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Cheech Tremendous

The US Economy and Current Financial Crisis

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But unlike the weatherman, their predictive statements might influence events.

 

Perhaps. But, if you're taking people like Jim Cramer seriously then you're an amateur who shouldn't be involved in the stock market in the first place.

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I'm confused about why that guy Santelli was even flipping out about Obama helping people with mortgages. I don't see the problem with helping those who got into trouble because of job loss or the swindling of a bank and not helping those who just dug a trench they knew they couldn't afford in a 1000 years (i.e, buying a $600,000 home when they knew they would never make enough to afford it). That actually seems fair and reasonable to me.

 

That's still punishing those who made a piss poor decision and helping those who just got up and screwed.

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I disagree. It's one thing to say we shouldn't be concerned. It's another to say that we shouldn't be propping them up and supporting their bad decision, whether they were properly given the facts or not. People get swindled all the time. And I don't think it's ever a good thing. But, I don't think that I should be forced to pay for their bad decisions or even bad fortune. I am not responsible for insuring their financial success.

 

First of all, unless you're single-handedly financing the mortgage bail-out, you really don't have room to say "I don't think that I should be forced to pay". The American people are collectively paying for this, and even that's arguable since its going to be financed with debt. No one is going to send you a bill in the mail for this thing.

 

Second, you still don't seem to get how keeping more foreclosures from happening in the future helps the country overall economically. Whether the benefit outweighs the cost is a debate that needs to occur, but we're not doing this to insure "their financial success," we are doing this to keep the crisis from getting worse.

 

We have a real problem is this country of people not recognizing how the effects of economic and social problems tend to hurt not just the people originally affected, but often spread to the rest of society.

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First of all, unless you're single-handedly financing the mortgage bail-out, you really don't have room to say "I don't think that I should be forced to pay". The American people are collectively paying for this, and even that's arguable since its going to be financed with debt. No one is going to send you a bill in the mail for this thing.

 

The fact that we're going to be paying for this with U.S. treasuries (the public debt) and, more likely, massive inflation means that I'll be paying for this just as you will be. It's something that's not going to benefit me in the slightest, especially when it utterly fails. I don't think it's a good idea and I'm being forced to pay for it no matter what, through public debt assurances, future tax hikes to pay for that debt (assuming we ever try to do that), and, again, inflation.

 

Second, you still don't seem to get how keeping more foreclosures from happening in the future helps the country overall economically. Whether the benefit outweighs the cost is a debate that needs to occur, but we're not doing this to insure "their financial success," we are doing this to keep the crisis from getting worse.

 

We have a real problem is this country of people not recognizing how the effects of economic and social problems tend to hurt not just the people originally affected, but often spread to the rest of society.

 

Actually, I'm not opposed to preventing future foreclosures through stricter monitoring of the financial sector and tighter rules on how and why banks can lend. Neither of those things will alleviate the situation we have now. In all likelihood, they'd probably exacerbate the problems by further restricting credit and raising interest rates. But, those are the things that need to be done to produce a vibrant and lasting economy, rather than a future bubble economy (like this administration wants to re-inflate.)

 

Preventing foreclosures already scheduled to occur, however, is what's currently on the docket. This is an attempt to stabilize housing prices which are, quite frankly, still far too high and need to fall even further before demand will begin to match the amount of supply out there. The government cannot create that demand, it can only provide the illusion of its existence and even then it has to pay for it with something, usually either debt or inflation. So Plan B is to eliminate the problem of a still-growing supply-side (the foreclosed-upon houses) by paying the difference of between what the borrower ought to pay (by his agreement) and what they now can pay. The difference is paid to the lender absorbing that loss (i.e. the bank), but still doesn't address the much lower level of demand in the housing market, which will continue to dip (whether people are in houses or not), or the economy as whole, which needs to start to turn around before the housing market can turn around. (The housing market will not lead the way out of this depression.)

 

The problem is, as Peter Schiff frequently points out, Americans are broke. They can no longer afford their luxurious lifestyles with the debt they've accumulated. The final nail in the coffin will be once the rest of the world stops buying our debt and looks to dump the dollar as their reserve note, which is already well on its way.

