Quote from: andy6432668 on September 15, 2008, 07:24:05 PM
When it comes to Obama and Biden you can say dumb and dumber Joe Biden is a gift that keeps on giving.

That grammatical error makes what you said humorous. Deeerrrrrrppp.

Obama's just Biden his time.  He'll be Barack on top any day now.

Quote from: Nichole on September 15, 2008, 11:54:50 PM

Jenn, I don't think you'll have to wait all that long for Peak Oil or something very like it.

I know, I told you I didn't have enough time to prepare our eco-community.  So what's Plan B? 

Quote from: Nephie on September 16, 2008, 02:08:06 PM
Obama's just Biden his time.  He'll be Barack on top any day now.

Jenn

We made less than zero provisions for the end of cheep oil and keep telling ourselves that some 'new' economy was going to replace the old one of making things and selling them to others.  Since 9-11 a collective insanity has gripped the USA that has/had everyone thinking that somehow we could replace income with debt and never have some 'due date' show up.

That's not a new situation.  The US has been engaging in deficit spending for decades.  Bush just accelerated the process.

Oh its not just the government, its become a problem across the board, from families to financial institutions.

Certainly you can blame society-wide greed, corruption, and shortsightedness for most of the troubles, but that's only relevant on the micro level.  The big picture is simpler, and more frightening.

The policies of the Fed and the government set the tone for the rest of society - especially since the populace has lost all critical thinking skills.  Look at the enormous policy push for "home ownership", and what the Fed's been doing with interest rates.  They've been flooding America with "easy money".  When the cash is more plentiful, risky loans don't seem so risky anymore, and everyone can have a good time.  Then... OOPS!  Productivity hasn't actually increased, so the new money wasn't backed by real wealth.  We just had a destructive frenzy of consumption and malinvestment.  Meanwhile, the state's been trading government securities to the Fed for new dollars in a grand counterfeiting scheme, and spending the money to run the bureaucracy and fund the wars in the Middle East.  The amount of wealth that's being destroyed like this is just INCREDIBLE.

Things like the income tax are just for show - the biggest part of the state's income is borrowed or printed from scratch.  States have been debasing the currency to pay for expenditures since time began, and it's always been a disaster.  Unfortunately, the USA has got people convinced that the debasement is a GOOD thing, helping to stave off the collapse, rather than the primary cause.

Perhaps things are "just for show" and perhaps the government's debt is responsible for the debts incurred by each of us individually.

Personally I am not willing to grant myself that, or you, that sort of reprieve. Fact is that tekla is correct on this. An insanity in the goverment is mirrored by the ways we are raised and the way we "see" things. We bemoan government debt while we consume vast mortgages and spending sprees for ourselves imagining that the "right" house or the right toys will make everything all better and that "somehow" there will be a way to pay for it all.

As high as goverment debt is, individual debt is higher. Has been for decades. That that is not figured into GNP and all those "economic indicators" the Fed releases doesn't make it non-existent.

The mentality has not been there for years and years among individuals. It's a new mentality. My grandparents and even my parents would have never accrued the kind of debt that I really just shrug at. I'd be willing to bet that you are in exactly the same frame of mind. But, maybe not.

Money = debt. It was an idea first "floated" by marine insurers in Genoa and Venice a thousand years ago. It was made palpable by the organization of the Bank of England three hundred or so years ago. Money is always made of nothing. Our willingness to believe in it is what gives it any credence at all. It has no "value" in and of itself.

Harry Houdini should have debunked that concept as well as debunking seances, rapping on tables and magical illusions. Now we all seem to buy that something can and is created from nothing at all.

Nichole

There's nothing wrong with governments having debt, if its to pay
for infrastructures, investments, etc.

Buying a bridge cash would be really dumb, like a house.

Also, by using debt, the government can leverage its current
wealth in the expectation of future wealth derived from the
operation, use of the item.

Like someone building a new plant for a new product
before having made a cent from it

Its when somebody borrows to pay for current programs
that debt and deficit is bad.

Also, in good times, government should try to pay back as much debt
as possible so they'll be able to spend less of their shrinking
tax revenues on
debt repayments when the economy's bad (making this money
available for targeted relief without the need to borrow. 

http://en.wikipedia.org/wiki/Paul_Samuelson

Debt used correctly is not a bad thing.  But, as I was taught, the item ought to outlast the debt and perhaps even contribute to paying it off.  So, if I buy a suit to get a job on credit, and I get that job, then that's OK, and the suit better last longer then the payments do.  But, if you are buying a dinner on credit, your paying off that dinner long after you've eaten it, so that's bad.

Governments using money for capital improvements can be good.  Using it to bail out a company that is going belly up anyway is more than likely a bad idea.

