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Economic Recovery

by Phrak
Tags: economic, recovery
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brainstorm
#415
Nov17-10, 09:42 AM
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Quote Quote by turbo-1 View Post
And some salient points. The rest of the US can't be expected to bail out CA, or any other state that benefited so much from the boom-times and excesses of the past few decades. We didn't share in the largess and shouldn't have to pick up the tab for the crash.
The problem is that prosperity trickles down to some degree in all directions. So you can't really say that no one benefited from a CA boom, the same as homeless people can't say that they don't benefit from other people's labor and prosperity. The problem with these bailouts, imo, is that they try to prevent the bubbles from collapsing completely instead of just providing people with basic means to get by and restart their lives, such as food-stamps, access to abandoned property, etc.
czelaya
#416
Nov17-10, 10:16 AM
P: 72
Quote Quote by turbo-1 View Post
And some salient points. The rest of the US can't be expected to bail out CA, or any other state that benefited so much from the boom-times and excesses of the past few decades. We didn't share in the largess and shouldn't have to pick up the tab for the crash.
Agreed.

California has continued to extended benefits to a larger populace, and has failed to be fiscally responsible. However, the government will intervene. Then the rest of the US will be burdened with helping California. There will be no lesson learned.

States have to be responsible for their actions. California going into insolvency while not economically viable… must happen. There has to be corrections made. If we continue with advocating fiscal irresponsibility, the US economy as a whole will be next. And this is what exactly is happening.

I just can’t understand while people complain about the trickling effects of insolvency with more government intervention. All it does is extend what eventually will fail.

I live in Louisiana, overall our economy is doing well. The state has taken steps every year to decrease spending. As a graduate student, I've personally felt the cuts in education. However, we make do. More cuts are coming but compared to the rest of the United States our losses haven’t been that great. The state has saved though out the years and has been dipping into its general saving but at the same time returning revenue back.
readaynrand
#417
Nov17-10, 12:51 PM
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Quote Quote by bleedblue1234 View Post
A lot of this mess could be largely avoided if the government hadn't stepped in years ago to continue this crazy scherade of propping up the US economy against the rest of the world and continuing to rely on the cheap easy credit that has moved the US economy along for the past 10-15 years.
Absolutely correct. In a system with sound money (like gold and silver), a crisis like this would never have occured. Government involvement is the source of the problems.
Astronuc
#418
Nov17-10, 01:38 PM
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Quote Quote by readaynrand View Post
Absolutely correct. In a system with sound money (like gold and silver), a crisis like this would never have occured. Government involvement is the source of the problems.
And business played a role.
turbo
#419
Nov17-10, 02:14 PM
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Quote Quote by Astronuc View Post
And business played a role.
A big role. More government involvement (regulation of derivative investment products for instance, and requiring heavy capitalization levels for companies engaging in very risky investments, for instance) might have saved us from some of the devastation. Instead, financial giants packaged over-rated "investment" products of dubious worth and made billions until the bubble collapsed, and the taxpayers found themselves on the hook for billions more. "Too big to fail" is a license to steal.
Al68
#420
Nov17-10, 02:25 PM
P: 801
Quote Quote by turbo-1 View Post
A big role. More government involvement (regulation of derivative investment products for instance, and requiring heavy capitalization levels for companies engaging in very risky investments, for instance) might have saved us from some of the devastation.
Yeah, more government interference as a solution for problems caused by government interference. Nice vicious cycle we're in there. How convenient is that for power hungry politicians?
WhoWee
#421
Nov17-10, 02:26 PM
P: 1,123
Quote Quote by turbo-1 View Post
A big role. More government involvement (regulation of derivative investment products for instance, and requiring heavy capitalization levels for companies engaging in very risky investments, for instance) might have saved us from some of the devastation. Instead, financial giants packaged over-rated "investment" products of dubious worth and made billions until the bubble collapsed, and the taxpayers found themselves on the hook for billions more. "Too big to fail" is a license to steal.
Perhaps LESS Government mandates that lead to some of these problems should be considered?
turbo
#422
Nov17-10, 02:37 PM
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Quote Quote by WhoWee View Post
Perhaps LESS Government mandates that lead to some of these problems should be considered?
Where is the government mandate that made financial firms bundle risky loans, classify them as grade-A investments, and sell them to unsuspecting investors? We not only need to re-regulate the financial markets, we need to enforce the regulations already on the books. And actually punish the people who break the law. Fraud is and has been against the law for a long time - why aren't the crooks being prosecuted?
mheslep
#423
Nov17-10, 02:47 PM
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Quote Quote by turbo-1 View Post
A big role. More government involvement (regulation of derivative investment products for instance, and requiring heavy capitalization levels for companies engaging in very risky investments, for instance) might have saved us from some of the devastation. [...]
Good grief. We have a $3.5 trillion government employing some two million people, not including the military, and that's just the federal government. Yet the answer is "more government involvement"?
mheslep
#424
Nov17-10, 02:50 PM
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Quote Quote by Astronuc View Post
Something to look forward to or ponder - what if -

California Will Default On Its Debt, Says Chris Whalen
http://finance.yahoo.com/tech-ticker...s-Chris-Whalen

He makes some interesting points.
I'm curious about the predicted results of a California default. I noted the other the day that roughly half of the states defaulted on their debts in the 19th century, from building canals and such, yet they and the union are still here.
Al68
#425
Nov17-10, 03:04 PM
P: 801
Quote Quote by turbo-1 View Post
Where is the government mandate that made financial firms bundle risky loans, classify them as grade-A investments, and sell them to unsuspecting investors?
You already know the answer to this. Fannie and Freddie sought to buy risky mortgages, ostensibly to make it easier for people to get credit.

