

We have a dear old friend through our church who lives in our neighborhood.  He's in his mid-eighties and beginning to show signs of dementia.  His house is being foreclosed on.  After the death of his first wife, he married a younger, attractive woman (who treats him horribly).  We have no idea what he's going to do.  He has a very wealthy older (!) brother who could help him.  Don't know what he's going to do, or if his wife will just pack up and leave him. 

He's such a gentle, kind man.  We have no idea how he ended up in this situation.

81 74 Robviously,

it was not bad but like I said above the Maseur does not really value the massage less than 50 bucks they are renting you the skill and time...

if the masseur had other skills that would gain them more than 50 bucks for the time and used them it does not inherently mean their massage is worth more or less than 50 bucks it means their time is worth more than 50 bucks....

the fact that I made more money selling my labor to clean up JP-4 spills than I did selling pizzas does not mean *I* value my hazmat skills more than my pizza skills it means the market does.....

I make a personal decision about which skill to rent to which employer.....

the income potential I surrender is an opportunity cost.

82 I overheard someone discussing the lawsuits against the banks the other day.  they were laughing and said "is 'we followed the law' actually going to be part of their defense?"

It's quite sad that barney is still there, still elected. despite the fact that he was the number 1 enabler for the banks.

83 80 Jane D'oh,

I'm sorry to hear it.  If you have his brother's contact data you should use it, and then let not your heart be burdened.  Life is a series of decisions and the gentleman made his marital one when he was in theory of sound mind and body.

I'll pray for him

84 Thanks, sven.  My husband is looking for the older brother's info.  The wife is useless, spends all her time working out and flirting with other men.  Every time I see her I want to slap her.

Then I remind myself of the New Tone of Civility™.

85 76 Valiant,

if you have the patience of Job you can track the value of the dollar by watching currency rates.....

another good place is the census.....

http://preview.tinyurl.com/3jfhdrd

you know that whole "we can't keep borrowing 44 cents of every dollar!" thing Monty and I go on about.....

yeah exactly....the loss of purchasing power is directly related to how leveraged the debt is.

86 What is the best place to track this?

How do I do it? I price the USD in terms of how much gold it will buy.

Put it this way: in 1970 or thereabouts, $38 would buy 1 oz of gold; now, $1820 buys one ounce of gold. That's a pretty staggering rate of inflation over the course of four decades. Gold is trading high right now, so assume that a more rational USD/Gold ratio is $1500/oz. That's still pretty damned bad.

Those are the wages of moving to a fiat currency.

87 Monty, they said yesterday that the chinese are buying gold, lots of gold, on the dips, after intimating some manipulation of the part of someone.  Love the way the business channel folks make all kinds of insinuations.  Anyway, why is china buying so much gold?

88 65 AlextheChick,

you gotta survive baby...even Galt swept floors....

I do not have faith in my ability to outlast the moochers in a race to the nihilistic finish line.....

a person's  heart either sings to productivity or it doesn't....

a productive person who is truly giving wants to do good work and earn.....

some folk don't care about the formula I just wrote.

89 He's such a gentle, kind man. We have no idea how he ended up in this situation. That's heartbreaking. From what you have written I can only assume he fell prey to the wants and needs of his dick. It is the story as old as time.

90 I can't shake the suspicion that ultimately, true wealth creation that lasts is due to the actual creation of THINGS.

Yes. And just as US citizen individual right-to-work should have precedence to totally corrupted authoritarian Union management, better yet if US domestic manufacturing industry is not monopolized by Eisenhower's reference to the military industrial complex dependent upon exporting wars for profits.

The Ugly American made its mark on it's generation of readers.

"I became a standard Midwestern conservative, self-satisfied, well-paid; I had 17 custom suits, a plush suburban home, the works. And so did all the people I knew. We were part of the managerial class, used to having our way. You develop a mystique to justify this; ours was that what was good for management was good for everyone. We really believed that we were the salvation of America and that laboring people ought to bow down and thank God for us every day before breakfast." Management executives no longer seemed to Hess the sacred bearers of progress. "I began to ask, 'What did we really do? What did we create?' We invented nothing, made nothing, improved nothing. All we did was shift people and paper around. I was a managerial featherbedder. I had attended hundreds of meetings, but only at two or three did the subject of product improvement ever come up. The product is only incidental to the real business of business, which is making money for nothing. Next to politicians, the managerial class is the least productive, most parasitic group on earth." big business, "free enterprise," group had given its money to Johnson instead of Goldwater; in the crunch, the corporations wanted not the laissez-faire of their slogans, but government subsidies and contracts and tariffs and preferential regulations. Established power centers of the Republican party, preferring the status quo of the Democrats, had defected from a Republican standard-bearer who stood for traditional conservative doctrine. The campaign dialogue that Hess had counted upon to equalize the disproportion in money, patronage and organization had been so distorted and caricatured as to make millions believe that Goldwater wanted to abolish their Social Security and start a nuclear war. And the pro-"war in Vietnam" party had posed as the peace ticket and had gotten away with it [mass media machine saw to that false propaganda]. To Hess, such perfidies robbed the electoral process of all meaning. Where was the free choice between alternatives that was supposed to legitimize the awesome power of government? "I had once edited Washington World, a paper designed to prove that private enterprise could do anything better than government and make a profit to boot. Our chief backer was a Kansas wheat grower who, as it turned out, was getting a huge farm subsidy every year. The subsidies he was against were subsidies to poor people. I saw that conservatism in practice was shot through with that sort of thing. Conservatives reject the state as an instrument of beneficence but revere it as an instrument of chastisement. They would deny the Federal Government certain controls over people at the state level, which they say is more effective. This means that conservatives support the coercion of individuals at the most effective level!"  "Most of the founders of National Review were disillusioned-Communists whose new cause in life was the destruction of the Soviet Union. The others were Catholics, like Bill Buckley and me, quack metaphysicians who regarded Communism as the Antichrist and the war against it as God's fight. This group of accomplished pamphleteers took over conservatism from the old isolationist-pacifist right and converted it into a military-religious crusade against the Reds. It was a tragedy, for it left no political opposition to resist the liberal push toward more and more U.S. intervention around the globe. (1970, former RNC spokesman, Hess.)

Collected irony of ironies. We US taxpayers were permeated with PC to believe that wars are compassionate, that "American Exceptionalism" is the duty to police destabilize the world, to sucker nations to embrace the onus for banking speculative debt, and empower elitist radical violence that denounces natural rights as heresy.

Of course the kneejerks won't go figure.

91 Posted by: sven10077 at September 07, 2011 09:59 AM (AEIYh)

What is saved money, beyond "potential" wealth, then?

I believe you (and Hrothgar) and conflating a luxury based (or trivial) economy with a service based economy.

Two more examples.

Medical Treatment is a service, yes?  Would you say that medical treatment does not add wealth to the economy?  It may not directly add wealth, but the money that the doctor receives is "potential" wealth (like the true definition of "static" energy is "potential" energy).  It may not be wealth until used to purchase some good (though I disagree with that, actually), it is a good placeholder for wealth, conceptually.

On the "produce" side: what if the only things our economy produced were Nerf guns and hockey sticks?  Oh, we'd be fine as long as there was a market for such things- we could sell them, and then use that money to purchase things like food and clothing from some other economy that produced such things.  As soon as no one (or many, many fewer) wanted Nerf guns and hockey sticks, we'd be in the problem you're imagining a "service based" economy would have- a lot of useless capital (in your theoretical service economy, that capital is Human Capital in the form of maltrained workers, in mine, it's a bunch of Nerf and Sports equipment factories).

"Wealth" is just as ephemeral a concept as "value."

Let's say I own 1000 acres of prime growing land.  That is only "wealth" in proportion to my ability to profit from it, and only inasmuch as I can defend it, or the Government will defend it for me.  If I'm not a farmer myself, and I can't lease the land to people who are, it provides me nothing.  If I could, but I can't assert my right to the land, it still provides me nothing.  Only if (as a non-farmer) I can lease my land to farmers AND assert my property rights to the land does it constitute "wealth."

This is why intellectual property (which, after all, is just a service) is every bit as much "property" as that 1000 acres.

92 86 Monty,

can you wrap your head around how nonsensical "minimum wage" laws are when indexed to that wild inflation?

of course I use the currency exchange as well as the gold standard because oddly i suspect we ARE living the old "perspective" canard of 'if everything is growing at roughly the same rate and speed you'll never notice' folks use to explain away why we don't notice the big bang more

93 Thanks, sven.  My husband is looking for the older brother's info.  The wife is useless, spends all her time working out and flirting with other men.  Every time I see her I want to slap her.

Then I remind myself of the New Tone of Civility™.

Posted by: Jane D'oh at September 07, 2011 10:09 AM (UOM4

OK, I have to ask, how old is this "younger woman"?  If he's in his eighties, she could be 65 and still be a younger woman.  Or did he go all out and get himself a Kardashian?  Seems like one of them is marrying someone every week.

94 Posted by: Monty at September 07, 2011 10:10 AM (/0a60)

I'm not sure that the price of gold is reflective of the value of the dollar. It seems to be a reflection of the impression of the markets of the overall health of the economy. While that is linked to the value of the dollar, it isn't a 1:1 correspondence.

And...a strong dollar is not an unalloyed wonderful thing. Our exports are more expensive!

It's almost as if there is some equilibrium that needs to be found. Luckily we have Ben Bernanke to calculate that equilibrium. Otherwise it would be left to the market, and we all know that the market can't do as good a job as our Ivy League overlords.

95 in the real world nobody sells their time for less than it is worth.

There is a subtle fallacy here. You don't determine what your time is "worth"; the market does. I may consider my time "worth", say, $2000/hr, but if all the market will pay me is $20/hr, then that's all my time is worth. Pricing is how the free market handles supply and demand, remember. If I have specialized skills in high demand, I can charge a premium; if not, or if I have similar skills to a lot of other people (high supply) the price for my time will go down regardless of what I want.

