Given a Shovel, Digging Deeper Into Debt

Originally posted by kmax87
okay so with the exception of you and the other 20 people just like you, whats your solution to the 5 to 10 trillion dollar bailout required for the freddy fanny bailout.

I think the extent of this real problem indicates some form of underlying societal malaise that wont be fixed by just a stern chat and a pull yourself up by your bootstraps man type of ad ...[text shortened]... vience to laissez faire capitalist principles will yet lead to all of our undoing, if we let it.

Originally posted by Wajoma
Why would you give the fanny/freddy fiasco as an example of market failure, both these entities were created by guvamint, even when they became public companies they didn't have to operate under the same rules as the private sector.

In other words it's a monumental guvamint cockup and your solution is more guvamint?

Originally posted by whodey
Not that it is any of my business but you are 60 years old and still in the stock market? That takes some real gonades, especially in this evironment. I hope it is only a small part of your savings.

As for the whole debt situation, I get the feeling that you blame lenders for it, however, I blame our educational system. We are taught everything in schoo ...[text shortened]... de? I kind of hope it is ineptitude because the alternative answer is just to upsetting to me.

Originally posted by Scriabin
yeah, cojones required. sure I'm in the market -- also in real estate.

things go down, they also go up.

I've been through bear markets before -- the key is not to panic and diversify.

I've been out of financial stocks for some time -- I've been in energy stocks for a long time.

I had serious losses after the tech bubble burst -- I more than ma ...[text shortened]... use more trouble than it is worth. A lot of money carries with it a lot of cares.

Originally posted by scherzo
You seem to have about every job in the government.

Is your name ... let's see .....

John D. Rockefeller?

Originally posted by Scriabin
You really don't have a clue how anything in the real world works, do you?

Here we are on the interNET and you don't understand what networking is all about ... In a town of policy wonks, why is it surprising that a lot of them talk with each other, email each other, consult, attend events, and otherwise share information? Ah, you didn't think of that, ...[text shortened]... n his ears, but can't process data from outside well enough to make any sense of the world.

See Krugman, who is an economist, in the NYT: http://www.nytimes.com/2008/07/18/opinion/18krugman.html

He says home prices are in free fall, unemployment is rising, consumer confidence "is plumbing depths not seen since 1980," and asks: "When will it all end?"

The answer is, he says, probably not until 2010 or later. Using the last 20 years as a guide, he says, the prospect for the economy is for a prolonged period of flat or at best slowly improving performance.

He begins with housing. Citing the widely used economist tool called the Case-Shiller index, average U.S. home prices fell 17 percent over the past year. He thinks housing prices probably still have a long way to fall. So do all the experts I know -- including my wife, who has 30 years of experience in the private sector mortgage business. Now she's a regulator.

Real home prices, adjusted for inflation in the rest of the economy, went up more than 70 percent from 2000 to 2006. Since then they've come way down — but they're still more than 30 percent above the 2000 level, Krugman says. He thinks the bottom of the market is where the bubble started, at the level prices were in 2000.

He cites the case of Los Angeles, which in the late 1980s experienced a large localized housing bubble: real home prices rose about 50 percent before the bubble popped. Home prices then proceeded to fall by a quarter, which combined with ongoing inflation brought real housing prices right back to their prebubble level, Krugman says.

And here's the thing: this process took more than five years — L.A. home prices didn't bottom out until the mid-1990s, according to Krugman. If the current housing slump runs on the same schedule, we won't be seeing a recovery until 2011 or later, he says.

So I'm not buying any real estate until I see approximately a 30 percent discount -- and I wouldn't sell my house for at least another 4 or 5 years.

As for the broader economy, although the last two recessions, in 1990-1991 and 2001, were both quite short, in each case, the official end of the recession was followed by a long period of sluggish economic growth and rising unemployment that felt to most Americans like a continued recession.

The 1990 recession officially ended in March 1991, but unemployment kept rising through much of 1992, allowing Bill Clinton to win the election on the basis of the economy, stupid.

The next recession officially began in March 2001 and ended in November, but unemployment kept rising until June 2003.

Krugman says these prolonged recession-like episodes probably reflect the changing nature of the business cycle. Earlier recessions were more or less deliberately engineered by the Federal Reserve, which raised interest rates to control inflation.

Modern slumps, by contrast, have been hangovers from bouts of irrational exuberance — the savings and loan free-for-all of the 1980s, the technology bubble of the 1990s and now the housing bubble.

Ending those old-fashioned recessions was easy because all the Fed had to do was relent, according to Krugman.

Ending modern slumps is much more difficult because the economy needs to find something to replace the burst bubble, he says.

Krugman points out that the Fed, in particular, has a hard time getting traction in modern recessions. In 2002, there was a strong sense that the Fed was "pushing on a string": it kept cutting interest rates, but nobody wanted to borrow until the housing bubble took off.

And now it's happening again. The Onion, as usual, hit the nail on the head with its recent headline: "Recession-plagued nation demands new bubble to invest in."

But Krugman doesn't think we'll find another bubble — at least not one big enough to fuel a quick recovery. And this has, among other things, important political implications.

Given the state of the economy, it's hard to see how Barack Obama can lose the 2008 election, Krugman says.

I'll grant him that the election is Obama's to lose, but I'm confident that if there is a way for a liberal Democrat educated at Harvard to lose, he'll find it.

Krugman cites an anecdote: This week a passing motorist shouted at a crowd waiting outside a branch of IndyMac, the failed bank, "Bush economics didn't work! They are right-wing Republican thieves!" The crowd cheered, he said.

Well, I agree with that, alright. The Bush Administration's historical simulacrum was the Harding Administration and before that the Grant Administration. Never have so few taken so much from so many with such little justification or justice.

But Krugman says that what the economy gives, it can also take away. If the current slump follows the typical modern pattern, the economy will stay depressed well into 2010, if not beyond — plenty of time for the public to start blaming the new incumbent, and punish him in the midterm elections. Just like they did to Clinton -- ensuring another era of Washington gridlock.

With any luck, I'll retire just about when those midterms come around and so I may be spared the experience of trying to protect public health by trying to make the country's biggest and worst polluter, the Pentagon, to obey the laws just as everyone else does.

To avoid the gridlock scenario, Obama — if he is indeed the next president — will have to move quickly and forcefully to address America's economic discontent, Krugman says.

That means another stimulus plan, bigger, better, and more sustained than the one Congress passed earlier this year -- gotta be something more than "don't worry, here's $300, go shopping!."

It also means passing longer-term measures to reduce economic anxiety — above all, universal health care, according to Krugman.

That ain't happening. Obama has never been for that. He's a band-aid kind of politician -- let's all get together and compromise, make a deal.

Well, that sounds downright appealing until you realize that none of us is as dumb as all of us.

Originally posted by der schwarze Ritter
He's a "free radical" all right.

Originally posted by scherzo
Thank you. 🙂

Originally posted by Scriabin
I predict that you will see two more events like the one I predicted before -- one tomorrow and another one next week.

Might want to short the market tomorrow.

But you'd know what I mean, right?

I don't really mind you, Scherzo, you've got a soft heart and a head to match.