Posted: Tue Jul 22, 2008 7:20 pm Post subject: Re: nationalizing freddie and fannie
Tyler_JC wrote:
The solution is to increase productivity. Then we can pay people higher wages without leading to inflation.
That's entirely accurate. The trend since the 80s however has been to export labor to countries where it's cheaper, thus reducing the cost of a finished product. That same product has then been sold in the United States for the same price as it was when labor was more expensive. Cost wise, it is cheaper to build cars with robots, but those savings have not been passed along to GM consumers - they have shown up as bloated salaries and incentive packages for the CEOs, owners and shareholders.
By not passing the savings of increased efficiency along to the consumer, the increase productivity/increase wealth cycle has been short-circuited and become increased productivity/concentrated wealth. The result is a population that cannot afford to buy what it produces. If there hadn't been an explosion of consumer lending that allowed people to purchase goods beyond their ability to pay for them, this couldn't have continued as long as it did.
The US consumer is now maxed out on debt, because nothing they buy is worth what they pay in real-world value based on what it took to create and market the item.
When manufacturing is done outside the country that is consuming the item, the problem is compounded by the fact that the money paid to manufacture the item doesn't recycle in the economy consuming the item - it leaves the system. This represents a net loss to the consuming economy. If enough exports are not sold to the country producing the items (which REQUIRES manufacturing in the consumer economy), the wealth of the consumer economy slowly flows out and is not replaced. In the US, this outflow has been replaced by a steady acquisition of debt. Now that debt can no longer fill the gap between creation of wealth (manufacturing real goods) and consumption (paying money to buy real goods), people will "run out of money" so to speak. Consumption will slow, and no matter how much money is printed, the purchasing power of the dollar in real world value will terminally decline as the last wealth is sucked out of the system and sent over seas, leaving a wrecked husk of a once booming economy, and a miniscule percentage of ultra-wealthy elites.
Posted: Tue Jul 22, 2008 7:38 pm Post subject: Re: THE Freddie Mac & Fannie Mae Thread (merged)
threadbear wrote:
cube wrote:
Starvid wrote:
...
3. Make sure sufficient regulation is put in place to ensure this can never happen again.
such as...
Just reregulate them. The problems began occurring when regulations were lifted.
Be specific threadbear.
Exactly what are you "proposing."
No offense but you almost sound like Bill Clinton when he said, "I'd like to build a bridge to the 21st century."
Sounds great but what the hell does that mean anyways? It can be interpreted a dirty dozen different ways!
I call that the art of talking without actually talking.
If you said, "I think we should apply regulations so these crooks cannot act like organized gangs"....that's NOT saying much.
But if you said for example ,"the government should only insure home mortgage loans that require at least a 30% down payment. That way if the market ever drops in the future again there will be some type of cushion to avoid defaults."--->now that's talking!
oops but Joe Sixpack doesn't want to pay a 30% down payment. J6P likes cheap credit.
Again threadbear please tell me exactly what you are proposing.
//
MrBill wrote:
In other words a return to Merchantile Capitalism.
.............
You may one day look back at today's 'social injustice' and WISH you were a wage slave with a guaranteed paycheque every month that actually bought your unpredecented standards of living! HAHA!
When I say my "vision of a post PO world." that does not necessarily mean a desire but simply what my crystal ball tells me.
For example I often say, "I think over half the world will die-off." That does NOT mean I'm sitting here with a bucket of popcorn enjoying the show.
In a nutshell here's my theory.
The root of investing is the belief that: population goes up, businesses expand, technology goes up, efficiency goes up, living standards rise in foreign countries thereby increasing trade opportunities. It is this "moving up" that makes it possible for asset prices to rise. Basically there's an assumption that:
Life moves up!
In a steady state economy nothing goes up.
It would be ridiculous to buy a piece of real estate or ownership in a company and expect to sell it in the future for more than what you paid for it.
Your business did not expand. How can it? There will be no more potential customers in the future then in the present.
Any potential buyer in the future will be no more economically wealthier then the previous generation. Since the buyer cannot afford to pay a higher price, how can asset prices go up?-->it can't!
"Investment" as we know it today isn't going to be around in a post PO world.
Posted: Wed Jul 23, 2008 12:16 am Post subject: Re: THE Freddie Mac & Fannie Mae Thread (merged)
threadbear wrote:
Cube, Reinstating the Glass-Steagall act would be a start.
Let me guess???
You want a separation between commercial and investment banking?
Furthermore you would like future commercial banks which create home mortgage loans to assume the risk of the loan rather then offloading it onto someone else's shoulders (perhaps a hedge fund) as a MBS (mortgaged backed security) or whatever it is they call it. right?
