Rolling US Economy Into The Shitbin Thread

How many generations forward must we mortgage to sustain a standard of living for too many people, one which they don't actually deserve?

Plz to note that this fucktard, among others, argues exactly the opposite of this when it comes to climate change.

OMFG Adam - this isn't about giving "them" money. It's about restoring confidence in a credit market paralyzed by uncertainty.

Are you seriously suggesting there's no connection between the pre-bubble stagnation in HH net worth and the increase in income you're citing precisely during the bubble's grand finale? Is that really just coincidence?

Post 9/11 action by the fed effectively reduced the cost of borrowing money to nil... so per the magic of supply and demand, the markets for goods that are primarily purchased with borrowed money (houses, cars, US and A) went through the roof. And increased demand for the labor to supply them.

That increase in HHI that you note is an EFFECT of the bubble. You're trying to decouple them so that HHI can continue a blithe, cheerful rise while "Wall Street" collapses, but you can't any more than you can decouple waves from the ocean.

JFC... I'm all for public whipping replacing golden parachutes, but "Wall Street" isn't some subterranean cabal of New York bloodsuckers - it's the ground that you're standing on.

Which is to say the average US citizen will see the market for their labor contract significantly.

here's a good little round-up of sobering news.

Which is to say the average US citizen will see the market for their labor contract significantly.

― rogermexico., Tuesday, September 30, 2008 2:14 PM (2 minutes ago) Bookmark Suggest

I know, I lost a 2 1/2 year job this summer, for mostly economic reasons. So I'm not standing on that ground anymore.

I wasn't really trying to emphasize the increase so much as the fact that the median income is $50,000, which is alot less than I was expecting. Those were just the most recent numbers I could find on the census site.

http://upload.wikimedia.org/wikipedia/en/thumb/a/a7/United_States_Income_Distribution_1967-2003.svg/800px-United_States_Income_Distribution_1967-2003.svg.png

I know, I lost a 2 1/2 year job this summer, for mostly economic reasons. So I'm not standing on that ground anymore.

oops. sorry for misunderstanding and being a dick about it. i'm a little riled up today :o

roger, the now-dead bubble allowed the entire world economy to become crazily distorted by the assumption that tens of trillions of dollars of money (in the form of financial paper) had been summoned out of the vasty deeps of the real estate markets and could be spent, respent, leveraged and releveraged until every global transaction became distorted to some extent.

The choices are pretty stark and neither one is good. We can attempt to maintain the illusion that these trillions rest on some measure of value and reflate the bubble, keeping housing prices ballooned at ridiculous values and hope it all turns out ok (hint: it won't) or we can allow tens of trillions of dollars to evaporate out of the system like dew on a sunny morning, causing a global recession as the markets revalue down to earth with a crash.

The first choice will lead to mega inflation, the second choice will lead to deflation and a half-frozen economy similar to the Great Depression. The chances that we'll land somewhere in the middle (stagflation) are slim, but not impossible.

Basically, we're not getting out of this without much pain. Hoping for a better outcome than the ones I've mentioned is unrealistic, insofar as I can see into the murky waters of the financial system and the size of this bubble.

I wish us luck (stagflation). $700bn was probably too little to achieve this end anyway. We'll just have to sit tight and see what the powers that be deliver to us.

In the meantime, my personal finances are in a hunkered-down defensive position and have been for many years.

^^ without reflating the bubble, we can stabilize markets and let some of the fake value leak out in the form of inflation over time (i.e. house prices go down in real terms by holding steady).

best and worst case scenarios?

hahahahaha no one has a fucking clue what's going to happen. I'm so glad "The Road" is coming out this year.

^^ without reflating the bubble, we can stabilize markets and let some of the fake value leak out in the form of inflation over time (i.e. house prices go down in real terms by holding steady).

