[basil_hayden]

Ferretlover Wrote

All economies are about people wanting things.

I don't agree. Majority of the people are looking for security. Things come later. Even during housing bubble, people were really looking for economic security. People really believed buying house on borrowed money is a good thing because houses always appreciate. So we can sell the house later and be better off.

Riiiiiiiiiiiiiiiiiiiiiight!!! The illegal maid in California who bought the $700,000+ house while making $6 an hour didn't WANT the house. It was like, her 401-K plan. Brilliant analysis!

This makes as much sense as the Frontline episode about the Upper East Side of New York City and all the people yammering how they had no money after being laid off. Like the lady who was glad she had a Porsche -- so she could sell it to pay her health insurance. It's good that she had the car she said - I am better off since I had it. Another brilliant strategy. A Porsche for a 401-K! She didn't WANT the car -- she wanted a savings account, but was too stupid to find one of a bazillion bank branches in New York City!

I wonder which end of the political spectrum you support....

First of all I don't believe a maid was offered a $700000 home loan. Even if that's true, she wasn't stupid enough to believe she could live there for ever. She must have thought of selling it at some point, but didn't do it soon enough. And cars don't appreciate. If it was really things they wanted, there are thousands of homes lying vacant and foreclosed, why don't people just live in one of them. It's because those houses have no resale value. Hence no security.

(And NO, before you ask, I do NOT want to pay her unemployment benefits until she is 65 since she was too stupid or undisciplined to save any money (she looked 50, so should have been working for about 30 years)

If she has been working in USA for 30 years, what makes her illegal

You are having major reading comprehension issues my friend. These are two separate stories highlighted in the media over the past couple years that are indicative of both the scammers and scammees. While there are many different flavors and intensities, this story can be told over and over again as the cause of the sub prime mortgage collapse, and now the general economic collapse. Look at the two anecdotes as two ends of a spectrum of lies, some told by the lender, some the borrower.

[americandream]

@basil-hayden

PB's comprehension stikes me as being pretty spot on. The other fellow reduced PB's point down to some instances of bizarro economics and PB was replying in reasonably clear language which validated his intial point. You on the other hand, seem intent on delving deeper into the bowels of distractionland.

Stay on the pb's point. Ta.

[basil_hayden]

@basil-hayden

PB's comprehension stikes me as being pretty spot on. The other fellow reduced PB's point down to some instances of bizarro economics and PB was replying in reasonably clear language which validated his intial point. You on the other hand, seem intent on delving deeper into the bowels of distractionland.

Stay on the pb's point. Ta.

Angry about me pointing to your traitorous lechery in another thread, AD?

PB clearly asked if the woman in the story was an illegal after being here 30 years, and I pointed out that it was two different individuals that Outcast_Searcher was referring to, in order to straighten out any misunderstanding PB might have.

Now let's review:

There were a few hundred stories of scummy capitalists, such as yourself AD, lending to witless folks who would never be able to pay the mortgage they received on the wage they earned. Some of these scummy capitalists even gave the borrowers the downpayment, just so the scummy capitalist mortgage writer could get a cash bonus for writing a loan.

There was also the recent story of a woman who was happy she had an asset, called a Porsche, to sell and pay for the medical insurance she now needed due to bing laid off by, more than likely, another scummy capitalist.

Got it straight now or must I draw you a picture? Go stick some candles, clearly reading comprehension is not your forte, however venom appears to be.

Carry on.

[americandream]

@basil-hayden

PB's comprehension stikes me as being pretty spot on. The other fellow reduced PB's point down to some instances of bizarro economics and PB was replying in reasonably clear language which validated his intial point. You on the other hand, seem intent on delving deeper into the bowels of distractionland.

Stay on the pb's point. Ta.

Angry about me pointing to your traitorous lechery in another thread, AD?

Not at all. PB's point related to security issues in the acquiring of homes. The other fellow brought up some distracting and irrelevant examples of bizarre departures from that rather obvious point. As for being a traitor and a lecher, read Karl Marx before presuming to windbag forth on something you know nothing about other than whatyou read about in the MSM. That isn't Marxism.

Carryon.

Edit: As for being a scummy capitalist, it's each man for himself. No room here in the self-preservationist system for concessions for fellows like you who can't cut the mustard. You want change, get off your rear end and work for it.

[smiley]

I would suggest that you give this two years alright? If you are still here in that time, I venture that nothing will have changed,

If you can look into the seeds of time,
And say which grain will grow and which will not;
Speak then to me.
William Shakespeare, Macbeth,

We can argue till we are blue in the face. Instead lets touch base so that I can explain why each of these time scales must pass and conditions (as you will find them then) MUST emerge as they are.

