Free Republic
Browse · Search
News/Activism
Topics · Post Article

Skip to comments.

Housing Bubble Deflating: Will The Us Consumer Follow?
Prudent Bear ^ | September 10, 2002 | Marshall Auerback

Posted on 09/10/2002 1:49:01 PM PDT by AdamSelene235

Archive >Commentary Archives

Commentary Archives
Credit Bubble Bulletin
International Perspective
Mid-Week Analysis
Guest Commentary
Market Summary

Related Links
Stock indices
Index returns

Market action
Market stats
Company news
Earnings Summary
Analyst actions
Bond rates
Bond spreads
Commodities
Economy

International Perspective, by Marshall Auerback

Housing Bubble Deflating: Will The Us Consumer Follow?

September 10, 2002

 U.S. consumer profligacy has persisted for so long that it is has become hard to envisage what would stop it in its tracks. All traditional determinants of spending have pointed to an imminent decline in consumption, yet none of these indicators have thus far been validated by sharp declines in expenditures. A historically anomalous willingness of US households to increase their rate of debt accumulation in order to stay on a rising path of consumption has been one of the most striking features of the US economy as have come into the 21st century.

Through Q2 2002, the financial balance of the US household sector remains in its worst position since the hoarding wave prior to the Korean War. The duration, if not the depth of household spending in excess of income flows during this past business cycle, is simply unprecedented. Declining stock wealth has not curbed the consumer?s animal spirits, despite record public participation in the equity market. Nor have record high debt levels per se because it is argued that lower interest rates have served to cushion the consumer?s debt burden (even if aggregate debt service to income is at an all time high). Consumer spending has risen despite declines in the various measures of consumer sentiment, so this appears to be yet another unhelpful indicator. 

The consumer?s perverse debt-laden rush toward the cliff face has really found only one cogent explanation, which has drawn the attention of an increasingly large number of analysts ? namely, the housing market bubble and the corresponding impact of mortgage refinancings. Until recently, the persistent appreciation in house prices has enabled the US consumer to treat his home virtually like a cash point machine.  Higher valuations have enabled American households to extract increasing equity from their respective homes, whilst declining interest rates through multiple mortgage refinancings have also helped to buttress consumer expenditures by lowering their interest rate bills. This has been made possible by very low nominal interest rates and aggressive policies of mortgage finance, orchestrated through the Federal Reserve and Government Sponsored Enterprises (GSEs), such as Fannie Mae and Freddy Mac.  US fiscal policy has also been very stimulative ? in a year and a half the fiscal balance has swung by a full 5 per cent of GDP. 

But there are some crucial differences today. Evidence is mounting that housing prices are peaking (thereby diminishing the scope for further equity extraction on the basis of higher valuations), and the comparatively low existing interest rate environment means that future cuts will give the consumer less bang for his buck in terms of savings on the interest rate bill. Generally speaking, Fed funds declining from 4.75 per cent to an existing 1.75 per cent will have a much greater impact than falls from 1.75 per cent to zero. 

There is an equally germane consideration: previous refinancing booms took place against the backdrop of an expanding economy, in which the one-off boost from mortgage refinancing occurred in the context of other cumulative dynamics of economic expansion, including rising house prices. This is precisely the opposite of current conditions which pertain today. In addition to intensifying recessionary pressures (reflected by substantial falls in the equity market), we are also confronted with an environment overlaid with the imminent prospect of war with Iraq, an event that has the potential for a further exogenous shock to expenditures.  In today?s post bubble environment, the fear of default must surely be viewed as an implicit cost that is now getting factored in to household portfolio decisions, especially given the deflation of equity wealth and the increasing signs that the housing bubble is losing altitude. Thus, the long-awaited rebuild of US household savings may be upon us ? a necessary precondition for future growth, but with wrenching adjustment implications today for the American economy, given the extent to which growth has hitherto been fuelled by private household consumption and the issuance of debt.

