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While the US is focused on its own domestic dramas, Europe as the Economist (UK) puts it, is bleeding out. Silently, exsanguinating below the fold, but bleeding all the same.
While the US is focused on its own domestic dramas, Europe as the
Economist (UK) puts it, is bleeding out. Silently, exsanguinating below the fold, but bleeding all the same. http://www.economist.com/blogs/freee.../euro-crisis-5 |
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While the US is focused on its own domestic dramas, Europe as the Economist (UK) puts it, is bleeding out. Silently, exsanguinating below the fold, but bleeding all the same.
On May 2, 2:36*pm, ПЈö'Донован wrote:
“While the US is focused on its own domestic dramas, Europe as the Economist (UK) *puts it, ‘is bleeding out.’ Silently, exsanguinating below the fold, but bleeding all the same.” http://www.economist.com/blogs/freee.../euro-crisis-5 Of all the zombie ideas that have been reanimated in the wake of the global financial crisis, austerity is the most dangerous. austerity created the disasters of the 1930s, and contributed to the descent of the world into global war. European austerity policies have prevented any recovery from the crisis of 2009, while rescuing and protecting the banks and financial institutions that created the crisis. An essential guide for anyone who wants to understand the current depression. http://www.oup.com/us/catalog/genera.../Political/?vi... Austerity The History of a Dangerous Idea Mark Blyth ISBN13: 9780199828302ISBN10: 019982830X Hardcover, 304 pages Mar 2013, In Stock Price: $24.95 (02) Governments today in both Europe and the United States have succeeded in casting government spending as reckless wastefulness that has made the economy worse. In contrast, they have advanced a policy of draconian budget cuts--austerity--to solve the financial crisis. We are told that we have all lived beyond our means and now need to tighten our belts. This view conveniently forgets where all that debt came from. Not from an orgy of government spending, but as the direct result of bailing out, recapitalizing, and adding liquidity to the broken banking system. Through these actions private debt was rechristened as government debt while those responsible for generating it walked away scot free, placing the blame on the state, and the burden on the taxpayer. That burden now takes the form of a global turn to austerity, the policy of reducing domestic wages and prices to restore competitiveness and balance the budget. The problem, according to political economist Mark Blyth, is that austerity is a very dangerous idea. First of all, it doesn't work. As the past four years and countless historical examples from the last 100 years show, while it makes sense for any one state to try and cut its way to growth, it simply cannot work when all states try it simultaneously: all we do is shrink the economy. In the worst case, austerity policies worsened the Great Depression and created the conditions for seizures of power by the forces responsible for the Second World War: the Nazis and the Japanese military establishment. As Blyth amply demonstrates, the arguments for austerity are tenuous and the evidence thin. Rather than expanding growth and opportunity, the repeated revival of this dead economic idea has almost always led to low growth along with increases in wealth and income inequality. Austerity demolishes the conventional wisdom, marshaling an army of facts to demand that we recognize austerity for what it is, and what it costs us. Features • Tackles one of the most important topics in world politics and economics in clear, trenchant language • One of the only accounts that successfully links together the political and economic aspects of the current crisis. Reviews "Austerity is an economic policy strategy, but is also an ideology and an approach to economic management freighted with politics. In this book Mark Blyth uncovers these successive strata. In doing so he wields his spade in a way that shows no patience for fools and foolishness." --Barry Eichengreen, George C. Pardee and Helen N. Pardee Professor of Economics and Political Science University of California, Berkeley "Of all the zombie ideas that have been reanimated in the wake of the global financial crisis, austerity is the most dangerous. Mark Blyth shows how austerity created the disasters of the 1930s, and contributed to the descent of the world into global war. He shows how European austerity policies have prevented any recovery from the crisis of 2009, while rescuing and protecting the banks and financial institutions that created the crisis. An essential guide for anyone who wants to understand the current depression." --John Quiggin, author of author of Zombie Economics "Most fascinating is the author's discussion of the historical underpinnings of austerity, first formulated by Enlightenment thinkers Locke, Hume and Adam Smith, around the (good) idea of parsimony and the (bad) idea of debt. Ultimately, writes Blyth, austerity is a 'zombie economic idea because it has been disproven time and again, but it just keeps coming.' A clear explanation of a complicated, and severely flawed, idea." -- KIRKUS REVIEW "Mark Blyth's fascinating analysis guides the reader through 'the historical ideology which has classified debt as problematic.' In doing so he outlines the relevance of century-old debates between the advocates and opponents of laissez faire, and explains why, after a brief reemergence in 2008-09, and despite the lack of evidence supporting austerity, the world turned its back on Keynesian policies." --Robert Skidelsky, author of Keynes: The Return of the Master "Among all the calamities spawned by the global financial crisis, none was as easily avoidable as the idea that austerity policies were the only way out. In this feisty book, noted political scientist Mark Blyth covers new territory by recounting the intellectual history of this failed idea and how it came to exert a hold on the imagination of economists and politicians. It is an indication of the sorry state of macroeconomics that it takes a political scientist to expose so thoroughly one of the economics profession's most dangerous delusions." --Dani Rodrik, Rafiq Hariri Professor of International Political Economy, The John F. Kennedy School of Government, Harvard University "Essential reading... The economy is much too important to leave to economists. We need to understand how ideas shape it, and Blyth's new book provides an excellent starting point."--Washington Monthly "An important polemic... valid and compelling."--Lawrence Summers, Financial Times "splendid new book". Martin Wolf, Financial Times Product Details 304 pages; 5-1/2 x 8-1/2; ISBN13: 978-0-19-982830-2ISBN10: 0-19-982830- X About the Author(s) Mark Blyth is Professor of International Political Economy at Brown University. He is the author of Great Transformations: Economic Ideas and Institutional Change in the Twentieth Century. |
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While the US is focused on its own domestic dramas, Europe as the Economist (UK) puts it, is bleeding out. Silently, exsanguinating below the fold, but bleeding all the same.
