Technocrat

The Most Expensive Day In The History of the United States

Bruce Perens
Fri Sep 19 16:23:00 -0700 2008
Politics.
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The U.S. government is going to buy up all of the bad debt in order to keep the housing collapse from spreading to money-market funds - which it's started to do - and from there to retail banking and essentially a complete economic collapse. Their relief scheme won't work unless they buy essentially all of the bad debt.

This is the biggest bet in history. The U.S. has a $4.7 Trillion national debt. The economic rescue, if it is unable to hold up housing values would add 1 to 2 Trillion to this number, perhaps in less than a year.

So, let's go over what has happened to you. First, the government encouraged almost infinite credit for buying homes. This pushed up home prices to the point that you essentially had to mortgage your entire life to pay for a home, and if you didn't want to pay for a home, you were penalized through the tax system.

Now, by buying the bad debt, all of us become home-owners, but we don't get the actual use of the homes. We do, however, lose if home values don't recover their previous inflated prices.

All of this to live in a country that can't even provide health care to its citizens and that lets its poor and insane sleep on the street.

Increasingly, people in the U.S. are owned. They have their own jobs, their property, but these things are denominated in money over which they have no control. Whether it has value or is just a piece of paper is decided by someone else. Every four years, those folks scare you about Islamics, and homosexuals, and whatever else your hot buttons are so that you'll vote for them. And then they go back to transferring any value you had in your money to their cronies.

Folks, we used to have riots about the draft. Now, you've all been drafted, you're in the yoke, and you've got no choice but to pull the cart. But it would be damn hard to even get a few of you to march on Washington.

Nothing's going to change if you don't rise up.

The Most Expensive Day In The History of the United States
GuyFawkes
Fri Sep 19 17:24:25 -0700 2008
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Nothing's going to change if you don't rise up.

...and leave...

seriously, if it is that bad "vote with your wallet" or more accurately the industry of your labour...

ah, yes, but, boiling a frog.

hedge funds and shorters are still out there, just because some banks are now off limits, nothing else is, eg GM or Boeing or Wal-mart.

there are a lot of smart people now saying that the big question is no longer *if* the dollar collapses and the USA goes bankrupt, but *who* gets dragged down in the vortex.

http://business.timesonline.co.uk/tol/business/columnists/article4790099.ece

The Most Expensive Day In The History of the United States
Bruce Perens
Fri Sep 19 17:34:35 -0700 2008
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Well, I do much of my work in Europe and this has pushed me to renew contracts there. I probably should bank more there. I've brought my family there for summers, so far.

But that was all because we were afraid of the rise of the right wing in the U.S. Not about the economy.

I did feel the economic failure before most Americans, though. Dollars haven't been worth much overseas for years now.

The Most Expensive Day In The History of the United States
Spider
Fri Sep 19 17:48:47 -0700 2008
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Are we seeing the death throws of Capitalism?  Will Democracy also disappear?  It appears that the US Government didn't ask the people of America if it was OK to use their money to bail out these financial organisations. Communists must be smiling at the chaos within the biggest capitalistic system almost on the verge of complete collapse. The BBC reports that apart from some inflation the Middle East is doing very well.

Would mass marches on Washington do any good? The people who live in the White House seem pretty oblivious to anything the people of the USA wanted over the last 8 years, would they even notice a march?  What a terrible presidency George W. Bush has had. I bet he can't wait for the day he can walk away from it all.

The Most Expensive Day In The History of the United States
Uncle Entity
Fri Sep 19 19:23:40 -0700 2008
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Yeah, more like the death of the mixed-market economy.

The best part is that they promised even bigger government and more 'mixed' to solve the problem...along with having families pay 'less' by guaranteeing all that bad debt than letting everything work itself out and having prices fall to their 'natural' level as is Bruce's argument.

The Most Expensive Day In The History of the United States
President4242
Mon Sep 22 07:48:55 -0700 2008
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As if anybody is EVER going to believe a banker again after this.

Or in credit.

Or in money.