That might be a good idea as this (as interesting discource it might be) is in serious risk of derailing this tread.

[ralfy]

The downgrade's not enough.

[AgentR11]

If it was really things they wanted, there are thousands of homes lying vacant and foreclosed, why don't people just live in one of them. It's because those houses have no resale value. Hence no security.

I knew there was a key disconnect somewhere that was bothering me. This is right to the core of what is wrong in the underlying real estate market and its associated financials.

A cheap, unsellable house:
(-) Does not provide an improving balance sheet for the owner. Thus is bad as an investment.
(+) Does provide an indefinite hold on cost of dwelling increases. A thus is a defensive instrument against really bad outcomes.

We don't like to think that really bad outcomes are right around the corner.

When I bought my house years ago, I was completely uninterested in it as an investment; it was a strategic, defensive purchase, and may be why I am still very happy with the decision.

If more people would admit to themselves that they are not speculative real estate investors, but rather people who would be well served by a defensive position establishing a constant, affordable cost of dwelling, this market could unwind cleanly and efficiently. Houses are only good investments when someone is blowing a bubble. Houses can, on the other hand, save you a good bit of money if you don't fall for the trap of buying 1000 sf/person.

Security should be found in the stable, affordable dwelling cost.
Security should never be dependent upon bubble blowers.

[Keith_McClary]

S&P Offices Demolished by Cruise Missile

Well, so far they're just "in the crosshairs":
S&P Is Facing a Bipartisan Backlash in Washington

Standard & Poor's downgrade of the U.S. government's credit rating has created something few thought possible: a bipartisan consensus in Washington.

Unfortunately for S&P, the rating firm is the one in the crosshairs. Democrats and Republicans in Congress are gearing up to put it under investigative scrutiny and do more to restrict the influence of S&P and its peers in financial markets.

SEC Asking About Insider Trading at S&P: Report

The post-downgrade backlash against S&P seems to be gathering strength.

The FT is reporting, citing anonymous sources, that the SEC is investigating whether there was any insider trading done by employees of Standard & Poor’s ahead of their downgrade of the US a week ago.

Dow Jones Newswires writes:

The U.S. Securities and Exchange Commission has asked Standard & Poor’s to disclose who within its ranks knew of the recent decision to downgrade U.S. debt before it was announced, the Financial Times newspaper reported Thursday on its website, citing unnamed people familiar with the matter.

The people said the SEC’s request was part of a preliminary look into potential insider trading, the report said. It cited one person as saying the inquiry was made by SEC examination staff, who have oversight of credit rating firms and can make referrals to the SEC’s enforcement division if they believe any law has been violated–although theinquiry might not result in a referral.

The person said the agency isn’t aware of a leak from an S&P insider, nor was it aware of an aberrational trade, the report said.

Remember, rumors of a post-bell downgrade were rampant on Wall Street very early on Friday, rumors that turned out to be true. It sure sounded like a leak, though the leak could have come from either S&P or Treasury. It seemed inevitable there would be an investigation, though it could be hard to find anything.

MarketWatch points out that, according to the 2006 Credit Rating Agency Reform Act, S&P could have its license revoked if it leaked word of the downgrade:

As observers call for a probe of insider trading from Standard & Poor’s decision to downgrade the U.S. credit rating, a little-known law from five years ago gives the Securities and Exchange Commission authority to do so.

Regulatory observers are focusing, partly, on a heavy trading volume and a major sell off of equity securities at one point on Friday, responding to speculation rampant in the markets that S&P was going to downgrade the U.S. debt later that day. S&P did, in fact, lower the U.S. government’s top-tier credit rating late that day a notch to AA+.

At issue, in part, is a 2006 statute — the Credit Rating Agency Reform Act — that says a credit rating agency could have its licence registration revoked if it leaked information about its pending downgrade decision before making that information publicly available. It also said that the rater must have policies and procedures to prevent such a disclosure.

S&P says it does in fact have such policies in place, pointing to an 18-page section of its code of conduct. It’s illegal for S&P employees to trade the stuff they rate, and the policies try to prevent that, S&P says.

This news comes at a time when lawmakers are reaching across the aisle to join hands and then start kicking S&P repeatedly in the face.

WSJ again, not paywalled for me, but I ripped the entire article anyway.

I guess "kicking S&P repeatedly in the face" is somewhere between "in the crosshairs" and "Demolished by Cruise Missile".

[Keith_McClary]

We can argue till we are blue in the face. Instead lets touch base so that I can explain why each of these time scales must pass and conditions (as you will find them then) MUST emerge as they are. Or better still, read Capital by Karl Marx.