On May 2, 4:35*pm, ПеаБраин wrote:
snicker, amity shales, snicker. here is what really happened before and during the great depression, and hayek, freidman, rand, greenspan, or any other revisionists seem not to be able to lie away, http://www.aliveness.com/kangaroo/Timeline.htm TIMELINES OF THE GREAT DEPRESSION: This page features two timelines: the first for general events of the Roaring 20s and the Great Depression, the second for leading economic indicators. The importance of these timelines cannot be emphasized enough. Seeing the order in which events actually occurred dispels many myths about the Great Depression. One of the greatest of these myths is that government intervention was responsible for its onset. Truly massive intervention began only under the presidency of Franklin Roosevelt in 1933, who was sworn in after the worst had already hit. Although his New Deal did not cure it, all the leading economic indicators improved on his watch. But don't take my word for it -- here is the raw data: TIMELINE OF GENERAL EVENTS 1920s (Decade) • During World War I, federal spending grows three times larger than tax collections. When the government cuts back spending to balance the budget in 1920, a severe recession results. However, the war economy invested heavily in the manufacturing sector, and the next decade will see an explosion of productivity... although only for certain sectors of the economy. • An average of 600 banks fail each year. • Agricultural, energy and coal mining sectors are continually depressed. Textiles, shoes, shipbuilding and railroads continually decline. • The value of farmland falls 30 to 40 percent between 1920 and 1929. • Organized labor declines throughout the decade. The United Mine Workers Union will see its membership fall from 500,000 in 1920 to 75,000 in 1928. The American Federation of Labor would fall from 5.1 million in 1920 to 3.4 million in 1929. • "Technological unemployment" enters the nation's vocabulary; as many as 200,000 workers a year are replaced by automatic or semi- automatic machinery. • Over the decade, about 1,200 mergers will swallow up more than 6,000 previously independent companies; by 1929, only 200 corporations will control over half of all American industry. • By the end of the decade, the bottom 80 percent of all income- earners will be removed from the tax rolls completely. Taxes on the rich will fall throughout the decade. • By 1929, the richest 1 percent will own 40 percent of the nation's wealth. The bottom 93 percent will have experienced a 4 percent drop in real disposable per-capita income between 1923 and 1929. • The middle class comprises only 15 to 20 percent of all Americans. • Individual worker productivity rises an astonishing 43 percent from 1919 to 1929. But the rewards are being funneled to the top: the number of people reporting half-million dollar incomes grows from 156 to 1,489 between 1920 and 1929, a phenomenal rise compared to other decades. But that is still less than 1 percent of all income-earners. 1922 • The conservative Supreme Court strikes down federal child labor legislation. 1923 • President Warren Harding dies in office; his administration was easily one of the most corrupt in American history. Calvin Coolidge, who is squeaky clean by comparison, becomes president. Coolidge is no less committed to laissez-faire and a non-interventionist government. He announces to the American people: "The business of America is business." • Supreme Court nullifies minimum wage for women in District of Columbia. 1924 • The Ku Klux Klan reaches the height of its influence in America: by the end of the year it will claim 9 million members. It will decline drastically in 1925, however, after financial and moral scandals rock its leadership. • The stock market begins its spectacular rise. Bears little relation to the rest of the economy. 1925 • The top tax rate is lowered to 25 percent - the lowest top rate in the eight decades since World War I. • Supreme Court rules that trade organizations do not violate anti- trust laws as long as some competition survives. 1928 • The construction boom is over. • Farmers' share of the national income has dropped from 15 to 9 percent since 1920. • Between May 1928 and September 1929, the average prices of stocks will rise 40 percent. Trading will mushroom from 2-3 million shares per day to over 5 million. The boom is largely artificial. 1929 • Herbert Hoover becomes President. Hoover is a staunch individualist but not as committed to laissez-faire ideology as Coolidge. • More than half of all Americans are living below a minimum subsistence level. • Annual per-capita income is $750; for farm people, it is only $273. • Backlog of business inventories grows three times larger than the year before. Public consumption markedly down. • Freight carloads and manufacturing fall. • Automobile sales decline by a third in the nine months before the crash. • Construction down $2 billion since 1926. • Recession begins in August, two months before the stock market crash. During this two month period, production will decline at an annual rate of 20 percent, wholesale prices at 7.5 percent, and personal income at 5 percent. • Stock market crash begins October 24. Investors call October 29 "Black Tuesday." Losses for the month will total $16 billion, an astronomical sum in those days. • Congress passes Agricultural Marketing Act to support farmers until they can get back on their feet. 1930 • By February, the Federal Reserve has cut the prime interest rate from 6 to 4 percent. Expands the money supply with a major purchase of U.S. securities. However, for the next year and a half, the Fed will add very little money to the shrinking economy. (At no time will it actually pull money out of the system.) Treasury Secretary Andrew Mellon announces that the Fed will stand by as the market works itself out: "Liquidate labor, liquidate stocks, liquidate real estate… values will be adjusted, and enterprising people will pick up the wreck from less-competent people." (More) • The Smoot-Hawley Tariff passes on June 17. With imports forming only 6 percent of the GNP, the 40 percent tariffs work out to an effective tax of only 2.4 percent per citizen. Even this is compensated for by the fact that American businesses are no longer investing in Europe, but keeping their money stateside. The consensus of modern economists is that the tariff made only a minor contribution to the Great Depression in the U.S., but a major one in Europe. (More) • The first bank panic occurs later this year; a public run on banks results in a wave of bankruptcies. Bank failures and deposit losses are responsible for the contracting money supply. • Supreme Court rules that the monopoly U.S. Steel does not violate anti-trust laws as long as competition exists, no matter how negligible. • Democrats gain in Congressional elections, but still do not have a majority. • The GNP falls 9.4 percent from the year before. The unemployment rate climbs from 3.2 to 8.7 percent. 1931 • No major legislation is passed addressing the Depression. • A second banking panic occurs in the spring. • The GNP falls another 8.5 percent; unemployment rises to 15.9 percent. 1932 • This and the next year are the worst years of the Great Depression. For 1932, GNP falls a record 13.4 percent; unemployment rises to 23.6 percent. • Industrial stocks have lost 80 percent of their value since 1930.. • 10,000 banks have failed since 1929, or 40 percent of the 1929 total. • About $2 billion in deposits have been lost since 1929. • Money supply has contracted 31 percent since 1929. • GNP has also fallen 31 percent since 1929. • Over 13 million Americans have lost their jobs since 1929. • Capital growth investments have dropped from $16.2 billion to 1/3 of one billion since 1929. • Farm prices have fallen 53 percent since 1929. • International trade has fallen by two-thirds since 1929. • The Fed makes its first major expansion of the money supply since February 1930. • Congress creates the Reconstruction Finance Corporation. (More) • Congress passes the Federal Home Loan Bank Act and the Glass- Steagall Act of 1932. (More) • Top tax rate is raised from 25 to 63 percent. • Popular opinion considers Hoover's measures too little too late. Franklin Roosevelt easily defeats Hoover in the fall election. Democrats win control of Congress. • At his Democratic presidential nomination, Roosevelt says: "I pledge you, I pledge myself, to a new deal for the American people." 