Posted: Wed Jul 23, 2008 2:16 am Post subject: Re: THE Freddie Mac & Fannie Mae Thread (merged)
cube wrote:
Quote:
When I say my "vision of a post PO world." that does not necessarily mean a desire but simply what my crystal ball tells me.
For example I often say, "I think over half the world will die-off." That does NOT mean I'm sitting here with a bucket of popcorn enjoying the show.
Our everyday use of the English language is very ambiguous. We often say, you should, when the correct word should be, one should. This is very clear in German. So when I say,
Quote:
You may one day look back at today's 'social injustice' and WISH you were a wage slave with a guaranteed paycheque every month that actually bought your unpredecented standards of living! HAHA!
I was not refering to you, cube, but posters, plural. Clarified? ; - ))
cube wrote:
threadbear wrote:
Cube, Reinstating the Glass-Steagall act would be a start.
Let me guess???
You want a separation between commercial and investment banking?
Furthermore you would like future commercial banks which create home mortgage loans to assume the risk of the loan rather then offloading it onto someone else's shoulders (perhaps a hedge fund) as a MBS (mortgaged backed security) or whatever it is they call it. right?
There is nothing wrong with banks selling insurance products or combining investment banks with commercial banks. The problem is allowing them to operate under different capital adequacy rules. Some under Basel I while others under Basel II. Basically an example of the US trying to rule the world or make the world play by its own rules. This only allows for regulatory arbitrage.
The US has to sort out its patchwork quilt of regulatory oversight. The current system of SEC/CFTC/OFHEO/etc. as well as state regulators is not suited for banks or non-bank financial institutions who's operations not only straddle state borders, but also international ones and operate on a global scale. I cannot think of another country that has such poor regulatory oversight?
Freddie and Fannie operate outside the scope of The Glass-Steagal Act in the first place. They were designed to. They are neither commercial or investment bank. The problem as always is that they were given special treatment by the government that gave them an unfair advantage in the market. An implicit guarantee became an explicit guarantee. Everyone saw it coming since years now. Even Greenspan.
I believe like the clean-up after the S&L crisis that Freddie and Fannie should be effectively nationalized, then ring-fence their assets, so that they can be sold-off over time, and then in the process be wound down. The damage has been done. It cannot be undone. But the government should make sure that Freddie and Fannie are unwound, so that they cannot inflict these losses on the taxpayer again. That means housing prices would need to fall further as fewer banks could or would be able to afford to service existing mortgages.
UPDATE: Chartered by Congress
Quote:
Fannie Mae, founded as part of President Franklin D. Roosevelt's plan to resuscitate the U.S. economy in 1938, and Freddie Mac, started in 1970, were chartered by Congress. They bundle home loans into securities to sell to investors and use cash from the sales to fund mortgage lenders. Together, Fannie Mae and Freddie Mac own or guarantee about half of the $12 trillion of mortgages in the U.S.
Securitization of residential mortgages by underwriters outside of Fannie Mae and Freddie Mac has almost stopped. Banks bundled $1.15 trillion of home loans into so-called private-label securities in 2006, Inside Mortgage Finance reported. The number fell to $46 billion in the first half of 2008, according to the Bethesda, Maryland-based industry publication.
The two government-sponsored enterprises own or guarantee 81 percent of U.S. mortgages originated this year, data compiled by the Washington-based Office of Federal Housing Enterprise Oversight show.
Posted: Sun Jul 27, 2008 12:26 pm Post subject: Re: nationalizing freddie and fannie
jbrovont wrote:
When manufacturing is done outside the country that is consuming the item, the problem is compounded by the fact that the money paid to manufacture the item doesn't recycle in the economy consuming the item - it leaves the system. This represents a net loss to the consuming economy. If enough exports are not sold to the country producing the items (which REQUIRES manufacturing in the consumer economy), the wealth of the consumer economy slowly flows out and is not replaced. In the US, this outflow has been replaced by a steady acquisition of debt. Now that debt can no longer fill the gap between creation of wealth (manufacturing real goods) and consumption (paying money to buy real goods), people will "run out of money" so to speak. Consumption will slow, and no matter how much money is printed, the purchasing power of the dollar in real world value will terminally decline as the last wealth is sucked out of the system and sent over seas, leaving a wrecked husk of a once booming economy, and a miniscule percentage of ultra-wealthy elites.
The above just about sums up, quite neatly what is currently wrong with THE WEST. (not just USA, Europe also).
Only one solution, stop buying from Chindia. (NOT easy).