― rogermexico., Tuesday, September 30, 2008 2:51 PM (13 seconds ago) Bookmark Suggest Ban Permalink

yah thats what usually happens to housing bubbles - the fact that prices are down 15+% is srsly o_O

Armageddon it

If the markets fear that the nays have thrown their toys out of the pram for the long term, the following scenario is quite likely:
* The US stock market tanks. Bank shares collapse...
* CDS spreads for banks explode, as will those of all highly leveraged financial institutions. Credits spreads generally take on loan-shark proportions, even for reputable borrowers...
* No US bank will lend to any other US bank...
* Assets not viewed as toxic before will become unsaleable at any price...
* Banks will stop providing credit to households and to non-financial enterprises.
* Banks will collapse... No bank will be safe, not even the household names...
* Households and non-financial businesses revert to financial autarky, among wide-spread defaults and insolvencies.
* Consumer demand and investment demand collapse. Unemployment shoots up.
* The government suspends all trading in financial stocks until further notice.
* The government nationalises all US banks and other highly leveraged financial institutions...
* We have the Great Depression of the 2010s.

Paulson's fumbles

Which is to say the average US citizen will see the market for their labor contract significantly.

this was already happening over a year ago.

Someone in this bitch is calling you out, Danny P.

I can't believe I'm now on this thread arguing the opposite of the title.
I transferred a big chunk of my MM into my high-growth stock and S&P Index funds last night, hopefully that went through this morning at opening time.

I'll say again I don't believe that only a few centenarian investment houses are capable of providing credit. It's like saying in the eighties that we were going to let America's computer industry die because we didn't bail out DEC and Cray.

I BELIEVE IN A BOLD NEW AGE OF PAYPAL

from comments in marginal revolution:

Those banks which most heeded government demands to make "politically correct" mortgages (Countrywide) vanish.

redlining kept our economy intact for years and years rite

I would like to see Adam's charts regarding wage stagnation in real terms applied logarithmically to reflect the actual amount of people stuck year over year with no raise

so the 250 limit is actually gonna happen?

Someone in this bitch is calling you out, Danny P.

okay first, don't call me Danny

second, lol @ Harvard MBAs anyway, one of them is George W Bush

from comments in marginal revolution:

Those banks which most heeded government demands to make "politically correct" mortgages (Countrywide) vanish.

i'm still looking for the section of the community reinvestment act that mandated the leveraging of risky loans into complex derivatives and then scattering them like poisoned easter eggs through the global economy.

It was near the back.

oops. sorry for misunderstanding and being a dick about it. i'm a little riled up today :o

― rogermexico., Tuesday, September 30, 2008 2:40 PM (31 minutes ago) Bookmark Suggest

Thanks. I'm just as riled up! No hard feelings!

What I know about the American economy and the financial system I learned through the Georgia public school system - some of the worst in the country for a long time - so I realize I have an exceptionally limited view of what is actually happening here. Nonetheless, it is my tax dollars at stake here so I'm trying to put my perspective into the mix, however ill-informed.

weren't only federally insured banks required to make "pololitcally correct" mortgages? ie. not Countrywide

i think this is the source of that countrywide reference. of course, it's hard to say if they were being "politically correct" or ripping off poor people. but you know, tomayto, tomahto.

good god the CRA meme is fucking infuriating.

― goole, Monday, September 29, 2008 10:25 AM (Yesterday)

keep a tally of anyone and everyone who says this and believes it: racists, all of them.

though in the olden days, when hard times hit these kinda people would storm into the ghetto and start torching the roofs, so i guess it's some improvement.

somebody give newsday's graphic design dept a raise

http://bigpicture.typepad.com/photos/uncategorized/2008/09/30/lli.jpg

those roofs are now collateral on the bad notes they hold. maybe now theyll just shoot ppl

xpost

I am kind of annoyed with the Junior Senator from Illinois parroting last year's news along with everybody else. Businesses will close! Jobs will be lost! Yes, that was true, last October.

It still is but what the fuck ever you know

Thanks. I'm just as riled up! No hard feelings!

You're a gentleman, and I was totally an ass.

The "round-up of sobering news" tipsy mothra linked upthread is actually a REALLY good summary of the "what" of what's happening. The "why" is that everyone is terrified that a dollar lent to *anyone* right now, under any terms, is a dollar they'll never see again.

It may seem like ancient history, but if you haven't read it I'd really recommend LIAR'S POKER right now. It's well-written and entertaining and turns out now in retrospect to offer a pretty direct look into the early days of the mortgage-backed security.

