Democrats versus Republicans

[AdamLein]

Originally Posted by wind_magic

That's what the voluntary simplicity crowd says.

I think they have a point, it does seem like quite a coincidence that most people's expenses rise to the level of their income (or exceeds it) no matter what their income is.

Or beyond, when they take out mortgages that, due to events often outside their control, they can no longer afford.

I could never go in for voluntary simplicity. I like "stuff" too much. But it's probably wise to find a middle road somewhere.

[wind_magic]

Originally Posted by AdamLein

I like "stuff" too much. But it's probably wise to find a middle road somewhere.

Multiply that by 300 million people, and there's your answer ...

[sck5]

I read that article in the Atlantic (or at least the first page since it wouldnt let me go beyond that) and I am not as impressed as you were.

First, it is written by a guy who missed the tech bubble AND the current housing bubble. He admits he "drove his clients over a cliff". This is a guy who has an obvious self interest in saying "nobody could have foreseen". But in fact they did. When you are looking at graphs like this one:

Calculated Risk: House Price-to-Income Ratio

You shouldnt have to wait until it turns down to know that something bad is going to happen. It is obvious way before the **** hits the fan that a crash is going to happen because the curve has gone so way way way far out of historical ranges. And there are plenty of other examples of indicators that were ridiculously out of whack. It was obvious YEARS before the end that things were dangerously wrong.

So I dont buy the self serving claims that nobody could have known. They did and they said so.

The author did have a point though in that there is plenty of blame to go around. There was a near universal failure on the part of ALL the potential regulators to do ANYTHING. And they could have. There was no reason, for example, we couldnt have said to insurance companies that they needed to have capital to back them if they wanted to sell default swaps. We didnt but could have and will in the future. Again, this was not something that suddenly appeared out of the clear blue sky.

The challenge for the future will be to put in enough regulation to prevent this kind of excess but not so much that we return to the old days where there was too much regulation. We all should hope they get it right. But doing nothing is insane. Unless you LIKE having the economy of 2008.

[PBzeer]

sck - the one thing you seem to fail to take into account is the human factor. The root of the phrase "irrational exuberance". Those who seek wealth will often go where angels fear to tread, simply because they think that they will be the one to come out on top.

Any investment, not tied to a guaranteed return, such as a 18 month CD for example, is a crap shoot. Where there is no risk of loss, there is no risk of gain beyond a certain level which is generally way below what people want. Playing the market is just another form of gambling.

The only regulation that should be in place is that which stops fraudulent dealing. But along with that should also be the explicit warning that you proceed at your own risk. Be it an individual, or a corporate entity. No bailouts, no rescues. There are "safe", low-yield investments if you want guarantees, or you can gamble on hitting the jackpot.

-------------

On a further note, is anyone aware of how much of the "losses" we hear about are of principle, rather than earnings?

[xort]

lets remember that in 2005, the repubs had control of the senate and they held hearings on fanny & freddy. experts testified that if things do not change, those two will need a federal bailout. repubs suggested changes. dems screamed bloody murder, dug in their heels and said there is no problem and there will be no bailout. GWB addressed the need to fix fanny & freddy in his 2005 state of the union and was booed by the dems. fanny and freddy were inventions of the dems. harold raines took 60 million in bonuses, fraudulently, as ceo of freddy. ended up as obamas financial advisor.
plenty of blame to go around, this is not a one party problem.

if dems are so wonderful, why didn't they do more to stop this alleged republican scheme? they have used the filibuster or the threat of filibuster and a bunch of other tactics to get their way when they were not in power.

IF you believe the reps are the cause, then you HAVE to also blame the dems for being too stupid to see it or too lazy to do anything about it or too greedy to want to stop it. they were there the whole time.

this constant blame bush is for cowards

[danjarch]

Sck5, let me save you the grief and tell you now that people aren't rational. I was predicting this madness 10 years ago when Rooms to Go started to sale cheap furniture at inflated prices and let you go for a year or more with out paying anything. Same goes for rent to own chrome wheels and a whole bunch of other shady deals. Banks handing out credit cards to college students without an income was always a stupid idea in my opinion. Plenty of people more intelligent then me warned against it to, but because it didn't fall apart the next day, people ignored them.