I'm not saying that individual debts don't matter - I'm saying that the American attitude toward borrowing, spending, and consumption has been fostered by a policy of easy money.  It's easier for people to be profligate with money when the dollars are easier to come by, not realizing that the quantity increase isn't backed by an increase in savings.  Wealth gets siphoned off by the people who get the new dollars first, prices increase, and people who are the last to see the influx of dollars get stuck holding the bag.  It's theft - the exact reason that counterfeiting is condemned, as is borrowing without intent to repay.  Yet, we have let our elected officials do this for nearly a century, and concocted economic fairy tales to justify it.

Posted on: September 17, 2008, 02:27:29 PM

---

http://en.wikipedia.org/wiki/Say's_law

If I was drunk off my ass, driving at 120 MPH and hit a pothole that rips off my wheel and flattens the tire while rolling the car, I could, technically, say - "oh the crash was due to tire failure."  But somehow that explanation is not the exact story.

Simple magic bullet answers to very complex problems are not going to solve anything.  These problems are long-term (75% of the debt is from Reagan, Bush I and Bush II, so its been going on for a while now, since 1980 at least), systemic (the much vaunted 'consumer economy' followed by 'the information economy' never replaced the real economy, based on manufacturing) and its going to be very hard to turn around.

Peek Oil aside, the era of cheep energy is gone and it ain't coming back.  Yet, we have not attempted to retool our standard of living, or our suburban sprawl culture.  The US standard of living can not be sustained in an era of expensive energy.  In an attempt to sustain it, debt both on the part of government as well as individuals was run up to record levels.

As James Kunsler said:
All the debt run up by all parties -- home-owners, credit-card holders, business, banks, hedge funds, government -- is not being paid back reliably, and all the leveraged arrangements that depend on it being paid back are coming apart. Thus, capital disappears. The wealth of a nation disappears. All that remains is the pretense that we are still a wealthy society

And that pretense is even slipping away.

QuoteAnd that pretense is even slipping away.

As a country we can not import more value than we export as we have doing for many years. The math tells me that the country is bankrupt and we have been living on pure beliefs. People are now demanding objective evidence, that is not to be found in the fantasy.

The main problem is leverage based on future wealth, that's the main issue.
Leverage enables people to buy things based on their capital base
and future revenue stream, capital creates more capital.
That's sound economics if done properly. When its reasonable, say 6-7 times,
the capital base + current value of all revenue streams,
that's fine, it enables liquidity for investment without
having to sell assets.

In countries with little liquidity, or a dismal financial system, its almost
impossible to get a loan to buy anything. The Ukraine has been like that
until recently. A friend had a Condo worth 90K, paid entirely,
but couldn't get any credit for anything, she couldn't even use
the money in her Condo as collateral, she was sitting on money
and this money could not be reused in the economy or used
as a way to buy another house or just to improve this one!

The problem is that banks in the US allowed leverages of 20-100 times
the capital base the person, which is NOT sustainable long term. It basically
printed money by giving credit to people who could not possibly repay it
unless the housing sector continued growing at 10% a year forever
(same thing with the dot com era).

That's just crazy economics and
EVERYBODY KNEW IT. That's what angers me, the tacit wink wink
mentality where everybody lines their pockets as fast as possible
because they know that once the crap hits the fan, they're not
the ones who are going to be hit worse.;

This was totally predicatable
a meltdown. The main responsible for this is Greenspan. He created two
of the worse bubbles since the depression and then bailed out. Bernanke
is now left to hold the broken vessel together...

But, I also blame the stupid people who bought those houses with
no money, and very bad terms. They shouldn't even be allowed
to touch credit since they're basically too stupid to read properly,
do the simple math and assess risk.

Keira, when was the last time you read a countrywide mortgage document or any other lease agreement or mortgage agreement or loan agreement and understood it.

As part of "de-regulation" the corportations have been allowed to write such documents that even attorneys are left lost by them.

You distaste for the "common man" isn't the problem here, your understanding of all that has been going on in USA IS the problem. I defy you to find one of those documents yourself and understand it.

It's not a matter of stupidity of the "common person" but fear not. At this point most of those people will never own squat again. They are well and truly screwed.

Nichole

QuoteBut, I also blame the stupid people who bought those houses with
no money, and very bad terms. They shouldn't even be allowed
to touch credit since they're basically too stupid to read properly,
do the simple math and assess risk.

True, they also had nothing to lose since they started with nothing.
The bigger problem all those people that are the future of this country, have no competitive skills to insure growth in the economy. They barely can write a letter and can not do math even with a calculator. 75% of the engineering students in this country are from abroad. The schools have backed off teaching science because the objective training questions religion. There are more women in college than men. Everyone wants to market and no one wants to build.