Figures from the House Price Index from the Office of the Federal Housing Enterprise Oversight show that since 1995 house prices have risen far in excess of the rate of inflation. Over this seven year period, home sale prices have risen by more than 47 per cent in nominal terms, an amount that is nearly 30 per cent above the rate of inflation. This run-up in housing prices has translated into an additional $2.7 trillion in housing wealth, more than $35,000 per average American home owner, compared to a scenario in which house prices had only kept pace with underlying inflation.

What has this meant in terms of US consumption? There have been some attempts to quantify the extent to which the housing market has shaped consumer expenditure patterns.  According to Alan Greenspan, 10% to 15% of the rise in housing wealth is consumed whereas only 3% to 5% of the rise in stock market wealth is saved. Since US households now have almost 50% more assets in housing than equity, then the ratio is about 4.5: 1. That is, a 1% rise year-on-year in house prices offsets a 4.5% year-on-year fall in equity prices). Based on this analysis, the current 7.1% median US house price inflation offsets a 33% year-on-year decline in equity prices. More optimistic still, a 2001 NBER paper by Shiller, Quigley and Case conclude that the housing wealth effect is 11% to 17% (internationally) and 9% to 11% in the US while the stock market wealth effect was just 2% (and with no statistical significance on the regression).

This analysis would certainly help to explain why the debt laden US consumer has not yet demonstrated a greater propensity to save. Quite simply, when consumers see their own homes appreciating in value, they feel less inclination to put aside income for the future. Largely as a result of this run-up in home prices, consumption has remained high and savings rates have remained miniscule, even though all other determinants of consumption (e.g. debt, falling equity prices, etc.) suggest that the opposite should be occurring at this juncture. 

It is fascinating to us that so many people are finally ready to accept the crucial importance of housing in fuelling this buying binge. For many years, Doug Noland?s assertion that the housing market and the concomitant mortgage refinancing boom was a key, yet substantially overlooked, determinant of consumer expenditures was a hugely controversial position.  But as evidence has mounted that this has indeed been the case, it has metamorphosed into a simplistic axiom to the effect that when mortgage refinancings rise, so automatically do consumer expenditures.  And mortgage refinancings have again been strongly on the rise since July.  Does this imply that another consumption boom lies ahead?

Ironically, just as this idea has become received wisdom, there are signs that consumer expenditure is finally faltering despite the increase in refi activity. Having previously minimized the importance of such activity, most of the analytical community on Wall Street now tends to view such activity in an isolated context, failing to observe such refi activity previously was taking place in the context of rising house prices and growing employment. There are many statistical and anecdotal signs, however, to suggest that housing prices have begun to roll over: softening prices of vacation homes, lengthening of houses on the market before sale, and a substantial build-up in housing ?inventory?.  Consider the following excerpt from a Rocky Mountain News story on the Denver housing market, which is typical of many municipalities:

'For sale' signs not adding up

Record 22,910 homes available; July report was off mark by 56%

By John Rebchook, Rocky Mountain News
August 29, 2002

If you think there are a lot more homes for sale in your neighborhood than
reported, you're probably right.

A record 22,910 unsold single-family homes and town homes are on the market
this month. A computer glitch discovered this week revealed a whopping 56
per cent discrepancy from the 14,717 unsold homes reported in July.

Because the glut of unsold homes is so much greater than previously
believed, it could force sellers to lower the asking price of their homes.
Combined with some of the lowest mortgage rates in nearly 40 years, falling
prices on a huge inventory of unsold homes could make this an ideal time to
buy.

"It is, if you have a stable income," said Byron Koste, head of the
University of Colorado Real Estate Center at the Leeds School of Business.
"If you don't, you're playing Russian roulette."

In July, 20,005 unsold homes and town homes were actually on the market,
according to a calculation by a veteran real estate agent, Norm Waugh...

 While home prices are hovering at record levels, Jerry McGuire says they're
heading lower.

A report to be released today will show the average price of a single-family
home sold in August is $274,802, slightly off the record $274,904 set in
July.