1933 • Roosevelt inaugurated; begins "First 100 Days" of intensive legislative activity. (More) • A third banking panic occurs in March. Roosevelt declares a Bank Holiday; closes financial institutions to stop a run on banks. • Alarmed by Roosevelt's plan to redistribute wealth from the rich to the poor, a group of millionaire businessmen, led by the Du Pont and J.P. Morgan empires, plans to overthrow Roosevelt with a military coup and install a fascist government. The businessmen try to recruit General Smedley Butler, promising him an army of 500,000, unlimited financial backing and generous media spin control. The plot is foiled when Butler reports it to Congress. (More) • Congress authorizes creation of the Agricultural Adjustment Administration, the Civilian Conservation Corps, the Farm Credit Administration, the Federal Deposit Insurance Corporation, the Federal Emergency Relief Administration, the National Recovery Administration, the Public Works Administration and the Tennessee Valley Authority. (More) • Congress passes the Emergency Banking Bill, the Glass-Steagall Act of 1933, the Farm Credit Act, the National Industrial Recovery Act and the Truth-in-Securities Act. (More) • U.S. goes off the gold standard. • Roosevelt does much to redistribute wealth from the rich to the poor, but is obsessed with a balanced budget. He later rejects Keynes' advice to begin heavy deficit spending. • The free fall of the GNP is significantly slowed; it dips only 2..1 percent this year. Unemployment rises slightly, to 24.9 percent. 1934 • Congress authorizes creation of the Federal Communications Commission, the National Mediation Board and the Securities and Exchange Commission. (More) • Congress passes the Securities and Exchange Act and the Trade Agreement Act. (More) • The economy turns around: GNP rises 7.7 percent, and unemployment falls to 21.7 percent. A long road to recovery begins. • Sweden becomes the first nation to recover fully from the Great Depression. It has followed a policy of Keynesian deficit spending. (More) 1935 • The Supreme Court declares the National Recovery Administration to be unconstitutional. • Congress authorizes creation of the Works Progress Administration, the National Labor Relations Board and the Rural Electrification Administration. (More) • Congress passes the Banking Act of 1935, the Emergency Relief Appropriation Act, the National Labor Relations Act, and the Social Security Act. (More) • Economic recovery continues: the GNP grows another 8.1 percent, and unemployment falls to 20.1 percent. 1936 • The Supreme Court declares part of the Agricultural Adjustment Act to be unconstitutional. • In response, Congress passes the Soil Conservation and Domestic Allotment Act. (More) • Top tax rate raised to 79 percent. • Economic recovery continues: GNP grows a record 14.1 percent; unemployment falls to 16.9 percent. • Germany becomes the second nation to recover fully from the Great Depression, through heavy deficit spending in preparation for war. 1937 • The Supreme Court declares the National Labor Relations Board to be unconstitutional. • Roosevelt seeks to enlarge and therefore liberalize the Supreme Court. This attempt not only fails, but outrages the public. • Economists attribute economic growth so far to heavy government spending that is somewhat deficit. Roosevelt, however, fears an unbalanced budget and cuts spending for 1937. That summer, the nation plunges into another recession. Despite this, the yearly GNP rises 5.0 percent, and unemployment falls to 14.3 percent. 1938 • Congress passes the Agricultural Adjustment Act of 1938 and the Fair Labor Standards Act. (More) • No major New Deal legislation is passed after this date, due to Roosevelt's weakened political power. • The year-long recession makes itself felt: the GNP falls 4.5 percent, and unemployment rises to 19.0 percent. • Britain becomes the third nation to recover as it begins deficit spending in preparation for war. 1939 • GNP rises 7.9 percent; unemployment falls to 17.2 percent. • The United States will begin emerging from the Depression as it borrows and spends $1 billion to build its armed forces. From 1939 to 1941, when the Japanese attack Pearl Harbor, U.S. manufacturing will have shot up a phenomenal 50 percent! • The Depression is ending worldwide as nations prepare for the coming hostilities. • World War II starts with Hitler's invasion of Poland. 1945 • Although the war is the largest tragedy in human history, the United States emerges as the world's only economic superpower. Deficit spending has resulted in a national debt 123 percent the size of the GDP. By contrast, in 1994, the $4.7 trillion national debt will be only 70 percent of the GDP! • The top tax rate is 91 percent. It will stay at least 88 percent until 1963, when it is lowered to 70 percent. During this time, America will experience the greatest economic boom it has ever known. ECONOMIC TIMELINE The following timeline shows the order of economic events during the Great Depression. Notice the effect that deficit spending had on economic growth: Receipts: Tax receipts as a percentage of the Gross Domestic Product Spending: Federal spending as a percentage of the Gross Domestic Product GNP: Percent change in the Gross National Product Unemp.: Unemployment rate Tax Federal GNP Unemp. Year Receipts Spending Growth Rate ------------------------------------------------- 1929 -- -- -- 3.2% Hoover era, Great Depression begins 1930 4.2% 3.4% - 9.4% 8.7 1931 3.7 4.3 - 8.5 15.9 1932 2.9 7.0 -13.4 23.6 1933 3.5 8.1 - 2.1 24.9 FDR, New Deal begins; contraction ends March 1934 4.9 10.8 + 7.7 21.7 1935 5.3 9.3 + 8.1 20.1 1936 5.1 10.6 +14.1 16.9 1937 6.2 8.7 + 5.0 14.3 recession begins, May 1938 7.7 7.8 - 4.5 19.0 recession ends, June 1939 7.2 10.4 + 7.9 17.2 1940 6.9 9.9 1941 7.7 12.1 1942 10.3 24.8 1943 13.7 44.8 1944 21.7 45.3 1945 21.3 43.7 As you can see, Roosevelt began relatively modest deficit spending that arrested the slide of the economy and resulted in some astonishing growth numbers. (Roosevelt's average growth of 5.2 percent during the Great Depression is even higher than Reagan's 3.7 percent growth during his so-called "Seven Fat Years!") When 1936 saw a phenomenal record of 14 percent growth, Roosevelt eased back on the deficit spending, overly worried about balancing the budget. But this only caused the economy to slip back into a recession, as the above chart shows. I have been unable to find reliable economic growth figures from World War II, but as a generalization it is safe to say the economy exploded, experiencing it’s greatest growth in U.S. history. Between 1940 and 1945, the GDP nearly doubled in size, from $832 billion to $1,559 billion in constant 87 dollars. And this occurred as deficit spending soared, to levels Keynes had earlier and unsuccessfully recommended to Roosevelt. Next Section: Summary Return to The Great Depression Homepage Sources: T.H. Watkins, The Great Depression: America in the 1930s (New York: Little, Brown and Company, 1993) Kevin Phillips, Boiling Point (New York: HarperCollins, 1993) Kevin Phillips, The Politics of Rich and Poor (New York: Random House, 1990) The 1995 Grolier Encyclopedia (Entries: New Deal, Depression of the 30s, Roosevelt, Coolidge.) The Encyclopedia Brittanica Online (Entries: New Deal, Great Depression.) Donald Barlett and James Steele, America: What Went Wrong? (Kansas City: Andrews and McMeel, 1992) Donald Barlett and James Steele, America: Who Really Pays the Taxes? (New York: Simon & Schuster, 1994) James MacGregor Fox, Roosevelt: The Lion and the Fox (New York: Konecky and Konecky, 1956) Elaine Schwartz, Econ 101½ (New York: Avon Books, 1995) Peter Pugh and Chris Garratt, Introducing Keynes (Cambridge, England: Icon Books, Ltd., 1993) Paul Krugman, Peddling Prosperity (New York: W..W. Norton and Company, 1994) Online sources: History lecture notes: http://www.marshall.edu/history/mcca...ure/greatdep.1 Gary H. Stern (President, Federal Reserve Bank of Minneapolis), "Achieving Economic Stability: Lessons From the Crash of 1929," 1987 Annual Report Essay, http://woodrow.mpls.frb.fed.us/pubs/ar/ar1987.html Office of Management and Budget, Budget of the United States Government, Fiscal Year 1997, Historical Tables 1.2 and 10.1, http://www.doc.gov/BudgetFY97/histtoc.html |
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While the US is focused on its own domestic dramas, Europe as the Economist (UK) puts it, is bleeding out. Silently, exsanguinating below the fold, but bleeding all the same.
