The Only Road Out of Crisis

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• Reader Comments (8)

  Page 1 of 1 pages

  Schwartz -

  “The disaster of deregulation”

  Ummm, would you care to expand on that a little?

  Now, I can see that if the Democrats pass laws that require banks to give mortgage loans to people who have no income or assets, this would be not only unproductive, but stupid. 

  I suppose one moderately priced home in bankruptcy might have $10,000 in costs, and the home owner and/or lender (and/or the taxpayer now) will have to absorb that cost.  If that home is now underwater by $20,000, $30,000, or more, that amount will be absorbed by someone, probably the taxpayer.  So if you have several million homes in trouble, and each home has an associated cost of several tens of thousands dollars, soon you are talking real money. 

  But that does not explain any “disaster of deregulation.” You cannot, in fact, come up with a coherent explanation, independent of the Democrats’ mortgage fiasco, of what you just called the “disaster of deregulation.”

  But to understand the problems we face, you have to go back a few years.  LBJ’s War on Poverty cost $6.6 trillion (WaPo), the amount went straight to the national debt, the money was totally wasted, the WoP ended in an orgy of Democratic fraud and corruption, and the taxpayers are still on the hook for that $6.6 trillion plus all the interest that has been paid for the intervening forty-four years. 

  So, the cost of the Democrat’s mortgage follies are now piled on top of the cost of the Democrats’ War on Poverty in the national debt..  All that wasted money, and the prospect of a Marxist president, convinced prudent investors to protect their assets by withdrawing from the markets; who would willingly leave their assets exposed to Marxist inefficiency and corruption?

  When LBJ started spending money foolishly on the Great Society and the War on Poverty, the markets reacted by going sideways for seventeen years, including three recessions culminating in the Carter Catastrophe.  President Reagan pulled us out of that one.

  When Clinton and Greenspan stupidly let the dot.com bubble get out of hand, the NASDAQ fell $2-1/2 trillion in the year (2000)before Clinton left office.  President Bush pulled us out of that one.

  Who is going to pull us out of the Democrats latest wasteful folly?  You can bet your assets it will not be a Democrat.

  Posted by scorp on May 15, 2009 at 8:16 PM

  Laws do not/did not *require* that loans be given to low income buyers, scorp.  The laws simply gave low income borrowers the chance to participate by addressing red-lining (or attempting to).  It was the loan originators that got pressure put on them by Wall Street to sell those loans; Wall Street wanted the loans made, knowing full well that they would default. The loan originators had to produce, or die. Their bosses demanded that these loans be made. Loan originators made promises they couldn’t keep, and obfuscated a lot of information anyone with common sense would have rejected if they knew the facts.

  Assuming that you’re right, and it’s all the Democrats’ fault, do you—-a seemingly very intelligent person—- REALLY believe either party was going to prevent any of this stuff? Both parties are corrupt to the core. Both parties are owned by Wall Streeters. Neither party makes policy that makes any real sense for the nation.

  Go ahead and blame it on Clinton all you want. It doesn’t make a bit of difference now. Business-first Democrats AND Republicans shoved this shit finance legislation through at the state and national levels.  You don’t seem realize that the US has been very Marxist since the early 1900s—-BEFORE the USSR—- even happened. Marxism is a whole lot more than what you think it is. I’m not defending Marxism; I could care less about Marxism. I’m just saying that beliefs like yours have their head up your a**.

  Posted by M_in_Baltimore on May 15, 2009 at 10:18 PM

  M -

  I am amused and bemused that you would make patently false and ridiculous arguments on well-documented recent historical events.

  Not only did the Democrats pass laws penalizing lending institutions that did not issue toxic mortgages, the government issued policies that described, in detail, how these lending institutions were to fake the data to make non-eligible borrowers appear to be eligible for mortgage loans.  The relevant document is “Closing the Gap: A Guide to Equal Opportunity Lending” issued by FRB Boston in April 1993 and subsequently adopted as policy by FDIC and the Clinton Administration. 

  The document is twenty-nine pages long, but the print is large and there are many blank pages and spaces.  Depending on your attention span, you would do well to read it in full, and dispell your prodigious ignorance.

  Posted by scorp on May 16, 2009 at 12:04 PM

  M -

  ” ... do you ... REALLY believe either party was going to prevent any of this stuff?”

  Well, yes, one party has a long history of cleaning up the other party’s social and financial disasters.

  In the 1960s, LBJ and the Democrats passed the Great Society legislaltion and the War on Poverty.  The WoP alone cost $6.6 trillion over the next thirty years, failed utterly in it’s stated goal of reducing poverty, and ended in a morass of Democratic Party waste, fraud, and corruption.  Two years ago, the federal debt passed the $9 trillion mark, and almost exactly three-quarters, 75%, of that was Democratic Party legacy from the War on Poverty.  When the Democrats started spending the peoples’ money foolishly in 1965, the markets went stagnant for seventeen years, including three recessions, before Reagan revived the economy and initiated a period of unparalleled growth. 

  From 1996 to 1999, Clinton and Greenspan stupidly allowed the dot.com bubble to develop.  Like all economic bubbles, there was no net gain from all that economic activity, and a lot of pain.  The NASDAQ fell $2-1/2 trillion, half it’s total value, during Clinton’s last year in office.  Fortunately, Bush took the proper corrective actions, the damage was minimized, and growth resumed until the Democrats’ toxic mortgages hit us.

  You really ought to be more attentive to history and facts before you say foolish things.