ONLY commodities you grow yourself or mine yourself or create yourself can you trust.

not in the police state

zogger
Fri Sep 19 19:23:43 -0700 2008
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Not in this day and age when they have dropped untold billions on "security" and hiring no questions asked order followers. Too much at stake, fatcats cushy living must be protected at all costs and they could, would and will order their muscle into the streets with full authority for the ultra nasty. Just like you see in any other typical dictatorship. They just won't put up with economic riots, they would squelch any with extreme prejudice -that's my best guess. The only mass marches we will see will be lines at banks with people trying to access any sort of cash (one more big bank is it for FDIC), then lines at brokerages with people trying to sell stocks that no one wants (except at fractions of pennies maybe), then mass lines at soup kitchens, if the "we the people" folks are lucky enough to organize them and keep the goons hands off of them with their "continuity of goonishness" plans and schemes.

This "form" of capitalism will collapse, yes. It's a kleptocracy, the biggest crooks rose to the top, but since they started stealing from each other and actually believing in their own *madness* that those convolulted paper products had real worth..I mean..really.. delusions of grandeur, megalomania, sociopathy, all of it as official policy. Quite insane really..

Be that as it may, the old traditional form, where you actually have to have either a product or a *useful* service to sell, will arise again. Eventually, I have no timetable on that. Could be awhile, although barter economy is always immediate in other historical examples, and don't forget it is quite possible to barter services.

I will be (somewhat) surprised if it doesn't get quite a bit more dire within a month now. The momentum is amazing. Hope I am wrong but don't think so, I've been calling this now for two years and change straight on this board, and for some years previous on others, you could see it coming, it's not hard either, because you can't base a huge economy on BS and poofery. That's the real "bottom line", and once I saw that as the main "economic driving force" I knew it was toast. Destroying manufacturing on purpose so they could skim off huge sums from fast labor arbitrage was the first big clue, right off the bat as crimes go it was outright treasonous, and it has gone downhill since.

Really, dudes smarter than me figured out a long time ago that casino economics won't work. Casinos are based on skimming a fat percentage of the cash that walks in the door and entertaining those that are being skimmed so they don't get annoyed, and they do it by hyping and shilling "you'll get rich if you play our game!". The ones being fleeced put up with it and the casino can stay running as long as the skim isn't too great and the entertainment stays acceptable (along with keeping them drunk as possible...). Lose either facet, the casino goes under. In the way olden days they called it bread and circuses. We have to ask ourselves now, is what is happening lately too much of a skim, and how "entertaining" is it really, is it worth it? I'd answer, WAY too much of a skim, and it has negative entertainment value.

The Most Expensive Day In The History of the United States
truthAddict
Sat Sep 20 00:57:13 -0700 2008
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Capitalism? If by that you mean a healthy respect for the fact that price is proportional to demand and inversely proportional to supply, then no. That law is ironclad and absolute. In that sense, the US is not capitalist.

And if by capitalism you mean savings poured into investments to further economic growth, in exchange for a share of the profits, well, America doesn't really do that either. Because whenever the deal goes bad, a bailout is waiting, thus eliminating risk and encouraging malinvestment.

Capitalism, socialism, and communism are really like the hacker/cracker thing. They've been so diluted of their meaning that they're kind of pointless to use. I thought socialism was supposed to be the workers owning the means of production. Which is a good thing, in the sense of employees owning stock in their company. That's not at all what communism was.

I think zogger touched on this somewhere in this thread. Rationality will eventually return to humanity. Everyone will get nukes, all will be on a level playing field, imperialism will end, and we'll all be much better neighbors. Peace and prosperity through power. But no telling how long it will take and how much ugliness will have to be offered up on the altar of irrationality for that to happen. But then, after we get the nuke stuff nailed down, a new race for space colonies will start all this shit up again, I'm sure. Endless cycle. Human nature.

And the so called communist countries are not smiling. Nobody is. A superpower with nothing to lose and trying a hellmary pass is not in anyone's best interest.

The Most Expensive Day In The History of the United States
rubycodez
Sat Sep 20 09:24:04 -0700 2008
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everyone will get nukes and that will solve the war/warmongering problem?

 

that's so optimistic it's silly. 

 

everyone will get nukes and some will use them.  that's much more likely, and human nature.