Ed Jalowsky, a broker with Classic Advantage Realty, said the glut helps
explain why so many houses are languishing on the market.

"If I knew there were 50 percent more homes on the market than being
reported, I would have told my clients to lower their prices faster,"
Jalowsky said. "You have to. It's the law of supply and demand. The supply
is going up, and the demand is going down."

Waugh said it's hard to say how much of an impact the incorrect reporting of
the numbers has had on the market.

We have heard comparable anecdotes in markets as diverse as San Francisco, Tampa, and the Northeast. (To be sure, there are obviously going to be regional disparities within a country as large and geographically diverse as the US and, by extension, those regions that have not experienced anything like a housing bubble, will clearly not suffer from comparable deflationary after-effects.)  A recent report by Merrill Lynch has highlighted another risk which threatens to undercut the strength of the housing.  The report notes a surge since year end 2000 in home equity loan loss rates. Rob Parenteau of Dresdner RCM notes the ominous implications for the housing market (and, by extension, US consumption trends):

?If it becomes harder to securitize home equity loans in asset backed vehicles, banks will not be able to get these loans off these books as fast as they used to. They in turn are likely to become less willing to make home equity loans, or, at a minimum, are likely to engage in more serious credit analysis before making new home equity loans if it becomes harder to securitize them off their balance sheets. Quantity credit rationing to the household sector would be the result, which would seriously confound Chairman Greenspan's earnest efforts to sustain if not accelerate a housing bubble in the US. While it is too early to say this credit tripwire has been triggered, it bears close monitoring, since any threat to a US housing bubble is equally a threat to global economic recovery and so begs the double dip question.?

Needless to say, a consumer boom predicated on mortgage refinancing presupposes an ongoing ability to service one's mortgage. Even that is now coming into question. The percentage of first mortgage loans more than 30 days past due rose by 12 basis points in the second quarter to 4.77 per cent, the Mortgage Bankers Association of America said yesterday. The percentage of FHA loans that are delinquent rose to a record high 11.81, the trade group said. The group's quarterly survey also showed the number of home loans on which foreclosure was started rose to its highest quarterly rate ever at 0.4 per cent. That this is occurring with mortgage rates at forty year lows provides eloquent testimony to the parlous state of the American consumer's personal balance sheet.

Why have people focused so much on the refinancing issue? According to one estimate of CSFB economist, Paddy Jilek, the refinancing wave in the US could add as much $250bn to $300bn to consumers' discretionary cash flow (up from $150bn last year). At this stage, however, the more germane question is what consumers will actually do with the incremental cash. For there is increasing evidence to suggest that acute debt distress, coupled with an apparent peak in many regional housing markets, is leading to an increased propensity to save, rather than spend. Certainly, the deceleration in revolving credit growth from double digit year on year growth rates last year to near 25 year lows (around 2.5%) indicates that consumers are finally paying back debt.

Of course, one could make the contention that just as analysts underestimated the impact of mortgage refinancings on past consumption trends, so they are guilty of overestimating its impact this time around.  Mortgage refinancings give households a one shot opportunity to cash out and spend.  When the refinancing surge reverses, all things being equal, consumer spending should fall. But those optimistic about the US economy might still seek to argue that one should not necessarily view this fall as an ominous portent for future US economic growth, because in the past once the effects of such refi booms have been passed on, the economy did not collapse.

It is true that prior historical episodes with refinancing surges do not reveal immediate subsequent significant declines in consumer spending.  A recent study on US consumption by Frank Veneroso explains why:

?The Fed lowers rates and refinancings surge.  And stock prices rise.  And firms hire and employment expands. And firms need more capacity and have the profits to finance more capacity and so capital spending rises in turn.  The Fed ease that triggers the refinancing surge sets into motion the cumulative dynamics of an economic expansion. Consumer expenditures derived solely from cash outs from mortgage refinancings do abate.  But in the many other ways associated with cumulative expansions consumer incomes and sentiments are lifted and so consumption expenditures are kept on an upward path... Consumer spending growth seems to track employment growth more closely than refinancings, suggesting that the impact of the cumulative dynamics of an economic expansion impact consumer spending in large part via employment conditions.?

