The credit crisis, which is sapping America's economic strength, was the result of an almost religious belief in deregulation whose excesses are now coming home to roost.
It is instructive to compare the American financial mess with the economic situation in nations that resisted deregulation. Old Europe tends to get a scornful press in the U.S. But Europe is not suffering a financial meltdown today -- mainly because Europeans (with the exception of Britain and Switzerland) took only a few sips of the financial Kool-Aid so heavily promoted by U.S. banks.
read more at the American Prospect.
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19 comments:
I think the Europeans have benefitted from being around long enough to know better, and from watching our adolescent country's arrogant mistakes. They'll be laughing their asses off when we're in a new Depression.
Jess,
What "regulations" controlled mortgage lending in the US?
When did the US government run the mortgage business in this country?
I believe the practice of borrowing money to buy things you can't afford is the cause of the credit crisis.
to greenspan and rhubarb,
you are welcome to read the article and then comment.
Or you are welcome to continue to be idiots.
your choice.
Jess,
You did not answer the simple question about WHEN the US government regulated the mortgage market?
There are many banking laws to which lenders must conform. But LIMITING credit is not one of them.
Historically, lenders have come under fire for setting lending standards too HIGH. You are now complaining that standards are too LOW. Clearly you dislike the idea of Loans for Everybody.
I'll answer my original questions for you:
The US government has never regulated the mortgage business. But it has set liquidity levels for banks -- commercial banks, community banks and savings & loans, the primary originators of mortgages. There are different standards for brokerages, insurance companies, and credit card companies.
For along time some banks and mortgage brokers have been in the business of lending to high-risk borrowers. Those lenders have traditionally loaned money to borrowers who preferred to disclose very little personal financial information. The banks extended credit to these customers in exchange for higher interest rates and, usually, higher downpayments.
But then federal and state organizations got into the act of giving first-time homebuyers loan protection and downpayment money. Real estate buyers began taking bigger and bigger risks with less and less of their own money.
Some lost their bets. Big deal.
Compared with the hit the US took during the Savings & Loan Crisis of the late 1980s and early 1990s, the current mortgage issue is easily manageable.
How did I get here?
My God, what have I done? *grins*
Monkey, it's just slappydaho back again. Zogby, Greenspan and Mr. Energy.
Sad, sad, pitiful and unable to make an informed argument slappy.
I've left his comments up so that we can laugh at them and can look at what pathetic canards the far right fascist wing throws up as arguments.
You know it is bad when they don't even understand what they are arguing for or against. Who can tell.
The internet is such a warm home for psychopaths.
I can't decide if Friedmanites should be called fundamentalists or fetishists.
I actually have a little empathy for fetishists, but you know that already.
There's a retail business I like: Steve & Barry's.
The stores sell all their merchandise for $8.99 or less. Sales were over $1.2 billion last year, and it looks like the company will see good growth this year.
Of course all their goods are produced outside the US. But buyers get the advantage of the low labor costs and the low profit margin sought by Steve & Barry. That leaves money in the pockets of shoppers for other items.
Jess, you can believe whatever you want about economics. But when it comes to real-world economic activities, you and the others sharing your free-lunch visions are outnumbered in this country.
However, Obama is a presidential candidate whose platform is loaded with goals that would require vast tax increases if they were enacted.
By the way, if oil-industry subsidies were eliminated, do you think gasoline supplies would increase or decrease? And do you think the elimination of oil-industry subsidies would lead to lower gasoline prices? Or higher gasoline prices?
Really? which ones? the parts of the platform that call for reparations?
Here's where I laugh my ass off at your stupidity.
Tell me, when was the last time we had both a republican president and a budget surplus?
You can't even begin to talk about fiscal responsibility and equate it with republicans. That's just another trope you hang your tiny little hat on.
Jess, despite your credulity on this matter, US voters elect both Republican and Democratic presidents. Hence, your focus on budget issues, which really reflect global and national economic cycles -- not presidential policies -- is a footnote to the situation.
Meanwhile, you never answer my simple questions. That's a clear indication you know you can't without admitting you know your economic beliefs are fantasies.
I have responded ad nauseum to your questions. That you fail to comprehend them is your own problem, I would say. We discussed the effect of oil industry subsidies for days. The "fantasy" is that increasing demand for petroleum is somehow going to solve a myriad of our problems. The greater "fantasy" is that taxpayers ought to subsidize companies with record setting profit margins. Strange how someone who argues for laissez-faire also demands subsidies. Just another point at which you argue against yourself. Sure sign of an inability to reason.
This is my blog. That I find you fatuous, ignorant and repugnant yet still allow you (for the time being) to stick around is about as much of my time that I plan to waste on you.
You answered your own question about mortgages above, yet probably don't even realize that you did.
