You are either not logged in or not registered with our community. Click here to register.
 
December 07, 2016, 04:12:54 PM

Welcome, Guest. Please login or register.
Did you miss your activation email?

Login with username, password and session length

Click here if you are having problems.
Default Wide Screen Beige Lilac Rainbow Black & Blue October Send us your theme!

Hark!  The Herald!
Holiday Issue 2016

Wiki Blogs Dicebot

Author Topic: So, the economy  (Read 4132 times)

0 Members and 1 Guest are viewing this topic.

Offline consortium11

Re: So, the economy
« Reply #50 on: May 19, 2009, 12:45:01 PM »
Bah, lost post. Oh well.

Oh, I feel your pain. I’ve lost a ton of long posts to whatever dreaded error hits me on a given day. If I know I’m going to be banging out a long post I try to get it on Word… but even now I still forget from time to time.

I was, of course, referring to lending practices within the United States. ARMs were relatively new, and adapted for a market that didn't really apply to much of the country. They were frequently combined with negative amortization and obfuscated language.

The first time I checked to see that you're not in the US, you've probably never seen some of these agreements that loan pushers would try to shove on people, especially new home buyers. Often, they were advertised with just the 'introductory rate', which was sometimes not the accrual rate, just the rate you would have to pay for the first few years.

For example, when I got my house I received notices for interest rates anywhere from the 1.9% to 3.9% rates - below prime. What these some were, were negatively amortized ARMs where the real interest rate was 8% or so, and the balance would accrue even if you didn't cover it all.

Yes, it was frequently fraud, on a massive scale, but the FBI's hands were tied with the war on terror and Bush and his staff prevented diverting more resources towards this issue.

I’ve seen terrible home loans before… sub-prime wasn’t just restricted to the US… considering house prices in the UK we had just as many outrageous offers being made.

However, I think we should still be careful between lenders who deliberately misled clients and those whose clients simply didn’t read (or get someone to read) the paper work. One is fraud (and should be prosecuted as such), one is simply a bad bargin.

Variable Rates are not the issue. With commercially sensible caps and checks they offer a flexibility that few other mortgage types do with a certain security for both parties. The issue here was that they didn’t have sensible caps (or any at all)… partly due to predatory lending (that eventually should/would be punished by the market) and partly due to government pressure. When the risk of default is high (as it was in these cases) the interest rates are always going to be higher. In the “correct” series of events these mortgages would never bee offered. Unfortunately they were… and they made enough short term profit to fill people’s eyes with £/$/*insert currency symbol here* signs.

Regardless, your claim:
Calling government interference the direct cause is false. There were plenty of greedy scumbags who thought nothing of destroying people's lives - and knew they were going to ahead of time - factoring into it.

The crises was caused because of toxic debt. Toxic debt was caused by CDS’s and CDO’s containing sub-prime debts being sold on. CDS’s/CDO’s contained sub-prime debts because the market was flush with them. The market was flush with them because F&F was supporting any they could get their hands on. F&F were supporting any sub-prime loans they could because the government told them too.

As I said before, the financial system set up the dominoes (and certainly left them rocking), but it was the government that knocked them down. Perhaps without government interference something akin to this would have happened eventually. But the government did interfere and directly caused this crises.

In the US, banks are required by law to maintain a certain amount of leverage. However, investment banks, exempt from these rules, sometimes had leverage on the order of one dollar for every hundred they had in debts.

Or worse.

Which is woeful commercial sense. Bear Stearns had always been somewhat of a rogue institution and bet very, very, very badly on sub-prime and paid the price.

The issue with that, is that the FBI saw this coming in 2002 - two years before F&F became seriously involved. Many Americans, myself included, saw this coming in 2003. F&F began serious subprime pushing in 2004, and, ultimately, during this period, it was the republicans - not the democrats - who championed the deregulation that permitted this. And in the case of Bush's office, actively and willfully prevented proper investigations from occurring when they could have put a stop to this.

I’m not partisan with my criticism here. Both of the major US parties screwed up and other governments around the world also didn’t mitigate the harm. Both Republicans and Democrats championed HUD efforts… and prior to that the CRA in the early 1990’s. The seeds of the triffid that sub-prime became were planted long ago… and many were with an understandable attempt to play politics with the market.