Gasmon _________________ Constantus excrementia et level variatum
Were allways in the sh|t, its only the depth that varies
Joined: Sep 08, 2005 Posts: 749 Location: Atlanta, GA
Posted: Sun Jul 27, 2008 1:31 pm Post subject: Re: nationalizing freddie and fannie
While a lot of folks keep saying "vote the rascals out", I have this to propose.
Everyone who feels they don't make enough for what they get paid for...they need to go on a spending boycott NOW. Only buy what is barely essential to live, nothing more. In order to bring down the biggest scam in human history, the people have got to stop contributing to it by not buyin what they don't need. That means no more Wal-Mart, no more buying of new cars, no buying of new clothing, *no Christmas shopping*, buying non-processed foods, no eating out at chain restaurants (I'm partial to the mom-and-pop diner up the street, though, so lets go easy on them ) and so on and so forth. And take out no debt of any kind, from here on out. Only way to kill the beast is to starve it, and yes, it can be done.
Anyone with kids have got to start teaching them the evils of materialism, and urge them to never, ever get a credit card or borrow money for any reason for as long as they live.
Only then will we be able to take back our country. It's our money, and it's about damn time we start holding on to it for a change. _________________ Nowhere to run, nowhere to hide...
...and the meek shall inherit the Earth!
Joined: Feb 23, 2005 Posts: 501 Location: Winnipeg
Posted: Mon Jul 28, 2008 11:05 am Post subject: Re: nationalizing freddie and fannie
I was thinking along the lines of the US government using the housing crisis as a way to seize large tracts of land to use for state subsidized housing, detention camps, solar farms, whatever else they might find useful. I wasnt so concerned about whether it would be a good investment or not.
I was also wondering if perhaps this situation may have been part of plan to seize large amounts of real estate with no fuss. Or if thats even worth considering. I mean if everyone's losing their jobs and cant afford housing and the peak oil crisis is going to make the recession essentially permanent wouldn't it be an option to solve the housing crisis?
Posted: Mon Jul 28, 2008 2:31 pm Post subject: Re: nationalizing freddie and fannie
Things like this just shock me. Please don't take this like a partisan shot, because it's not at all.
...but how could anyone even entertain the idea of voting for a guy that takes advice on the economy from someone who destroyed HP? Would you want her for your personal financial advisor? Isn't that kind of like hiring a child molester to baby sit your child?
Again, this isn't a partisan shot. All I'm saying is, it's common knowledge Carly Fiorina can't manage the finances, or the leadership of a large business. Compared to the economy of the United States, HP is small fries - simple. It's a lemonaid stand, and she couldn't even handle that. ...and here's McCain trying to prove he can lead the United States while taking economic advice from her?
Um... problem. "Danger Will Robinson."
Edit: I think I should add that I'm not advocating Obama. All the PR, great sound bites and visionary photography haven't convinced me that he knows what he's doing either.
Tyler_JC wrote:
The perfect example of this problem is Carly Fiorina, McCain's top economic advisor.
She was a horrific CEO and turned HP from a world leader in computer technology into a second rate printer ink company.
After the company's shares collapsed by 50%+ under her watch, they booted her out with a $21 million severance package! Two larger institutional investors sued HP and forced her to return at least some of the money.
On the day that she left HP, the company's stock jumped 7%. Ya, she was that bad.
Posted: Wed Jul 30, 2008 3:46 am Post subject: Re: THE Freddie Mac & Fannie Mae Thread (merged)
[quote="cube"][quote="threadbear"]
cube wrote:
[.
In a nutshell here's my theory.
The root of investing is the belief that: population goes up, businesses expand, technology goes up, efficiency goes up, living standards rise in foreign countries thereby increasing trade opportunities. It is this "moving up" that makes it possible for asset prices to rise. Basically there's an assumption that:
Life moves up!
In a steady state economy nothing goes up.
It would be ridiculous to buy a piece of real estate or ownership in a company and expect to sell it in the future for more than what you paid for it.
Your business did not expand. How can it? There will be no more potential customers in the future then in the present.
Any potential buyer in the future will be no more economically wealthier then the previous generation. Since the buyer cannot afford to pay a higher price, how can asset prices go up?-->it can't!
"Investment" as we know it today isn't going to be around in a post PO world.
Yes it does away with the speculative bubble. People don't want to go back to simple living but will soon be forced to. Envy and greed are two things which fuel the materialistic society. People (that survive) hopefully will have a different set of values. Simple living and high thinking.