Your first sentence in the comment above proves your own abdication of any sensibility on the issues of economics. It's just coincidence that democrats preside over better economies than republicans? Be that as it may, then it just behooves us to go for luck and vote dem. Your sentence would also imply that Reagan and neither of the Bushes had any impact on the economy whatsoever. Is that what you are trying to say? (That's a rhetorical question. I know that you've lost the train of thought about 30 stops back)
Jess, as usual, you mind plays tricks on you.
You claimed:
"The greater "fantasy" is that taxpayers ought to subsidize companies with record setting profit margins. Strange how someone who argues for laissez-faire also demands subsidies."
I never anywhere ever said any company deserves a subsidy.
All I did was ask you about the impact of removing the subsidies you claim oil companies enjoy.
If they do receive subsidies, how will removing those subsidies affect consumers? Simple question.
As for the presidential impact on the economy, well, it goes like this -- the government always REACTS to situations. Our leaders REACT to the will of the people and attend to what most believe needs attention.
The government swings into action IN RESPONSE to inflationary pressures or IN RESPONSE to trade issues. Or IN RESPONSE to shifting military threats. Things like that.
The government does not cook up new policies just for the fun of seeing what they'll do. The government does not identify needs and attempt to satisfy them. The government responds to squeaky wheels.
Meanwhile, you have no basis for judging the quality of economies under various presidents. However, as far as your silly claims go, the US suffered through the Great Depression under one Democratic president, who, as reasonable economists know, prolonged the Depression with his fixes and caused unemployment to surge.
FDR pressured businesses to maintain wages rather than cut paychecks as most employers wanted to do. Hence, when revenue fell, companies had no choice but to fire people instead of seeking pay-cuts for everyone.
People who kept their jobs also maintained their pay. But prices were dropping. Therefore, every dollar bought more goods and services during those years. IN other words, the people who kept their jobs saw their purchasing power increase; they got raises while millions lost jobs.
That was the brilliance of FDR's Depression policies.
Then there was WWII, followed by Truman taking us into the Korean War. In the 1960s Kennedy and Johnson took us deeper and deeper into Vietnam. In 1968 Hubert Humphrey campaigned on a platform of winning the war.
Nixon, REACTING to the will of the people, said he had a plan to end it. Nixon won and combat ended in 1972, though it took until 1973 for the official cessation of hostilities.
Inflation was roaring when Carter was president, but Fed Chairman Volker REACTED and brought it under control after Reagan was elected.
The US defeated the Soviet Union after 30 years of continuous cold war. We did it without the two nations firing a shot at each other. But the last straw for Gorbachev and the Soviet Union was Reagan's REACTION to Soviet threats.
I answered your simple question two weeks ago, do you also suffer from a reading comprehension problem?:
Prices rose after Dick Cheney's energy subsidy, in the form of 5 billion dollars in tax breaks and royalty free domestic drilling.
That is an indisputable fact. But I haven't been arguing about price. High prices allow for conservation and for an interest in alternative energies and mass transit and infrastructure. So, the subsidies are all around a bad thing. They did not lower price, they did not lower demand, and our environment is no better off with them.
The Bush Administration DOES cook up schemes to see what they can do. It has a name: ideology.
Grover Norquist gave its slogan: to make government so small you can drown it in a bathtub.
Its modus operandi is to privatize formerly public industries.
I gave you a link that cites a Wall Street Journal study that shows consistently better economies under democrats than republicans and you return with nursery rhymes told by your neocon wet nurse.
Let's see: The GI bill, the last of the New Deal policies, created the middle class as we know it (and was bi-partisan). Funny thing, both Cal Thomas and Ann Coulter admit that their fathers would never have become the people they were without the government hand out they received. (I do believe their wording was slightly different).
Social Security and Medicare have been wildly successful for maintaining the middle class. Until this administration tried and failed to privatize social security and took the balls away from medicare by NOT allowing it to negotiate drug prices. Craziness.
Nixon presided over the Vietnam War for 5 years. We still lost. When the country collapsed. Quite a "plan".
Gerald Ford's campaign slogan was "Whip Inflation Now". Crazy how it was Carter's fault then, wasn't it?
Volcker was secretary under Carter, the "Volcker Shock" that constricted monetary policy was begun in 1979.
The Soviet Union collapsed because it was running record deficits. And not in reaction to a Reagan arms buildup either. Good lesson for superpowers who take on a trillion dollars in debt to wage wars in Afghanistan and Iraq.
Jess, your responses to my statements are always non-sequiturs.
You also make liberal use of the a few logical fallacies. You're quick to use the Fallacy of Composition, Fallacy of Ambiguity and Post Hoc, Ergo Propter Hoc.