  Posted by scorp on May 16, 2009 at 1:06 PM

  History?  None of us seem to have learned from history, have we? Foolish? Fine.

  I’m not going to sit here and defend any policy anywhere down the road the last 50 years. Petty “facts” arguments go nowhere. Anybody can cherry-pick “facts.”

  All I said is that both parties are corrupt to the core; both parties made the necessary moves to assure that their own complicity in the raping of this economy wasn’t exposed. They do that together; hand in hand. They do that with a lot of help from overseas banking, too. They all do that with “facts.” Nowhere is there any integrity or *wisdom*—- those get thrown out without thinking.

  All I know is that the earning base in the US was systematically demolished; that is abundantly evident. No manufacturing. Jobs crushed to subsistence level while financializations relentlessly increased. Let’s not overlook that the Republicans had a concrete majority going in Congress since the 90s. The dot-com bubble couldn’t have been prevented; the dot-com bubble was pure speculation. Speculation has been allowed to run rampant for decades. It’s a wildfire. The Fed didn’t have any say in the matter. Crooked bookkeeping and tax evasion maneuvers are also a factor. Add to that a bone-crushing war chest for an adventure that is increasingly evident was cooked up and exceedingly dubious. In a war economy, jobs get generated in the war industry. Everything is top secret clearance now. The number of people who can be vetted top secret are a very, very small proportion of the population. The rest of the job infrastructure slid into “service” jobs that pay bottom-feeding wages. Just where is the money necessary to keep the society stable going to be coming from under these conditions?

  The War on Poverty? What part of the word co-optation do you not understand?

  Cite facts all you want. Talk is cheap. The overall picture is what has to be grasped. If YOU are oh, so wise, run for office!  See how far you get.

  Posted by M_in_Baltimore on May 16, 2009 at 3:32 PM

  I’ve been saying now for months that they should nationalize one of the big banks to show free enterprise the government could do a better job than they are doing such as the TVA project years ago.  Treasury Sec. Geithner’s PPIP program isn’t going to work.  Saying that there are GOOD and BAD DERIVATIVES and using drivatives as currency.  It’s like mixing counterfeit money with real money.  The paragrath in the article I liked the best SAID IT ALL: “Federal regulators are doing their best to hide the dire situation of our megabanks, thus delaying official acknowledgement of their insolvency.  The regulators have let banks off the hook, sparing them from having to “mark to market” declining assets while allowing them to use the declining prices of their bonds (which will have to be paid off in full if held to maturity) to lower their total liabilities.  Thus, the recent quarterly reports of bank profits are largely accounting fictions.” 
  lavern, Disgusted Middleclass Taxpayer

  Posted by LaVern Isely on May 16, 2009 at 6:02 PM

  Dear Lavern, Disgusted Middleclass Taxpayer,

  How right you are to be disgusted. I frankly think you should get really boiling angry!  I certainly am.

  Ever since Enron, we have known beyond a shadow of a doubt that the accounting profession is baldly corrupt. My brother is a CPA; he is absolutely terrified of the implications of this situation in the accounting profession.  He frankly feels he cannot believe ANYTHING a balance sheet or financial report says anymore. Talk about a crisis of confidence!

  Just imagine what a $0.001 (one tenth of one cent) tax on every single financial electronic transaction would generate.

  Posted by M_in_Baltimore on May 16, 2009 at 7:19 PM

  Scorp:
  People who can’t pay their mortgages are insidiously chastised as derelicts and low lives.
  The economic reality is that if the nation can produce the wealth, the financial community is responsible for the necessary monetization to get the wealth distributed. But no!!! There’s some spurious, pseudo-morality that says, better bulldoze the houses down, than make them available at a lower price to the people. The financial community can scapegoat those who are down and out and can’t be heard.
  The financial community owns the president, the congress, and almost all regulators, who removed the rules of the game so we were on a level playing field.
  Don’t clamor for “free markets” thinking they are democratic or even fair markets. To population has been made to believe that the super-wealthy and the bankers are the paragon of virtue because they are the only who produce anything valuable.
  Only the rank and file folks who work produce valuable products. Bankers manipulate how to represent that wealth, so they get take it all over a 15 year period, little by little.
  The more people dare dig into economic basics and discover more truth, the stronger the general public will be when it’s time to vote with our money… which is not too far off.

  Another way to continue to hoodwink and deceive the public is to perpetuate the notion that we are short of money, and where can we get the money to do this, that and the other… This is the biggest fraud in our economic system. If you understand money, you’ll realize that our money is our ability to produce, and we are the best in the world, or at least we were until 30 years ago.

  If we have the raw material resources and ready and willing labor, we can produce more wealth in one year than the population could possibly consume in several years. So where is the money?

  The financial community has been given and is given cart blanch to create and distribute money at their will, uncensored, unregulated, secretly, and they used TARP to turn the markets around… but didn’t one iota of good to the production economy. Remember, what’s traded in the financial markets are intended to eventually buy good and services. What will they be worth if nothing is being produced? Also, pay attention that any growth in the GDP include the transaction in the financial markets. Last year that was about 30-45% of the GDP.  So we count gambling transactions as production, while the real economy is collapsing.

  It’s not injudicious people who kill the economy. It is always and has always been the rulers in the financial community and the government officials that get in bed with them.

  Posted by Nick Polimeni on May 20, 2009 at 6:29 AM

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Also by Joseph M. Schwartz

• The Only Road Out of Crisis
  Yes, it is socialism, but nationalize the banks already.