Excellent book -- Michael Lewis's first, if I remember right. I still have a copy around somewhere, I think.

When Genius Failed, about Long Term Capital Management, gives a decent overview of how hedge funds work, what it means to say a firm has gotten too big to fail, and how that comes about. A problem with the bailout is that there's no reason to expect it will discourage more firms from getting too big to fail.

Will the whole economy really collapse if we take another week to figure this crisis out better?

LOL this is going to turn into the Michael Lewis C/D, S/D thread...

That meme about CRA is not going to stick with all those lower middle class white folks who all know someone in their family/peer group with an unsustainable mortgage given to them by an unscrupulous loan officer sharking for another commission. My mother had to debunk that one for the person in our family who did this and was having a Do Not Look In Mirror moment because (this is uncharacteristic, but also never thought I'd hear this rel say he'd never vote for a black guy) pointy-finger so much easier.

When discussing with distaff parent we did speculate on whether or not all the constituent pressure is the real cat amongst pigeons here; voters were actually doing what they SHOULD do WRT their government and in effect keeping Congress hanging until the bill presented is livable-with.

Obama is behaving like someone who is working towards a solution, not necessarily the particular bailout on offer at present.

good god the CRA meme is fucking infuriating.

― goole, Monday, September 29, 2008 10:25 AM (Yesterday)

keep a tally of anyone and everyone who says this and believes it: racists, all of them.

though in the olden days, when hard times hit these kinda people would storm into the ghetto and start torching the roofs, so i guess it's some improvement.

― goole, Tuesday, September 30, 2008 3:42 PM (59 minutes ago) Bookmark Suggest Ban Permalink

my boss was talking about it yesterday--for him it seemed less "racism" and more "clinton's fault" but he made sure to specify that it was minority homeowners who were receiving the mortgages. i would have said something, but, uh, hes my boss, and im a wuss.

three sentence answer:

CRA was passed in 1977, Clinton was president eight years ago, the housing boom took off in the last eight years and the crash is happening now.

CRA covers banks, not mortgage lenders like countrywide.

mortgage lenders got into subprime because it was making them money, not because clinton forced them to, or to be PC.

YES. This. Thank fuck my mother knows all of these answers are correct.

o come on max u missed the perfect opportunity to call yr boss a racist get fired sue the company and sit out the great depression II burning trees and eating pizza

http://pageoneq.com/news/2008/Fundamentalists_blame_Wall_Street_0930.html

The Nation Will Right Itself If It Fixes Sex

"Doctor, my sex broke."

Bottom line (and not hindsight - I was saying this in 2003!): appropriate control of the money supply in 2003/2004 would have headed this off but there was way too much pressure on the fed to not turn the lights out on everyone's big party, especially with an election coming and a war on and all.

what the public thinks:

http://people-press.org/report/455/bailout-plan

and awaaaaaaay we go:

Cities, states and other local governments have been effectively shut out of the bond markets for the last two weeks, raising the cost of day-to-day operations, threatening longer-term projects and dampening a broad source of jobs and stability at a time when other parts of the economy are weakening.

The sudden loss of credit, one of the ripple effects of the current financial turmoil, is affecting local governments in all parts of the country, rich and poor alike. In New York, a real estate boom has suddenly gone bust. Washington has shelved a planned bond offering to pay for terminal expansion and parking garages already under construction at Dulles and Reagan National Airports.

Billings, Mont., is struggling to come up with $70 million more for a new emergency room. And Maine has been unable to raise $50 million for highway repairs.

“We really are in terra incognita here,” said Robert O. Lenna, executive director of the Maine Municipal Bond Bank, which helps that state’s towns and school districts raise money. He said he had worked in public finance for 34 years and had never seen credit evaporate so completely.

http://www.motherjones.com/kevin-drum/ in general

http://web.archive.org/web/20010211134621/www.investmentrarities.com/thebestofdn2.html

So, does anybody else find any fault with my plan to ride all this out with plenty of cheap beer and whatever old doctor who serials I can "acquire"?

At this point, I think it's the only proper course of action.