Our time is a scarce resource, and it has a mimimum and a maximum price-point. But since we are social and ethical creatures, other factors besides pure economic impetus drive our use of our time. Why would we "waste" time in a movie rather than working overtime? Because our leisure is worth more than the cash benefit at that moment in time. A day or a week later, the overtime wage may loom larger in our personal calculations. Why would we watch television rather than building a table that we can sell for a profit on E-Bay?

We control how we "spend" our time, and economic considerations often are only part of that calculus. But the market determines the "price" for our time -- it provides the metric of "profit" and "loss", and thus determines the opportunity costs of our actions.

96 I may consider my time "worth", say, $2000/hr, but if all the market will pay me is $20/hr, then that's all my time is worth. So that's why Doctors make more tha 7-11 clerks. I get this economics thing.

97

Wait.

So Obama's plan is to extend the jobs plan he already has in place?

 

Is that correct?

98 The morning Doom crew is en fuego this am. Good stuff.
 
Barky is about to embark on (trying to) taking over all those repossessed homes and becoming Uncle Landlord. First, it will mean the value of these homes will continue to deteriorate as renters don't care for a home like an owner. Second, it will mean in essence a vast expansion in Section 8, or subsidized housing as it is better known.
 
A court in Britain recently ruled that a list of unoccupied homes MUST be provided to a squatters council. What is a squatters council? A group dedicated to taking over unoccupied homes free of charge. The ole free lunch theory. The judge even said that it was inhumane to keep these houses unoccupied; that even though the squatters would do some damage to the places it didn't outweigh the injustice of the place sitting there unused.

99 Under Obamacare, if you like Habib, your 7-11 clerk, you can keep Habib. 

100

Posted by: Jane D'oh at September 07, 2011 10:09 AM (UOM4

OK, I have to ask, how old is this "younger woman"?  If he's in his eighties, she could be 65 and still be a younger woman.  Or did he go all out and get himself a Kardashian?  Seems like one of them is marrying someone every week.

Posted by: yinzer at September 07, 2011 10:19 AM (/Mla1)

I'm guessing forties.  She's very attractive. 

101 "But the market determines the "price" for our time..."

Posted by: Monty at September 07, 2011 10:19 AM (/0a60)

Oh, I think not. You doctors will take $25/hr for your services and you will like it.

102 Anyway, why is china buying so much gold?

For the classic reason: a hedge against inflation. The Yuan is a fiat currency as much as the USD is, and China traditionally has held very low gold reserves. I suspect that they're trying to build a "cushion" in case their own inflation gets out of control, or if there is a substantial disruption in the international currency markets.

India and Russia are buying a lot of gold as well, and for the same reason.

103 Monty all your questions will be answered by Sparky this Thursday. Don't panic, stay calm. He is a light bender.

104 the fact that I made more money selling my labor to clean up JP-4 spills than I did selling pizzas does not mean *I* value my hazmat skills more than my pizza skills it means the market does.....

You may not value the skill more, but you value the return on your investment more than you would the return on your investment as a pizza maker.

Indeed, if "the market" valued your skill for making pizza more than they did your skill at cleaning up hazardous materials, you'd make more money (which, yes, is creating wealth- though we could argue those semantics all day) making pizzas.

However, if you still valued the return on your investment (time away from home/family, use of skills learned, etc.) more for hazmat cleanup than you the return on your investment for pizza making, you'd still do hazmat cleanup, even if it meant forgoing some monetary wealth.  That is: you will do what is more valuable to you, whatever the market thinks.

Think of it another way.  A relatively pretty girl turning tricks is more desirable to the market than that same relatively pretty girl flipping burgers (based on price as an average of value).  If that relatively pretty girl values her life/morals/social station/health/etc. more than she values the money, she'll flip burgers anyway.  She will be forgoing wealth for something she values more (personal pride/self worth).

The entirety of capitalism (and Libertarianism, in it's "pure" form) is the idea that people can be counted on to do what they think is best for themselves- whatever anyone else may say about it.

105 India and Russia are buying a lot of gold as well, and for the same reason. Oh yeah?, I traded my gold for these magic beans. Who is the smart one now?

106 O/T, and probably dumb, but will the debate be on all channels?  If not, what time and channel?

107 Ugh China is doing it again.  wonder if trump or anyone else will be out there calling them out? link

this is like right out of the hugo chavez playbook.

108 If not, what time and channel?

NBC moved the debate to Thursday, as I predicted.

109 Don't forget the two elephants in the room: 1. Once you have food in your belly and a place to sleep reasonably free of the threat of molestation by weather, animals, and two-legged predators, strictly speaking, everything else is icing. 2. Mankind will always be saddled with those who cannot or will not produce. It is impossible to help the "cannots" without a few "will-nots" sneaking a turn at the trough. Worse yet, any imperfect system will create "will-nots."

110 107, Shit like that causes great big wars.

111

O/T, and probably dumb, but will the debate be on all channels?  If not, what time and channel?

Not dumb.

Do you have cable? It will certainly be on FNC, CNN, and MSNBC. Maybe even C-Span.

112 91 AllenG,

What is saved money, beyond "potential" wealth, then?

I believe you (and Hrothgar) and conflating a luxury based (or trivial) economy with a service based economy.

saved money is unused purchasing power if it is not in a bank earning interest.....

it is "dead energy"


Medical Treatment is a service, yes?  Would you say that medical treatment does not add wealth to the economy?  It may not directly add wealth, but the money that the doctor receives is "potential" wealth (like the true definition of "static" energy is "potential" energy).  It may not be wealth until used to purchase some good (though I disagree with that, actually), it is a good placeholder for wealth, conceptually.

The medical treatment itself is a service to the doctor's PoV, but to the patient it is more honestly viewed as a capital investment in economic infrastructure.  A person can't sell their goods or services if they are dead.  The grim reaper is the ultimate accountant and his balance sheet is final. 

The doctor is getting an IOU of the patient's that is held for the economic activity they engaged in or the money value of wealth liquidated.....

the act of the doctor surrendering that gained purchasing power for his rented service is where cash becomes wealth.

On the "produce" side: what if the only things our economy produced were Nerf guns and hockey sticks?  Oh, we'd be fine as long as there was a market for such things- we could sell them, and then use that money to purchase things like food and clothing from some other economy that produced such things.  As soon as no one (or many, many fewer) wanted Nerf guns and hockey sticks, we'd be in the problem you're imagining a "service based" economy would have- a lot of useless capital (in your theoretical service economy, that capital is Human Capital in the form of maltrained workers, in mine, it's a bunch of Nerf and Sports equipment factories).

What you are describing assumes there really is such a thing as "our economy" as though there is not "one economy"....

what I am saying is that the above describes the war to find true value/price interchange.....

the land you took out of farm production to make nerf guns or grow hockey sticks is being inefficiently used if you cannot produce enough priced properly to maintain your standard of living.....

what we are stuck in RIGHT NOW as a 'service based economy" is a bunch of people who have useless skills for what America can still do efficiently and are being disincentivized through government interference from felling the necessary pain to be motivated to alter their behavior/skills......

it would be using your example the nerf factory owner refusing to alter the use of his land and assets through liquidation of the wealth that is the factory's physical plant and repurposing of the land itself to a better use....



"Wealth" is just as ephemeral a concept as "value."

Let's say I own 1000 acres of prime growing land.  That is only "wealth" in proportion to my ability to profit from it, and only inasmuch as I can defend it, or the Government will defend it for me.  If I'm not a farmer myself, and I can't lease the land to people who are, it provides me nothing.  If I could, but I can't assert my right to the land, it still provides me nothing.  Only if (as a non-farmer) I can lease my land to farmers AND assert my property rights to the land does it constitute "wealth."

This is why intellectual property (which, after all, is just a service) is every bit as much "property" as that 1000 acres.

"wealth" is a hard tangible asset leveraged to risk.....even investments that look only like paper are leveraged to some asset or promise of future return on surrendered purchasing power.

While I agree entirely with the point you made above it represents more a bad investment and wasted efficiency than it does a lack of 'wealth" the act of 'wealth creation" is the action of surrendering short term purchasing power and exposing the loss or gain of that surrendered power to revaluation down the line......

that is "risk"......

screwing the pooch and not knowing how to maximize the income potential of your wealth does not stop that land from being 'wealth" it means you stupidly surrendered the fruits of the offering of your goods and services inefficiently.....

your highlighted example is actually a precise illustration of why we should never have engaged in TARP.

113 111, Thanks.  I do have cable, and do not want to miss it.

114 in the real world nobody sells their time for less than it is worth.

That is bullshit. No one WANTS to work for less than service is worth unless donating to charity. But the independent highly skilled individual is obliged to take what they can get in hard times amongst hard people, "fair" or not, in order to survive.

Caveat being "worth"...the highly skilled professional isn't "worth" more than the popular amateur given the lot of public ignorance.

115 102 Monty,

the yuan is a fiat currency based on a set of closed books....

"charming" no...?

I think they may be preparing to dump our paper

116 Vic update: Vic is doing fair, he will be home sometime today. He'll be posting tonight or tommorrow. Report is that it's stage 3, in lymp nodes and he is looking at Chemo!.........lurker Bro in GA.

117 103 He is a light bender.
__________

Pfft. What a lightweight. Call me when he can bend an unbendable beam.

118 I may consider my time "worth", say, $2000/hr, but if all the market will pay me is $20/hr, then that's all my time is worth.

But the union and government contractors and government employees will take what they want as if what they're "worth", regardless.

Establishment economics: the buck doesn't stop here.

119 116. Thank you for the update! I have been really worried about him. I hope he is feeling better soon. Then of course the chemo will suck as it always does. F*cking cancer.