Be careful with the term 'the market'. 'The market' did not make these stupid decisions, various bank (or things that pretended to be kinda sorta banks) executives did, which is an altogether different problem - executives should be held responsible for the messes they create.

The market should have prevented it in the short term, but didn’t. Now to stop present suffering it’s being prevented from correcting itself (which we’ll have to wait and see if that was the right thing to do). But the market did as badly as anything else here. Partly due to the way the government manipulated it, partly due to individual investors. Between them they blinded the market.

And as for executives being held responsible hopefully they are… in that they never receive any high paying job again. Considering the amounts they made, that’s probably not the most severe of punishments. But if we’re saying that directors should be held liable for the loses of a company then it’s simply not a sensible suggestion. No-one would ever become a director. Why would they with the risk? They’d have to be offered a mind destroying salary.

If Well's Fargo's losses total only 3.2 billion over 12 billion dollars in writedowns in two years, with a supposed majority of it being due to home equity loans, that's still a minimum of 3 billion in profit.

And as I said before, all power to them. Doesn’t escape the fact that they still couldn’t escape sub-prime completely. Virtually no-one could.

Not sure where you get that. On one hand you have lower end small business loans where this isn't an issue, and on the other there are investors. To say nothing of people who don't need significant funds. The value I provide Elliquiy in terms of labor is around a thousand a month or so, coding quotes for the new CMS I'm building for the place run from the high six figures to low seven.

Is it going to cost me that? Hell no.

Perhaps we’re using different terminology.

DTI: Debt to Income.

So setting a mandatory DTI rate for loans means that anyone with a low income trying to set up a company etc would be in immense difficulty. They’d be forced into the arms of venture capital at best or simply prevented from doing anything at worst.

Now if you just meant for mortgages then I’m not necessarily against that. I’d prefer it to be done without government interference through commercial principles, but I can accept it.

Or Goldman Sachs seeding every level of the US financial system with cronies.

Oh, I agree. Goldman have lead the corporatism of the financial system. The FSA in the UK consists of ex-bankers and lawyers taking a few years off before returning to their “real” jobs and civil servants who don’t understand the system… so can’t keep a check on the “insiders” who don’t want to cause any problems for getting another good job.

Because the regulated American markets are either a source for just about every good imaginable, or a potential source. Play games in other markets and people just won't buy.

Why not? Virtually every commodity can be found on the markets I listed, and if the US regulated markets became too restrictive, commodity traders would simply move… and would be welcomed by those other markets. They’re mercenaries… and the few who stayed loyal (see AIG) saw themselves sold out by the US government… which isn’t the best way to prevent them moving.

Often the former, some frequently even cite the Chrysler decision. Fallacious or not, people are often looking to next quarter rather than ten years from now.

The shareholders own the company. If a director is acting in their best interests (which he should) and they are happy for short term gains at the risk of longer term future losses then it seems strange to say “no… you can’t.” Shareholder’s aren’t happy now, but were perfectly happy with their dividends during the good years. Unless we change the basic law saying directors have to act in the best interests of the company (which would be horrific) then if shareholders start demanding short term gains, a director would be hard pressed to ignore them.

It mentions intelligence going back to 2002.

But makes no mention of when Bush was briefed…

Intelligence dating from 2002 points to the Gramm-Leach-Bliley Act in 1999 far more than a twelve year long rise for the subprime crisis.

That's not just my opinion, either. Warren Buffet and Paul Krugman both are not fond of Mr. Gramm.

I’m not sure how the GLB can be argued to have caused the sub-prime crises. It possibly made it worse through allowing the risky investment banking practices to overwhelm traditionally more risk averse commercial banking and with some of its deregulation, but it factored far more into the greater financial crises then just the sub-prime issue.

On the other hand there’s good arguments to be made that the act actually helped mitigate the damage by allowing the larger banks to diversify… and to allow private takeovers of certain failing banks. Beyond that GLB didn’t set leverage ratios and didn’t create securitization, CDOs or the culture of greed that you yourself blame for much of the crises.

Oh, and if we’re using Krugman as a financial expert he’s one of the strongest voices saying speculation wasn’t the cause for the hike in oil prices, on much the same basis as I do.

That's the premise of everyone who's ever argued politics on every forum that ever was so much as the glimmer in an administrator's eye. That's like saying "I'm breathing now."

