Flash - Bailout package voted down

[competentone]

Originally Posted by 911pcars

I'm not a financial analyst, but I think your view is too concentrated at the top. Credit affects all sectors of the economy. Your salary might be funded by a short term line of credit until payments for goods are received by your employer. If you don't get paid, it trickles down from there. For example; your mortgage payment? How does your company continue producing? How do cars and goods get sold without providing credit to consumers?

When I talk about the "credit bubble" and our economy being "overweighted" with too many people involved working in lending, I am not just referring to "big" credit transaction.

The economy used to work just fine 40-50 years ago without massive amounts of credit.

Currently, there are literally tens of millions of Americans who live (quite well) without using credit -- and even more who use it very conservatively.

The "dire consequences" warnings by those pushing for this bailout, implying that "all" economic activity will stop because credit "stops" (which it wouldn't; credit would just become more expensive) is irresponsible and insulting toward the millions of Americans who are not living "on the edge" using massive amounts of credit to live a lifestyle they have not earned yet.

This bailout, philosophically, involves a battle between those who live responsibly and those who act like children screaming, "I want it, Mommy! I want it now! Give it to me now!

[competentone]

Originally Posted by Purrybonker

We once danced that soviet-style communism was dead. Now Karl Marx must be chuckling in his grave. Capitalism is pretty sick too. Seems you can't get around that stubborn human greed problem no how....

The rest of your comments are excellent, but I would take issue with the suggestion that the problems we are seeing are the result of "capitalism."

We live in a "mixed economy" -- some aspects of our economy are capitalistic, some are socialistic.

The Federal Reserve Banking system, engaged in money creation and constantly manipulating the price of credit (representing "price controls" in the business of renting money), is not capitalism.

[Purrybonker]

Originally Posted by competentone

The rest of your comments are excellent, but I would take issue with the suggestion that the problems we are seeing are the result of "capitalism."

We live in a "mixed economy" -- some aspects of our economy are capitalistic, some are socialistic.

The Federal Reserve Banking system, engaged in money creation and constantly manipulating the price of credit (representing "price controls" in the business of renting money), is not capitalism.

Yes, but they're not the source of the grief today either. Just like the housing "bubble" and sub-prime lending aren't the sources of our grief. These things are just participating catalysts. You build a house of cards and then the AC kicks in and knocks it over. The AC isn't the bad guy- the sloppy card building is at fault.

It's like the ENRON boys all over again. There are thousands of "smartest guys in the room" out there who will always come up with an angle and a dangle to cream a couple of financial beeps off every possible conceivable commercial transaction. It's like website hits, or big macs - you make a few points on everything (without adding commercial value - that's the big key here) and pretty soon you got $100 million paychecks.

That's how capitalism is shown to be broken with social policy and regulation clearly ALWAYS needed to keep it in check.

Securitize this, collateralize that, off-balance sheet finance this, swap that, credit-enhance the other, CDO your brother, ABCP your sister - It's an alphabet soup of wealth for a few and a huge bill for Main St. If the smart guys hadn't had their fingers in the pie all we'd have today is some bust home owners and a few bust lenders that went into a falling housing market without doing proper diligence. End of story. Like a guy buying an '84 SC without a PPI.

Instead, because of a web of unregulated financial in-breeding between every financial institution in the nation (world) - Johnny Consumer gets blind-sided because some bank in London swapped some credit defaults with some insurance company in NY who credit-enhanced a debt rating for some savings and loan in Dry Gultch Montana.

Johnny kept his nose clean - took a mortgage and bought a house he could afford. But it don't matter when he loses his house 'cause his employer goes broke 'cause, 'cause, 'cause. Meanwhile hundreds of CEOs/CFOs and investment bankers have cashed $100 million paychecks.

Let the money changers have their head and they will screw your granny out of every cent, every time.

Hey, just look at what the bible has to say about the money changers.

I rest my case - capitalism is not sustainable without social control. The carnivores will devour each other along with the herbivores if you let 'em.

That's for sure...

I guess this goes to the root of what I don't get about the core of the conservative right in the US. These are Johnny Consumer types for the most part - honest, hard-working people that just want to own a home, go to work, buy a car, drink some beer, go to church, own a gun and a dog - all while looking forward to a nice, decent retirement with a robust medical insurance plan.

These same Johnny Consumers are sold on a republican branding - vision/dream that equates romantic visions of freedom and pride with free enterprise and capitalism. Geez you guys - these bastards will sell you down the river each and everytime. Ain't no mystery, ain't no evil - it's just human nature. Just like we need laws or strong guys would be constantly creaming weak guys - we need regulation to stop rich guys from creaming poor guys or smart guys from creaming stupid guys and so on and so on. This is what separates us from the animals... that's all.

A handful of investment bankers, unchecked can ruin the USA a whole lot quicker and a whole lot more completely than any millions of terrorists could ever do.

[competentone]

Originally Posted by Purrybonker

Yes, but they're not the source of the grief today either. Just like the housing "bubble" and sub-prime lending aren't the sources of our grief. These things are just participating catalysts. You build a house of cards and then the AC kicks in and knocks it over. The AC isn't the bad guy- the sloppy card building is at fault.

It's like the ENRON boys all over again. There are thousands of "smartest guys in the room" out there who will always come up with an angle and a dangle to cream a couple of financial beeps off every possible conceivable commercial transaction. It's like website hits, or big macs - you make a few points on everything (without adding commercial value - that's the big key here) and pretty soon you got $100 million paychecks.