The Most Expensive Day In The History of the United States
truthAddict
Sat Sep 20 14:15:27 -0700 2008
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Yes, they will most likely be used again. I just think that technological equalization is more likely to lead to limited warfare, whereas rule by a few is more likely to lead to larger scale warfare.

The Most Expensive Day In The History of the United States
President4242
Mon Sep 22 07:51:19 -0700 2008
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Capitalism? If by that you mean a healthy respect for the fact that price is proportional to demand and inversely proportional to supply, then no. That law is ironclad and absolute. In that sense, the US is not capitalist.

And yet everybody keeps telling me that labor being in surplus worldwide isn't a HUGE problem for the free market.

The Most Expensive Day In The History of the United States
truthAddict
Mon Sep 22 17:55:54 -0700 2008
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That's very true, and one of the many reasons I'm not a hard core libertarian. I'm not against tariffs in principle. The problem is too many Eastern countries are exporting to Western countries rather than developing their own markets. And too many Western countries are producing too much valueless fluff (IP, financial, accounting, prison industrial complex, technocrat comments, etc).

I sort of look at it this way. The relationship between supply, demand, and price isn't really something to aspire to; it's more that it just is. Like the relationship between force, mass, and acceleration. Or voltage, current, and resistance. It's neither good nor bad, and it cannot transcend problems which are not fundamentally economic in nature. IOW, you can't work a thermo problem if you don't have all the information describing the closed system in question.

Ultimately "capitalism" is unattainable without perfect markets. And "socialism" is unattainable without perfect people. But I do wish we could stick to a solid theoretical basis to build our models, rather than the trash that passes for mainstream economics in the West today.

The Most Expensive Day In The History of the United States
truthAddict
Mon Sep 22 18:03:23 -0700 2008
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Guess that sounds a little anti-Western huh? In fairness, it should be noted that other places have just as much if not more intellectual trash as us. I guess I'm so hard on us, because this (US) is my country. There are many like it, but this one is mine.

The Most Expensive Day In The History of the United States
President4242
Tue Sep 23 12:46:10 -0700 2008
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Except, of course, there IS a competing formula for price.  It's called Just Wage and Fair Price, and was used by guilds in feudal Europe for about 1000 years before "supply and demand" pricing took over.

Of course, it's based on morality that is now possibly lost forever- the idea that you, as a worker, owe your boss and your customer a living, and likewise your customer and boss owe you as a worker a living.  You're all in this together- the key is not to starve.  So therefore, obviously a Just Wage is one that allows you to feed your family- and a Fair Price is the cost of feeding your family, for the time that it took to create the product, plus the cost of supplies, plus something for the guy who taught you how to create the product. 

Also known as cost+ pricing, it guarantees a profit while not soaking the customer.  Unlike supply/demand pricing, where the intersection of the curves *might* make you rich, *might* make you operate at a loss, and are always changing.

The trouble is that cost+ pricing can always end up making you *NOTHING*- under competition.

The Most Expensive Day In The History of the United States
Daniel Colascione
Sun Sep 21 15:03:59 -0700 2008
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New Zealand is still trying to encourage people to move there. It seems like an attractive enough place. Any thoughts?

The Most Expensive Day In The History of the United States
Uncle Entity
Sun Sep 21 19:44:45 -0700 2008
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Depends on who they want.

Oz is also looking for people but they want skilled people in jobs like health care and...health care.

No shortage in unskilled or semi-skilled labor down under.

Rise up and ?

rubycodez
Fri Sep 19 17:44:39 -0700 2008
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Since both parties are by and large on board with this proposed "rescue" (using us and our descendents as outhouse holes for toxic investment turds) which does absolutely nothing to solve the base problems, I would say rising up and voting off a ballot full of fat cat's minions or rising up and marching to Washington to argue with fat cat's minions is utterly pointless.

 

Even peaceful revolutions need purposes, demands, goals.

 

Petitions to NOT bail out failed investments with public funds?  Demand for return to regulation (such as Glass-Seagall and more oversight for hedge funds, derivative markets, etc.?  Mandatory balanced budget and mandatory reduction of national debt?