\Let’s be fair now… at least some of them would be arguing it was one parties administration that was incompetent , but certainly not the other. Then someone will put forward a traditional anarchist theory… then someone else a communist one… then an Anarcho capitalist one. The someone will blame the Illuminati, someone will probably say it was “the Jews” fault, then someone else brings up the Lizard men, then someone shouts about how much Palin spent on clothes… then Obama’s half brother… then that global warming is a myth etc etc.

But, my point is more specific then overall government inadequacies. That the government has for a long time been trying to force the market to offer houses to those who traditionally couldn’t afford it. The market did… along with all the consequences we face now.

The highest rates of gun crime correlate far better to a mix of corruption and (of course) availability. IE Washington D.C., Russia, and so on.

Which ties to my point rather nicely. The idea behind correlation not equaling causation is you may be overlooking coincidence or other causes.

Other causes such as emerging markets?

Nickel is not smelted or forged with fossil fuels like iron and steel are.

So speculation (pretty much alone) drives up the price of oil and through that also drives up iron/steel in a virtually identical curve… but speculation does the opposite to Nickel because it’s not dependant on oil?

Nickel had almost as much speculative activity and its price fell. Speculation alone isn’t enough to force the price of something up.

Beyond that, though, the Enron loophole only exempted energy trades.

And yet virtually all trades (on all markets) which followed the oil curve (and all… coincidentally of course… were required for emerging markets) also fell in the exact same way.

...Nelson Hunt never ring a bell?

First he actually was stockpiling silver and all the evidence points to a fall in inventories in this case.

Secondly, the facts are the facts. In the rise of the price of oil to the peak it finally reached speculation followed the market… not led it.

And, as we’re using Krugman as a guru on the going-ons-financial:

http://www.nytimes.com/2008/06/27/opinion/27krugman.html
http://krugman.blogs.nytimes.com/2008/06/23/speculative-nonsense-once-again/
http://krugman.blogs.nytimes.com/2008/05/13/more-on-oil-and-speculation/
http://krugman.blogs.nytimes.com/2008/07/19/oil-outlook/
http://krugman.blogs.nytimes.com/2008/06/25/confusions-about-speculation/
http://krugman.blogs.nytimes.com/2008/06/24/various-notes-on-speculation/
http://krugman.blogs.nytimes.com/2008/06/24/speculation-and-signatures/

Offline OldSchoolGamer

Re: So, the economy
« Reply #51 on: May 20, 2009, 07:39:32 AM »
I think the economic outlook can be summed up rather succinctly: we're fucked.

One of the many problems has to do with the fact that Obama and Co. are trying to pursue two goals which at least at this point in time are mutually exclusive: a healthy, profitable banking system, and a reflation of the housing bubble.  In other words, we go back to the days when mortgages were handed out like candy to people who could not repay them, yet also have viable banks.

It doesn't work that way.  The only way we will ever have a stable, healthy financial sector again is when money can be loaned to people who stand a good chance at being able to repay it.  This means that housing prices have quite a ways to deflate, when you consider that real wages in this country have been stagnant for almost a decade now.  Add to that the drop in demand due to soaring unemployment, and you're not talking about unwinding housing prices to, say, 2006 or even 2005 levels.  You're looking at going all the way back to the 1990s...probably 1997 or 1998. 

What's going on now is called a "suckers' rally."  If you look at the 1930s, you'll see there were a couple such rallies, followed by steeper declines.  What we've seen thus far is only the first leg of the descent.  The next phase will be marked by continued declines in consumer spending, as well as sharp dropoffs in state government spending that will suck even more demand from the economy.  Conditions are already so bad across America that, for many states, emergency federal loans and subsidies are actually the largest source of income.  That's right: the economy has cratered so badly that many U.S. states are, for all intents and purposes, bankrupt

Only borrowed (or printed) federal money is standing between the economy and total collapse.  We're joining the ranks of countries like the Weimar Republic and Zimbabwe that ran their economy from the printing press.  Every republic that has resorted to fiat money on anything near the scale we are using it now has collapsed.