120

Don't panic, stay calm. He is a light bender.

I think what you meant to say it that he's on a bender.

Subtle difference. 

121 Posted by: Vic's Bro in GA. at September 07, 2011 10:36 AM (DZor3)

God bless him.

122

Don't forget the two elephants in the room:
1. Once you have food in your belly and a place to sleep reasonably free of the threat of molestation by weather, animals, and two-legged predators, strictly speaking, everything else is icing.
2. Mankind will always be saddled with those who cannot or will not produce. It is impossible to help the "cannots" without a few "will-nots" sneaking a turn at the trough. Worse yet, any imperfect system will create "will-nots."

Let's pretend that all assets were confiscated from all people in the country and redistributed equally.

How long do you predict it would take before the workers amongst us made something for themselves and the slackers were screaming for a new wave of redistribution?

I'm going to guess about two years.

In two years time the brightest and hardest working amongst us, assured there would be no further redistribution, would get back to building a future for themselves and their employees. They would create new products and services and would excel in the quality of each. Meanwhile, those who were slackers prior to the original redistribution would find themselves flipping burgers...again...for the same reasons they did before. Sure, there are some hard-luck cases who would benefit from a leg up and would make something of themselves, but there would also be some prior success stories who would give up and go on the dole. So, no net gain.

I would LOVE to see an experiment conducted in a college somewhere. After the first semester, redistribute the GPA and see what happens to the GPAs by the end of the year. The cream will rise.

123 Posted by: Vic's Bro in GA

Thanks for the news, though I wish it were better. A lot of us have been praying and thinking about him. Please tell him hello from lots of morons.

124

Vic update: Vic is doing fair, he will be home sometime today. He'll be posting tonight or tommorrow. Report is that it's stage 3, in lymp nodes and he is looking at Chemo!.........lurker Bro in GA.

Prayers sent his, and your, way.

125 95 Monty,
a far more elegant explanation...

when I say "nobody sells their time for less than its worth" the fact is that the valuation of a person's time is based on the market....

if some idiot is willing to buy an hour of a bad masseur's time for 200 bucks that hour was worth 200 bucks....

of course the fact that the bad masseur may have a LOT of sunk time in between the morons paying 200 bucks is as you said "an opoortunity cost" to the masseur for their dead time.....

the price paid to an individual in wage or sales if they are self-employed is the market setting what their time is worth....

and as you say there are other factors but I'll stand by my crude assertion.....

the demand for what you supply with your time is what sets its "worth" not some personal valuation of it other than a decision to remove your skills and labor from the market if you decide an exchange offered for your service or product is not worth it.

if the masseur who can't attract an efficient enough client base at 200 a session refuses to accept that the market dictates that attaining enough volume means the price must go down to 50 an hour then the market has said her time is worth 50 an hour....I doubt she'll discount her fee to 45 on a lark and if she feels that 50 an hour is not a return on her skill she can accept she'll find a new task.

126

 111, Thanks.  I do have cable, and do not want to miss it.

YW. I'm also going to venture a guess that there will be live-blogging at the HQ, so check in here during the debate as well.

It should be fun.

127 If you're still lurking, Vic's Bro, tell him some morons re-fought the Civil War War of Northern Aggression Late Unpleasantness on yesterday's morning thread in his honor. Just in case he wants a little light reading.

128 Vic we're praying for you buddy...stay strong

129 I'm surprised the Chinese aren't just spray painting lead with gold paint and selling GLD certificates, saying that it comes from Chinese mines.

130 The photo on Drudge might be titled, "I want my sugar and I want it now!"

That one ought to be in an RNC attack ad.  Perfect.

President Focused Investments.  Investing in his own reelection.

131 Thanks for the update on Vic. He's going to have a tough time.

132 104 Allen G,

you got it....

in hard economics the price I pay for not doing the most economically efficient thing is "opportunity cost"......

I have made a lot of money and I have made no money I currently make "some" money.....the thing is that I am surrendering that earning potential(assuming that my skills were still sharp enough to be marketable) to allow my wife to maximize her earning and spend time with my son.....

frankly I look at the time I spend with my child guiding and mentoring him to be a responsible adult who wants to leave a patrimony to my future descendants to be an investment with a payoff outside my personal timeline....

my son understands that the wealth he accrues properly channeled can aid our family name going on that is worth the lost wages to me.....

//besides carcinogen cocktails are an opportunity all their own

133 129 jean,

who says they aren't....

the chinese economy is a long con IMHO....

a lot of people are gonna feel a lot of pain when the house of cards is finally exposed.

134 Thank you for the update on Vic.  He is really missed around here by all.  We will all be glad when he is back.

135 "There are no good guys in this crime story, but killing the banks out of class-war vindictiveness is just stupid." Who the fuck paid for that blowjob line? The fact is the banks actively scammed the system. They did very illegal things which BOTH parties worked very hard to coverup. Spend some time reading the discussions at Zerohedge, Automatic Earth or Mish's opinions. You might fucking learn something.

136 Vic update: Vic is doing fair, he will be home sometime today. He'll be posting tonight or tommorrow. Report is that it's stage 3, in lymp nodes and he is looking at Chemo!.........lurker Bro in GA.

Posted by: Vic's Bro in GA. at September 07, 2011 10:36 AM (DZor3)

Sending prayers his way!  He's too ornery to let this get him.

137 "How long do you predict it would take before the workers amongst us made something for themselves and the slackers were screaming for a new wave of redistribution?" I'm in complete agreement with you. My first point was that "tangible" wealth is an entirely subjective topic, so there is plenty of room for give and take and push and pull when zeroing in on what "value" is. My second point was that the social safety net is objectively an economic sink. Once all the multipliers from moral hazard are considered, it is a far worse problem. Your "cream rises" example is an excellent point. Back when I was working IT infrastructure in the mid 90s, I saw the same play over and over again. The people agitating most for change to a new platform or architecture were the ones who fell to the wayside when the existing platform was being stood up. They really believed that another roll of the dice would somehow negate the fact that they really needed to find another line of work.

138 122 Clueless,

yup....

the ultimate failure of the liberal mindset is their belief that equality comes not from the leveling of opportunity but the predetermining of results....the problem is that people will always succeed or fail based on a combination of personal drive and circumstance.

You cannot make equal results without coercion and eventually that coercion will require the threat of violence.

139 Vic's Bro, thanks for the update. Many here have been asking (and worrying) about him.

140 The photo on Drudge might be titled, "I want my sugar and I want it now!"

That photo of Pelosi over there...geez. If she has anyhting else lifted her eyebrows will become her hairline.

141 Pretty good snark from a poster at NRO about DOOM!

"I think that it was entirely appropriate for then-nominee Obama to use 'Styrofoam Greek columns' as a backdrop. After all, in less than three years heÂ’s managed to give us a Styrofoam Greek economy."

142 137 FTL,

the IT sector is probably the best example of attritable skills indexed to value I can think of for a small scale lab of valuation of labor.....

a lot of people get burned each time they don't invest in keeping their systems fu up to date.

143 Hang in there Vic.

144 Prayers for Vic.

145 Pull my finger, Vic.
;^)

146 I blame the founding fathers.  If they hadn't done what they did, I wouldn't be a son of a bitch.

Bastards.

147 Thanks, Vic's bro.  Please let him know we miss him and he's in our prayers.

148 I'm in complete agreement with you. My first point was that "tangible" wealth is an entirely subjective topic, so there is plenty of room for give and take and push and pull when zeroing in on what "value" is.

Absolutely agree with both you and Maslow. And, for this reason, there will always be those who do "just enough".

149 146 HtP,

heh...indeed....

who are you going to believe is the better man?

George Washington or Jimmy Hoffa jr.

150

I see NAZI PEELOUSI is peeved there will be no Pubbie rebuttal. Smart move by pubbies to just get the speech over with and go watch football. Puts Sparky on center stage with the requirement to be interesting. They had better polish TOTUS up are we are talking major failure on all Networks.

 

Sparky, please, please say something partisan snarky so Pubbies can get up and leave.  The optics will be wonderful.

151 Vic's bro - ditto what Jane D'oh said.  Give him our best.

152 Thank you for the update on Vic.

153 You will suffer for this outrage.

154 On valuation:

"I often wonder what the Vintners buy / One half so precious as the Goods they sell."

155 wow nice post by Ben....

Michigan just put a 2 year limit on welfare benefits lifetime....

156 Posted by: sven10077 at September 07, 2011 10:34 AM (AEIYh)

I think, at this point, we're down to arguing semantics.

My money in an emergency fund is "wealth" insofar as it is a "hedge against disaster."  I will be able to draw down that wealth to prevent things like default or missing a bill payment, or to cover things like a broken car axle, or whatever.  Even if it doesn't make any interest, it is still available to me as wealth.

If I set that money aside, determined never to use it, it may still be "wealth" in the strictest sense, but it has ceased to be wealth in any useful sense.

Purchasing power (that is: money) is as sure a representation of wealth as actual land, or gold, or whatever.  In many ways it's better, since it is already liquid.

Wealth which cannot be exploited to get you something is not wealth, it's just "stuff."

Money is no more "purchasing power" than some good or service (or, theoretically, real property), as long as I can exchange those things for some other good, service, or real property that I desire.

157 {{{{Vic}}}   prayers


Monty,
How did you get a picture of me in the morning????

158 Monty, your post today reminds me of how formative my Dad was to my world-view. An Econ major in college, he was explaining the futility of New Deal make-work projects when I was still listening to Golden Records. His usual scenario was raking leaves across a field one way, then all the way across the other way. He said it as if he'd actually seen it done. So I learned basic economic truths before I knew how to add and subtract. I had forgotten about that.

Thanks, Dad! and thanks, Monty.

159

who are you going to believe is the better man?

George Washington or Jimmy Hoffa jr.