"??'???????" wrote in message ... While the US is focused on its own domestic dramas, Europe as the Economist (UK) puts it, is bleeding out. Silently, exsanguinating below the fold, but bleeding all the same. http://www.economist.com/blogs/freee.../euro-crisis-5 won't be long before they recognize what the conservative tactics do, and they switch to socialism and go after them rich *******s with torches and pitchforks, |
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While the US is focused on its own domestic dramas, Europe as the Economist (UK) puts it, is bleeding out. Silently, exsanguinating below the fold, but bleeding all the same.
On May 2, 5:53*pm, "BIG BIRD" wrote:
"??ö'???????" wrote in message ... “While the US is focused on its own domestic dramas, Europe as the Economist (UK) *puts it, ‘is bleeding out.’ Silently, exsanguinating below the fold, but bleeding all the same.” http://www.economist.com/blogs/freee.../euro-crisis-5 won't be long before they recognize what the conservative tactics do, and they switch to socialism and go after them rich *******s with torches and pitchforks, could be. lets remember, the world saw the new deal for what it was, and many countries not only embraced it, and emulated it, but even expanded on it. this is what happens with education. and the results were staggering. in america we went form a country ruled by wealthy parasites with a very small middle class of around 15%, to a almost all middle class population, other countries did even better. that is why you see "THE CONSERVATIVES" desperate attack on schools, "THE CONSERVATIVES" embrace fascism, and of course as the fascists say, give me the schools, i will get the country. but it might not be so easy these days. keynes spectacular achievement in economics, means that in the modern world, demand for goods and services is wage driven, and so far not one "CRANK CONSERVATIVE" has found a way around that. so taking away today may not be so easy as time passes, and will effect the wealthy parasites that "THE CONSERVATIVES" so feverishly serve. the youth of the world seem to despise "CONSERVATISM", and in the u.k., they say ding dong the witch is dead)) no wonder the worlds youth despise "CONSERVATISM" the Anglo-American model, with a migration from manufacturing to finance and a big bet placed on unfettering private sector titans, Young Britons (and young Americans as well) have a lifetime of part time hustling for low pay to look forward to. As one London fellow put it to me, “being born next to the Baltic is like winning life’s lottery.” The second model has been the Northern European one (by which I include Germany and Holland), with a big bet placed on the wisdom of massive long term investments in human capital by government. And taxes high enough to pay for that human capital bet. It is looking like the Norse/Teutonic instincts were better. Both models have their problems, but in terms of business competitiveness, health, and most importantly in terms of measured human happiness and confidence in tomorrow, the Thatcher model has brought only tidings of woe. yea, she is so loved, even by that left wing bastion forbes. lets be polite about a monster that destroyed her country. http://www.forbes.com/sites/eamonnfi...the-iron-lady/ Eamonn Fingleton, Contributor My beat is East Asia - and history's biggest industrial revolution 4/14/2013 @ 10:46AM |93,734 views Thatcher's Last Wish: Another Clunker From The Iron Lady The news today is that a group of supporters of Margaret Thatcher are pushing a plan to build a museum and library as a permanent memorial to her. It is clear that the plan, which would establish a first in British politics, has been long in the making and that it not only had Thatcher’s approval but she herself largely instigated the idea. This is another clunker from the Iron Lady – a final terrible idea from a woman who, pace all current hagiography, will *be remembered as one of the worst political leaders in modern British history. Let’s be clear first on the larger politics. As someone who served as a Fleet Street commentator in the late 1970s, I fully recognize that she made progress on some issues, not least trade union dominance of the economy. But her predecessor Jim Callaghan would undoubtedly have continued to focus on these same issues had he been reelected and he would have dealt with them in a perhaps more effective, and certainly less divisive, way. The voters who elected Thatcher in 1979 were motivated powerfully by humiliation at the UK economy’s constant loss of position in global competition since the early 1950s. So how did Thatcher do in reversing the trend and what in particular did she do to improve the UK’s trade position? The eulogizers are quiet on the subject. Advisedly so. *The fact is that under Thatcherism the UK’s trade position went from the merely weak to the totally disastrous. The UK ran a current account surplus of 0.6 percent of GDP in 1978, the last full year before Thatcher came to office. As of 1989, the last full year before she was ousted by her own party in May of 1990, the current account DEFICIT had reached an appalling 3.9 percent of GDP. In the meantime Thatcher presided over a savage program to destroy the UK’s core exporting industries and, with wholesale financial deregulation, laid the groundwork for *the catastrophic financial bubbles of more recent times. She was smitten by the *erroneous notion that *advanced nations should leave “rust bucket” industries behind and move to a postindustrial model. Not a view shared by Germany, which has now long eclipsed the UK as Europe’s premier economy. It is not shared either in any of the most successful economies of East Asia (though they are delighted if the English-speaking world continues to believe in postindustrialism). *I have consistently attacked the postindustrialist fallacy since the 1980s and indeed I devoted a whole book to in 1999 (In Praise of Hard Industries: Why Manufacturing, Not the Information Economy, Is the Key to Future Prosperity). As for the Thatcher museum and library, this is a characteristically egotistical Thatcherite project at odds with British tradition. *The British after all put a high value on modesty — or at least the appearance of it — and even the most capable of them have traditionally left it to others to sing their praises. The fear now is that she has established a precedent that *future British political leaders will feel compelled to follow, and in so doing will render politics in London as dysfunctionally money-ridden as politics in Washington already is. Thatcher apparently was much impressed with the Reagan Presidential Library. But why? Such memorials typically involve pandering to wealthy donors and transnational corporations — and the pandering typically begins long before the honoree leaves office. Not the least of the problems is that many of the corporations involved have at best no loyalty to the nation and some are indeed foreign and almost by definition have a clear conflict of interest. What we know for sure is that the Reagan library was made possible in large measure by *General Electric. Although it is not yet apparent to most Americans, General Electric has played a starring role in the enfeeblement of the United States. A key charge is that GE has led corporate America in the torching of America’s once peerless industrial base on the funeral pyre of globalism.