Add to this the the incipient energy shortage--during the 1930s we were still nicely on the upslope of energy availability.  If we wanted more energy, all we had to do was dig and drill more holes, build more power plants, etc.  The Lower 48 was still three to four decades away from peak oil production, and the planet was three-quarters of a century from peak.  Now we've passed the peak.  So not only are we going to be struggling to recover the economy, but to do so on a progressively lower energy budget.  It's not going to happen.

Folks, I hate to break it to you, but from an energy and economic production standpoint, 2007 was about the best year we're going to be seeing for a long time...possibly our lifetimes.  You see, oil prices have almost doubled in the past six months, despite the absence of any real economic recovery.  Peak Oil is getting to be the world's worst-kept secret now.  Let me reiterate a point I made in an earlier post: as soon as any real, tangible reconomic recovery gets underway, oil prices are going to explode.  And they're not going to come back down, at least in the absence of another major, molar-rattling economic crash. 

Energy scarcity has set a permanent ceiling on economic production, and that ceiling is going to get lower each year going forward.  And despite the talk of a gazillion acres of solar panels launched into space, or cow farts, or swimming-pool scrapings being distilled into premium gasoline, there is no solution to the energy situation that is being deployed or is anywhere near being deployed or even verified to be sufficiently scalable to be deployed in the foreseeable future.  We're going into this energy crisis pretty much with the infrastructure we have in place today.

To me, the salient question isn't whether the United States of America will collapse.  That's a near-certainty, as we are far too over-invested in complexity to be viable in a low-carbon world.  No, the operant question is whether America will be able to maintain its territorial and political integrity while re-organizing at a much lower level of energy input and complexity, or whether we will see the dissolution of the United States, much like happened to the USSR.

 

Offline Zakharra

Re: So, the economy
« Reply #52 on: May 20, 2009, 08:48:48 AM »
 I can accept most of your arguement TyTheDnDGuy, except the one about Peask Oil. There is plenty of oil and will be for the next century at the least. We will NOT run out and everything collapse. You are making it sound like the oil is gone (now!) and  we can't find anything to replace it. Time and again people have posted links and  ways it is being dealt with. We are finding new and economical ways to find more oil, and to get to oil from sand/shale. Ways that will be economical.

  Plus there are alternatives that are being developed. It's not like Oil is the end all and be all of energy. Is it the biggest source right now? Yes. Is it the only source? No. We know about oil's eventual run out and are looking for alternatives.

 The way you talk about Peak Oil, we might as well shoot ourselves now since this is the BEST it will ever be! It's all downhill from here. Upcoming energy shortages, famine, war, decay of morals and anarchy.

Offline RubySlippers

Re: So, the economy
« Reply #53 on: May 20, 2009, 11:12:10 AM »
We can always go to WW 2 Type rationing for essentials if we must stand alone the two advantages we have really is food production which the rest of the world needs and an ambundance of human and natural resources.

I have an idea default on all our debts and go into a rationing program now while we can do so, what is the rest of the world going to do - come in and make us pay them back?

I would use a form of Fortress American secure North America and the hell with the rest of you at this point its every nation for ourselves. When that hammer falls the rest of the world will be joining us and we will all be equal again then in a century things can get back into a balance perhaps. It might mean hardships but its the best way out I can see from this mess.

Offline HairyHeretic

  • Lei varai barbu - The true bearded one
  • Knight
  • Addict
  • *
  • Join Date: Dec 2006
  • Location: Ireland
  • Gender: Male
  • And the Scorpion said "Little frog .. I can swim."
  • My Role Play Preferences
  • View My Rolls
  • Referrals: 1
Re: So, the economy
« Reply #54 on: May 20, 2009, 01:14:34 PM »
I have an idea default on all our debts and go into a rationing program now while we can do so, what is the rest of the world going to do - come in and make us pay them back?

I would use a form of Fortress American secure North America and the hell with the rest of you at this point its every nation for ourselves. When that hammer falls the rest of the world will be joining us and we will all be equal again then in a century things can get back into a balance perhaps. It might mean hardships but its the best way out I can see from this mess.

Do you have any idea at all how that sounds? The sheer arrogance and self centeredness of that is quite literally sickening.

How about this as an alternate. Take some responsibility, cut back on your luxuries and your excesses and clean up your mess.