Veneroso highlights a crucial point overlooked by many: most mortgage refinancings in the past took place in the context of a strong economy, coupled with reasonable employment growth. Today?s current round of refi activity is happening in an economy in which the cumulative dynamics of an economic expansion are not taking place; quite the contrary in fact. Stock prices have been falling. Capital expenditure is still being cut back. Corporate profits are still falling. And (despite last week?s employment report), the trend toward higher unemployment is unmistakable. Today?s refi activity in fact looks more like a desperate attempt by the consumer to build a liquidity net egg, akin to Minsky?s description of Ponzi-finance in which one uses the flows of further debt issuance (as opposed to cash flow) to service existing borrowings. This is inherently unsustainable; clearly one cannot continue to borrow at 6.75 per cent and stick the money in savings accounts yielding less than 2 per cent. The US consumer, laden with debts taken on in the euphoria of the late 1990s, therefore remains exceedingly vulnerable to further retrenchment if these adverse trends continue.  If the urge to save replaces the consumer?s unsustainable willingness to splash out, the US recovery, indeed, much of the global recovery, will be sunk. If this occurs against the backdrop of sharply rising oil prices and a war, another global economic downturn would be all but certain.

The Japanese economy experienced simultaneous bubbles in its housing and stock markets in the late eighties. The collapse of these two bubbles has left Japan?s economy nearly stagnant for more than a decade. The United States faces the same sorts of risk from the collapse of its stock market and housing bubbles (both of which are symptoms of the larger credit bubble). The evidence suggests that it is far too simplistic to presuppose that a refinancing boom will usher in another period of booming consumption in the absence of further cumulative dynamics of economic expansion, particularly rising employment. It was poor economic policy to allow these bubbles to develop in the first place. Yet policy makers in America continue to display a curious reluctance to acknowledge past errors; they appear more interested in rewriting history to exculpate themselves. This leaves one less hopeful that the right policy mix to deal with the collapse of these bubbles will be found any time soon.

 

 

 

 



TOPICS: Business/Economy; Extended News
KEYWORDS:
Navigation: use the links below to view more comments.
first previous 1-2021-4041-6061-8081 next last
To: LS
LS, before I start,these comments are not directed to you specifically. I'm just adding my $.02, and you're the poster I clicked on.

A prior poster remarked that ex-Californians were buying million dollar homes in Colorado to avoid the tax bite. That poster needs to brush up on his tax facts before spouting such drivel. The tax laws regarding home sales were changed several years ago: a married couple can claim up to $500,000 of the profit of a house they sell, if they meet a few simple requirements. None of those requirements have anything to do with the purchase price of the next house.

Another poster (WillyOne) called 2500 SF houses 'monsters'. I've got a 2500 SF house, and my wife and 3 kids (and I) hardly consider our house a monster. Do we live more comfortably now than when we lived in a 1300 SF apartment? Absolutely! But now, I am enjoying the thrills of home ownership, to include paying for all of the repairs and maintenance on my castle.

As for a housing 'bubble', on the same plane as the dot com bubble? Please, don't make me laugh! There may be a pocket here and there, but it sure isn't happening here in Dallas-Fort Worth! Even in the burb I live in (Valley Ranch), home prices have appreciated modestly over the past 10 years. By modest, I mean 6-8% appreciation per year. For those that bought before '86, it took them 10 years to recoup their paper losses on their properties.

Keep up the good work, LS. Common sense will prevail.

61 posted on 09/11/2002 11:04:41 AM PDT by Night Hides Not
[ Post Reply | Private Reply | To 60 | View Replies]

To: LS
You have a world of "splainin'" to do if you think you are going to convince anyone that China is capitalist, in any sense.