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I see what you are saying now.

 

I'll need to consider the benefit of lower home prices versus the problems this will cause for the parts of the economy that rely on new home construction and purchases to drive them.

 

Can you explain further what you think the beneficial effects of housing deflation will be? I want to consider all sides of this.

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Can you explain further what you think the beneficial effects of housing deflation will be? I want to consider all sides of this.

 

Owning a house might be put in the proper perspective again. Houses will no longer be treated as sources of credit, but strictly as living spaces. Houses will become affordable again. According to the article I posted above, perhaps houses will become smaller and use less energy.

 

That's about all I can think of right now. But, the point really is that this needs to happen and will happen because the housing bubble cannot be sustained, not necessarily that it ought to happen. I agree with you that it would be nice to continue building new houses and therefore support the people in the industries reliant on that business, but we don't have the money to do that. It would be nice if everyone had all their basic necessities taken care of and didn't need to work, but that's not reality.

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Can you explain further what you think the beneficial effects of housing deflation will be? I want to consider all sides of this.

 

Owning a house might be put in the proper perspective again. Houses will no longer be treated as sources of credit, but strictly as living spaces. Houses will become affordable again. According to the article I posted above, perhaps houses will become smaller and use less energy.

 

That's about all I can think of right now. But, the point really is that this needs to happen and will happen because the housing bubble cannot be sustained, not necessarily that it ought to happen. I agree with you that it would be nice to continue building new houses and therefore support the people in the industries reliant on that business, but we don't have the money to do that. It would be nice if everyone had all their basic necessities taken care of and didn't need to work, but that's not reality.

 

 

You bring up a good point here, and I think I mentioned it earlier in this thread. Before the housing bubble burst, housing prices were out of fucking control. Three bedroom houses going for $400,000. Housing prices like that, especially in areas that do not have wages to support it, lead in to people taking out ridiculous loans they cannot afford and the cycle continues.

 

I think one of the problems is that people are looking at houses as a way to make money in the future, rather then simply a place to live. Now, in essence there is nothing wrong with property value going up, as inflation goes up, but the house marking of the early 2000's way out of control, and I don't think enough people are showing enough concern for that situation that is bound to repeat itself.

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From Drudge:

 

"Sen. Charles Grassley wants AIG executives to apologize for the collapse of the insurance giant—but said Tuesday that "obviously" he didn't really mean that they should kill themselves.

 

The Iowa Republican raised eyebrows with his comments Monday that the executives—under fire for passing out big bonuses even as they were taking a taxpayer bailout—perhaps should "resign or go commit suicide."

 

I thought he had the right idea the first time, personally. I think we need to make corporate America a little more uncomfortable, especially right now.

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You bring up a good point here, and I think I mentioned it earlier in this thread. Before the housing bubble burst, housing prices were out of fucking control. Three bedroom houses going for $400,000. Housing prices like that, especially in areas that do not have wages to support it, lead in to people taking out ridiculous loans they cannot afford and the cycle continues.

 

I think one of the problems is that people are looking at houses as a way to make money in the future, rather then simply a place to live. Now, in essence there is nothing wrong with property value going up, as inflation goes up, but the house marking of the early 2000's way out of control, and I don't think enough people are showing enough concern for that situation that is bound to repeat itself.

 

This is something I just noticed, but people in NYC would kill someone to get a 3 BR house for $400,000. I just saw something on the news last week which was trying to show what you could get for a "mere" $500,000 these days and it could get you a 2 or 3 BR in Hoboken, NJ (I forget), a smallish 2 BR in Jackson Heights, Queens or a 1 BR condo in Manhattan and all that's AFTER the bubble burst. Just thought I'd provide a little perspective on how absurd the market still is here at least.

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From Drudge:

 

"Sen. Charles Grassley wants AIG executives to apologize for the collapse of the insurance giant—but said Tuesday that "obviously" he didn't really mean that they should kill themselves.