Nouriel 'Dr. Doom' Roubini: ‘Karl Marx Was Right’

Economist Nouriel "Dr. Doom" Roubini, the New York University professor who four years ago accurately predicted the global financial crisis, said one of economist Karl Marx's critiques of capitalism is playing itself out in the current global financial crisis.

Marx, among other theories, argued that capitalism had an internal contradiction that would cyclically lead to crises, and that, at minimum, would place pressure on the economic system.

Companies, Roubini said, are motivated to minimize costs, to save and stockpile cash, but this leads to less money in the hands of employees, which means they have less money to spend and flow back to companies.

Now, in the current financial crisis, consumers, in addition to having less money to spend due to the above, are also motivated to minimize costs, to save and stockpile cash, magnifying the effect of less money flowing back to companies.

"Karl Marx had it right," Roubini said in an interview with wsj.com. "At some point capitalism can self-destroy itself. That's because you can not keep on shifting income from labor to capital without not having an excess capacity and a lack of aggregate demand. We thought that markets work. They are not working. What's individually rational...is a self-destructive process."

He doesn't predict when.

[americandream]

If it was really things they wanted, there are thousands of homes lying vacant and foreclosed, why don't people just live in one of them. It's because those houses have no resale value. Hence no security.

I knew there was a key disconnect somewhere that was bothering me. This is right to the core of what is wrong in the underlying real estate market and its associated financials.

A cheap, unsellable house:
(-) Does not provide an improving balance sheet for the owner. Thus is bad as an investment.
(+) Does provide an indefinite hold on cost of dwelling increases. A thus is a defensive instrument against really bad outcomes.

We don't like to think that really bad outcomes are right around the corner.

When I bought my house years ago, I was completely uninterested in it as an investment; it was a strategic, defensive purchase, and may be why I am still very happy with the decision.

If more people would admit to themselves that they are not speculative real estate investors, but rather people who would be well served by a defensive position establishing a constant, affordable cost of dwelling, this market could unwind cleanly and efficiently. Houses are only good investments when someone is blowing a bubble. Houses can, on the other hand, save you a good bit of money if you don't fall for the trap of buying 1000 sf/person.

Security should be found in the stable, affordable dwelling cost.
Security should never be dependent upon bubble blowers.

This was the popular capitalism peddled by generations of Western governments, going back to Thatcher and Raegan in the US and Roger Douglas here in New Zealand. Like any bubble, homeownership is symptomatic of underlying forces. With a housing market that has esentially priced itself out of business, the outgoing tide brings up its casualties, who whether rightly or wrongly, were caught up in the wave of exhuberance. There will be more of these to come and I am sure, more of the blamegame whilst those scoundrels who promoted these foolish ideas will have long since disappeared for whatever reason.

[prajeshbhat]

Marx, among other theories, argued that capitalism had an internal contradiction that would cyclically lead to crises, and that, at minimum, would place pressure on the economic system.

Companies, Roubini said, are motivated to minimize costs, to save and stockpile cash, but this leads to less money in the hands of employees, which means they have less money to spend and flow back to companies.

I think the internal contradiction Marx is talking about is called market efficiency.

If you ask an engineer, he will tell you that efficiency means more output for less effort. .

But if you ask an economist or a corporate executive, he will tell you that efficiency means MORE OUTPUT, MORE EFFORT and LESS PAY.

[americandream]

We can argue till we are blue in the face. Instead lets touch base so that I can explain why each of these time scales must pass and conditions (as you will find them then) MUST emerge as they are. Or better still, read Capital by Karl Marx.

Nouriel 'Dr. Doom' Roubini: ‘Karl Marx Was Right’

Economist Nouriel "Dr. Doom" Roubini, the New York University professor who four years ago accurately predicted the global financial crisis, said one of economist Karl Marx's critiques of capitalism is playing itself out in the current global financial crisis.

Marx, among other theories, argued that capitalism had an internal contradiction that would cyclically lead to crises, and that, at minimum, would place pressure on the economic system.

Companies, Roubini said, are motivated to minimize costs, to save and stockpile cash, but this leads to less money in the hands of employees, which means they have less money to spend and flow back to companies.

Now, in the current financial crisis, consumers, in addition to having less money to spend due to the above, are also motivated to minimize costs, to save and stockpile cash, magnifying the effect of less money flowing back to companies.

"Karl Marx had it right," Roubini said in an interview with wsj.com. "At some point capitalism can self-destroy itself. That's because you can not keep on shifting income from labor to capital without not having an excess capacity and a lack of aggregate demand. We thought that markets work. They are not working. What's individually rational...is a self-destructive process."

He doesn't predict when.