The word I would choose is Fascist. That said, there are pockets of economic freedom in Fascist societies that exceed the freedom available in Western Socialist Mobocracies. My company's life saving technology would have died on the vine if we waited for approval in the States. You literally have to buy a Senator to bring certain technologies to market in this country. Actually your remark : Look at Wm. McNeill's "Pursuit of Power," on how the Chinese ran a mercantilist system---for the good of the government---and reacted strongly against capitalism when it came in. is an apt description of modern Socialist America. Rather than nationalizing the means of production like the USSR did America has nationalized the results of production. Its the same basic idea, its just a more workable implementation of Marxism. Competence is harnessed in America to subsidize incompetence, incompetence results in crisis. Crisis is used to justify more power for the mobocracy and more restrictions upon freedom.Rinse wash repeat.

As for Social Security, no, it does matter how Americans "view" things: If they see it as a contract, which they do, they will insist that it be honored.

Sure, our view matters. Unfortunately, our "view" is divorced from reality. How do you propose to conjure these nonexistent savings out of the thin air? If these savings exist, I should be allowed to opt out without harming the system, right? But obviously, that is financially impossible. The younger generation will be the tax slaves of the Baby Boomers. SS is not in any way, shape or form, savings, it is tax. I pay more in SS than I do in rent (amusingly I pay rent to a boomer who also already receives 15% of salary in Social Security taxes).

62 posted on 09/11/2002 12:11:03 PM PDT by AdamSelene235
[ Post Reply | Private Reply | To 60 | View Replies]

To: LS
But government is natural.

Well, hydrofluoric acid is perfectly natural. I prefer to keep it bottled up and away from me.

What is not natural?

63 posted on 09/11/2002 4:35:59 PM PDT by AdamSelene235
[ Post Reply | Private Reply | To 54 | View Replies]

To: Night Hides Not
As for a housing 'bubble', on the same plane as the dot com bubble? Please, don't make me laugh! There may be a pocket here and there, but it sure isn't happening here in Dallas-Fort Worth! Even in the burb I live in (Valley Ranch), home prices have appreciated modestly over the past 10 years. By modest, I mean 6-8% appreciation per year. For those that bought before '86, it took them 10 years to recoup their paper losses on their properties.

The NASDAQ bubble vs. Fannie Mae

Yahoo! Finance Search - Finance Home - Yahoo! - Help
Wednesday, September 11 2002 7:38pm ET - U.S. Markets Closed.
Welcome [Sign In] To track stocks & more, Register
Premium: Streaming Real-Time Quotes and Charts[new] | Free: Pay bills - Transfer funds - Money Manager Register/Sign In ]
Charts
Customize Finance
Enter symbol(s)   Symbol Lookup
No Inactivity Fees
Chart: Basic - Moving Average - Technical Analysis - IntraDay - Detailed
 FANNIE MAE (NYSE:FNM)  - Trade: Choose Brokerage
Range: 1d 5d 3m 6m 1y 2y 5y max Type: Bar | Line | Cdl Scale: Linear | Log Size: M | L
Compare: FNM vs.     S&P    Nasdaq    Dow    
Chart
Splits: 17-Oct-89 [3:1] 16-Jan-96 [4:1]
Last Trade
4:01pm · 75.33
Change
+0.18 (+0.24%)
Prev Cls
75.15
Open
76.00
Volume
2,619,100
Day's Range
75.17 - 76.00
Bid
N/A
Ask
N/A
P/E
14.45
Mkt Cap
74.803B
Avg Vol
4,327,863
52-wk Range
64.03 - 85.14
Bid Size
N/A
Ask Size
N/A
P/S
1.43
Div/Shr
1.32
Div Date
Aug 25
1y Target Est
97.00
EPS (ttm)
5.20
EPS Est
6.20
PEG
0.89
Yield
1.76
Ex-Div
Jul 29
Historical Prices, Messages, News, Options, Profile, Reports, Research, Upgrades, more...
Compare 22 long-distance plans at a glance. Yahoo! Savings Finder.
Add to My Portfolio - Set Alert Historical Quotes: daily | weekly | monthly
Quotes delayed 15 minutes for Nasdaq, 20 minutes for NYSE and Amex. For delay times on other exchanges see exchange table. Quote data provided by Reuters.
Don't Delay. Get real-time exchange quotes and streaming charts[new] from NYSE, AMEX, and Nasdaq.