Is that a rhetorical question because the answer is obvious.

160 Pelosi pissed that GOP won't respond to Obama speech.  Didn't I, just last night, suggest igoring Obama?  Yeah, I did. :->

161 "Spend some time reading the discussions at Zerohedge, Automatic Earth or Mish's opinions. You might fucking learn something."

Posted by: Happy at September 07, 2011 10:53 AM (CFhHo)

Or try this alternative: Go back to those sites and stop boring us with your idiocy.

162

Killing of the banks at this point would be merciful.  The big ones need to be euthanized.  They cannot be fixed.  Sucks if you are one of the 200,000 people who work in one of them, but it is what it is.

It is complete bullshit that our economic recovery depends on Bank of America, JPMorganChase, Wells Fargo, and Citigroup making even bigger profits and controlling even more of the market in financial services.  Kill them now, I say, and let a thousand smaller and more responsible banks grow in their wake.  There are already better ones growing along the coasts - TD Bank and PNC on the East Coast, Union Bank on the west coast. 

 

163 I am not suggesting that Obama isn't a true believer. I think he is. But he is not an intellectual. He is not well educated. He does not understand the sources of his beliefs. He is a mushy-headed dilettante with no intellectual rigor to back up his ideas. That doesn't mean that he isn't pursuing those goals aggressively. It just means that he is stupid and intellectually lazy.



I believe what you are trying to say here is why Obama is a stuttering clusterfuck of a miserable failure.

164 Is anyone else disappointed that "partisan brinksmanship" hasn't risen to the dead-horse-beating Obama campaign speech phraseology tour? I had high hopes for this plucky little phrase when I first heard him say it, but it just never seem to take hold. Alas...

165 Posted by: rockmom at September 07, 2011 11:09 AM (lSyyU)

Okay, Just let me know first, so I can move my money out of Chase Bank.

166 Vic. Vic. Vic. You have so many praying for your full recovery. I am just one of thousands.

167 Posted by: rockmom at September 07, 2011 11:09 AM (lSyyU)

Huh?

Kill them? Really? What are you, Obama lite?

Those banks are doing badly because of government interference with their business. Those banks were forced by congress to make all of those crappy loans .

168

Posted by: Vic's Bro in GA. at September 07, 2011 10:36 AM (DZor3)

I'll send all the good thoughts and prayers I can for Vic to remain stoic and fight this bastard.  We might be etherial but we're real and we care.

169

#135 Go read "The Devils Are All Here" and you will see just how bad the banks were.  But read it on an empty stomach, you might have multiple episodes of nausea before you finish.

These banks absolutely SHOULD have been punished, and punished severely for what they did during this bubble and well into its collapse.  People should be in prison now.  What is amazing to me is that Barack Obama had an absolute mandate and a veto-proof Congress to go after the banks, and probably would be sitting on a pretty substantial recovery and a 60% approval rating today if he had.

170 156 AllenG,

I am not trying to play semantic games with you but money in a cookie jar is just unused purchasing power.....the money in the cookie jar will NOT increase in amount but thanks to the wonders of market confidence and time it may lose value or even gain.....

say the EMP attack in "one second after" happens and *poof* all the one and zeros we have a lot of "phantom cash" wrapped up in vanish....in the short term while there is still confidence in the "full faith and power of the US government" the actual cash in the cookie jar will be valued higher for gaining goods and services-right up and until people realize the government is gone and people have to decide whether to go to barter or repeg value to the token of exchange.....

that would be an interesting experiment.....isolate a group of people and calculate just how long it takes to repeg valuation of labor/assets to a 'dollar'.....

171 What's all of this fatalism about Vic?

Hey Vic, get off your Johnny Reb ass, stop lounging in the hospital, and start defending the indefensible (The CSA).

172 163

Killing of the banks at this point would be merciful.  The big ones need to be euthanized.  They cannot be fixed.  Sucks if you are one of the 200,000 people who work in one of them, but it is what it is.

It is complete bullshit that our economic recovery depends on Bank of America, JPMorganChase, Wells Fargo, and Citigroup making even bigger profits and controlling even more of the market in financial services.  Kill them now, I say, and let a thousand smaller and more responsible banks grow in their wake.  There are already better ones growing along the coasts - TD Bank and PNC on the East Coast, Union Bank on the west coast. 

 

You don't need to kill them. They will fix themselves. What you need to fix is the Government Mortgage underwriters Fannie/Freddie. Simple fix is to break them into regions, capitalize them with private money, institute hard rules for underwriting (min 10% down plus insurance for an additional 10%) and prevent them from moving money nationally. This will prevent any region's real estate market from becoming speculative because they are limited in underwriting capital. A regions houses would only appreciate if the average income of the region grew. The problem all along was Clinton's use of CRA to inflate the dot.com bust to get his economic miracle. Stop the Feds from pumping and things will normalize. The Banks are captive to the Feds game. They borrow from the Treasury. If the Fed tells them to jump, they ask how high.

173 "Is anyone else disappointed that "partisan brinksmanship" hasn't risen to the dead-horse-beating Obama campaign speech phraseology tour?" It's a stylistic choice. "Partisan brinksmanship" as a pair of words doesn't end with the suffix "-ing." Therefore SCOAMF cannot drop the final "g" and sound folksy, as in: Workin' man Pocketbooks are hurtin' Presidentin' is hard ...and so forth.

174 171 Rockmom,

the banks did what they were told to do by the people who in the end have the guns....

punishing them for feeding the FM/FM beast beyond forcing them to take their loss is wrong.....

any cases of fraud greater than the fraud the political class pulled on the public that banks should be forced to ignore proper valuation of risk in making loans should be prosecuted as criminal matters....

I refuse to think of a banker being morally more to blame for the mess than the politician who forced the banker to write bad paper....

"bundling" was cloaking the proper valuation of risk potential in an asset.

175 Posted by: Vic's Bro in GA. at September 07, 2011 10:36 AM (DZor3)

prayers for Vic , and praying for great wisdom from His doctors

176 This looks like something dum-dum, palin steele or one of the other trolls would be involved in....

http://tinyurl.com/3ttbt33

177 Posted by: Sub-Tard at September 07, 2011 11:17 AM (0M3AQ)

No. Fannie and Freddie are simply government interference in our economy. Get rid of them, and the ridiculous lending requirements that have pushed the banks to make bad loans, and they will indeed fix themselves.

More accurately, the market will fix or destroy those banks.

178 169 CBD,

yeah and one of the lawyers tilting at the windmill of the "community reinvestment act" was a young Barry Soetoro.....

179 Those banks are doing badly because of government interference with their business. Those banks were forced by congress to make all of those crappy loans .

Posted by: CharlieBrown'sDildo (NJConservative)) at September 07, 2011 11:12 AM (LH6ir)

You really need to take a look at who oversees those banks... its all X bankers, and Politicians bought and paid for with banking money.

The idea that the Fed Reserve Bank, cannot even be audited by the Federal Government??

The upper echelon of the Banks were willing participants IMO... we heard few if any coming out and saying those loans were a REALLY bad idea...

Remember, these banks are run by Flawed men... they are not thinking entities unto themselves.

180 178 This looks like something dum-dum, palin steele or one of the other trolls would be involved in....

http://tinyurl.com/3ttbt33

Good grief.  Is that Jim?

181 Posted by: sven10077 at September 07, 2011 11:21 AM (AEIYh)

As if I needed another reason to hate that stuttering clusterfuck of a miserable failure!

182 179 CBD,

exactly....

frankly i think the banks were bailed out to keep them from highlighting just how much interference the federales had engaged in....

imagine how happy the 401k imploded electorate would have been with the fans of the CRA and fan and fred had defendant after defenedant pointed out all the times they had been directed by the feds to write high risk loans with no collateral in the name of 'social justice"

183 Vic, you can do it buddy.  We're all pulling for you.  For every regular commenter you can be sure there are 10 lurkers.  Thanks Vic's bro for the update.

184 What is amazing to me is that Barack Obama had an absolute mandate and a veto-proof Congress to go after the banks, and probably would be sitting on a pretty substantial recovery and a 60% approval rating today if he had. Posted by: rockmom at September 07, 2011 11:15 AM

Do you know how much money Barry got from Goldman-Sachs and other financial institutions?  From Open Secrets.  A politician will not bite the hand that writes the checks.

185

The unintentional irony of what Krugman is talking about is that it can work, there can be a source of free money--it's called colonies.  Yes, if only we had the social justice model of 19th century Europe, we could do all these programs without consequence to us because we'd be raping some 3rd world cesspool for all it's worth, transferring resources and wealth to the US and damn the consequences for those poor bastards over there.  I'd love to see an editorial that takes Krugman, and proponents of unlimited government welfare, to task on this.  They can have bankruptcy here or social injustice abroad, but they must have one of the two* if they want to continue the present course of spending.

* I suppose there is option 3, a miracle happens and we find out that all the concentrated bs in government has reached a critical point and created the world's largest diamond mine underneath D.C.  I rate this as only slightly more likely than liberals recognizing that their ruinous policies are, in fact, ruining the country.

186

"Those banks are doing badly because of government interference with their business. Those banks were forced by congress to make all of those crappy loans ."

Sorry, but this has become the new conservative fairy tale.  The subprime mortgage boom had nothing to do with CRA and everything to do with greedy bastards on Wall Street chasing bigger investment returns and huge bonuses.  They thought they had figured out a way to turn dross into gold by slicing up subprime mortgages into pieces they could get Moody's to rate as AAA.  Then they gleefully stuffed their balance sheets with this AAA-rated garbage and walked away with millions in bonuses.  They absolutely knew that the loans were getting worse and worse, but they didn't care as long as they could find some other poor sucker to buy them.  When the shit hit the fan, they ran to Hank Paulson and he bailed them out, and they STILL walked away with millions.