* It has done this principally by transferring many of America’s most advanced production technologies, including aerospace technologies, to foreign production partners. These partners, located mainly in East Asia, have undertaken to low-ball their prices and have thereby boosted GE’s quarterly earnings, but at the cost of hollowing out the American industrial base. You may not have seen much written about this subject in recent years but the trend is acutely apparent in U.S. trade figures. With its industrial base almost gone, America has consistently in recent years run a current account deficit of 4 to 6 percent of GDP – the weakest trade performance of any major nation in history. The geopolitical consequences could hardly be more disastrous as the United States has come increasingly to depend on funding from such creditor nations as*China and Japan. It is not an exaggeration to say that America’s role now has been reduced to borrowing *from China to save the world from China. The concept of presidential libraries is actually quite modern. The first was built by Franklin Delano Roosevelt. It was a relatively modest affair and, more important, he had the decency to do it with his own money. *In recent decades succeeding presidents have vied with one another for the title of largest and most impressive presidential library. For the record the title now seems to be held by Bill Clinton. As Winston Churchill once said, “The price of greatness is responsibility.” Would Churchill be better regarded today had he run around drumming up support for a memorial to himself?*For that that matter, would George Washington? POSTSCRIPT As of this writing , this blog has already generated more than 170 comments, not all of them friendly…. I am the first to acknowledge that Margaret Thatcher’s legacy, in common with that of most other human beings, is a mixed bag. Some of the things she did were good but the further you are from the UK –and the less you know about British politics — the more likely you are to take a favorable view. Even David Cameron, the current Prime Minister and central casting’s idea of a traditional British Conservative, is not a Thatcherite. Hardly anyone else is either. The fact is that she was ousted by her own senior colleagues, and they had good reason to rise up against her. Many readers of my commentary seem to think she played a vital role in winning the Cold War. This gives no credit to the Soviets, who had long known their system was not working. She and Ronald Reagan were pushing on an open door. If Jim Callaghan and Jimmy Carter had been in charge in 1989, the outcome in the East Bloc would have been the same. Thatcher’s rhetoric may have been particularly shrill but what demolished the Berlin Wall was a sober realization in Moscow that the dogma-driven societies it had created were totally dysfunctional. The point that concerns me most — and I happen to have the benefit of *a special understanding of the facts — is that the British economy is almost as hollowed out as the American one.*Remarkably virtually none of *my critics has made any reference to this point. Just like the United States, the UK must constantly borrow abroad — principally from China and Japan. In an earlier era, British leaders would have considered this an appalling fate. In a future era, when the East Asians finally stop propping up the pound (they have good strategic reasons for doing so for a few more years), it will be obvious to everyone that Thatcher’s trade policy was catastrophic. My larger point stands: it is at best unseemly for political leaders to go around canvassing support for their memorials. Below are three reader comments which I believe deserve wider circulation. Unsurprisingly they happen to be favorable to my point of view. But if my critics have a cogent argument against my thesis, they have yet to make it. From logic001 [9/4+ Member: logic001] 75.48.104.187 Submitted on 2013/04/14 at 3:10 pm The article is correct on the major points. Since the 1980′s I’ve witnessed up close and personally the paths taken by two very different models for Western Civilization. One is the Anglo-American model, with a migration from manufacturing to finance and a big bet placed on unfettering private sector titans. 2 The second model has been the Northern European one (by which I include Germany and Holland), with a big bet placed on the wisdom of massive long term investments in human capital by government. And taxes high enough to pay for that human capital bet. It is looking like the Norse/Teutonic instincts were better. Both models have their problems, but in terms of business competitiveness, health, and most importantly in terms of measured human happiness and confidence in tomorrow, the Thatcher model has brought only tidings of woe. This is most apparent over the course of decades. In the 1980s, the life and dreams of a young man in the U.K. were broadly on par with those of a young man in West Germany or Sweden. Today, it is not even close. Young Britons (and young Americans as well) have a lifetime of part time hustling for low pay to look forward to. As one London fellow put it to me, “being born next to the Baltic is like winning life’s lottery.” That is Thatcher’s legacy. From gladpick Marks [1/0+ Member: gladpick] |
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While the US is focused on its own domestic dramas, Europe as the Economist (UK) puts it, is bleeding out. Silently, exsanguinating below the fold, but bleeding all the same.
On May 3, 8:24*am, ПЈö'Донован wrote:
Democrat politicians forced banks to make such loans to their poor risk constituents who probably wouldn't be able to pay the loans back. They forced them how? What was exactly the actual instrument of alleged coercion? Did those villains Democrats beat the banks directors to pulp for refusing the loans. Or may be they weatherboarding them? |
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While the US is focused on its own domestic dramas, Europe as the Economist (UK) puts it, is bleeding out. Silently, exsanguinating below the fold, but bleeding all the same.
On May 3, 9:06*am, Old Pif wrote:
On May 3, 8:24*am, ПЈö'Донован wrote: Democrat politicians forced banks to make such loans to their poor risk constituents who probably wouldn't be able to pay the loans back. .................................................. .................... They forced them how? What was exactly the actual instrument of alleged coercion? .................................................. .................................................. .................. Community Reinvestment Act From Wikipedia, the free encyclopedia "The Community Reinvestment Act (CRA, Pub.L. 95–128, title VIII of the Housing and Community Development Act of 1977, 91 Stat. 1147, 12 U.S.C. § 2901 et seq.) is a United States federal law designed to encourage commercial banks and savings associations to help meet the needs of borrowers in all segments of their communities, including low- and moderate-income neighborhoods.[1][2][3] Congress passed the Act in 1977 to reduce discriminatory credit practices against low- income neighborhoods, a practice known as redlining.[4][5] The Act instructs the appropriate federal financial supervisory agencies to encourage regulated financial institutions to help meet the credit needs of the local communities in which they are chartered, consistent with safe and sound operation (Section 802.) To enforce the statute, federal regulatory agencies examine banking institutions for CRA compliance, and take this information into consideration when approving applications for new bank branches or for mergers or acquisitions (Section 804.)[6] Enforcement The Community Reinvestment Act of 1977 seeks to address discrimination in loans made to individuals and businesses from low and moderate- income neighborhoods.[7] The Act mandates that all banking institutions that receive Federal Deposit Insurance Corporation (FDIC) insurance be evaluated by Federal banking agencies to determine if the bank offers credit (in a manner consistent with safe and sound operation as per Section 802(b) and Section 804(1)) in all communities in which they are chartered to do business.[3] The law does not list specific criteria for evaluating the performance of financial institutions. Rather, it directs that the evaluation process should accommodate the situation and context of each individual institution. Federal regulations dictate agency conduct in evaluating a bank's compliance in five performance areas, comprising twelve assessment factors. This examination culminates in a rating and a written report that becomes part of the supervisory record for that bank.[8]....." |
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While the US is focused on its own domestic dramas, Europe as the Economist (UK) puts it, is bleeding out. Silently, exsanguinating below the fold, but bleeding all the same.
