We had a very good discussion of this topic in February and its only 2 pages long, but the quotes are long and it will take a bit of time to read it all, or go beyond that to the sourced articles. It was not all Barney Frank, Fannie Mae and Freddie Mac, they were a problem, but they were not the biggest part of the problem. The govt. had a separate bailout for Fannie/Freddie, about 200 billion. The bailout in the private sector was 700 billion for the TARP last Sept. 2008. Too much deregulation since Reagan started it in 1980, failure of the Fed to exercise regulator power they still had, fraudulent loan originators, fraudulent rating agencies calling junk bonds AAA bonds, and the wild expansion of leverage at the investment banks that was enacted by the SEC in 2003 allowing them to lever up their balance sheets from 15:1 to 45:1 (which created the demand for the liar loans at the loan originators). CRA played a relatively small part in the deal, that's shown in the thread. See Thread Here
It was the Democrats who insisted that loans be made available to "the poor". The system doesn't collapse if all of the sub prime loans weren't made to fools who couldn't pay them.
The banking and the housing fiasco had major players on both sides. However, the balloon really expanded with Clinton demanding that everyone should be able to buy a house. Most of these people could not realistically afford a house. The crash was doomed from the beginning. Key Dems in Congress were in full coverup mode. Then there was the unions that had such a strangle on the auto industry that it was being suffocated.
How did the dems insist the loans be made to the poor? Did the dems order the mortgage brokers to sell "no doc" loans? What was the penalty to those who did not lend to the poor? What was the law and what were the rules that forced lenders to lend to the poor?
Clinton did not demand that everyone be able to buy a house. If you want to say that, show me where that was said. I know you can't, because that is not what was said, but go ahead and try if you want to. This I want to see. Did you read the thread I mentioned in my post above? It's about 4 posts above, and it says See Thread Here.
I completely disagree. Polls indicate that Americans are very concerned about the national debt. I have no doubt that the current massive national debt and the projected massive deficits for the next decade is having a negative effect on consumer spending. Not everyone in this country lives paycheck to paycheck and is ignorant to the significance of the national debt/future deficit projections. What does the massive debt and future projected deficits mean to you? You mentioned you think large deficits are bad because they weaken the dollar. That's not going to effect your confidence in the future of the US economy and result in less hiring (if you own a business), less spending, and less overall investing? Sharp Differences in Partisan Views of Economic Problems Americans Endorse Obama?s Approach, but Wary of Debt Are you saying without the stimulus bill the economy would have collapsed? If so, I completely disagree. I think the stimulus bill, just like the Japanese stimulus bills in the 90's, has had marginal to little positive effect on the economy. Once again. Not going to defend Bush II or the republicans. You were right to rail against the doubling of the debt from 2001 to 2008 but the situation is projected to get much worse. It's projected that Obama's budget will triple the national debt by 2019! You made my point. The huge deficit will inevitably lead to a lower standard of living. Yet you believe that a huge deficit doesn't curtail consumer spending. Certainly a lower standard of living goes hand and hand with lower consumer spending. How are they going to pay for it? Isn't higher taxes as detrimental to a crippled economy as cutting government spending? How many of those countries you mentioned that have chose deficit spending to stimulate their economies are raising taxes? Do you really believe the dems will actually cut out waste to pay for the rest? Why wouldn't cutting taxes (all else equal) have a positive effect for the long term? Consumer have more money to spend and invest.
Some folks are concerned about the national debt, but folks stop spending when: 1. they lose they job 2. they still have their job but many folks around are losing theirs 3. they lose 50% of their 401K 4. their house goes down in value by 20%+ I have never heard an acquaintance tell me they are spending less because of the national debt. I don't know if the economy would have collapsed into a 30's style depression, but we've had that great depression and it can always happen again. Stephen Roach, economist at Morgan Stanley by the middle of this decade gave the US only a 10% chance of avoiding "financial Armageddon" (see Wikipedia). Dr. Doom, Nuriel Roubini, wrote about the coming crash. This is what we know, with the stimulus, there has been no great depression. Without it, you can't prove what would have happened without it. But here are some investment pro's discussing the situation: Argentina & Mining 101: Recessino to end in 2009! MAI.to, WLC.v Do not trivialize the problems nor the danger this economy was in. It was the worst since the great depression, and I believe if the wrong steps were taken, a depression was a possibility. Obama will not triple the deficit by 2019. He will double it from 10 to 19 trillion, like his predecessor doubled it. The point you miss is that you don't consider what the alternative is. You don't acknowledge how dangerous the situation was, which I showed in my quote just above, a depression was on the table as a possibility if not handled correctly. Our banking system melted down, our housing industry was near shutdown, and two of the major 3 automakers went bankrupt. If the down spiral was not halted, other business segments could have been pulled into the sinkhole. I have seen many business leaders like Warren Buffet all say, the depression risk was taken off the table by the banking bailout and the stimulus program, just as I quoted above. How do you pay for it? What is being proposed is to allow the Bush tax cuts to expire on the wealthy, those making over 250 per year. They can afford it, they paid those tax rates in the 90's and the economy hummed along nicely. The balanced budget was produced by collecting more tax revenue and a slow increase in the rate of spending. Heck, Clinton folks changed the way inflation was calculated to understate inflation, so the COLA increases to social security recipients would be lower forever in the future. That saved the govt. trillions over the next 50 years. It just has not worked. Reagan rolled back taxes in 81, Bush I had to raise them in 91, Clinton raised them again in 93. Bush II cut taxes in 2001 and 2003, the deficit soared, the dollar plummeted (it was lower in 2007 than it is now). The supply side theory that a lower tax rate will raise the general business activity level so that future tax collections will exceed the level of prior to the tax cut has not worked. If you want to cut taxes, you will have to cut spending or the deficit will continue to rise. Pick defense, medicare/medicaid, social security, they are the only things big enough to make a dent. You can't effectively cut interest on the debt without paying down the debt or cutting interest rates and interest rates can't be cut anymore.
I think most of your post was pretty good, but this is absolutely not true. The expiration of the Bush tax cuts will be a huge tax increase on median income earners. I, for example am paying 1,000 more right off the top because of the scale back of the child tax credit from 1000 per child to 500 per child. On top of that I will be paying 5% more on the first 8,500 or so of income because the 10% marginal bracket will disappear. The 15% bracket will shrink so I will be paying more into the next bracket as well. Worst of all the cap gains tax increases and my sharpe ratio is so screwed up that I am better off playing black jack than putting my money in the market.
Exactly! If you assume the stimulus plan actually worked, anything that this administration tried to do to stimulate the economy will be undone once the tax cuts are gone. Just wait until Cap and trade folks! We will be like any other country by the time these radicals are out of office! Broke and a third world economy!
