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The Market Ticker
in part:unlike all previous recessions since the 1930s this one began with consumer defaults on subprime loans. That is, we began to approach the zero point through the dramatic increase in debt outstanding and the most-marginal borrowers were unable to make their payments.
This in turn caused the cessation of origination of these loans and the construction of homes that were enabled by them, which forced people out of work both in those lending and building enterprises (thus forcing per-capita income downward.)
That in turn drove us even closer to the zero point, and the damage began to move up the scale. Higher-quality borrowers began to default - first on ALT-A loans and then prime loans, and the defaults spread into other areas of finance including credit cards and commercial real estate.
The Fed and Government, in response to this trend, flooded the system with liquidity in an attempt to drive down borrowing costs (that is, to get the interest component down so "the wall" was further away.)
Did it work?
No - because the banks, rather than being forced to admit their losses and come clean, were instead permitted to hide them. They took this "cheap money" for themselves and instead of lowering interest costs for consumers, moving the default function in the desired direction, raised them on consumer debt, forcing the default function the wrong way!
The government in turn stepped up its borrowing and replacement of actual income with subsidy, since the interest rate for government borrowing did indeed go down. This prevented an all-on implosion at that instant in time.
But did it fix the problem?
NO!
Why not?
Because the debt is still out there and the ability of the government to continually borrow more money forever to use in these subsidies for the purpose of halting the shift to the left in the debt/income default function does not exist.
Oh sure, government can do this for a while - and it has. But not forever, and yet "forever" is what is required, until and unless those debt levels go down or income levels go up to get us back into the "safe" zone of the default function.
Yet the government's actions in fact move the curve the wrong way over time! That is because government borrowing is in fact debt that ultimately must be paid for out of individual income. While it is "cheap" borrowing it has not (and doesn't) replace the high-cost debt that is causing the problem - it is simply a means of attempting to subsidize the current payment required to keep the default from happening "right now" (as in this month.)
this is 2 parts and definitely worth taking the time to read the articles and watch the video.
How about a simple blanket explanation that can be applied to ANY government program or policy to explain why it failed: because it's a government program! Nuff said!
you certainly have a valid point there. there has never been a government plan that looked into the long range consequences of its actions, because it is always just about the next election for these officials. that is why they scheduled the bailout so close to the election, so people wouldn't have time to react and allow a new candidate into the picture.
how about replying to the charts that he posted? or why not reply to this series of facts:
1) 90 percent of all new home loans are funded or guaranteed by taxpayers
taxpayers are on the hook for most of the loans that are still being made if they go bad. And they are also on the line for any losses in the massive portfolios of old loans at Fannie Mae and Freddie Mac, which own or back more than $5 trillion in mortgages.
2) Gets better. WaPo is reporting a high risk of default (Are we surprised with a 9.7% official unemployment rate?)
There is growing evidence that many loans being guaranteed by the government have a significant risk of defaulting. Delinquencies are spiking. And the Federal Housing Administration, another source of government support for home loans, is quickly eating through its financial cushion as losses mount.
3). Finally look at the money WaPo is pointing to that has been poured into the mortgage market (versus the Zombie banks):
The outlay has already reached about $1 trillion over the past year and is rising. During that time, the government has pumped more money into the mortgage market than has been spent on Medicare or Social Security or the defense budget, more even than Washington has paid to bail out banks and other struggling companies. (washington post)
taxpayers are being saddled with increasing risk thanks to government intervention!
I love the graphs, this guy doesn't even understand what sweep account means, that it drops reserves to 0 (it's an account to sweep out cash in excess of company treasury needs for higher investments), or ever explain his view on "Free Money Last Stand". Per person debt is also wrong, I think he is excluding mortgages till recently (it was not 0 in 1970 if you include mortgages on people's houses) to boost it up to make his graph climb even higher. I also love how the source for the numbers that are used are unavailable, any monkey with a spreadsheet can make those graphs with a set of random numbers.
I love how people take lunatic bloggers opinions and think they are the "Truth".
Wow, I'd love to understand what I am supposed to be afraid of by floridasandy's post...but, it was nonsense.
Please try again, and this time, add your "inside info" and insights about Obama being from Kenya cuz he never showed a legitimate birth certificate, and tell in great detail how the US is going to be a Socialist nation.
The second article in your link is very telling: "Today you heard from our President, Barack Obama. Some of your parents voted for him, and most of the rest of the country voted for his opponent, John McCain."
Stop me here, b/c I am no math whiz, but exactly, what kind of math is that?!!! And this article/website purports to understand the complexities of an national, even global, economy? I wouldn't trust them to give me change for a $10 bill!
"Some" vs. "Most" would mean that McCain would be president. But, since Obama's president, I think this article intends to imply that somehow, Republicans were cheated of having their president? I can't imagine what kind of irresponsible journalist hack could write this drivel.
Another quote: "What you did not hear from President Obama today was that your government, together with your school, has refused to provide you with the knowledge necessary for you to understand what has happened to this nation and its economy over the last 30 years. This is not an accident."