On May 3, 9:00*am, ПеаБраин wrote:
On May 3, 9:06*am, Old Pif wrote: On May 3, 8:24*am, ПЈö'Донован wrote: Democrat politicians forced banks to make such loans to their poor risk constituents who probably wouldn't be able to pay the loans back. .................................................. ................... They forced them how? What was exactly the actual instrument of alleged coercion? .................................................. .................................................. ................. Community Reinvestment Act From Wikipedia, the free encyclopedia "The Community Reinvestment Act (CRA, Pub.L. 95–128, title VIII of the Housing and Community Development Act of 1977, 91 Stat. 1147, 12 U.S.C. § 2901 et seq.) is a United States federal law designed to encourage commercial banks and savings associations to help meet the needs of borrowers in all segments of their communities, including low- and moderate-income neighborhoods.[1][2][3] Congress passed the Act in 1977 to reduce discriminatory credit practices against low- income neighborhoods, a practice known as redlining.[4][5] The Act instructs the appropriate federal financial supervisory agencies to encourage regulated financial institutions to help meet the credit needs of the local communities in which they are chartered, consistent with safe and sound operation (Section 802.) To enforce the statute, federal regulatory agencies examine banking institutions for CRA compliance, and take this information into consideration when approving applications for new bank branches or for mergers or acquisitions (Section 804.)[6] Enforcement The Community Reinvestment Act of 1977 seeks to address discrimination in loans made to individuals and businesses from low and moderate- income neighborhoods.[7] The Act mandates that all banking institutions that receive Federal Deposit Insurance Corporation (FDIC) insurance be evaluated by Federal banking agencies to determine if the bank offers credit (in a manner consistent with safe and sound operation as per Section 802(b) and Section 804(1)) in all communities in which they are chartered to do business.[3] The law does not list specific criteria for evaluating the performance of financial institutions. Rather, it directs that the evaluation process should accommodate the situation and context of each individual institution. Federal regulations dictate agency conduct in evaluating a bank's compliance in five performance areas, comprising twelve assessment factors. This examination culminates in a rating and a written report that becomes part of the supervisory record for that bank.[8]....." "CONSERVATIVES" have absolutely no credibility at all. that is a lie. back it up with real facts, and you will be the first to collect a $100,000.00 reward that has been offered for proof of your conservative lie. go ahead liar, i will give you the info, go collect the money, then get back to me liar. Get Me ReWrite! By Barry Ritholtz - May 13th, 2010, 7:20AM My approach to everything I have written, studied and analyzed in this space is pretty straight forward: Start with the data and evidence and go forward from there. Figure out what the “Truth” is; try to get as close to the objective reality beneath the noise in order to make intelligent investing decisions for myself and my clients. There are others who do not share this objective. Their goals are either political (winning the next election) or ideological (having their belief system become dominant). Truth is irrelevant to these people. Not surprisingly, these folks — many of whom contributed to the crisis in a might way — are desperately trying to duck responsibility for what happened. Those who helped cause the crisis are engaged in an ongoing effort to rewrite its history. Their goal? Exonerate their own bad behavior, throw off any responsibility to the collapse, blame anything but their own ideology and horrific decision making. They want to keep pushing their tired political agendas, despite the damage they may have caused. When writing Bailout Nation, I tried to steer clear of partisan finger pointing. I kept the focus on what actually occurred, what could be proven mathematically. I blamed Democrats and Republicans — not equally, but in proportion to their what they did. Unsupported theories, tenuous connection, loose affiliations were not part of the analysis. Every legislative change, each regulatory failure, all corporate actions, to be blameworthy, had to manifest themselves in actual mathematical proof. This led me to ascertain the following 30 year sequence: * * -Free market absolutism becomes the dominant intellectual thought. * * -Deregulation of markets, investment houses, and banks becomes a broad goal: This led to Glass Steagall repeal, Derivative exemptions, Investing house leverage exemptions, and a new breed of unregulated non bank lenders. * * -Legislative actions reduce or eliminate much of the regulatory oversight; SEC funding is weakened. * * -Rates come down to absurd levels. * * - Bond managers madly scramble for yield. * * -Derivatives, non-bank lending, leverage, bank size, compensation levels all run away from prior levels. * * - Wall Street securitizes whatever it can to satisfy the demand for higher yields. * * -”Lend to securitize” nonbank mortgage writers sell enormous amounts of subprime loans to Wall Street for this purpose. * * -To meet this demand, non bank lenders collapse lending standards, leading to a credit bubble. * * -The Fed approves of this innovation. * * -Housing booms, then busts * * -Credit freeze, market collapse recession. You will note that the CRA is not part of this sequence. I could find no evidence that they were a cause or even a minor factor. If they were, the housing bubbles would not have been in California or S. Florida or Ls Vegas or Arizona — Harlem and South Philly and parts of Chicago and Washington DC would have been the focus. Nor do I blame Fannie and Freddie. Now understand, there is no love lost between myself and the GSEs. For years, I have called them “Phoney and Fraudy.” *Since George Bush and Hank Paulson nationalized them, I have accused the government of using these two as a backdoor bailout for banks — a hidden PPIP/TARP used to buy all the garbage mortgages that banks are desperate to get off their balance sheets. Longtime readers will recall we very publicly shorted Fannie based upon their fraudulent practices and horrific balance sheet. But even I cannot reconcile the movement to place all of the world’s troubles at the feet of the GSEs. Not, at least, according to the data. That lack of evidence, however, doesn’t stop ideologues from making the attempt. Consider this attempt at rewriting the causes of the credit crisis by Kevin Hassett: * * “The worst financial crisis in generations was set off by a massive government effort, led by the two mortgage giants, to make loans to homebuyers no matter whether they could make the payments. Lenders were willing to lend money to just about all comers, no matter how low their income. Why? Because the lenders knew Fannie and Freddie would purchase the loans from them for a high price before bundling them into securities to sell to investors.” Now, this makes for a fascinating narrative that plays into a number of different ideological beliefs. It exonerates the radical free market deregulators, it ignores what the private sector did, and it somehow ignores the fact that Congress was controlled by a very conservative GOP from 1994 to 2006 — the prime period of time covered leading up to and including the beginning of the crisis. But worse than all of that, the data supporting Hassett’s position simply isn’t there. Over the past 2 years, I have repeatedly asked the people who push this narrative to provide some evidence for their positions. I have offered a $100,000 if they could prove their case. Specifically, I have requested some data or evidence that DISPROVED the following facts: * * -The origination of subprime loans came primarily from non bank lenders not covered by the CRA; * * -The majority of the underwriting, at leats fro the first few years of the boom, were by these same non-bank lenders * * -When the big banks began chasing subprime, it was due to the profit motive, not any mandate from the President (a Republican) or the the Congress (Republican controlled) or the GSEs they oversaw. * * -Prior to 2005, nearly all of these sub-prime loans were bought by Wall Street — NOT Fannie & Freddie * * -In fact, prior to 2005, the GSEs were not permitted to purchase non-conforming mortgages. * * -After 2005, Fannie & Freddie changed their own rules to start buying these non- conforming mortgages — in order to maintain market share and compete with Wall Street for profits. * * -The change in FNM/FRE conforming mortgage purchases in 2005 was not due to any legislation or marching orders from the President (a Republican) or the the Congress (Republican controlled). It was the profit motive that led them to this action. These are data supported facts I pounded on in BN. Of course, folks like Hassett hate this factual history, as it conflicts with their goals and politics. Rather than produce evidence, they create story lines unsupported by facts. *But Monkeys love a good narrative, and so they give that to them. However, as an investor, I demand evidence, data and facts. The blame Fannie & Freddie crowd have managed to remain blissfully data free. They have steadfastly ignored all calls for proof. Its way past the time to call out their intellectual dishonesty. If you cannot show any data, if you cannot prove what you are alleging with actual facts, you need to be called out for what it is you actually a Proponents of a failed philosophy. http://www.ritholtz.com/blog/2010/05...es-of-the-cred... |
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While the US is focused on its own domestic dramas, Europe as the Economist (UK) puts it, is bleeding out. Silently, exsanguinating below the fold, but bleeding all the same.