Posted on: September 17, 2008, 08:11:35 PM

---

QuoteI defy you to find one of those documents yourself and understand it.

I have owned 3 house and built two. I have had construction loans and contracts as well as mortgages and refinance. I have always gone with fixed interest and can read and understand the contracts as well as the credit card contracts that are 20 pages or so. They are simple nothing is in your favor. Do not forget the rule of 78 in car loans. If you do not understand something it is simple do not sign. If you need to hire a lawyer to explain it to you chalk it up to your poor education and pay them. Ignorance is not an excuse.

Quote from: tekla on September 17, 2008, 03:36:48 PMIf I was drunk off my ass, driving at 120 MPH and hit a pothole that rips off my wheel and flattens the tire while rolling the car, I could, technically, say - "oh the crash was due to tire failure."  But somehow that explanation is not the exact story.

That's true as far as it goes, but we're talking about a situation where a climate of moral hazard was fostered as a matter of policy.  Many people made stupid decisions with money, but those so unqualified wouldn't have had easy access to that money without the state's intervention.

It's more like if a known alcoholic and drunk driver was OK'd for a loan to buy booze and a new car.

Even if there were fine print to a doc (there are 20 pages of terms for software licenses but reads that),
you should get as much information as you can by asking pointed questions to those that loan you.

And, if you've got little no proof of income at all,
and someone loans you 300K,
well any sane person would think that there's a catch somewhere...

There are sad cases of people who where in fact defrauded by lenders
but I will contend that there's even more greedy stupid people
who just took the cash and lived for the golden moment
(like the dot commers...
I was one of those dotcommers, and believe, I paid for my stupidity, lost 30K in money,
lost my job and had to move country inside 10 days )
Ignorance was no excuse for me, its no excuse for anyone.

Now, I think I read pretty well.  I even know a bit of law.  I studied contracts.  I work from time to time for lawyers.  And I read these contracts and I don't get it.  So, I hire a lawyer.  The first step in buying a house, is to get a contract lawyer.  I bought two in my life, and both times I had a lawyer go though it line by line, and the second time I went back to the seller four times and had them change the language in the contract.

The main problem is leverage based on future wealth, that's the main issue.
Leverage enables people to buy things based on their capital base
and future revenue stream, capital creates more capital.
That's sound economics if done properly.

However we are not talking about sound economics.  We are talking about Alice in Wonderland stuff.  Moreover, a massive liquidation of present wealth - which is what we are talking about here - is not going to create future wealth.

which is NOT sustainable long term. It basically
printed money by giving credit to people who could not possibly repay it

In fact, they printed the money and gave it out to their pals, at Enron, in the UAE and Saudi Arabia, and defense contractors.  They had no intention of repaying it, they were always going to keep it.

As for the housing deal, you're right in that loan were written for people to buy houses that they could not afford, however, the reason they could not afford them had more to do with property flipping than income.  In essence, as well as in reality, few houses sold since 1995 were actually worth what people were paying for them.  They were overvalued.  They were sold, with a lot of lies, to people who didn't know any better.  That might be the fault of the buyer, but the sellers - the banks, the real estate agents, the finance companies all - ALL - knew better.

But, as you so obviouly do not know, is only the 'subprime' crisis, but we are in a full fledged prime morgauge crisis also.  People who do work, work hard, make good money and all that who now find themselves falling further and further behind. 

Buying a house 30 miles from work, 10 years ago, had a commuting cost that has risen by triple digits and are in a squeeze.  A friend of mine, is in that deal.  When he bought the house it cost about $10 a week to drive the BMW (which get pretty good gas miles) it now cost him $50 a week and he has had no increase in his salary to compensate for a difference from $40 to $200 a month.  So, does he eat less, or miss a payment on the house?

I have family, my GFs family.  Hard working UAW type guys who have spent their life making damn good cars.  Pi, made F150 trucks for Ford.  They are good trucks.  But now?  Line shut down.  May not reopen.  30 years working for FORD, ->-bleeped-<- FORD was about as American as America ever got, how could he lose a job at FORD for ->-bleeped-<-s sake?  What's he to do?

And that is the people I worry about, and that you don't see.  The ones who worked hard, who did have good jobs, who did those jobs well, who tried to be responsible, and still it turned out that a bunch of morons in Grosse Point, who did not do their jobs well, who did not work hard, wasted it all for them.

I worry about the American worker, on a very real scale, and on a very real level.  People who did do the right thing and are about to (if not already getting) screwed to the wall for it, and all they get for all the hard work is some PR bit of ->-bleeped-<- from some PR hack writing for a presidential candidate who does not know how many houses he owns, thinks that 5 million is rich, and has a wife who wore a dress that cost $200,000 to the convention.