Oh, that sneaky Obama! Elected in November, sworn in this past January and he had the foresight to tell schoolbook publishers what to provide a whole year before he was even president! Wow, he is good! Wonder what wacky thing Obama "did" next; you know being in office for a few months makes one responsible for everything the U.S. has done wrong since it's inception. Or, so the article implies...
Floridasandy...even you have to admit, the link you provided is so far to the right it needs a chiropractor, c'mon, now.
Wow, I'd love to understand what I am supposed to be afraid of by floridasandy's post...but, it was nonsense.
Please try again, and this time, add your "inside info" and insights about Obama being from Kenya cuz he never showed a legitimate birth certificate, and tell in great detail how the US is going to be a Socialist nation.
The second article in your link is very telling: "Today you heard from our President, Barack Obama. Some of your parents voted for him, and most of the rest of the country voted for his opponent, John McCain."
Stop me here, b/c I am no math whiz, but exactly, what kind of math is that?!!! And this article/website purports to understand the complexities of an national, even global, economy? I wouldn't trust them to give me change for a $10 bill!
"Some" vs. "Most" would mean that McCain would be president. But, since Obama's president, I think this article intends to imply that somehow, Republicans were cheated of having their president? I can't imagine what kind of irresponsible journalist hack could write this drivel.
Another quote: "What you did not hear from President Obama today was that your government, together with your school, has refused to provide you with the knowledge necessary for you to understand what has happened to this nation and its economy over the last 30 years. This is not an accident."
Oh, that sneaky Obama! Elected in November, sworn in this past January and he had the foresight to tell schoolbook publishers what to provide a whole year before he was even president! Wow, he is good! Wonder what wacky thing Obama "did" next; you know being in office for a few months makes one responsible for everything the U.S. has done wrong since it's inception. Or, so the article implies...
Floridasandy...even you have to admit, the link you provided is so far to the right it needs a chiropractor, c'mon, now.
you tried to turn an economic article into a political article, without even addressing the economic issues posed. i have said nothing about obama's birth certificate ever and could care less whether he gave a pep rally to students (although i do think he could make better use of his time), so don't try generalizing.
as i posted earlier, what whacky things obama HAS done since in office:
1) US dollar at it lowest point this year
2) gold rising, due to lack of confidence in the US dollar
3) authorizing funds to fully fund, (including back funding), the UN, which, in turn, advocates a new global currency to replace the dollar
4) increases US military spending with a supplemental appropriations bill
5) increases the federal deficit, which is now ballooning to over 9 trillion in the next 8 years,nearly doubling to 100% of GDP.
6) tries to force a cap and trade tax on americans, which not only gives us a competitive disadvantage, since china and other countries refuse to do it, but increases energy prices for already struggling americans.
7) allows increased risk on wall street, while the banks continue to hide their toxic assets.
8) has the US taxpayer underwriting 90% of the new mortgages in an unstable market.
9) unemployment at its highest point in 26 years, even with a 787 billion taxpayer funded stimulus program. where did all the money go? where is the transparency?
10) allows the federal reserve to hide information, and congress still has blocked an audit of the federal reserve, although we may have a ruling by a JUDGE requiring audit at the end of the month. do we really need to get judges to step in when our own legislative body refuses? this from a president who promised transparency and change!
11) voted for the bank / wall street bailout, which started this whole mess in the first place.
12) authorized the purchase of foreign cars with the american taxpayer funded cash for clunkers, and demanded that the old cars be destroyed, reducing used car availability.
13) gave a loan to brazil's oil company Petrobras to help BRAZIL in oil exploration! (and benefit his backer, george soros). what country is he president of again???
14) there is no stimulus money transparency, and this was just released from the boston globe:WASHINGTON - After winning $2.3 million in federal stimulus money for a sewer project, officials in Auburn, Maine, wrangled another prize from Washington: permission to forgo American-made manhole covers for a design made only at a Canadian foundry.
as local governments race to spend stimulus money, many are seeking exemptions from the law’s “Buy American’’ restrictions, which were intended to prevent taxpayer money from ending up in foreign pockets. The administration has granted waivers for goods as varied as steel for public housing projects, high-speed Internet equipment, and Auburn’s manhole covers, which have heavy-duty hinges to help withstand the town’s heavy truck traffic.
The Obama administration could not provide a list or amount of waivers granted - which potentially could total billions of dollars.
again, this is american taxpayer money which should at least be stimulating american businesses! which country is he president of again?
15) allowing state pensions to increasingly risk retiree savings, after already losing big chunks of their portfolio, on wall street bets. (just google calpers for an example of pension fund and risk). this is an accident just waiting to happen, and the taxpayers will be the loser in the event of implosion.
Last edited by floridasandy; 09-09-2009 at 06:20 AM..
there are still no safeguards in place to stop the looting of the pension funds. this could end very badly.....
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Birther alert!