On May 3, 11:29*am, Nickname unavailable
wrote: On May 3, 9:00*am, ПеаБраин wrote: On May 3, 9:06*am, Old Pif wrote: On May 3, 8:24*am, ПЈö'Донован wrote: Democrat politicians forced banks to make such loans to their poor risk constituents who probably wouldn't be able to pay the loans back. .................................................. ................... They forced them how? What was exactly the actual instrument of alleged coercion? .................................................. .......................... ......................................... Community Reinvestment Act From Wikipedia, the free encyclopedia "The Community Reinvestment Act (CRA, Pub.L. 95–128, title VIII of the Housing and Community Development Act of 1977, 91 Stat. 1147, 12 U.S.C. § 2901 et seq.) is a United States federal law designed to encourage commercial banks and savings associations to help meet the needs of borrowers in all segments of their communities, including low- and moderate-income neighborhoods.[1][2][3] Congress passed the Act in 1977 to reduce discriminatory credit practices against low- income neighborhoods, a practice known as redlining.[4][5] The Act instructs the appropriate federal financial supervisory agencies to encourage regulated financial institutions to help meet the credit needs of the local communities in which they are chartered, consistent with safe and sound operation (Section 802.) To enforce the statute, federal regulatory agencies examine banking institutions for CRA compliance, and take this information into consideration when approving applications for new bank branches or for mergers or acquisitions (Section 804.)[6] Enforcement The Community Reinvestment Act of 1977 seeks to address discrimination in loans made to individuals and businesses from low and moderate- income neighborhoods.[7] The Act mandates that all banking institutions that receive Federal Deposit Insurance Corporation (FDIC) insurance be evaluated by Federal banking agencies to determine if the bank offers credit (in a manner consistent with safe and sound operation as per Section 802(b) and Section 804(1)) in all communities in which they are chartered to do business.[3] The law does not list specific criteria for evaluating the performance of financial institutions. Rather, it directs that the evaluation process should accommodate the situation and context of each individual institution. Federal regulations dictate agency conduct in evaluating a bank's compliance in five performance areas, comprising twelve assessment factors. This examination culminates in a rating and a written report that becomes part of the supervisory record for that bank.[8]....." "CONSERVATIVES" have absolutely no credibility at all. that is a lie. back it up with real facts, and you will be the first to collect a $100,000.00 reward that has been offered for proof of your conservative lie. go ahead liar, i will give you the info, go collect the money, then get back to me liar. Get Me ReWrite! By Barry Ritholtz - May 13th, 2010, 7:20AM My approach to everything I have written, studied and analyzed in this space is pretty straight forward: Start with the data and evidence and go forward from there. Figure out what the “Truth” is; try to get as close to the objective reality beneath the noise in order to make intelligent investing decisions for myself and my clients. There are others who do not share this objective. Their goals are either political (winning the next election) or ideological (having their belief system become dominant). Truth is irrelevant to these people. Not surprisingly, these folks — many of whom contributed to the crisis in a might way — are desperately trying to duck responsibility for what happened. Those who helped cause the crisis are engaged in an ongoing effort to rewrite its history.. Their goal? Exonerate their own bad behavior, throw off any responsibility to the collapse, blame anything but their own ideology and horrific decision making. They want to keep pushing their tired political agendas, despite the damage they may have caused. When writing Bailout Nation, I tried to steer clear of partisan finger pointing. I kept the focus on what actually occurred, what could be proven mathematically. I blamed Democrats and Republicans — not equally, but in proportion to their what they did. Unsupported theories, tenuous connection, loose affiliations were not part of the analysis. Every legislative change, each regulatory failure, all corporate actions, to be blameworthy, had to manifest themselves in actual mathematical proof. This led me to ascertain the following 30 year sequence: * * -Free market absolutism becomes the dominant intellectual thought. * * -Deregulation of markets, investment houses, and banks becomes a broad goal: This led to Glass Steagall repeal, Derivative exemptions, Investing house leverage exemptions, and a new breed of unregulated non bank lenders. * * -Legislative actions reduce or eliminate much of the regulatory oversight; SEC funding is weakened. * * -Rates come down to absurd levels. * * - Bond managers madly scramble for yield. * * -Derivatives, non-bank lending, leverage, bank size, compensation levels all run away from prior levels. * * - Wall Street securitizes whatever it can to satisfy the demand for higher yields. * * -”Lend to securitize” nonbank mortgage writers sell enormous amounts of subprime loans to Wall Street for this purpose. * * -To meet this demand, non bank lenders collapse lending standards, leading to a credit bubble. -The Fed approves of this innovation. * * -Housing booms, then busts * * -Credit freeze, market collapse recession. You will note that the CRA is not part of this sequence. I could find no evidence that they were a cause or even a minor factor. If they were, the housing bubbles would not have been in California or S. Florida or Ls Vegas or Arizona — Harlem and South Philly and parts of Chicago and Washington DC would have been the focus. Nor do I blame Fannie and Freddie. Now understand, there is no love lost between myself and the GSEs. For years, I have called them “Phoney and Fraudy.” *Since George Bush and Hank Paulson nationalized them, I have accused the government of using these two as a backdoor bailout for banks — a hidden PPIP/TARP used to buy all the garbage mortgages that banks are desperate to get off their balance sheets. Longtime readers will recall we very publicly shorted Fannie based upon their fraudulent practices and horrific balance sheet. But even I cannot reconcile the movement to place all of the world’s troubles at the feet of the GSEs. Not, at least, according to the data. That lack of evidence, however, doesn’t stop ideologues from making the attempt.. Consider this attempt at rewriting the causes of the credit crisis by Kevin Hassett: * * “The worst financial crisis in generations was set off by a massive government effort, led by the two mortgage giants, to make loans to homebuyers no matter whether they could make the payments. Lenders were willing to lend money to just about all comers, no matter how low their income. Why? Because the lenders knew Fannie and Freddie would purchase the loans from them for a high price before bundling them into securities to sell to investors.” Now, this makes for a fascinating narrative that plays into a number of different ideological beliefs. It exonerates the radical free market deregulators, it ignores what the private sector did, and it somehow ignores the fact that Congress was controlled by a very conservative GOP from 1994 to 2006 — the prime period of time covered leading up to and including the beginning of the crisis. But worse than all of that, the data supporting Hassett’s position simply isn’t there. Over