Posted on 04/09/2019 4:47:47 AM PDT by Kaslin
A totally managed business cycle that never weeds out the weak sisters is a socialist’s dream.
That certainly is true. Local, state and national. Just look at the current budget projections. We are ‘doomed’. Nobody wants to make serious cuts. The very wealthy can just go to another country. Older people won’t be around. The youth will get to suffer the carnage.
Correct and having the tax-payers guarantee any losses ensures public debt.
Imagine if you could go to a casino with a guarantee that someone other than you would cover any losses, how much restraint would you exercise?
They don’t like the answer: illegal aliens, “protection from national origins discrimination” and CDOs.
CDOs were designed to give blacks access to mortgages. Blacks WERE a higher risk collectively, but the effect of banks evaluating hat risk was still racially discriminatory. So bankers, Sen. Gramm of Texas and Bill Clinton designed a way to protect banks from that risk so that they would lend to blacks.
Then Clinton double-crossed them and extended that protection, by executive order, to people who couldn’t speak English on the grounds that failure to do so would constitute discrimination on the grounds of national origins. Banks now had to lend to non-English speakers at the same rate they lent to white, English-speaking people.
The problem is that non-English speakers are almost certainly illegal aliens, or financially interdependent with illegal aliens, since you can’t qualify for most visas or for naturalization without English skills. So that meant banks were forced to cmoe up with ways to make loans to people who couldn’t afford them.
It seemed an acceptable risk to buyers of CDOs. The value of homes went up, up, up, so if someone defaulted on their loans, the banks assumed ownership and still made a profit, or enough revenue at least to cover any lost value of the home due to neglect, etc. So the housing market went up, up, up.
What no-one considered was that the fact that ILLEGAL ALIENS were buying the homes meant that the demand for housing could actually decline. When an American went underwater, his name, degree, reputation, job skills, etc., had a huge value. When an illegal alien went underwater, they disappeared. The home went unoccupied and depreciated alarmingly fast, and there were no new buyers to claim it.
What we saw in 2008-2010 was a tidal wave of defaults by people who were solid credit risks -- but who got in way over their heads in overpriced homes. The other thing we saw over the last decade or more was a change in bankruptcy laws that made it much harder to discharge things like student loan and credit card debt in bankruptcy. So the whole landscape of personal debt turned upside down ... to the point where skipping mortgage payments became the FIRST course of action financial advisors would recommend for someone in financial distress.
Stop the boom bust cycle
Interest rates that are too low + increases in money out of thin air that are too large + easy credit that is too easy = artificial economic boom.
Then, raising interest rates to quickly and too high + cut back in the rate of increase in the money supply, or decrease in the money supply + credit crunch = bust
In re your comment:
“The rampant inflation in commodity prices was caused by the collapse in the value of the U.S. dollar. This was not caused primarily by artificially low interest rates. It was driven by a flood of U.S. cash in the global market as our government financed the Iraq war with hundreds of billions of dollars in expenditures that never showed up in our military budget.”
What the U.S, spent on the Iraq war was a wash in terms of the money supply. Why? What “extra” money it spent was borrowed - you can see the rise in the deficit from 2000 to 2008. Borrowing by the U.S. government takes dollars given to it and gives the lenders T-bills. In other words it was cash pulled out of the global economy to lend it to the U.S., and then returned in the form of U.S. defense spending - a net wash in the global money supply, not an addition to it.
Those hundreds of billions of dollars did show up on our military spending which went up about $200 billion from 2001 to 2008. It was no mystery.
In re your comment:
“It’s no secret that the U.S. military was shipping pallets of paper currency overseas to bribe Iraqi tribal leaders in the mid-2000s.”
The money the U.S. military delivered to Iraq for the U.S. treasury was not in sums great enough to have any affect on the global dollar supply, if it had been “extra” money, which it wasn’t.
The reported amounts (unverified in each report), range from $4, to $12 to $40 billion. Barely a blip on the global supply of dollars.
Most of the money came from money already accounted for in the U.S. money supply as (1) money held from Iraqi oil sales, and (2) money held by Saddam’s government that the U.S. confiscated (restricted movement out of the banks) and did not turn over to Saddam. They did turn them over to the new Iraqi government (the pallets flown in by the U.S. military). As far as the economy and conditions in Iraq it surely might have seemed like a flood of cash locally (their economy was broke). But in the scheme of the global supply of dollars it was not a flood at all.