Edit: As if the above isn't common knowledge, here's a link to Fannie bragging about their "chartered mission to increase the amount of funds available in order to make homeownership and rental housing more available and affordable": http://www.fanniemae.com/kb/index?page=home&c=aboutus

Here's a link to Fannie easing their underwriting standards: http://query.nytimes.com/gst/fullpag...5AC0A96F958260


They were classified as grade-A because their value was ensured by the demand of government sponsored enterprises.

So the mistake that private companies made was to go along with that government scheme. And your conclusion is to blame private companies for their participation instead of the politicians who devised the scheme?

And you are well aware that mortgages meeting private lending standards were not a part of the problem.
WhoWee
#426
Nov17-10, 03:09 PM
P: 1,123
Quote Quote by turbo-1 View Post
Where is the government mandate that made financial firms bundle risky loans, classify them as grade-A investments, and sell them to unsuspecting investors? We not only need to re-regulate the financial markets, we need to enforce the regulations already on the books. And actually punish the people who break the law. Fraud is and has been against the law for a long time - why aren't the crooks being prosecuted?
Are you serious?
http://www.ffiec.gov/CRA/
http://www.federalreserve.gov/dcca/cra/
Astronuc
#427
Nov17-10, 03:22 PM
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Yes he is serious. From the second link:
Neither the CRA nor its implementing regulation gives specific criteria for rating the performance of depository institutions. Rather, the law indicates that the evaluation process should accommodate an institution's individual circumstances. Nor does the law require institutions to make high-risk loans that jeopardize their safety. To the contrary, the law makes it clear that an institution's CRA activities should be undertaken in a safe and sound manner.
The CRA wasn't responsible for the subprime crisis. If one disagrees - please provide the evidence that supports such a view. For example, please provide the volume of subprime loans by type and year for the GSEs, and then provide the default rates. Then provide the same data for the non-GSEs, e.g, Bear Stearns, Merrill Lynch, Lehman Bros, Citibank, Goldman Sachs, AIG, . . . . .

http://www.law.cornell.edu/uscode/12...1----000-.html

The federal spending and the GSEs were part of the problem, but perhaps a bigger problem with the distressed corporate debt that exploded in the 2000s, and in conjunction with the CDOs, CLOs, and various derivatives undermined the financial markets.

Making risky subprime loans is actually in violation of the CRA.

The government didn't force, bribe or coerce anyone in making fraudulent (illegal) or risky loans. People freely chose (as in free market) to do so.

And at the moment, government spending and lack of revenue is a really big problem - and it's unsustainable.
WhoWee
#428
Nov17-10, 03:29 PM
P: 1,123
Quote Quote by Astronuc View Post
Yes he is serious. From the second link:
The CRA wasn't responsible for the subprime crisis. If one disagrees - please provide the evidence that supports such a view. For example, please provide the volume of subprime loans by type and year for the GSEs, and then provide the default rates. Then provide the same data for the non-GSEs, e.g, Bear Stearns, Merrill Lynch, Lehman Bros, Citibank, Goldman Sachs, AIG, . . . . .

http://www.law.cornell.edu/uscode/12...1----000-.html

The federal spending and the GSEs were part of the problem, but perhaps a bigger problem with the distressed corporate debt that exploded in the 2000s, and in conjunction with the CDOs, CLOs, and various derivatives undermined the financial markets.

Making risky subprime loans is actually in violation of the CRA.

The government didn't force, bribe or coerce anyone in making fraudulent (illegal) or risky loans. People freely chose (as in free market) to do so.

And at the moment, government spending and lack of revenue is a really big problem - and it's unsustainable.
Sometimes all you need is a little light along the path to go in the wrong direction.

As we've discussed in other threads, this all dates back to the S&L mess - the problem was never solved - just delayed and re-packaged.
Al68
#429
Nov17-10, 03:40 PM
P: 801
Quote Quote by Astronuc View Post
The government didn't force, bribe or coerce anyone in making fraudulent (illegal) or risky loans. People freely chose (as in free market) to do so.
They chose to freely accept the bribe. Demand for risky loans was artificially created by government. That's not what "free market" means. And the fact that the demand was created by government has been substantiated many times here, including recently in this thread. And the fact that banks were not forced to "take the bribe" doesn't make such an arrangement a "free market".
And at the moment, government spending and lack of revenue is a really big problem - and it's unsustainable.
One seventh of the entire nation's GDP collected by the federal government alone is a "lack of revenue"? On what planet?
Gokul43201
#430
Nov17-10, 03:46 PM
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Quote Quote by Al68 View Post
They chose to freely accept the bribe.
Are you saying that the entirety of the blame lies with the briber, and none of it with the bribee?
WhoWee
#431
Nov17-10, 03:49 PM
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Quote Quote by readaynrand View Post
These guys are analphabets of economics.
Welcome to PF. You might want to take a quick look at the rules.
WhoWee
#432
Nov17-10, 03:51 PM
P: 1,123
Quote Quote by Al68 View Post
One seventh of the entire nation's GDP collected by the federal government alone is a "lack of revenue"? On what planet?
Tax revenues are down - look back a page or 2 - (could be in the other thread).


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