ADVERTISEMENT
Recent News
Customize News
New research reports for FNM
Wed 9:27am FNM Fannie Mae, Freddie Mac 2002 bill sale calendar - Reuters Market News
Tue 2:17pm FNM Fannie Mae launches $1 Billion Reopening Of 3-Yr Callables - Dow Jones Business News
Tue 1:45pm FNM Fannie Mae launches $1 bln 3-yr callable notes - Reuters Market News
Tue 11:22am FNM Fannie Mae Redemption - Business Wire
Tue 9:34am FNM Fannie Mae, Freddie Mac 2002 bill sale calendar - Reuters Market News
Mon Sep 9 FNM US agencies slide with Treasuries; outlook buoyant - Reuters Market News
Mon Sep 9 FNM Fannie, Freddie Bought $338 Billion Of Own MBS Last Year -Report - Dow Jones Business News
Mon Sep 9 FNM Fannie Mae Announces Reopening 3 Noncall 1-Year Callable Benchmark Notes -R- - Business Wire
Mon Sep 9 FNM Fannie Mae To Reopen $500 Million To $1 Billion Benchmark Notes - Dow Jones Business News
Mon Sep 9 FNM Fannie Mae to sell $500 mln to $1 bln of callables - Reuters Market News

All headlines for: FNM
Premium Document Search for: FNM


Questions or Comments?

Copyright © 2002 Yahoo! Inc. All rights reserved. Terms of Service.
To learn more about Yahoo!'s use of personal information, please read the Privacy Policy.


Quote technology by TIBCO Software, Inc.
Historical chart data and daily updates provided by Commodity Systems, Inc. (CSI).
Market Cap and Avg Vol provided by Market Guide.
Target Price Est, EPS Est & PEG provided by the Thomson Financial Network.
Data and information is provided for informational purposes only, and is not intended for trading purposes. Neither Yahoo! nor any of its data or content providers (such as Reuters, CSI and exchanges) shall be liable for any errors or delays in the content, or for any actions taken in reliance thereon. By accessing the Yahoo! site, a user agrees not to redistribute the information found therein. All data provided by Thomson Financial Network is based solely upon research information provided by third party analysts. Yahoo! has not reviewed, and in no way endorses the validity of such data. Yahoo! and ThomsonFN shall not be liable for any actions taken in reliance thereon.The trading services which users may access through the links on this page are services of the listed independent brokerage companies. In order to use these services, you need to have an existing account with such brokerage company or you will need to set up such an account with such brokerage company. Yahoo! provides customized links to selected brokerage companies for your convenience only. Yahoo! is not a registered broker-dealer and does not endorse or recommend the services of any brokerage company. The brokerage company you select is solely responsible for its services to you, the user. Yahoo! shall not be liable for any damages or costs of any type arising out of or in any way connected with your use of the services of the brokerage company.

64 posted on 09/11/2002 4:41:40 PM PDT by AdamSelene235
[ Post Reply | Private Reply | To 61 | View Replies]

To: AdamSelene235
as opposed to artificial (i.e., something men would not do, but have to "create")
65 posted on 09/11/2002 5:46:11 PM PDT by LS
[ Post Reply | Private Reply | To 63 | View Replies]

To: AdamSelene235
Adam, when you say things like COMMUNIST China is "fascist" and that the U.S. has "nationalized production," we have nothing more to talk about. Enjoy life in the People's Republic.
66 posted on 09/11/2002 5:53:30 PM PDT by LS
[ Post Reply | Private Reply | To 62 | View Replies]

To: Night Hides Not
I agree that taxes change consumption habits, including home purchases. I think people, when it comes to homes, tend to look only in their neighborhood, and that is unfortunate because all real estate is Location Location Location.