Citibank took almost all of its mortgage holdings and put them into "structured investment vehicles" as a way to get them off their balance sheet and thus have zero capital behind them.  That's right, ZERO capital.  When the losses mounted and the regulators woke up from their drunken stupor, they found out that Citi alone had $55 billion in losses that were not on its balance sheet.  And zero capital to cushion any of it.

Everyone here really should read both Reckless Endangerment and The Devils Are All Here.  I promise you will not look at any of these institutions with pity after you read these books. 

 

187 181 Romeo 13,

serious question....

do you as an individual have to engage in ANY risk to have your money at a bank and if so how much due diligence in a bank's actions and investment philosophy and history?

188 179 Posted by: Sub-Tard at September 07, 2011 11:17 AM (0M3AQ)

No. Fannie and Freddie are simply government interference in our economy. Get rid of them, and the ridiculous lending requirements that have pushed the banks to make bad loans, and they will indeed fix themselves.

More accurately, the market will fix or destroy those banks.
  Agree with the final statement. A Government Mortgage co-conspiracy plan seems de riguer at this time. My prescription just limits its reach and forces stockholders, not politicians, to run the show. I remember Jim Lynch of Fidelity thinking the model idiot proof. I guess he was unable to fathom the thinking of a Maxine Waters-Barney Frank types. Any model will work as long as you can keep the "social justice" types out of the machinery.

189

You really need to take a look at who oversees those banks... its all X bankers, and Politicians bought and paid for with banking money.

Posted by: Romeo13 at September 07, 2011 11:22 AM (NtXW4)

Yes, it's called government.

Kick the government out of the banking business and let the market decide whether the big banks survive.

190 Whose DOOM is better?  George Orwell or Auldus Huxley?

191 Thoughts and prayers for Vic. May God give the doctors wisdom and discernment.

192 188 Rockmom,

who do you think has ANY pity for the banks?

I do rather enjoy your letting the agent of the bundling off the hook though.....

Fannie Mae and Fred her brother were in fact willfully and happily acting as risk launderers ma'am....

that's right the GSE ie Government Sponsered Enterprises were the trigger of the gun.....

the banks could not have created the house of cards without the willing collusion of Frank Raines and Jaime Gorelick.....

the GSE's paid hundreds of millions in bonus to what were defacto Federal employees....

when the feds told the banks to ignore guidelines that had been in place on mortgages since the great depression they became willing accomplices to the scam.

The 'punishment' to the banks would have been allowing their implosion of course the politicians bought the silence of the banking class with millions.....


what you seem to fail to understand is that the individual is responsible for grasping the health of their banks.....

they may advertise "worry free banking" but only a fool doesn't worry about their money

193 Laura Ingraham keeps quoting "60% of the Tea Party" won't support a Palin potus bid.

Perhaps so.

But given that the "Tea Party" is not an organization, despite usurpers profiting as if sponsors of the "Tea Party", what validity has any "Tea Party Poll"?

/Yeah, our "Tea Party Express" poll arrived via mail yesterday. Even so, it's just the Tea Party Express, not the entire Tea Party movement.

194

canker sore....are you smoking meth now?  pulling 24's on the nets?

195 190 sub-tard,

correct.....anytime you add in political goals to the mission statement of a financial institution you are breeding trouble.

196 Sorry, but this has become the new conservative fairy tale.

Yep. This was partly a regulatory failure, and partly an outcome of decades of really wrongheaded policy by D.C., but there was plenty of just plain malfeasance going on in the banks (whether ignored with a wink and a nod by Washington). But larding the already-fragile banking system with more debt does no one any good. The best disinfectant is sunlight -- there has to be individual punishment of the wrongdoers and a "clawback" of ill-gotten gains at some point. Simply loading the banks down with more shitty debt won't do anything but make them fail faster.

Banks need to get smaller and more nimble. The colossus banks we have now have shown the folly of letting institutions become too large, and too intertwined, and with fingers in too many pies (counterparty risk never went away; it just got nationalized).

We don't need more regulations (Dodd-Frank will cause far more damage than it will cure); we just need regulators and lawmakers to do their goddam jobs and enforce the rules already on the books.

197 Posted by: rockmom at September 07, 2011 11:25 AM (lSyyU)

You do realize that this isn't a populist blog?

Bashing big business is silly. Business acts amorally. That is the whole point. The market will self-regulate, unless government interferes.

Where do you think all of that mortgage money came from? The bubble was caused by the churning of those loans that were forced on the banks by the CRA.

198 @199

I know... I was in the Hamptons with Cohen this weekend!

199

You don't need to kill them. They will fix themselves. What you need to fix is the Government Mortgage underwriters Fannie/Freddie. Simple fix is to break them into regions, capitalize them with private money, institute hard rules for underwriting (min 10% down plus insurance for an additional 10%) and prevent them from moving money nationally. This will prevent any region's real estate market from becoming speculative because they are limited in underwriting capital. A regions houses would only appreciate if the average income of the region grew. The problem all along was Clinton's use of CRA to inflate the dot.com bust to get his economic miracle. Stop the Feds from pumping and things will normalize. The Banks are captive to the Feds game. They borrow from the Treasury. If the Fed tells them to jump, they ask how high.

Posted by: Sub-Tard at September 07, 2011 11:17 AM (0M3AQ)

The banks will fix themselves?  What are you smoking, and can I have some?  They've had five fucking years to fix themselves since the housing market turned, and they haven't done jack shit except swindle the American people out of a trillion dollars.  If anything, the exposure and the "too big to fail" problem is much WORSE than it was in 2008, because now we have four banks acting as a cartel.  There is nothing sacred about these banks and they are most assuredly not fixing themselves. 

I do like your idea for regional banks - this is more or less what the Federal Home Loan Bank system was supposed to be.  That system still exists and I think the whole banking system could be rebuilt around them.  The wheel does not need to be reinvented here, we just need to break up these huge banks. 

The Fed also really, really needs to raise interest rates and keep them level at about 4%.  Near-zero rates in the early 2000s is what drove the subprime boom, as investors clamored for the huge returns they could get on the AAA-rated subprime MBS and CDOs compared to Treasuries.  It's going to happen again with some other assets if investors can't get any kind of return on Treasuries. 

200

Posted by: sven10077 at September 07, 2011 11:26 AM (AEIYh)

Is there Risk when you put your money in a bank?  Just the risk that Inflation and Devaluation of the dollar will be greater than the interest rate you earn... as your account is protected by the Federal Government (up to a limit).

However, when there are systemic risks which hit the whole system, we have the risk that the Federal Guarentee becomes worthless, as they cannot pay the bill...

Bankers however (IMO) relied on that bailout.... relied on THEIR compatriots at Treasury and in the Congress saying they were too big to fail... and so individuals took profit out of the system through subprime loans and these 'investment vehicles'...

Question... once Money is in the System, is it ever DESTROYED? or does it just get change hands and sometimes get devalued.... becaues the total amount of Money available did not change (except to grow)... and all that cash went somewhere...

201 This means, of course, that retirement must be delayed indefinitely. And this in turn prohibits job mobility (promotions etc.) for younger workers because older workers are not leaving the workforce in the numbers they used to.

Solution offered by the leftys: lower the retirement age to 55, then all those jobs will be free-ed up.

Because the already underfunded SS & Medicare could absorb an extra 20-30 million teet-ers.  No problem.

202

No California is boned story?

It looks like I'll be able to sleep tonight.

203 198 Monty,

*applause*

of course I still can't see where she is saying there is some large body of conservatives who are huge fans of the megabanks....

I blame the political class for interfering because frankly that is not their job, and ANY interference by the political class in risk valuation muddies the water.  Banks should have to compete for their cashflow and people should understand that there is risk involved in banking as a client.  The feds have been trying to murk up the banking pond since 1933.

Glass-Steagall's long term impact has been to create a false sense of somehow inherent security in the moral and ethical fiber of banks and artificially cast the feds as an innate force of good in the financial world.

Let banks burn enough folk they'll fold.

204

Posted by: rockmom at September 07, 2011 11:37 AM (lSyyU)

I think you may have missed the (unspoken) point.  Had government regulations not forced banks to take on patently stupid loans--oh, you make $30K a year and want to own a $500K house?  Sure!  Just sign the dotted line!--then we wouldn't be in the crisis we are now.

205 Posted by: Monty at September 07, 2011 11:34 AM (/0a60)

The banks got that wink and nod from government because they had been forced to make inherently risky loans by the CRA.

However, your point about the behemoths being unstable is spot-on. Note that BofA is quickly "streamlining" to return to its roots as a bank, and not the holding company for 100s of divergent businesses that it was becoming.

This is an incredibly complex issue, but blaming business for taking advantage of poorly thought-out regulation is just silly. The law of unintended consequences can never be repealed!

206 The best disinfectant is sunlight -- there has to be individual punishment of the wrongdoers and a "clawback" of ill-gotten gains at some point. Exactly, Politicians, Bankers, Brokers and lobbyists, sweet Jesus don't forget the lobbyists all running the biggest multi billion dollar scam ever run on a society. Without a mass investigation and hundreds of people being put in jail there is nothing to stop our elitist betters from pulling this in the future.

207 **killing the banks out of class-war vindictiveness is just stupid.** Indeed, the left doesn't understand much, least of which being banks and money. I guess they want to kill banks because that's where the money is. But really, banks and wall street are investment avenues of fluidity, freedom. The individual stock and account holders can switch banks or choose not to play. Are these lefties trying to kill fluidity? Because I can imagine that private citizens can devise other ways and places to store and invest their cash.

