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A bunch of ARMs reset, suddenly hundreds of thousands of marginal homeowners living paycheck to paycheck found themselves unable to make their mortgage payments just as the economy was slowing down, and they defaulted, sticking the banks with the loans.
Those early defaults were in fact on predatory loans written into weak markets by brokers who KNEW FULL WELL that the notes would fail once interest rates began to rise. But the prospect of more soaring profits and bonuses was too much for them to resist. The Fed had regulatory powers to halt such credit market abuse, but Greenspan believed that markets were wise enough to regulate themselves. What a huge and cruel joke that turned out to be!
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Originally Posted by blisterpeanuts
The banks, deprived of billions of dollars in loan payments, began to go under, and the Bush Administration moved to prop them up to prevent a general panic. The Obama Administration was in complete agreement and continued this policy.
Remedial history -- the credit crisis came to a head in the summer of 2007. That's when the problem should have been addressed. Instead, the whole mess was allowed to fester and bleed out into the Main Street economy, leading to asset market crashes, job losses, and even worse credit conditions. Bush and then Obama acted in late 2008 and 2009 to shore up not banks, but a financial system that was starved for liquidity. Only a fool would have done differently.
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Originally Posted by blisterpeanuts
The real crime was that the federal government, led by progressives like Rep. Barney Frank (D - Mass.) forced the banks to make loans to marginal borrowers for political reasons. The Community Reinvestment Act and various state programs were how they pushed a progressive agenda that did not make economic sense. Fanny Mae and Freddy Mac encouraged this behavior.
What a load of total and counterfactual crap. Barney Frank was in the MINORITY between 1995 and 2007. He had no power to shape any policy at all. There has NEVER been any law, rule, policy, or court decision requiring that a single dollar be lent to any borrower who was not fully qualified for it. CRA credit portfolios built up in the 1990s performed better than industry averages. All that CRA required was that covered institutions LOOK FOR qualified borrowers in the areas where they did business. Many were surprised to discover that millions of prime borrowers had been hidden away in these once red-lined and under-served areas.
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Originally Posted by blisterpeanuts
Booms and busts are part of capitalistic economies and can't be avoided.
More nonsense. The normal state of an economy is a slow, steady expansion based on population and productivity growth. Deviation from that path is a sign that something has gone or been done wrong. The ancient myth of cycles is just a lot of rot.
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Originally Posted by blisterpeanuts
In fact, trying to buffer them and make the pain go away too quickly is what damages the economy. The banks should have been allowed to fail.
Stupidest idea ever. This would have brought economic activity everywhere to a standstill. A massive global depression would have been the all but unavoidable next phase. Without liquidity, there is no credit. Without credit, economic activity dies, and YOU have no job. YOU are the one who was being bailed out. Nobody wanted the system to collapse on top of YOU.
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Originally Posted by blisterpeanuts
General Motors should have been allowed to go through bankruptcy.
LOL! They did go through bankruptcy.
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Originally Posted by blisterpeanuts
In the end, these businesses would have reemerged, leaner and stronger than before. The system works, if allowed. Whenever politicians intervene, usually to demonstrate that they're "doing something" to solve the panic, they make a mess into a bigger mess.
And we can always count on knowledgeable folks like you to chronicle it all for us, right? What a hoot! By the way, China is past its point of inflection. Lots of miles of bad road lie ahead.
Last edited by Major Barbara; 07-20-2015 at 07:51 AM..
You've been mislead. Do you want to understand any of this, or do you just want to keep saying US = Greece over and over?
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Originally Posted by Burkmere
I do understand it. Clearly you don't.
No clearly you do not understand. Greece doesn't control the Euro, so they can't print more money to pay off there debts. United States on the other hand does control it's own currency, so it CAN print it's way out of debt. Granted there downsides to printing more money, hyperinflation to name one.
I think we are all in agreement that United States massive debt, unfunded obligations, and growing social services programs spell nothing but trouble for the future of this country, but United States is not the same situation as Greece.
Last edited by TechGromit; 07-20-2015 at 09:09 AM..
Workers today expect $15/hour to take burger orders and clean grills. Construction and trade unions demand usurious fees to do basic physical labor; NIMBY neighbors and enviro-radicals hire lawyers to litigate any project into oblivion.
You watch way too much propaganda TV.
I suggest a media fast. Maybe take a little cross country trip. Hang out and talk to people, see what is really going on.
I think we are all in agreement that United States massive debt, unfunded obligations, and growing social services programs spell nothing but trouble for the future of this country, but United States is not the same situation as Greece.
No, we are not all in agreement. Especially those actually educated and experienced in national economics will be taking a different tack.
By the way, efforts to expand the money supply are garden variety monetary policy. Fears that it will somehow trigger hyperinflation are akin to worrying that watering the lawn will bring about devastating local flooding.
Workers today expect $15/hour to take burger orders and clean grills. Construction and trade unions demand usurious fees to do basic physical labor; NIMBY neighbors and enviro-radicals hire lawyers to litigate any project into oblivion.
Workers who do full-time work expect to make enough money to feed and clothe their families, as well they should. That's not what "usurious" means. And I don't know about you, but I don't want to breath mercury fumes.
Interest rates are at zero, and we've been doing everything possible to prevent deflation. Hyper inflation is not a concern.
I wasn't referring to hyperinflation today, but in the future when the interest on servicing interest on United States debt exceeds the total sum of the government income. At some point in the future, when the treasury bonds are nothing but a junk bond rating, people will stop buying them and the government will have to print money to cover there debt obligations.
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Originally Posted by Major Barbara
No, we are not all in agreement. Especially those actually educated and experienced in national economics will be taking a different tack.
So your suggesting that United States continued reliance on borrowing money to close there yearly budget gap is a good thing? Federal debt has increase from 55% of the GNP in 2001 to 70% of the GNP in 2008 and 102% of the GNP in 2011, the snow ball only gets bigger and bigger as it rolls into the future. The total percentage of the debt to GNP has declined as the United States economy has improved, but the fact remains that the total debt amount is increasing. It only makes it harder and harder for the GNP percentage to remain a "good" figure as debt increases. Correct me is if I'm wrong, but there only three ways this can end.
1. Spending cuts and increased tax revenue will allow United States to met there yearly budget obligations and pay start to pay off principal on debt owed.
2. The United States prints there way out of debt.
3. The United States defaults on debt.
Last edited by TechGromit; 07-20-2015 at 09:35 AM..
We may not be like Greece overnight. But social programs face insolvency in the not so distant future. Eventually, much will have to be eliminated. The American high education system is being walmartized. In a few decades, it'll be very different. Either expensive education or cheaper but crap education. Useless, worthless degrees.
Wal-martizing would be an *improvement* over the "politically correct" but utterly fatuous and intellectually dishonest pap coming out of too many campuses now.
I wasn't referring to hyperinflation today, but in the future when the interest on servicing interest on United States debt exceeds the total sum of the government income. At some point in the future, when the treasury bonds are nothing but a junk bond rating, people will stop buying them and the government will have to print money to cover there debt obligations.
But today we are taking measures to prevent this future bogey man, when at this time we have precisely the opposite problem.
Doesn't that seem just a little bit stupid?
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Interest rates are at zero, and we've been doing everything possible to prevent deflation. Hyper inflation is not a concern.