What one might try to say about the war and the Fed’s easy money - possibly - was that the Fed played politics and kept the interest rates low not to help the economy so much but to help keep the T-bill rates low and lower the cost of U.S. financing of it’s deficits due to the war expenditures. Yet, the history of what interest rate the U.S. had to pay for new 10 year T-bills at the time does not reflect a great great change in those rates from 2003 to 2008. The costs were greater due to the amount of borrowing but the Fed’s actions were not making that borrowing cheaper. The Fed in affect was not financing the war with monetary policy.
During that period, while one of the Israeli/Hamas conflicts in Lebanon was continuing, NBC published photographic proof of this. In an image that purportedly showed the result of an Israeli attack on a "financial center" (NBC's words) in the rubble, was a partially wrapped stack of U.S. $100 bills STILL IN SHEETS.
I made note of it here on FR at the time, but it garnered no interest.
In re your comment:
“It’s no secret that the U.S. military was shipping pallets of paper currency overseas to bribe Iraqi tribal leaders in the mid-2000s.”
The money the U.S. military delivered to Iraq for the U.S. treasury was not in sums great enough to have any affect on the global dollar supply, if it had been “extra” money, which it wasn’t.
The reported amounts (unverified in each report), range from $4, to $12 to $40 billion. Barely a blip on the global supply of dollars.
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so in from your perspective, the wall (est $25bb) would “barely a blip”...
in the whole scheme of things that’s true.
build it.
Bush did try to address it but Congress said no, let the good times roll. Many people saw the train wreck coming but were way off as to when. Bubbles can run an amazingly long time when big government is involved. See China.
Everyone knows there is a huge bubble in higher indoctrination going on now but again Democrats say let the good times roll. Since the government is driving it who knows when reality will bite, but it's going to be a bloody mess when it does.
One ‘borrower’ who got a mortgage for a house:
ILLEGAL farm worker——California-—
Got a loan for a $650,000 house in Fresno——
Failed to make payments-——
Took over a year for bank to get property back.
Multiply that by about 2 millions bad loans.
Add Chuck Schumer making comments that Indy Mac bank IN PASADENA was not solvent.
Caused a run on a perfectly good bank & then the house of cards started to tumble.
Clinton was a doofus, only a step above Cortez who, is absolutely economically retarded. “””
Carter had the same ideas about lending to people who don’t have good credit.
But—Carter did file bankruptcy 3 times on the peanut farm he inherited.
Watch “The Big Short”; it’ll spell it all out..
“The real estate bubble was certainly exacerbated by half-witted national housing policies that offered low-down-payment mortgages with near 100 percent taxpayer guarantees to non-credit-worthy borrowers. The government made it easy for families to buy homes they couldn’t afford. And when the defaults rolled in, the taxpayers picked up the tab. “
That was the primary reason, not secondary as Moore seems to imply.
Confounding government with “public” (or "society”) is a bane - and has been for centuries:SOME writers have so confounded society with government, as to leave little or no distinction between them; whereas they are not only different, but have different origins.Society is produced by our wants, and government by our wickedness;Society in every state is a blessing, but Government, even in its best state, is but a necessary evil; in its worst state an intolerable one . . .the former promotes our happiness POSITIVELY by uniting our affections, the latter NEGATIVELY by restraining our vices.
The one encourages intercourse, the other creates distinctions.
The first is a patron, the last a punisher.
For were the impulses of conscience clear, uniform and irresistibly obeyed, man would need no other lawgiver; but that not being the case, he finds it necessary to surrender up a part of his property to furnish means for the protection of the rest . . . — Thomas Paine, Common Sense (1776)
The Big Short was a fun an interesting movie to watch concerning this though it managed to avoid any kind of political component in causing the problem. It was just those evil bankers that caused the problem. snort
The question is: why did the evil bankers believe their actions were the best way to make money?
The bankers were forced to act on policies that were contrary to eons of sound banking practice.
banks exist to receive and protect depositors money.
Well meaning left wing do gooders insisting on equality forced banks to lend to borrowers that were not credit worthy
The market was not too competitive, the politics were. When higher interest rates hit, it promotes high risk high yield companies and kills the fat cash cow cats lording it over people. But we have bailouts and low interest rates instead to save the like of GM who then send their factories to China laying off here.
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