the past 2 years, I have repeatedly asked the people who push this narrative to provide some evidence for their positions. I have offered a $100,000 if they could prove their case. Specifically, I have requested some data or evidence that DISPROVED the following facts: * * -The origination of subprime loans came primarily from non bank lenders not covered by the CRA; * * -The majority of the underwriting, at leats fro the first few years of the boom, were by these same non-bank lenders * * -When the big banks began chasing subprime, it was due to the profit motive, not any mandate from the President (a Republican) or the the Congress (Republican controlled) or the GSEs they oversaw. * * -Prior to 2005, nearly all of these sub-prime loans were bought by Wall Street — NOT Fannie & Freddie * * -In fact, prior to 2005, the GSEs were not permitted to purchase non-conforming mortgages. * * -After 2005, Fannie & Freddie changed their own rules to start buying these non- conforming mortgages — in order to maintain market share and compete with Wall Street for profits. * * -The change in FNM/FRE conforming mortgage purchases in 2005 was not due to any legislation or marching orders from the President (a Republican) or the the Congress (Republican controlled). It was the profit motive that led them to this action. These are data supported facts I pounded on in BN. Of course, folks like Hassett hate this factual history, as it conflicts with their goals and politics. Rather than produce evidence, they create story lines unsupported by facts. *But Monkeys love a good narrative, and so they give that to them. However, as an investor, I demand evidence, data and facts. The blame Fannie & Freddie crowd have managed to remain blissfully data free. They have steadfastly ignored all calls for proof. Its way past the time to call out their intellectual dishonesty. If you cannot show any data, if you cannot prove what you are alleging with actual facts, you need to be called out for what it is you actually a Proponents of a failed philosophy. http://www.ritholtz.com/blog/2010/05...es-of-the-cred... For objectivity free of political agenda on this fiasco one has to look north of the American border: http://www.theglobeandmail.com/servl...27.COWENT27/TP... "..In fact, no one wants to level with the people. If they did, they'd have to explain that everybody had a hand in creating the credit crisis - even Democrats. In fact, it was the Republicans who pushed for tighter regulations on Fannie and Freddie, the government mortgage lenders, and the Democrats who opposed them. "These two entities ... are not facing any kind of financial crisis," said Democratic congressman Barney Frank back in 2003. "The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing." Mr. Frank is now a central figure in the bailout talks. Both the Republicans and Democrats enthusiastically endorsed the idea of using government power to expand home ownership to people who had been shut out of the market....." Big Brother always knows what is good for us. |
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While the US is focused on its own domestic dramas, Europe as the Economist (UK) puts it, is bleeding out. Silently, exsanguinating below the fold, but bleeding all the same.
On May 3, 10:35*am, :ПеаБраин wrote:
For objectivity free of political agenda on this fiasco one has to look north of the American border: http://www.theglobeandmail.com/servl...27.COWENT27/TP... "..In fact, no one wants to level with the people. If they did, they'd have to explain that everybody had a hand in creating the credit crisis - even Democrats. In fact, it was the Republicans who pushed for tighter regulations on Fannie and Freddie, the government mortgage lenders, and the Democrats who opposed them. "These two entities ... are not facing any kind of financial crisis," said Democratic congressman Barney Frank back in 2003. "The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing." Mr. Frank is now a central figure in the bailout talks. Both the Republicans and Democrats enthusiastically endorsed the idea of using government power to expand home ownership to people who had been shut out of the market....." Big Brother always knows what is good for us. gee, why are you not taking your credible empirical evidence, and collect the reward? Fannie Mae and Freddie Mac were victims, not culprits Posted by: Aaron Pressman on September 26, 2008 http://www.businessweek.com/investin...hives/2008/09/... There s a dangerous and misleading argument making the rounds about the causes of our current credit crisis. It s emanating from Washington where politicians are engaging in the usual blame game but this time the stakes are so high that we can t afford to fall victim to political doublespeak. In this fact-free zone, government sponsored mortgage giants Fannie Mae and Freddie Mac caused the real estate bubble and subprime meltdown. It s completely false. Fannie Mae and Freddie Mac were victims of the credit crisis, not culprits. Start with the most basic fact of all: virtually none of the $1.5 trillion of cratering subprime mortgages were backed by Fannie or Freddie. That s right most subprime mortgages did not meet Fannie or Freddie s strict lending standards. All those no money down, no interest for a year, low teaser rate loans? All the loans made without checking a borrower s income or employment history? All made in the private sector, without any support from Fannie and Freddie.. Look at the numbers. While the credit bubble was peaking from 2003 to 2006, the amount of loans originated by Fannie and Freddie dropped from $2.7 trillion to $1 trillion. Meanwhile, in the private sector, the amount of subprime loans originated jumped to $600 billion from $335 billion and Alt-A loans hit $400 billion from $85 billion in 2003. Fannie and Freddie, which wouldn t accept crazy floating rate loans, which required income verification and minimum down payments, were left out of the insanity. There s a must-read study by staff members of the Federal Reserve Bank of New York analyzing the roots of the subprime crisis that came out in March. I don t think it got much attention then as the conclusions seemed uncontroversial at the time. But now that Washington politicians are trying to rewrite history, it should be mandatory reading for every American interested in knowing how we got here. The study identifies five causes of the subprime meltdown: - Convoluted loan products that consumers didn t understand. -Credit ratings that didn t do a good job highlighting the risks contained in subprime-backed securities. -Lack of incentives for institutional investors to do their own research (they just relied on the credit ratings). -Predatory lending and borrowing (which I think means fraud perpetrated by borrowers). -Significant errors in the models used by credit rating agencies to assess subprime-backed securities. You ll note in the Fed s five causes that there s some culpability for lenders, borrowers, investors and credit raters. There s no blame for Freddie Mac or Fannie Mae which had little or nothing to do with the entire situation. It s certainly fair to criticize Fannie and Freddie over real issues that contributed to their downfall. The companies had numerous accounting problems and inadequate safeguards covering their own investment portfolios. Those weaknesses came home to roost when the real estate market cratered. Fannie and Freddie purchased billions of dollars of subprime-backed securities for their own investment portfolios and got hit just like every other investor. But it s some kind of crazy, politically inspired CYA to blame for the mess we re in. |
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