Rise up and ?
Bruce Perens
Fri Sep 19 19:52:12 -0700 2008
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I agree the Democratic congress have been yes-men to the Republicans. It's a damn shame. But that doesn't mean there can't be useful changes.

Short term:

Obama. Not perfect but better than putting another Republican in office.

Let home prices fall. Investment means risk, folks.

Tighten up significantly on retail credit. Infinite credit means near-infinite prices.

Give tax breaks for increase in home equity rather than mortgage interest as at present. The incentive is to pay off debt rather than carry it. Structure that to favor the owner who lives in his own home over the non-resident investor or corporation.

Increase funding for public broadcasting. We're not getting the news we need.

Longer term:

A more parliamentary government system that enfranchises splinter parties.

End of the electoral college. One man, one vote is pretty fundamental.

Rise up and ?
Verteiron
Fri Sep 19 20:36:41 -0700 2008
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Any ideas how to bring any of this about? I'm supporting Obama, but my state's a lock-in for him already.

I don't own a home.

I can write my various congress-critters about home prices, credit, and tax reform, but why should they listen to me? They'll continue to do exactly as they please, and people will continue to vote for them, or replace them with others who will do exactly what THEY please.

I donate to PBS.

I'm all for the end of the EC, but again, why would any majority of politicians work against it? And wouldn't it take something on the order of a constitutional amendment to change it? How likely is that to happen?

I don't mean to sound utterly defeatist here, but honestly, what "rising up" are we supposed to do, exactly?

Rise up and ?
Bruce Perens
Fri Sep 19 20:45:05 -0700 2008
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I guess it has to start a step at a time. It ends up being a political campaign, or a series of them. It helps if you can write and speak effectively.

Rise up and ?
Verteiron
Fri Sep 19 20:58:56 -0700 2008
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I can write decently. I used to be able to speak coherently, but it's been years since I've tried it in front of a crowd. I can probably do it. Now what?

Rise up and ?
Bruce Perens
Fri Sep 19 21:08:02 -0700 2008
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Well, pick a piece of this that you care about, do some research, and start writing and speaking for free. Not just on your own blog, try to get the material somewhere that people will read. Lots of higher-traffic sites take guest editorials.

What am I doing? I'm going to try to work my way up the local democratic organization. Unfortunately I'm missing some meetings due to travel, but I think there will be enough of them.

Rise up and ?
Thomas Lord
Sat Sep 20 09:57:39 -0700 2008
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What am I doing? I'm going to try to work my way up the local democratic organization.

Endorsing Obama with luke-warm "better than a republican" probably doesn't help with that.

(And isn't that the problem, really? The way to climb through a party org. is be more over the top than the next guy advancing the party line. Where / when do you get to pitch for in-party change?)

-t

Rise up and ?
GuyFawkes
Sat Sep 20 03:31:15 -0700 2008
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Obama. Not perfect but better than putting another Republican in office.

Be careful what you wish for, Obama is just a slightly coffee coloured "all american" Tony Blair.

Let home prices fall. Investment means risk, folks.

Asset prices falling is one thing, house prices falling is another, houses are not assets when the debt associated with them significantly exceeds their value.

Negative equity != less equity.

Tighten up significantly on retail credit. Infinite credit means near-infinite prices.

Infinite credit = infinite indentured servitude servicing that debt.

Give tax breaks for increase in home equity rather than mortgage interest as at present. The incentive is to pay off debt rather than carry it. Structure that to favor the owner who lives in his own home over the non-resident investor or corporation.

But that is not what "they" want, they want you indebted.

Increase funding for public broadcasting. We're not getting the news we need.

But that is not what "they" want, they want you spin fed.