 

The Iowa Republican raised eyebrows with his comments Monday that the executives—under fire for passing out big bonuses even as they were taking a taxpayer bailout—perhaps should "resign or go commit suicide."

 

I thought he had the right idea the first time, personally. I think we need to make corporate America a little more uncomfortable, especially right now.

 

Yeah but what the hell is with conservatives and Republicans all of a sudden playing the economic populist card. Conservatives have screamed for decades the same tired mantras about tax cuts for the rich, loosening regulations on big business, and trickle down economics.

And now, all of a sudden they're screaming "EAT THE RICH!!"

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You bring up a good point here, and I think I mentioned it earlier in this thread. Before the housing bubble burst, housing prices were out of fucking control. Three bedroom houses going for $400,000. Housing prices like that, especially in areas that do not have wages to support it, lead in to people taking out ridiculous loans they cannot afford and the cycle continues.

 

I think one of the problems is that people are looking at houses as a way to make money in the future, rather then simply a place to live. Now, in essence there is nothing wrong with property value going up, as inflation goes up, but the house marking of the early 2000's way out of control, and I don't think enough people are showing enough concern for that situation that is bound to repeat itself.

 

This is something I just noticed, but people in NYC would kill someone to get a 3 BR house for $400,000. I just saw something on the news last week which was trying to show what you could get for a "mere" $500,000 these days and it could get you a 2 or 3 BR in Hoboken, NJ (I forget), a smallish 2 BR in Jackson Heights, Queens or a 1 BR condo in Manhattan and all that's AFTER the bubble burst. Just thought I'd provide a little perspective on how absurd the market still is here at least.

Isn't there also a large difference the average income in places with high costs of living and the rest of the country?

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You bring up a good point here, and I think I mentioned it earlier in this thread. Before the housing bubble burst, housing prices were out of fucking control. Three bedroom houses going for $400,000. Housing prices like that, especially in areas that do not have wages to support it, lead in to people taking out ridiculous loans they cannot afford and the cycle continues.

 

I think one of the problems is that people are looking at houses as a way to make money in the future, rather then simply a place to live. Now, in essence there is nothing wrong with property value going up, as inflation goes up, but the house marking of the early 2000's way out of control, and I don't think enough people are showing enough concern for that situation that is bound to repeat itself.

 

This is something I just noticed, but people in NYC would kill someone to get a 3 BR house for $400,000. I just saw something on the news last week which was trying to show what you could get for a "mere" $500,000 these days and it could get you a 2 or 3 BR in Hoboken, NJ (I forget), a smallish 2 BR in Jackson Heights, Queens or a 1 BR condo in Manhattan and all that's AFTER the bubble burst. Just thought I'd provide a little perspective on how absurd the market still is here at least.

Isn't there also a large difference the average income in places with high costs of living and the rest of the country?

 

I would think so. Like I said my main point is it comes down to whether the city/general outlying area has the type of jobs offering those type of incomes that can actually put people in houses without having to bend over backwards/sideways/frontways to get some type of manipulative type of loan in order to set foot inside a house.

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Isn't there also a large difference the average income in places with high costs of living and the rest of the country?

 

Not really. When I was a kid, the building (1 & 2 BR apartments) I live in was city owned and no one was paying more than $300 a month for rent. Once the city sold the building to a private owner in '99 the minimum rents tripled to at least $700 for everyone and the apartment that I live in now (a small 2 BR in what used to be classified as "the ghetto") now goes for AT LEAST $1200. The neighborhood I live in doesn't have jobs that pay $50,000+ but that's the kind of income you need to make in order to live in a neighborhood where the rents have gone up anywhere from $1000-1500 a month in the last 10-15 years. I don't need to tell you that the average income has lagged behind that increase greatly.

 

In simpler terms, very few rich people live in my neighborhood, but there's nothing you can do when studio apartments are in the $700 range. For my zip code, the

 

Average Household Income is $49,808

Median Household Income is $27,415

 

That's a HUGE discrepancy, but the landlords don't give a shit and still continue to charge the amounts that wealthier people can afford to pay. Gentrification hasn't made my neighborhood any "better" or "safer", but it's made it almost impossible to live in without a roommate or two.