That's how capitalism is shown to be broken with social policy and regulation clearly ALWAYS needed to keep it in check.

Securitize this, collateralize that, off-balance sheet finance this, swap that, credit-enhance the other, CDO your brother, ABCP your sister - It's an alphabet soup of wealth for a few and a huge bill for Main St. If the smart guys hadn't had their fingers in the pie all we'd have today is some bust home owners and a few bust lenders that went into a falling housing market without doing proper diligence. End of story. Like a guy buying an '84 SC without a PPI.

Instead, because of a web of unregulated financial in-breeding between every financial institution in the nation (world) - Johnny Consumer gets blind-sided because some bank in London swapped some credit defaults with some insurance company in NY who credit-enhanced a debt rating for some savings and loan in Dry Gultch Montana.

Johnny kept his nose clean - took a mortgage and bought a house he could afford. But it don't matter when he loses his house 'cause his employer goes broke 'cause, 'cause, 'cause. Meanwhile hundreds of CEOs/CFOs and investment bankers have cashed $100 million paychecks.

Let the money changers have their head and they will screw your granny out of every cent, every time.

Hey, just look at what the bible has to say about the money changers.

I rest my case - capitalism is not sustainable without social control. The carnivores will devour each other along with the herbivores if you let 'em.

That's for sure...

I guess this goes to the root of what I don't get about the core of the conservative right in the US. These are Johnny Consumer types for the most part - honest, hard-working people that just want to own a home, go to work, buy a car, drink some beer, go to church, own a gun and a dog - all while looking forward to a nice, decent retirement with a robust medical insurance plan.

These same Johnny Consumers are sold on a republican branding - vision/dream that equates romantic visions of freedom and pride with free enterprise and capitalism. Geez you guys - these bastards will sell you down the river each and everytime. Ain't no mystery, ain't no evil - it's just human nature. Just like we need laws or strong guys would be constantly creaming weak guys - we need regulation to stop rich guys from creaming poor guys or smart guys from creaming stupid guys and so on and so on. This is what separates us from the animals... that's all.

A handful of investment bankers, unchecked can ruin the USA a whole lot quicker and a whole lot more completely than any millions of terrorists could ever do.

I still say you are identifying faults of a mixed economy, more than any faults of "capitalism."

Capitalism does not mean there are no laws against fraud. A free market does not mean you don't have people willing to "sell you down the river each and everytime."

I think the market forces in a capitalist system are a greater limiting factor on such scammers than the opportunities for corruption by those with "political connections" in a mixed economy.

Would the current subprime mess have become the massive problem it is without Fannie or Freddie, or the Federal Reserve?

The free market by itself will normally allow "collapses" of poor business a lot sooner than the mixed economy business practices which use political pull and corrupt law to grow problems to sizes where they can do the sort of damage we see happening now.

[dtw]

Flash #2 - the revised bill has passed the Senate and House, with Bush expected to immediately sign into law.

[Purrybonker]

Originally Posted by competentone

I still say you are identifying faults of a mixed economy, more than any faults of "capitalism."

Oh yeah, we have a semantics gap. I'm starting from the "communism is dead - capitalism wins!" perspective. Capital "C" capitalism vs. Capital "C" communism.

Given free reign and as the sole raison d'etre - they both pretty much suck.

[Purrybonker]

Originally Posted by competentone

Would the current subprime mess have become the massive problem it is without Fannie or Freddie, or the Federal Reserve?

On this you are mistaken.

Absolutely - completely - no doubt about it.

The huge problem we have today has little to do with Greenspan's easy money policies or Fannie/Freddie's slack credit granting practises. The US economy is not at risk of implosion because of the bursting of the housing bubble.

Understand this - this is important. The US (and possibly the world) is at risk because of derivative financial instruments behind the bursting housing bubble. The housing bubble/easy lending has just been the lit fuse, the derivatives are the gunpowder. If not the housing bubble, any number of other catalysts could have set this off.

Without the un-regulated, un-controlled financial derviatives and spit-swapping between financial players (see ENRON - no really, see ENRON - same thing, except that was fantastical commodity trades/derivatives in an un-regulated, un-controlled environment) we would have only had a few bumps and bruises and an economic slow-down because of Greenspan and the housing bubble, not the potential armeggedon we have today.

Like Iraq and a 100 other important things going around us, we have to get much better at connecting dots.

Seriously. (apologies for the condescension)

[competentone]

Originally Posted by Purrybonker

Understand this - this is important. The US (and possibly the world) is at risk because of derivative financial instruments behind the bursting housing bubble. The housing bubble/easy lending has just been the lit fuse, the derivatives are the gunpowder. If not the housing bubble, any number of other catalysts could have set this off.

Yes, you are 100% correct on the derivatives being the "gunpowder."

But, I still will argue -- and this is not just "semantics" -- without the Federal Reserve and our fiat money system, this never could have grown to the proportions where it could tank the whole economy.

The Federal Reserve and fiat money are not part of a capitalist economy. The government maintaining a complete monopoly on one of the most important tools in the economy -- money -- is completely inconsistent with free market economics.

[911teo]

I think you missed a couple of Economics 101 classes. The ones about the lender of last resort?

Without a central bank the size of our economy would be 70-80 times smaller. There would be no accepted currency. I think you should go and read about how the Italians invented the banks, circa 1,300 AD... and how the system quickly evolved....