-------------

And here I am contemplating buying a 42" TFT 1920 x 1080 TV with PC input for the main room, cash purchase of course, prices are now down to 700 quid... haven't done it yet because I like the idea slightly less than I like having the spare cash, but it is there.

rise up, or route around

zogger
Fri Sep 19 18:29:54 -0700 2008
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Brute force or finesse, boxing or aikido, there are always choices. There *is* an alternative, structure your life so as to not be as effected by what happens with their markets and sham currency. It's hard to go all the way of course, but it is not unreasonable to go a long way to being independent of "them". A collapse would be painful but it might be needed, to sort out what is really valuable or not. And I really don't think many nations will be spared either, so geographical relocation won't be much more than a temporary solution. This creeping commercial crud is going to go over the whole planet, there is no "fix" for it. Those the least impacted will be those folks who are already living "poor" in terms of their dollars/yen/dineros/yuan/zlotys/pounds/euros/dinars whatever. And this is easily provable by seeing who is doing the most freaking out and panicking lately, the people who are 100% tied to that system and delineating their reality in terms of cash money, the billionaire elite class. They are beyond panic city now because without those overlapping congames they run, they got not much of anything going for them.

With that said, I listen to this dude on the radio sometimes, he nails stuff a lot, here is his outlook on the situation, from around a year ago. Getting closer.

rise up, or route around
Bruce Perens
Fri Sep 19 20:51:38 -0700 2008
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Well, it happens that I am not saddled with debt like the usual person. I own my home, it's not the bank's. I am welcome in more than one country where I am allowed to make money. There are things I could improve.

The really rich people have already diversified, both by market and geographically. This might mean they can't buy a new airplane, but they aren't going to be hurt by this the way that little folks will.

I and Thou

Thomas Lord
Fri Sep 19 19:19:14 -0700 2008
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Folks, we used to have riots about the draft. Now, you've all been drafted, you're in the yoke, and you've got no choice but to pull the cart. But it would be damn hard to even get a few of you to march on Washington.

Nothing's going to change if you don't rise up.

You first.

-t

I and Thou
Uncle Entity
Fri Sep 19 20:08:45 -0700 2008
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Y'all can carpool...

The Most Expensive Day In The History of the United States
truthAddict
Sat Sep 20 00:34:44 -0700 2008
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Marching on Washington isn't going to accomplish that much, because the American people just don't see things that way yet. 98% of them don't even understand what all this means or how it came about. They've been indoctrinated by the tow-the-line thinking which permeates history and economics at all levels of our educational system. "We're all Keynsians now." My ass, Nixon. Before change can happen, the markets have to bitch slap the people back to reality.

Then, after gravity goes, maybe we can do something. I'm just trying to keep my head above water and learn all I can that may be useful in a situation of "social unrest", shall we say. If I tried to march on Washington, besides being out a lot of money, I'd probably end up on yet another list. I'd rather just be on the list of net subversives which I'm sure is floating around somewhere. But this unholy mess we've created doesn't seem solvable by nonviolence.

Oh, and voting for 3rd parties. This R/D charade isn't going to help the problem at all. Deligitimization of current American thought is a prerequisite for change.

The Most Expensive Day In The History of the United States
squiggleslash
Sat Sep 20 07:15:04 -0700 2008
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Folks, we used to have riots about the draft. Now, you've all been drafted, you're in the yoke, and you've got no choice but to pull the cart. But it would be damn hard to even get a few of you to march on Washington.

Dude, we have blogs now. Marching is so 20th Century.

There's little to rise up against. The problem isn't one of a conspiracy to screw us over, it's the fact that the economy is, at all levels, managed by complete imbeciles and people working to a system that rewards short term objectives that aren't necessarily safe in the longer term. I've heard pseudo-economists complain that this crash would never have happened if we hadn't bailed out banks in the past.

Really?

Because someone, at some level, said "Hey, let's make our bank crash, sure we'll end up being run by the government, some of our directors may well end up in jail including me, and millions of people will be effected many to the degree of losing their homes and jobs, but the government once bailed out a S&L bank therefore it's in our best interests".

Huh? What logic is being used here?

We had:

  1. Morgage brokers paid commission so trying to sell as many mortgages as possible and generally not caring about the consequences
  2. New mortgage types intended for high credit risk clients, designed on the presumption that home prices would only go up, that were designed to be unmanageable after a few years thus forcing the mortgagee to sell home, pay off mortgage, and no longer be a risk.
  3. Banks selling aforementioned mortgages in an attempt to grow their businesses, because shareholders demand growth
  4. An immensely complicated system where very few people, if any, could see exactly how this was all fitting together and what the consequences would be.
  5. A housing market that showed no signs of slowing down until it was too late.