208 Darn the sock.

209 Monty, there are plenty of small and regional banks. The push for national banking was to allow the cost of capital to decrease by allowing interstate banking. If you return to a State Banking model only, you raise the cost of capital and more importantly enpower a small select group of state bankers to control a regions growth and its politics. The only restraint from the Fed should be not permitting any particular region to be over speculated via its underwriting function. The only reason the Big Banks played the game was because Clinton crowd required them to do "social justice" investing as a pre-requirement to be allowed to grow. Many banks whose business model was to remain in a region never went down this path and are very stable and solid. Only those growing their model were required to play. The results are known. The progs thought there was enough real profits in the system to suck to finance their "LBJ" dreams.

210 once Money is in the System, is it ever DESTROYED?

Of course.  Every fiat money system ever conceived has eventually failed.

211 and don't forget the backside of the CRA induced RE bubble - rising property tax returns to local government. The farm was bet on by the whole spread of government -- from local and state employees and pols, to government pension systems, to vertically integrated parties -- it wasn't just the DC fat cats who got bonuses, the unionized clerks got well too. Once government got a taste of that cash, without the associated political pain of raising taxes ...

212 Here's another really ugly problem: too many older Americans are carrying way too much debt into their senior years. And ...

Carol Willison has made lots of financial sacrifices for her two children over the years, including paying most of her older daughter's medical school tuition. But Willison's generosity has reached its limits.

Not only doesn't the 60-year-old Seattle woman plan to leave her daughters an inheritance when she dies, she's trying to spend every last dime on herself before she goes.

They don't call them the "ME Generation" for nothing"

Hey, I've heard stories of parents refusing to pay for expensive colleges because they wanted to get a new car every two years.

213 "...we just need to break up these huge banks."

Posted by: rockmom at September 07, 2011 11:37 AM (lSyyU)

Sorry, but who the fuck are you? What right do you have to break up businesses just because you think they are too big? Butt out of their business and let the market decide whether they are viable.

214 I have not used a bank in years. I have always been a member of a Credit Union. They don't seem to have these problems.

215 201 RockMom,

again allowing Big daddy Guvmint off the hook....

the largest landowner in the country is the federal government...bambi is sitting on 300,000 empty houses they seized.....

he is preventing the market from resetting itself as much as any bank and decisions by the federal government are what is forcing the interest rates to remain stupidly low.....

end of story.....

the bank is not a moral entity it is a business one, you keep expecting the bank to act with motivations other than profit....

you want morality go to a priest or a politician.....

you want ruthless profit seeking demand a better banker.

216 You do realize that this isn't a populist blog?

Bashing big business is silly. Business acts amorally. That is the whole point. The market will self-regulate, unless government interferes.

Where do you think all of that mortgage money came from? The bubble was caused by the churning of those loans that were forced on the banks by the CRA.

Posted by: CharlieBrown'sDildo (NJConservative)) at September 07, 2011 11:35 AM (LH6ir)

I know I come off as a fire-breathing populist on this issue, and I really am not.  But $10 trillion in subprime loans were most assuredly NOT "forced on the banks" by the CRA.  At one point in 2005, nearly half the market was in subprime loans.  Banks could satisfy CRA with about 5% subprime.  It is not that onerous a law.  The problem came when the big banks and investment banks figured out that they could slice and dice these loans and bamboozle investors into believing that the senior tranches were actually risk free.   Yes, they were all idiots in hindsight. 

Fannie and Freddie played a large part in the whole mess, but they were not the only cause.  By 2005 they were nearly irrelevant because nobody was buying their paper anymore, the subprime private-label securities were providing much bigger returns.  Their big mistake was trying to get relevant again by diving into subprime with little understanding of its risks. 

217 Many banks whose business model was to remain in a region never went down this path and are very stable and solid. Do you have a nice list, sorted by zip code?

218 208 The best disinfectant is sunlight -- there has to be individual punishment of the wrongdoers and a "clawback" of ill-gotten gains at some point.

So are you going to impeach Clinton or something? Silly. Privatize the system. Some people should not be in the home owning business until they can make the down payment. Skip this rule and hell will break loose.

219 216 OSP,

hear, hear...

credit unions have their own problems but "too big to fail" ain't one of 'em

220 look the banks made and bundled loans ACCORDING TO THE CRITERIA SET FORTH BY FANNIE  & FREDDIE & GINNIE MAE.....banks only make loans THAT THEY CAN GET RID OF...THEY DON'T WANT THEIR MONEY TIED UP IN THEM FOR 30 YRS and fannie, freddie and ginnie tell the bank....hey we need so many of these kinds of loans to sell to investors.....and the bank makes those loans...to the exact specifacation because they can sell that loan at a profit.....the housing collapse does not fall at the feet of the banks....it falls at the feet of the GOVERNMENT AND their involvment in mortgages..........and why for the love of GOD barney frank has not been tarred and feathered is beyond me.   

221 the bank is not a moral entity it is a business one, you keep expecting the bank to act with motivations other than profit....

you want morality go to a priest or a politician.....

you want ruthless profit seeking demand a better banker.

Posted by: sven10077 at September 07, 2011 11:44 AM (AEIYh)

+100

Why is this such a complicated point? It is so obvious that we should be embarrassed that you even had to type it!

222 The Fed also really, really needs to raise interest rates and keep them level at about 4%.

Yeah, but that would kill us dead, dead, dead. Even a fifty-basis-point change in short-term debt translates to hundreds of billions in increased borrowing and debt-service costs in the short-term since about 70% of our debt matures in less than 5 years. ZIRP is the only thing even giving the illusion of keeping us solvent right now. When you jack it up all the way to traditional rates (3-4%), the costs spiral near two trillion over ten years -- and that's just servicing and rolling debt we already carry, not new debt.

223 rockmom - you forgot the tax shelter nature of those exotic investment vehicles -- the government created a hole into which money would flow. The packaging of those a mixed pools should not have fooled savvy investors (caveat emptor) - the shady part was the "insurance" and "rating agencies".

224 215, Sorry, but who the fuck are you? What right do you have to break up businesses just because you think they are too big? Butt out of their business and let the market decide whether they are viable. OK, but don't we have a responsibilty to watch out for monopolies and colusion? I agree with the hands off approach but with so few institutions controlling a vast amount of the wealth isn't that also dangerous?

225 and why for the love of GOD barney frank has not been tarred and feathered is beyond me. he might enjoy it

226 the bank is not a moral entity it is a business one, you keep expecting the bank to act with motivations other than profit....

you want morality go to a priest or a politician.....

you want ruthless profit seeking demand a better banker.

Posted by: sven10077 at September 07, 2011 11:44 AM (AEIYh)

Exactly so.  Which is why banks need to be small.  And HIGHLY regulated - not in terms of who they can lend to, but in terms of basic risk management.  What we learned since the metldwon is that risk management was more or less nonexistent in these big banks, in AIG, in Lehman and Merrill Lynch.  Basic risk management has to be an essential element of banking.  If the banks are ruthlessly profit seeking by throwing risk management out the window, and neither their depositors nor investors know this, we have a problem. 

227 202 Romeo 13,

the FDIC is an artificial confidence tool created by politicians who will simply meet a failed banks liabilities with funny money if the crisis is big enough.....

"money" as in the actual bills die off and wear out, but the fiat currency is doomed on a long enough timeline to always lose value on a per unit basis....

Tarp didn't fix anything all it did was mask the pain of the virus.....

those megabanks will either succeed or fall based on their actions and the actions of the market.....

the rest is just noise

228
Posted by: Vic's Bro in GA. at September 07, 2011 10:36 AM (DZor3)





Best wishes to that ornery old cuss. We miss him.

229 OK, but don't we have a responsibilty to watch out for monopolies and colusion? I agree with the hands off approach but with so few institutions controlling a vast amount of the wealth isn't that also dangerous?

I you can point to one throughout recorded history that (a) was actually harmful to consumers and (b) wasn't created by government, you'll win a cookie.

230

Posted by: Jean at September 07, 2011 11:47 AM (WkuV6)

so the question becomes... who has that money now?

It changed hands... someone (the seller) realized a huge profit off of this... so who was it?

In every deal that goes South, there is a winner, and a loser, but the MONEY still exists.

231 Fannie and Freddie played a large part in the whole mess, but they were not the only cause.

Oh, they were major players. They were the primary buyers of all those shitty mortgages, remember. The merry-go-round would only keep going if lenders reduced the requirements on loans: Alt-A and subprime were cheerleaded by Fannie right up until it all blew up in their faces. (That's why the hypocrisy in suing the banks now is so feculent.) The banks wanted to keep the hopper fed, but the pool of good mortgage risks was tapped out: all the responsible people who wanted home loans (and could afford them) already had them. If they wanted to keep the money-train rolling, the only markets left were bad credit risks.

The main crime of the loan banks and investment banks was breach of fiduciary duty to their clients. (Goldie was shorting subprime for a year while still flogging CDOs to their customers; they acted in an amazingly sleazy and borderline-illegal way.)

Banks are dirty on this, no doubt about it. But the GSE's, and Uncle Sugar himself, bear a full share of the blame as well.

232 you want ruthless profit seeking demand a better banker. I actually want a prudent, stodgy, careful banker content with a modest growth; the ruthless profit seeking I want from my broker (bookie).

233 romeo13, who paid taxes on it, should be a question the IRS is asking.

234 **Sorry, but who the fuck are you?** Indeed, this sort of thinking (and rockmom may even be ok otherwise) is the liberal mindset that I am smarter and better than the people who actually do things that I know nothing about. If we want society to pick winners and losers, there are consequences. I'd prefer to let winning and losing occur based on merit, not connections or sob stories.

235 "...Which is why banks need to be small.  And HIGHLY regulated..."

Posted by: rockmom at September 07, 2011 11:49 AM (lSyyU)

You really don't understand. It was the unintended consequences of government regulation that created the housing bubble.

Once again --- the market is smarter than all of our politicians. It knows best. In fact, it is the only thing that knows anything!