Posted: Wed Jul 30, 2008 6:03 am Post subject: Re: THE Freddie Mac & Fannie Mae Thread (merged)
Hi manu! I have to politely disgree with Cube's sentiments. Some feel that Peak Oil will be the great social leveler. I happen to disagree. Nothing in History points to a universal egalitarian society. As soon as I have two cows and a piece of land I am doing better than the man with one cow or the other with no land. I automatically start to become a capitalist. Albeit on a small scale. What I do with that surplus - spend it or invest it - depends then on how much capital - land, labor & cows - I accumulate.
Nothing says that once I have accumulated wealth that someone cannot come along and forceably take it away from me or my hiers, but it is almost impossible to stop me from earning it in the first place. Early to bed, early to rise, makes a man happy, healthy and wise is sage old wisdom as old as the world is young. You might even say that necessity is the Mother of invention! Although I was not there, obviously parts of the Kuran, Old Testiment, Bhagavad-Gita or Confucius sayings all relate to age old human desires and follies. That is human nature and peak oil will not change that. But you're right simple living and high thinking is our only salvation. _________________ The organized state is a wonderful invention whereby everyone can live at someone else's expense.
Joined: Apr 12, 2007 Posts: 1168 Location: Central NC
Posted: Wed Jul 30, 2008 6:48 am Post subject: Re: THE Freddie Mac & Fannie Mae Thread (merged)
Ah! Time for some more cow economics. . .or is that politics?
SOCIALISM: You have two cows. State takes one and give it to someone else.
COMMUNISM: You have two cows. State takes both of them and gives you milk.
FASCISM: You have two cows. State takes both of them and sell you milk.
NAZISM: You have two cows. State takes both of them and shoot you.
BUREAUCRACY: You have two cows. State takes both of them, kill one and spill the milk in system of sewage.
CAPITALISM: You have two cows. You sell one and buy a bull.
Alternative: A COWSMIC VIEW OF WORLD ORGANIZATION
FEUDALISM: You have two cows. Your lord takes some of the milk.
PURE SOCIALISM: You have two cows. The government takes them and puts them in a barn with everyone else's cows. You have to take care of all the cows. The government gives you as much milk as you need.
BUREAUCRATIC SOCIALISM: You have two cows. The government takes them and puts them in a barn with everyone else's cows. They are cared for by ex-chicken farmers. You have to take care of the chickens the government took from the chicken farmers. The government gives you as much milk and as many eggs as the regulations say you should need.
FASCISM: You have two cows. The government takes both, hires you to take care of them, and sells you the milk.
PURE COMMUNISM: You have two cows. Your neighbors help you take care of them, and you all share the milk.
RUSSIAN COMMUNISM: You have two cows. You have to take care of them, but the government takes all the milk.
DICTATORSHIP: You have two cows. The government takes both and shoots you.
SINGAPORE DEMOCRACY: You have two cows. The government fines you for keeping two unlicensed animals in an apartment.
MILITARIANISM: You have two cows. The government takes both and drafts you.
PURE DEMOCRACY: You have two cows. Your neighbors decide who gets the milk.
REPRESENTATIVE DEMOCRACY: You have two cows. Your neighbors pick someone to tell you who gets the milk.
AMERICAN DEMOCRACY: The government promises to give you two cows if you vote for it. After the election, the president is impeached for speculating in cow futures. The press dubs the affair "Cowgate".
BRITISH DEMOCRACY: You have two cows. You feed them sheep's brains and they go mad. The government doesn't do anything. _________________ "The era of procrastination, of half-measures, of soothing and baffling expedients, of delays, is coming to a close. In its place we are entering a period of consequences…"
Sir Winston Churchill
Posted: Wed Jul 30, 2008 1:39 pm Post subject: Fannie, Freddie On a Tightrope
Quote:
The collapse in the stock prices of Fannie Mae and Freddie Mac earlier this month, followed by an equally dramatic rebound, underscored the vulnerability of today's agitated markets to panic and the mercurial behavior of global traders.
Financial experts said the drop, nearly 50 percent in a week, was precipitated by a series of alarming reports from analysts and in the media and was then turbocharged by a surge in short selling, bets made by investors that the shares would fall.
The federal government's response -- an unprecedented Treasury rescue plan approved by Congress this weekend, along with a move by the Securities and Exchange Commission to stop an especially troublesome type of short selling -- prompted a surge in the stock prices.
But the actions did not solve fundamental problems still facing the mortgage finance giants, especially their low levels of capital relative to those of other financial firms. The companies' leaders acknowledge that the rescue plan alone will not end the stock volatility or ease concerns about whether Fannie Mae and Freddie Mac have the resources to weather the financial crisis in coming months.
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) and so on and so forth. And take out no debt of any kind, from here on out. Only way to kill the beast is to starve it, and yes, it can be done.