In other words, you think if everyone followed your prescriptions, everything would work out just fine. You misuse words and shift meanings to suit yourself, which muddles everything you state, and much of your commentary expresses the sensibility that the sun rises because the rooster crows.
You are among those who think privatizing Social Security is a bad idea. Of course, if Social Security were privatized, people would put most of their money into Treasury securities, not the stock market. I'm sure you don't believe it, but since most retirement funds are in safe investments now, it's odd to think people would develop financial insanity if Social Security practices were changed.
As for Medicare negotiating with pharmaceutical companies, well, when it comes to setting prices for new drugs, pharmaceutical companies have many more customers than just Medicare. Thus, even though Medicare is a big buyer, it would have to bid against private insurance companies to obtain effective, new, patent-protected drugs.
Think of it this way. The US is the biggest single oil-consuming nation on Earth. Usually the biggest customer has some power over prices. Have we persuaded the middle-east oil shiekdoms to lower their prices? Nope.
The chief factor keeping some drug prices high is the 17-year life of patents. If you want lower drug prices, the way to get them is to shorten the life of patents. Somewhere around 10 years is probably best.
As you will note, when drugs go off patent and other companies can copy the formula, prices drop. In other words, competition does the trick once again.
Now what the fuck are you talking about?
You presented several scenarios, all of which were quickly dispatched and your response is that you don't like the structure of the responses?
I answered your questions. I proved you wrong. We have a plethora of examples that prove that all the schemes you believe in fail.
You haven't been able to back up a single point of yours: example-you are trying to reintroduce the pharmaceutical debate by asking for more government involvement, not less.
Your free market, private industry wants longer patent periods. Simple as that. So once again, you argue against yourself.
Our social security privatization schemes were based on the Chicago School experiment under Augusto Pinochet in Chile. And how'd that work out? See, you just have a theory about what will happen, and I have a concrete example
And as far as people following my prescriptions 1. The price of gas and the price of food have hardly any effect on my personal family budget whatsoever because we live where we can walk to any necessity. (Save for the pediatrician, who is 4 miles away.) 2. I can my own food, I buy from local vendors and farmers. Their prices used to seem high in comparison to corporate subsidized commodities, but now that the price of gas is high, local, sustainable food is in line with mass-market Wal-mart fare.
We buy good quality items and expect them to last for many years rather than cheap Steve and Barry's crap that will wear out and wind up in a landfill. We have begun to buy second hand items, so our clothing costs are less than those found at cheap discounters.
We save our money.
In other words, yep. Things would work out fine.
Based on all you've written, the system serves you reasonably well. Thus, it's surprising you complain so much.
As for my comments about the pharmaceutical industry, once again, you default to your reliance on ambiguity to make an irrelevant point.
I never said I thought 17-year patents were a good idea.
But the subject of that exchange was the price of drugs. I simply let you know that the prices of patent-protected drugs were often high because the patent protected the drugs from competition.
Hence, the way to lower prices is to increase competition, which would happen if the life of a patent was shortened to a more mutually beneficial period.
Meanwhile, you make it plain that you don't understand the free-market when you think that free-market people want MORE patent protection. Those people are NOT free-market people. There is a term for them in economics. They are called Rent-Seekers -- the people who want to gain an advantage through government legislation.
Every company takes its shot at this, as does every affinity group in the country.
With respect to giving examples to support my statements, that's easy. The Social Security issue for example.
You assert that because a plan failed in one venue, the same plan will be adopted in another and different venue, where it will also fail. You make the initial mistake of assuming that there are no differences between Chile and the US and that a US plan would copy the Chilean plan.
While there may be points of comparison between the financial systems of the two countries, there are far more contrasts. Second, we have IRAs, Keoughs, SEP IRAs, 401Ks, 403Bs, pension plans, profit-sharing plans and personal savings. Americans seem to handle them with intelligence and restraint. But you have zero confidence that the existing good sense of Americans will remain in place if the same people can choose to put their Social Security allocations into the investment vehicle of their choice.
Anyway, on top of a course in economics, you need a course in logic.
You haven't shown one example of were your ideas work.
And, thank you very much for admitting that there is no "free market" system as such, but that there is a "corporatist" system.
I understand the differences completely. That's why pharma wants laissez-faire on regulations but complete government cooperation in fending off competitors. So does the oil industry, so does the privatized water industry. So does any one else you seem to want to defend. In other words, I am trying to point out the real world for you and you are trying to live in the fantasy world.
You assert that a plan will work simply because you say so. Boy, that's logic and economic sense.
My complaints are with the destruction of the economy and the environment. About those I have every reason to complain.
Now which am I? A totalitarian or an American success story?
You sure don't know how to follow a narrative.
And, you haven't explained your wildly wrong statements above, about Bechtel in Bolivia, about anything really.
You must just keep coming back for the ass-kicking.
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