236 228 Rockmom,

no no no....

sorry but you keep acting like you can get morality without its own brand of greed from the regulators...what part of 'the Feds and communitay organizers were holding a judicial gun to the head of banks" do you not get?

anytime you get governmental interference and oversight on a financial institution it works ONLY so long as the thugocracy resist the urge to use the threat of fiscal force against the bank to game the system to its liking.....

someone above posited about "monopolies" and concentration of wealth....

Banks are just as vulnerable to the main reason why command economies do not work....the magnification and concentration of decision making in the hands of a bad actor.....

BoA cannot avoid the magnified impact of manipulating its risk pools unless of course your friend the "moral" politician devalues our currency to keep him from his pain.....

the investor class will seek out the mix of risk and return it can bear....

if monopolies were inherently evil why are the feds seeking them in HealthCare and several other aspects of our economy?

the answer is the answer

237 Wheeee! Free money!

According to Drudge, Prez Downgrade is going to call for $300 BILLION in stimulus spending!

Crank up the printing presses Uncle Ben, we need to hire people to fix roads that don't need to be repaired!

And don't forget those bridges to nowhere!

238 What we learned since the metldwon is that risk management was more or less nonexistent in these big banks, in AIG, in Lehman and Merrill Lynch.

I don't know that this is true. Everybody had a risk model; they were just wrong about where the risk was concentrated. They were preparing for a flood, and got hit by a meteor instead.

The problem was that everyone thought they were fully hedged (via CDS) when they really weren't. In fact, their hedge instrument -- the CDS -- turned out to be a poison that almost killed them. "Risk Management" had become a circular maze of self-fulfilling nonsense, in other words -- it looked great on paper, but completely failed when an edge-case (a large scale failure of a whole investment class) came about. Everyone thought it was impossible, but it turns out that it was not only possible, it was inevitable.

The problem was not in a lack of risk-modeling. The problem was in defective risk-modeling, and it's a problem that even the regulators missed entirely.

239 **you want ruthless profit seeking demand a better banker. I actually want a prudent, stodgy, careful banker content with a modest growth; the ruthless profit seeking I want from my broker (bookie).** Indeed, banks just hold money and loan it out to make you some money. It is not magic. And even sillier is the idea of suing a bank. Note to account holders, pull your junk out of the bank. Banks are under assault, but all that means is that people will find someplace else to put their money. Like their mattress or super private banks that somehow can't be bullied into throwing their money to ignorant poor people.

240 Wealthy people generally have about 3% of their wealth tied up in rolling stock - cars, planes, boats etc. In fact that is the rule of thumb that the wealthy use to judge each others' wealth. They can safely use that rule because they know that people who have more than 3% tied up in rolling stock are fools and won't remain wealthy very long. This was explained to me by someone worth about 800 million.

By that rule - to drive a $30,000 dollar car one needs to be worth about $1,000,000.

The average person has a lot more than 3% of their wealth tied up in rolling stock. This immediately tells the wealthy that the average person doesn't know what he is doing financially, and will never be wealthy.

When an average person buys a piece of furniture they do so to use the furniture. When a wealthy person buys a piece of furniture it is done as an investment.

A story will illustrate that point: An acquaintance of mine was doing a 2 million dollar remodeling job on a house in Dallas ( The house wasn't worth a mere 2 million dollars - that was the price of the remodeling  only). One of the subcontractors was carrying some equipment through a room - stumbled and dropped the equipment on a Louis the Fourteenth end table - destroying the table. Before you start rolling your eyes it was much worse than it sounds: it really was Louis the Fourteenth's end table. The little end table was appraised at $160,000 - the subcontractor's liability insurance didn't cover all the damages and the subcontractor wound up bankrupt. (If you ever do any work at a wealthy person's house - make sure you carry a lot of business liability insurance - and factor that into the cost of doing business with them).

Wealthy people build assets, middle class people don't, and therein lies the difference between them.

241

Sorry, but who the fuck are you? What right do you have to break up businesses just because you think they are too big? Butt out of their business and let the market decide whether they are viable.

But they ARE the market.  That does not bother you?  These four banks have more to say about your economic success right now than your government.  Did you elect the CEOs of these four banks?  Are they accountable to you? 

The FHFA has sued 17 of these banks because they knowingly sold Fannie and Freddie a shitload of bad paper and materially misrepresented the risks of these mortgages.  By the time Fannie and Freddie got into that market the banks ALL knew that the loans were crap, they were already seeing the spikes in defaults, the massive fraud by the mortgage brokers, etc.  But they knew they had suckers in Fannie and Freddie and they dumped as much of this crap on them as they could before the whole house came down.  Now The Big Four are screaming like stuck pigs, they are spending millions on lobbyists and PR firms to convince you that they are being unfairly hammered by this big bad government.  Don't buy it. 

242

The problem was that subprime loans were allowed and in many cases, encouraged or demanded. Further, we (the government) allowed banks to originate mortgages and then to package and sell them with the help of Fannie and Freddie (government again). We (government again) also pressure banks and other institutions to hold only AAA paper. Our government in essence mandated this stupidity. If we removed the link (thou shalt not blend crap with true AAA mortgages), then banks would be screwed baecause they were still being forced to make some of these crappy loans, but they had no where to go. But it might have come to a head sooner, with less widespread effect.

Yes, diluting the true value of AAA paper was a problem, but was the typical solution; kick the can and keep the charade going a bit longer. But subprime loans themselves are the root cause. Even if they remain legal, they shouldn't be encouraged or mandated by the government. Then they would go back to being the high risk fringe activity that they once were and deserve to be.

243

Posted by: rockmom at September 07, 2011 11:49 AM (lSyyU)

I think one disconnect is the idea that those who run the company, and profit personaly from it, will always to what is in the LONG TERM interest of the Company.

What I think happened, is that amoral folks, saw an opportunity for personal Gain, and took it... to the detriment of the Banks, AND the economy...

Note, the folks who started Countrywide, even after fines, walked off with somthing over $70 Million (chump change, but indicative).

244 "Banks could satisfy CRA with about 5% subprime." The GSEs constructed a sewer system to sanitize the shit the CRA forced the banks to create. Once that system came online, the banks made subprime money hand-over-fist shoving as much shit as they could into the system. Any player in the banking industry not racing to take advantage of this bizarro-world situation was doing wrong by his stockholders and would be replaced by someone less burdened by ethical sense. The CRA and leftard social engineering was the problem. Without it and community agitators like Obama whipping up mobs demanding that up is down and water is not wet, we would not be where we are today.

245 Indeed, this whole cant of "regulation regulation regulation," ignores that regulations and lawsuits forced the crisis. Banks may need regulations to prevent managers from taking all the cash to mexico or to prevent bad faith loans. But aside from that, what regulation is not there that should be there? There used to be a very simple banking rule, 3-6-9. 3 percent interest given on savings 6 percent interest on mortgage loans hit the golf course by 9 It's not magic, it's a place to put money.

246 234 Jean,

then shop for that banker....

that goes back to risk valuation and minimal acceptable rate of return for surrendering control of your cash doesn't it?

people don't want bankers and banks they want magicians and magic shows....

well magic contrary to Hollywood and populist thinking is simple physics and stagecraft.

247 Posted by: Monty at September 07, 2011 11:57 AM (/0a60)

Oh look, there's a black swan!

248 **The FHFA has sued 17 of these banks because they knowingly sold Fannie and Freddie a shitload of bad paper and materially misrepresented the risks of these mortgages.** um yeah, they did that because FHFA sort of encouraged them to do so. Architects of Ruin, indeed. It's sad that 3 years later, people still have no idea what happened.

249 well magic contrary to Hollywood and populist thinking is simple physics and stagecraft.

Posted by: sven10077 at September 07, 2011 11:59 AM (AEIYh)

Really?

250 And you know what, if these banks don't actually defend themselves by pointing out the malfeasance of the government in this, then I think they're in on it. That is, this is just another cash transfer and you better pull your money from these banks.

251 The GSEs constructed a sewer system to sanitize the shit the CRA forced the banks to create.

Once that system came online, the banks made subprime money hand-over-fist shoving as much shit as they could into the system.

The CRA and leftard social engineering was the problem. Without it and community agitators like Obama whipping up mobs demanding that up is down and water is not wet, we would not be where we are today.

Posted by: FRONT TOWARD LEFT

 

I just want to say that I hate you for saying what I said, only better and in far fewer words. Well said sir.

252 My bank never gives me any trouble.

I just stuff the dollars in my mattress.  It is difficult because I have a Select Comfort so I sort of lift it up and put in underneath the mattress.  
_{Don't even think about it morons.  I have an imaginary big dog and a not so imaginary big gun.  * Have a nice day!*}

253 250 JoeinDC,

people are going to have a hard time wrapping their head around what Peanut Chamberlain did as a parting gift back in '80.....

the CRA and the GSEs were a very strong container that was used to hold the steam of continued enforced subprime lending....

Bill Clinton himself acknowledged that his people understood the pressure that was building both he and Bush the younger tried to fix it.....

Bawney and maxine and Barry refused to let that happen.

254 "The FHFA has sued 17 of these banks because they knowingly sold Fannie and Freddie a shitload of bad paper and materially misrepresented the risks of these mortgages."

Posted by: rockmom at September 07, 2011 11:58 AM (lSyyU)

That is the charge. There isn't a chance in hell that it is accurate. It is a bald-faced political maneuver designed to get Obama reelected and to shift the blame from the government to the banks.

If you are suggesting that banks played very close to the edge with these rules, then I am in complete agreement. That's what they should do to maximize share value.

The problem is that government tried to micromanage an unimaginably complex system, and not surprisingly they fucked it up.

Looking for scapegoats is a time-honored tradition in government, and this is an excellent example of it.

255 you know right now the agriculture dept is making zero down loans in rural areas..................and you know who is applying for them....PEOPLE WHO CAN'T AFFORD HOMES!!!!!!!!!!!!!!!!!!!!!!!!