Essentially, nobody anywhere had an incentive to believe that there would be any problem with what they were doing. Mortgage brokers were encouraged to sell dangerous mortgages. Banks thought that the mortgages weren't dangerous, they were actually mitigating risks by ensuring - supposedly - that the mortgagees wouldn't be clients for long enough for it to actually be a problem. Everything relied upon the housing market growing, or the banks taking steps to predict when the market would reach a peak, and then start to pull back before that happened.

So there was a screw up, because everyone made gambles they shouldn't have. You solve this exactly the same way the government has solved it in the past, you increase the regulation - and maybe this time you actually do something to make it a little harder to remove the regulation later when some idiot Republican Congress comes along and starts on a "regulation is bad" path. Make it more difficult to make such gambles, by outlawing mortgages that aren't ever going to be sustainable. Create more oversight for the mortgage industry. Do something to regulate the credit bureaus whose pronouncements on the creditworthiness of the banks contributed to this mess.

And in the meantime, punish. You can't have a situation where entirely avoidable decisions almost result in the meltdown of the economy without people who were closely involved in those decisions who knew the risks being punished in some way. At some level, the fact 80% of AIG is going to be owned by the government is a small step in that direction, but it's not enough in the long term.

We don't have to get rid of the Democrats and Republicans for this. If this crisis is anything like those we've had previously, everything I've mentioned above will get done. The longer term issue is holding their feet to the fire so they don't deregulate again.

The Most Expensive Day In The History of the United States
rubycodez
Sat Sep 20 09:31:53 -0700 2008
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the proper punishment is to let institutions such as AIG to flop over.

Yes, restore the regulation we had, that Clinton under the guidance of Citicorp started to repeal.

 

Yes, we do have to get rid of Democrat and Republican parties, they're mostly the same.  They therefore are redundant collections of stupidity on legs.

 

There really is a conspiracy to screw us over, but it's centuries old, the banking cartels.  The current solution of bailouts uses their services to make us greater debt slaves.  They win again.

The Most Expensive Day In The History of the United States
Simon
Sat Sep 20 14:47:30 -0700 2008
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The U.S. has a $4.7 Trillion national debt.

What figure is this?

I thought US federal government debt stood at a little under 9.7 trillion USD.

A trillion here, a trillion there, and pretty soon you're talking real money. To misquote Dirksen.

The Most Expensive Day In The History of the United States
Matt Fulkerson
Sat Sep 20 19:28:38 -0700 2008
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It's probably the non social security portion of the debt.  In my opinion, it wouldn't be a bad idea dissolve the trust fund and immediately switch to a more rational system in which s.s. money out = s.s. money in.

The Most Expensive Day In The History of the United States
President4242
Tue Sep 23 12:50:35 -0700 2008
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It's probably the non social security portion of the debt.  In my opinion, it wouldn't be a bad idea dissolve the trust fund and immediately switch to a more rational system in which s.s. money out = s.s. money in.

At which point all the Baby Boomers retire, and the rest of us get charged 500% FDIC to pay for it?

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The Most Expensive Day In The History of the United States
Matt Fulkerson
Wed Sep 24 19:19:50 -0700 2008
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The baby boomers should not expect, nor do they deserve, full S.S. benefits.  Since the government freely borrows from the trust fund, the only number that really matters is the balance between total spending and total tax  revenues.  The total value of the national debt is the amount that past and current workers have underfunded the government (or if you prefer, failed to hold the government accountable for excess spending).

perhaps with biggest power grab of Bush administration

rubycodez
Sat Sep 20 22:37:38 -0700 2008
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as part of the bailout they're seeking to give the treasury secretary Paulson the ability to purchase assets without court interference - no lawsuits, no reviews.  almost God-like power considering the amounts of money involved. Unchecked power and Bush administration in same sentence, we all love to see that.

 

Now it happens Paulson has long personal ties with China's financial elite, from his days with Goldman Sachs.  Hmmm.....

 

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