I have a 2200 Sq. Ft. House. It is not a monster. It is exactly right for our 3-person family. This, by the way, makes a point that I seem unable to drive through the skulls of others here, namely that our "average" houses today are VASTLY superior to the "average" house of 30 years ago---not just in space, but in SOME aspects of construction; certainly in insulation and energy savings; occasionally in plumbing (although I want the "Big FLUSH" toilets brought back; in having central heat and air; in having INSTALLED appliances; and in having garages. Thus, a home today is the equivalent of a Ferrari 30 to the Chevy of 30 years ago.

67 posted on 09/11/2002 5:59:52 PM PDT by LS
[ Post Reply | Private Reply | To 61 | View Replies]

To: LS
Adam, when you say things like COMMUNIST China is "fascist" and that the U.S. has "nationalized production," we have nothing more to talk about

No, I said the US avoided nationalizing production but rather nationalized the results of production ie income,corporate, and capital gains tax. Its a more workable form of Marxism.

"Fascism" is my street level impression of China.

Capitalism + totalitarian government = Fascism, right?

It certainly isn't Communist. Get rich quick books line the streets and ever back alley is humming with commerce. The word communist doesn't spring to mind.

68 posted on 09/12/2002 10:11:24 AM PDT by AdamSelene235
[ Post Reply | Private Reply | To 66 | View Replies]

To: LS
as opposed to artificial (i.e., something men would not do, but have to "create")

I always think of "unnatural" as a null word meaning outside of nature.

I see man as an extension of nature. The development of technology & ideas is the most natural thing humans do, imo.

69 posted on 09/12/2002 10:18:11 AM PDT by AdamSelene235
[ Post Reply | Private Reply | To 65 | View Replies]

To: AdamSelene235
I agree. I was referring to the "Enlightenment" notions---which made it in some forms into the Declaration and Constitution---that government was "not natural." Locke and Hobbes (and later Roussearu) all said this. It is, of course, a complete reversal of the ideas of Aristotle and Plato and Augustine, and every other pre-Enlightenment thinker. That was what I meant.
70 posted on 09/12/2002 10:49:18 AM PDT by LS
[ Post Reply | Private Reply | To 69 | View Replies]

To: AdamSelene235
First, I agree with you that in their purest form, fascism and communism are nearly identical. Read Marx's 10 points in the Communist Manifesto and the 25 points of the 1920 Nazi Party---aside from comments about the Jews, they are virtually identical.

Where you and I differ (greatly) is in which represents the "true" China. I agree there is all sorts of capitalism going on in China as well as occurred in the USSR in the black market (as there is in every society at some level or another) that does not mean it is either "official" economic policy nor is it an indicator of where the society is heading, any more than the fact that there might be a lot of speeders on I-75 is an indication that the speed limit is changing. All it means is that for now, the government is tolerating it.

To me, the most important thing is that the MOMENT the Chinese government suspects that this "capitalist" base is viewed as a threat to the regime, it will vanish in the same amount of time that it took Stalin to eradicate the vibrant Kulak agricultural sector. Remember, Hitler used Jews in various positions as long as they contributed to the ends of Naziism.

71 posted on 09/12/2002 11:03:05 AM PDT by LS
[ Post Reply | Private Reply | To 68 | View Replies]

To: Sonny M
A have a textbook at home titled "New Ideas for Dead Economists" that would do the trick. I don;t remember the editor. I hesitate to recommend "The Affluent Society" by Gallbreath, but it is readily available.
72 posted on 09/12/2002 11:03:37 AM PDT by L,TOWM
[ Post Reply | Private Reply | To 2 | View Replies]

To: LS
I would daresay that a 2200 Sq Ft home is almost too much house for a family of three. Certainly with only one child. My own house is a little over 1900 square foot, and my wife and I plan to have a couple kids. It is more than enough space, even with three bedrooms occupied.