Offline OldSchoolGamer

Re: So, the economy
« Reply #55 on: May 20, 2009, 04:27:56 PM »
I can accept most of your arguement TyTheDnDGuy, except the one about Peask Oil. There is plenty of oil and will be for the next century at the least. We will NOT run out and everything collapse. You are making it sound like the oil is gone (now!) and  we can't find anything to replace it. Time and again people have posted links and  ways it is being dealt with. We are finding new and economical ways to find more oil, and to get to oil from sand/shale. Ways that will be economical.

Oil doesn't have to even come close to "running out" in order for industrial civilization to collapse.

You're right when you say there will be oil for the next century...well, I'd say 50 to 60 years, anyway.  The problem is there won't be nearly enough oil to sustain civilization at anything close to the level of complexity and energy use we take for granted today.  Our civilization must have cheap, abundant oil to survive.  Do you have any idea how much fossil fuel it takes to run this country every day?  And not just for the cars and the NASCAR ovals and the power plants.  We're talking agriculture, manufacturing, pharma--most of the man-made objects you see around you, from your car to your house to the computer you use to post here required oil to manufacture. 

Quote
Plus there are alternatives that are being developed. It's not like Oil is the end all and be all of energy. Is it the biggest source right now? Yes. Is it the only source? No. We know about oil's eventual run out and are looking for alternatives.

As stated above, it's not just energy oil is used for.  And there is no other energy source that can take the place of oil that's anywhere near to being deployed at anything close to the level we would need it to be deployed to run the United States of America. 

Quote
The way you talk about Peak Oil, we might as well shoot ourselves now since this is the BEST it will ever be! It's all downhill from here. Upcoming energy shortages, famine, war, decay of morals and anarchy.

Depends on how we approach it.  Cuba (whatever one may think of Fidel Castro and Co., and I don't hold them in any high regard) demonstrated that it is possible to have life on a low carbon budget.  If we let the market decide, yes, this country is going down in flames, because the market doesn't have the level of intelligence and organization to game this one out.  We saw last year how the "free market" treats oil shortages: screw the price into the ceiling until the economy crashes.  Unless we want the economy to spend the next three decades like a hyperactive dog on a choke-chain, surging forward only to get painfully throttled, and then surging again, we're going to have to look at other mechanisms to deal with the situation.

What needs to happen is that we need measures to conserve and reduce oil use, along with a tax on oil.  This may seem illogical until you consider Jevon's Paradox.  Conservation measures in this environment will reduce demand, which in turn will drop the price of oil.  Let the market act freely, and the price drop will encourage more consumption, defeating the conservation effort. 

Right now, what we need are stable oil prices around $100/bbl, going up about $10 to $15 a year.  Brutal?  Well, we either engineer it in a controlled manner, or the market will spike the price to $200 and things will fall apart.  There is no easy, graceful, soft way out of this.  The fact is we should have spent the last three decades seriously developing alternative energy sources, and we were largely asleep at the switch. 

The reason I'm pessimistic on this issue (a hardcore realist, actually) isn't because there aren't ways to engineer a (comparatively) soft landing into a low-carbon era, but because I'm not seeing any real effort on the part of our leaders to do so.  All we seem to have is the Left and the Right, and both have scant little to offer to solve this problem.  The Left will examine the resulting economic pain and seek redistribution of the wealth and taxes.  The Right will claim the rich aren't rich enough, and that we just need to drill more holes.  Neither one of these approaches will work, because the problem isn't distribution, it's production, money or even gold cannot substitute for basic energy resources, and there are no more places left to drill holes that are going to yield anything close to the oil we need to run civilization. 

So my advice to anyone reading this is not to look to government to solve this problem.  To paraphrase John Connor in Terminator: Salvation, if you're reading this, you are the low-carbon era solution.  Prepare for less access to energy, for large systems and complex structures to fray and then come apart at the seams, and for life to get a lot more local.  If you can personally take steps to consume less energy (buying a more fuel-efficient car, retrofitting your home for more efficiency, moving closer to your job) and produce your own food, do so.  If you or your relatives depend on government assistance (or a privately funded pension) to live, consider the very real possibility these resources may soon be diminished or unavailable, and make alternate arrangements.

There was human life before the exploitation of cheap fossil fuels, and there'll be human life afterward. 