You talk of regulation saving us but another smart fellow predicted where that would lead as far back as two hundred years ago. Apathy to dependence, dependence back to bondage. Take a look around. You'll be suprised and maybe a little scared just how dependent you are on the Government already. FAA look after the airlines, health dept checks up on the food supply, building dept makes sure you home and office is built to code, FDIC covers your bank account, on and on and on.

We're already starting to see more and more rules though. What you can and can't build on your property, what you can serve, who you can serve it to, and how you must serve it in your restuarant. Increasingly if they don't think we the people will accept an out right ban, its slipped through the back door. A punishing tax or limits on who and where it can be sold. Requirements for special permits and areas set off into the hinter lands for those activities.

Your right that to do nothing is insane but placing even more under government control isn't going to help. There are plenty of laws and lawyers to go after all the bad guys for false advertising, professional malfecense, and theft. Passing abunch of new regulations is going to do to banking what our current usery laws do. Instead of up front high interest rates from honest companies that are willing to lend to people with bad credit. We have rent to own scemes, check cashing joints that hit you ten ways from sunday, tittle loans pretty much the same thing, and a host of other shady joints operating at the edges of the law.

I used to get calls once a week with lease your own equiptment scemes. Do you really want to force more and more small businessmen into crazy scemes to get finacing. As well as send more and more investers into shady deals to try to get some return on they're investment.

[wind_magic]

Sck5, we might as well start at home with home prices. What are we going to do to insure that you don't sell your home for 10% more this year than you bought it for last year, that you only sell it for whatever the CPI rate is so it only appreciates as fast as inflation. We wouldn't want another housing boom would we ...

[sailaway21]

sck5,
Go to realclearpolitics.com and you'll be able to access the full article. You'll then see that the guy missed neither the tech bubble nor the real estate bubble but he, like everyone else, missed the exact top of the bubble. He's very open about his mistakes and others, and he explains quite well why it will all happen again.

[wind_magic]

Sck5,

The reality is that very few people get out at a market top, that's what makes it the top. If many people suddenly became informed and got out a week before the top, the top would move back in time and happen earlier. The top of a market isn't a price it was destined to hit, the top is the very fact that everyone was buying and nobody was selling, so to wish everyone would have cashed out at the top is just wanting the impossible - who would have taken the other side of the trade ? If everyone knows the market is going to go down it's a bottom, not a top, because the market only exists in the minds of emotional human beings. A market top IS the very fact that few people know it's the top. It's simply a case where being well informed and in tune with the news of the day doesn't help you, because if the market reporters are talking about it, by definition it's already happened, group think is counter-productive. Said another way - of course everyone thought the market was going to go up at the top, that's why it's the top.

I don't feel like retyping a bunch of stuff about it, but it's out there somewhere.

[sck5]

you guys miss my point. the point wasnt that people should have "picked the top". It was that it was very clear that an unsustainable bubble was in progress and that when it popped it would be unpleasant. In other words, it WAS foreseen by many though apparently not by anyone in a position to do something about it. At it was foreseen not a week or two ahead of time, but YEARS ahead of time. You dont have to pick the top to know that unsustainable trends are happening. Just look at the graph posted above. The system was way out of historical ranges years before it all melted down.

As for "putting things under government control" that is EXACTLY what too much deregulation has brought us. It is NOT A GOOD THING that the government now owns the mortgage market, the largest insurance company, and large parts of the banking system. Better regulation is preferable to government ownership. Most people would agree with that, and would not agree with the deregulation fanatics who say "let them all fail" because that would ruin too many lives.

THAT is the choice, - better regulation or another crash that results in government ownership of large parts of the economy. We can probably all agree that the latter isnt a very good outcome.