I never understood the need or desire of people to buy or build these huge 3000+ sq ft homes. It's too much house to maintain, much less keep clean!

73 posted on 09/12/2002 11:15:20 AM PDT by fogarty
[ Post Reply | Private Reply | To 67 | View Replies]

To: LS
To me, the most important thing is that the MOMENT the Chinese government suspects that this "capitalist" base is viewed as a threat to the regime, it will vanish in the same amount of time that it took Stalin to eradicate the vibrant Kulak agricultural sector. Remember, Hitler used Jews in various positions as long as they contributed to the ends of Naziism.

Nope, the government is embracing its capitalistic base. Why else would they break down the barriers between A and B shares or strip the military of its control over industry. The party is only interested in political power which can be enhanced by a powerful commercial base. Economic power has a way of becoming political power, and you have to enfranchise the population to create a powerful economy. This is where they are likely to lose control.

74 posted on 09/12/2002 12:04:26 PM PDT by AdamSelene235
[ Post Reply | Private Reply | To 71 | View Replies]

To: AdamSelene235
Don't believe it for a minute. And, I have yet to hear one single national security expert or China expert agree with this take.
75 posted on 09/13/2002 7:04:01 AM PDT by LS
[ Post Reply | Private Reply | To 74 | View Replies]

To: fogarty
Yah, we have been looking to downsize just a little. It is a lot to maintain. I can't imagine, even with "wage slaves" that rich people keep these monster 50-room mansions. For you and what army???? In my neck of the woods, though, you do have to have a large basement for tornado protection, but I don't think that is measured in the sq. footage, is it?
76 posted on 09/13/2002 7:06:57 AM PDT by LS
[ Post Reply | Private Reply | To 73 | View Replies]

To: LS
Don't believe it for a minute.

How do explain what's been going on in Shanghai for the last 10 years?

And, I have yet to hear one single national security expert or China expert agree with this take.

These would be the same "experts" who were surprised by the collapse of the USSR. The same experts who didn't figure out there was a problem with muslim extremists until the WTC was bombed twice??

77 posted on 09/13/2002 8:10:26 AM PDT by AdamSelene235
[ Post Reply | Private Reply | To 75 | View Replies]

To: AdamSelene235
No that would be the experts in capitalism, like George Gilder, who KNEW the USSR was collapsing, and told everyone who would listen. But fine. You think China is free and a happy Adam-Smithian republic. Enjoy.
78 posted on 09/13/2002 9:04:45 AM PDT by LS
[ Post Reply | Private Reply | To 77 | View Replies]

To: LS
But fine. You think China is free and a happy Adam-Smithian republic. Enjoy.

That is a deliberate misrepresentation of my views, and you know it.

I suspect America has more Socialist apologists than China these days.

79 posted on 09/13/2002 9:06:47 AM PDT by AdamSelene235
[ Post Reply | Private Reply | To 78 | View Replies]

To: AdamSelene235
Einstein had very little to do with the bomb.

My recollection of history was that Einstein's famous equation is the fundamental idea that got people thinking about the bomb. He is also credited with writing a very influential letter to Roosevelt arguing that the Nazi's were working on the bomb and the US should go full steam ahead to develpe the bomb. It has been reported that this letter was very important in FDR going ahead with the Manhatten project. You are correct that Eienstein had little to do with the practical engineering of the design of the bomb.

80 posted on 09/14/2002 4:39:04 PM PDT by staytrue
[ Post Reply | Private Reply | To 59 | View Replies]


Navigation: use the links below to view more comments.
first previous 1-2021-4041-6061-8081 next last

Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.

Free Republic
Browse · Search
News/Activism
Topics · Post Article

FreeRepublic, LLC, PO BOX 9771, FRESNO, CA 93794
FreeRepublic.com is powered by software copyright 2000-2008 John Robinson