At the point of, (without sounding trite,) peak capitalism....when as much of the world's human pool is turned to labour, as there is the resourcing capacity, passing the point of maximum return and then on the downslope which will be marked by increased automation, collapse in wages, the total collapse of energy sourcing and sources, the failure of that automation, the rise of near slavery with a concomitant rise in labour disaffection with the huge global disparity in the fruits of development. I am inclined to see this in the middle of this century which is when I suspect that the balance of resource demand versus development, tilts precariously.

[Novus]

I think the internal contradiction Marx is talking about is called market efficiency.

If you ask an engineer, he will tell you that efficiency means more output for less effort. .

But if you ask an economist or a corporate executive, he will tell you that efficiency means MORE OUTPUT, MORE EFFORT and LESS PAY.

This brings up another interesting point. China's political leaders are mostly educated engineers while American policy makers are Lawyers and Economists. While our economists are talking about digging ditches and filling them in China is busy building highways, dams, high speed rail, and factories to sell us stuff. It doesn't take a genius to figure out who going to come out on top on this one.

[americandream]

I think the internal contradiction Marx is talking about is called market efficiency.

If you ask an engineer, he will tell you that efficiency means more output for less effort. .

But if you ask an economist or a corporate executive, he will tell you that efficiency means MORE OUTPUT, MORE EFFORT and LESS PAY.

This brings up another interesting point. China's political leaders are mostly educated engineers while American policy makers are Lawyers and Economists. While our economists are talking about digging ditches and filling them in China is busy building highways, dams, high speed rail, and factories to sell us stuff. It doesn't take a genius to figure out who going to come out on top on this one.

China made a huge miscalculation in following the Anerican model. Can you imagine the rebellion there will be when the resourcung is no longer suifficient to meet Chinese labour aspirations let alone maintain the infrastructure. Most of the world will eventually subside into a collective agarianism and much of the infrastructure we take for granted today will be pulled down or scavenged, like the Roman roads.

[rangerone314]

Partly stupid Greenspan's fault for blowing housing bubble after tech bubble burst.

Economist kicks the can down the road so the fake economy can keep on sputtering and not face reality, then the politicians take a hint from the same page and kick the can down the road, too.

[eXpat]

Fitch Affirms U.S. AAA Credit Rating

Fitch Ratings affirmed its AAA credit rating for the U.S. and said the outlook is stable, citing the nation’s central role in the global financial system and the flexible, diverse economy.

Fitch had put the rating under review after lawmakers reached a compromise Aug. 2 on a debt-limit agreement that prevented a U.S. default. Standard & Poor’s on Aug. 5 cut its U.S. credit rating to AA+ from AAA, saying lawmakers failed to cut spending enough to reduce record deficits. Moody’s Investors Service affirmed its top U.S. ranking last week.

The U.S. may be placed on negative outlook should its debt levels rise more than projected, indicating more than a 50 percent probability that the nation will be downgraded in the next two years, Fitch said today in a statement.

Since S&P, the New York-based subsidiary of McGraw-Hill Cos., downgraded the U.S., the yield on the 10-year Treasury note, a benchmark for everything from home mortgages to car loans, has declined to as low as 2.03 percent from a high this year of 3.77 percent. Treasuries are on pace in August for the biggest monthly gain since December 2008. Interest rates on American bonds are lower today than on most of the countries with AAA ratings by S&P and the Treasury recently financed its outstanding debt at the lowest cost ever.

http://www.bloomberg.com/news/2011-08-16/fitch-affirms-u-s-aaa-credit-rating.html

[smiley]

The U.S. may be placed on negative outlook should its debt levels rise more than projected

Well it shouldn't take long to figure that one out:
http://www.cbo.gov/ftpdocs/100xx/doc100 ... .5.1.shtml

I mean:
~5% GDP growth per year between now and 2019
~10% tax revenue growth per year

And that's the baseline projection.

[rangerone314]

The U.S. may be placed on negative outlook should its debt levels rise more than projected

Well it shouldn't take long to figure that one out:
http://www.cbo.gov/ftpdocs/100xx/doc100 ... .5.1.shtml

I mean:
~5% GDP growth per year between now and 2019
~10% tax revenue growth per year

And that's the baseline projection.

Are they dropping acid at CBO?

[Cog]

Peak Oil is going to put a bit of a crimp in those growth estimates. We are currently 0.4% and 1.3% GDP for the first two quarters of 2011.

This is why when I read estimates of how long social security and medicare will last before going bankrupt, I get a little chuckle. People are really going to be in for a shock when they see how fast this can unwind.

[americandream]

Partly stupid Greenspan's fault for blowing housing bubble after tech bubble burst.

Economist kicks the can down the road so the fake economy can keep on sputtering and not face reality, then the politicians take a hint from the same page and kick the can down the road, too.

There's a bubble being blown as we post. It's called China. Capitalists never learn. They just keep blowing.