256 CharlieBD, yes and if the banks don't fight back, they're colluding. If the GOP nominee doesn't point this out, well God help us all.

257 252 JoeInDc,

that's the gag......

all of this is a two phase confidence scam by the same set of people....

the idea that Barry wants to raid these banks is ludicrous they are his biggest backers....

the Democrats land on their feet in the GSEs while they are in a holding pattern to go back to DC when they get voted out......

TARP was a bribe to keep the banks from running out actual facts in their defense and if they are "raided and fined" by the Feds but offer only softsoap as defense what is going on is the feds are stealing the investors' money back from "the loan".....it was all a gag to stabilize the mood from late '08 at that point.

I am still fairly certain that steps were taken to manufacture the events of late august '08on purpose.

258

Monty - have you read The Devils Are All Here?  I just finished it last weekend and it really opened my eyes about a lot of this.  Merrill Lynch fired its top risk manager in the midst of the boom, precisely because Stan O'Neal (who should be in prison next to Bernie Madoff IMO) did not want to hear about the risks it was getting into.  Hank Greenberg at AIG had the Financial Products division set up as a silo, the risk managers were never even allowed to look at it!  Risk managers were seen as "profit preventors."  ALL of the banks pretty much relied on the credit rating agencies as their risk managers, even though that was never supposed to happen.

The banks knew as early as 2005 that the housing market was peaking, they knew the subprime paper was getting worse and worse, but the profits were so huge and they all thought they would be clever enough to get out before it all fell down on somebody else's head.  Even after the death of Bear Stearns they all thought they would be the last man standing and they kept churning out the crap, right up until the very end of the game.  As late as early 2008, AIG was telling investors that their CDOs were only the "super-seniors" and there was no way any of them would lose money.  Within a year the government had sunk $185 billion into AIG.

Yes, the CRA was a bad idea, and the ratcheting up of Fannie and Freddie's affordable housing goals was an even worse idea.  But the geniuses at Merrill Lynch, Goldman Sachs, Citigroup, etc. made this mess far worse than it should have been, because they could not resist the gigantic returns and enormous bonuses they were raking in.

259 @255 it's so bad, because low information voters don't know or care how much the DNC is doing to destroy this country. At least the democrats are doing their thing, I have a lot of spleen towards our nominee of 2008 for playing along with the big lie. And for W for playing along as well. Barney may have stopped reform of the system in mid 2000's but that doesn't mean that W couldn't have used his bully pulpit at some point to let the left own their own policies.

260

By that rule - to drive a $30,000 dollar car one needs to be worth about $1,000,000.

The average person has a lot more than 3% of their wealth tied up in rolling stock. This immediately tells the wealthy that the average person doesn't know what he is doing financially, and will never be wealthy.

Again, apply Maslow's pyramid in this instance as well. One needs transportation and, by the standards you and your wealthy friends put forth, no person worth less than 250k should even OWN A CAR.

For those of us less well-off than your friends, an auto means a job. It means trips to the doctor's office and to the grocery store. It means not calling an ambulance at midnight if you go into labor.

When our basic needs are met....then we can start talking about investments.

So, you can shove your whole poor people don't invest crap up your ass.

Next time I need a piece of furniture, I'll check to see what kind of "investment" I can make with that $200 instead.

261 256 CBD,

looking for scapegoats

you betcha....

you are absolutely dead on correct by the way an argument can be made that the bank could be sued by investors for not taking advantage of the alice in wonderland setting the GSEs created....

"fiduciary responsibility" read up on it populists

262 OK, I hate long posts but I want to know if I am crazy, or is this the way the game is played. In 97 I to 18k, What I had saved up to that point for my three year olds college fund to an Investment Co. The money had been lounging in a savings accout. I told the advisor I would like to but Peabody Energy. It was $41 a share. Since then it has split and is now $48 a share. He told me that was a rediculously bad investment. What do I know? I'm a millwright/Pipefitter. He diected us tward a Tech company that made chips for Ipods. It was $19 a share. It went up to $28 in 6 moths ten dropped to $11 in a year and a half. Here is what I think happened. I think the investment company owned a large amout of this stock. I think they sold it to us rubes to raise the price then they sold their shares and pocketed the difference. This left me with a 45% loss and a hatred for all that is investment banking. My question, Is that what happened or is that even possible? My wife talked me out of shooting the son of a bitch.

263 261 rockMom,

and by letting these banks fail and proescuting the criminal for fraud what happens to the politicians who caused it all....

of that's right nothing they get to go back to work for the Feds ask Jaime Gorelick

264 Anne Coulter had a column pointing out that Goldman Sachs and others have a great investment plan: invest in bad things, lose $, and then get democrat presidents to bail them out dollar for dollar. What can you do?

265 262 JoeinDC,

he tried but he was sort of stuck because the media would never report what he saw was happening as a fair assessment of risk....

go back to youtube and watch the reporting around the committee antics of Frank Raines and Waters, Frank, Schumer et al

Schmuck Schumer tried to collapse the banks all during '08 with his mouth

266 267 JoeinDC,

depending on '12 go Galt because the moochers are nigh....

I feel like using brass knuckles on folks who decry the implosion as the failure of a freemarket system....

it was not the failure of freemarkets it was the success if the freeloader market that caused this mess

267 yes, schumer caused a run on a bank. And if the 2012 nominee doesn't at least try to pin these events on the left, well God help us because we got nothing.

268 it's an assault on fluidity, meaning it's an assault on freedom.

269 265 OP,

yeah it's possible although in theory not ethical....

bad brokers can craft little perpetual motion machines of trade left unwatched that garner them a nice burst of transaction fee

270 271, The company rymes with Bobert W Raird.

271

TARP was a bribe to keep the banks from running out actual facts in their defense and if they are "raided and fined" by the Feds but offer only softsoap as defense what is going on is the feds are stealing the investors' money back from "the loan".....it was all a gag to stabilize the mood from late '08 at that point.

I am still fairly certain that steps were taken to manufacture the events of late august '08on purpose.

Posted by: sven10077 at September 07, 2011 12:10 PM (AEIYh)

My opinion is that it was all done to save Citigroup.  Ever notice how Vikram Pandit is still there?  And you never see him quoted in the press, testifying before Congress, etc.?  He sure is invisible for a man with that much power.  If the TARP had been used for what it was originally intended - buying the bad assets from the banks, nearly all of it would have gone to Citi.  Once the Treasury realized that, they knew they had to do something else. 

What is shocking about the whole meltdown is that no single regulator had much power to do anything once the wheels started to come off.  Hank Paulson was making it up as he went along.  One reason he allowed Lehman to fail was because Dick Fuld was an arrogant asshole who basically told Paulson he would keep doing what he was doing, because he knew the government would eventually bail him out.  Sheila Bair made up the authority to force the sales of Washington Mutual and Wachovia, trying to avoid a serious run on all the banks which probably would have happened if either of those banks had failed. 

272 274 Rockmom,

Citi is definitely the corner piece of the puzzle....

we destroyed decades of faith in contract law's strength in this country between TARP and Porkulus for no gain.

the proper punishment for the banks and the people who chose their banks poorly was implosion.....

the proper medicine for the people who borrowed 30 times their annual income in housing is foreclosure.......

once the medicine is allowed to work the market will resume equilibrium and until then we play a long game of catch me fuck me between two sets of assholes

1) politicians

2) crony capitalists

273

Welcome home Vic! I hope you're well.

 

274 Again, apply Maslow's pyramid in this instance as well. One needs transportation and, by the standards you and your wealthy friends put forth, no person worth less than 250k should even OWN A CAR.

For those of us less well-off than your friends, an auto means a job. It means trips to the doctor's office and to the grocery store. It means not calling an ambulance at midnight if you go into labor.

When our basic needs are met....then we can start talking about investments.

So, you can shove your whole poor people don't invest crap up your ass.

Next time I need a piece of furniture, I'll check to see what kind of "investment" I can make with that $200 instead.

Do I own a car worth far to much for the amount of wealth I have? Yes, does that make me a fool? Yes, at the time that I bought it I didn't know any better. I wish somebody had told me all of this before I bought my car.

Poor people only have expenses.

Middle class people use their money to buy liabilities that cost them money.

People who have the same amount of money but who will be wealthy use that same money to buy assets that make them money.

Middle class and poor people both believe that money is something that is to be spent. A person who will be wealthy takes the same money and makes it earn him more money. You can either work for money or make money work for you - your choice.

 First you build up your wealth - then you buy nice things, not the other way around.

A middle class person never gets ahead because - like the government - their expenditures rise to meet their income - no matter how high that income gets to be. Worse, most middle class people have large amounts of debt. Debt means that not only is your money not working for you - it is working against you.

How can a middle class person expect the government to be more prudent than they themselves are?

Being angry at me for pointing out the truth to you is pointless.

275 AllenG and "Liberals" are both correct.

276 277 AO,

the idea that middle class America is "only getting their needs" with their profligacy is funny.....

everyday we make decisions....what tv to own, what food to buy, what appliances we need....all that bric a brac eats up potential wealth generation.....

I financed my first car last year prior to that in 21 years I bought cash outright and fixed them up as I used them paying a higher cost to minimize %of  my cashflow per month in note service by having to pay to repair the older car more often BUT I CAME OUT AHEAD on a long enough timeline......

the mad desire to be on the bleedin' edge of the state of the art is a self-imposed trap on the middle class not a structural flaw built into free markets

nice post again.

277 Obama is a stuttering clusterf*ck of a miserable failure.

278 I hope you never stop!  This is one of the best blogs Ive ever read.  Youve got some mad skill here, man.  I just hope that you dont lose your style because youre definitely one of the coolest bloggers out there.  Please keep it up because the internet needs someone like you spreading the word.