Offline OldSchoolGamer

Re: So, the economy
« Reply #56 on: May 23, 2009, 02:27:12 AM »
Here in California, the shit's about to hit the fan, at speeds a significant fraction of c.

Finally, the Powers That Be here 'fessed up: the money is gone, and there's nowhere to turn to for more.  All the books have been cooked, the holes in the desert containing the financial "bodies" are full with a stench in the air, and every possible source of credit has been tapped and overtapped.  The people were asked if they were willing to pay more, and the answer was not just "no," but "HELL no!"

So now the Republican governor, none other than "The Terminator" (the same one who rode into office six years ago with a promise to end "crazy deficit spending," and has spent the past term glad-handing and buck-passing and borrowing still more), is talking about what amounts to a near-total elimination of social programs and public assistance.

This of course has brought the right-wing wackos who have no perception of reality swarming like roaches out of the woodwork, heaping praise on this idea to "cut off the deadbeats" and "kick out the illegals" and whatnot.  They have scant understanding that most of the people on social programs are Americans (illegals are ineligible for most forms of public assistance) who have fallen on hard times.  Yes, there are those who abuse the system (there are those who raked in millions of dollars in bonuses from TARP-receiving companies, too).  They're even cheering the idea of cutting off college scholarships.

What these disaffected morons don't seem to understand is that this plan would result in hundreds of thousands of people, possibly over a million, who would have absolutely nowhere to turn to...and nothing to lose.  The state has nowhere to put them--as part of the budget crash, over a tenth of the state prison population is going to have to be released. 

If Arnie's plan is put into effect, the least that will happen is a huge spike in the crime rate.  It will start with petty theft of every sort imaginable, quickly escalating into greater thefts, and then violence at every level, from bank robbery to carjacking to home invasions to individuals going over their own personal cliff and figuring on taking some of those who vexed them along for the ride.

And that's if these abandoned people don't become organized.  If they do, all bets are off.  I'm suspecting they will, at least to an extent, as there is already a social infrastructure (also known as "gangs") of people from the bottom of society who figure they have nothing to lose.

If it comes to that.  Actually, I'm not going to be a bit surprised if Obama and his henchmen have a change of heart later this spring or early summer about a California bailout.  You've gotta figure there are high muckety-mucks in the CIA and NSA and other alphabet-soup security agencies who are right now feeding data into their secret computer models and simulations, gaming out what even a partial collapse of California's welfare state would mean for national security.  When the results come out the printer, there's going to be Mars Bars and Hersheys in many pairs of underwear, and people running for red telephones. 

Offline Serephino

Re: So, the economy
« Reply #57 on: May 23, 2009, 07:16:54 PM »
Ack.... remind me to never move to California!  I live in Pennsylvania and our Governor is actually getting more money for social programs.  I actually qualify for Medicaid after being told no several times when very ill.  They made lots of changes to it, but as long as I get medical attention when I need it I won't complain. 

They made me send a copy of my birth certificate to prove... well I don't know since they also required my photo id and SS card.  If you want proof I was born isn't the fact that I'm talking to you proof enough?  I'm pretty sure I didn't appear out of thin air. 

 

Offline OldSchoolGamer

Re: So, the economy
« Reply #58 on: June 06, 2009, 02:23:26 AM »
So, y'all checked out the price of oil and its distillates recently?

Seems they're getting just as expensive as they were back toward the end of the go-go house-flipping era in 2007.

It's Econ 1A time.  For the price of a commodity to reach the same level it was when demand was several percent higher means supply must be...   :o

http://www.ecosilly.com/wp-content/plugins/wp-o-matic/cache/579ba_ccst20090515.png

Offline Oniya

  • StoreHouse of Useless Trivia
  • Oracle
  • Carnite
  • *
  • Join Date: Sep 2008
  • Location: Just bouncing through. Hi! City of Roses, Pennsylvania
  • Gender: Female
  • One bad Motokifuka. Also cute and FLUFFY!
  • My Role Play Preferences
  • View My Rolls
  • Referrals: 3
Re: So, the economy
« Reply #59 on: June 07, 2009, 01:15:28 AM »
Maybe it's just me, but I have a hard time taking any URL with the word 'silly' in it seriously.  The 'Econ 1A' explanation might be sound, and I'm not discounting the possibility, but a more carefully chosen source would be more convincing.