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Jerk, my understanding is that, generally, incomes are higher in places with higher costs of living like NYC, but generally not high enough to make up for the cost. That is the increased cost of living is generally greater proportionally than the increased income. Does that make sense? Can someone who's lived in Smalltown USA and a major, expensive city verify this?

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So how much have the media contributed to the Economic downturn? You know the constant coverage and updates causing paranoia and unrest and starting events that wouldn't even have happened with some companies by just 'suggesting' that they might be in trouble. You know the whole feedback loop paradoxical bullshit.

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It can effect consumer confidence, but a lack of consumer confidence isn't what got us into this mess.

 

 

 

Speaking of messes:

 

Senate Banking committee Chairman Christopher Dodd told CNN Wednesday that he was responsible for language added to the federal stimulus bill to make sure that already-existing contracts for bonuses at companies receiving federal bailout money were honored.

 

Dodd acknowledged his role in the change after a Treasury Department official told CNN the administration pushed for the language.

 

Both Dodd and the official, who asked not to be named, said it was because administration officials were afraid the government would face numerous lawsuits without the new language....

 

...On Tuesday, Dodd denied to CNN that he had anything to do with adding the language, which has been used by officials at bailed-out insurance giant AIG to justify paying millions of dollars in bonuses to executives after receiving federal money.

http://www.cnn.com/2009/POLITICS/03/18/aig...ress/index.html

 

 

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The Democrats better be on their toes and not sitting back hoping the American people are willing to ride this out for the next four year, in case everyone hasn't noticed you have republicans falling all over themselves to get on all the cable news networks and to spew this populist banter(as if complaining about CEO salaries/bonuses is somehow going out on a limb here) and feigning outrage over the screwjobs these companies are pulling on the taxpayers, as if the conservative/libertarian/corporatist type policies over the past 30 years that they have all been harping up and down that we need to impliment aren't a major fucking reason we are in this mess.

 

Lets not forget that it was just this past February when legislation to cap bonuses at $500,000 was met with harsh criticism by Republicans who claimed such outrageous zingers such as "Is This Still America" ?

 

You'd think they would be getting called out on this hypocrisy because you know the media is "sooooo liberal" but it's not happening.

 

And on top of this the general public's attention span on these types of things are so short and scattered that they could fail to realize that these same people screaming on TV right now are the ones who played a major role in getting us here in the first place.

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Supposedly some of the AIG execs will be returning their bonuses now.

 

If so, this is a good day for America, and I'm glad for it. The public outrage and death threats worked. Hopefully the government and public will continue to hold corporate America (and others) responsible for their failures going forward.

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At least Congress voted to tax the hell out of these bonuses, and thus recoup most of them.

 

I too hate contract law. Let's fuck over all rich people because some of them made poor decisions at work. [/end sarcasm]

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At least Congress voted to tax the hell out of these bonuses, and thus recoup most of them.

 

I too hate contract law. Let's fuck over all rich people because some of them made poor decisions at work. [/end sarcasm]

 

Well, I hate my tax money going to help stupid people who don't deserve it. There's no justification for bail out money going to lucrative bonuses for these people. None.

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At least Congress voted to tax the hell out of these bonuses, and thus recoup most of them.

 

I too hate contract law. Let's fuck over all rich people because some of them made poor decisions at work. [/end sarcasm]

 

They fucked themselves over when they drove their business into needing bailout money in the first place. About a dozen of these executives at AIG took their retention bonuses and then split. That was paid by our tax dollars. And you are defending these guys? Are you yourself rich or something?

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I don't like the idea of the government selectively taxing certain groups of people based on anything other than income. That would be a potentially dangerous precedent to set.

 

I really don't like the fact that these scumbags are giving themselves bonuses, though.

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Well, these financial rapists need to be punished any way possible, in my mind. They had a free run under Bush, but that shit is over.

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It can effect consumer confidence, but a lack of consumer confidence isn't what got us into this mess.

 

It's what's keeping us in it.

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