Noah Millman writes:
"At this point, I don’t think anybody knows where we’re going. But there is a hierarchy of ignorance. And one thing is clear: Senator McCain is way too close to the bottom of that hierarchy for comfort. His comments on the crisis have been almost pure in their incoherence, emptiness and self-contradiction. Obama has not distinguished himself as a key leader so far – most of the commentary I’ve seen from him is somewhat out of date, pointing to real problems that contributed to the crisis but not giving a good indication of how we get out of the mess we’re in now we’re in it. But at least he has some idea of what he’s talking about."
My published articles are archived at iSteve.com -- Steve Sailer
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61 comments:
If I was in a plane where the pilot collapsed so I had to pick someone to take control and the two people willing to give it a go were:
A- Someone who admitted he knew nothing about it and would do whatever the voice on the radio said.
Or
B- A man who had read a couple of aviation magazines and was confident of his ability to land the plane despite having no demonstrable experience or qualifications.
I know who I would pick.
Neither McCain nor Obama have any known economic expertise or managerial experience but McCain recognises his limits, Obama doesn't.
What is it you always say, Steve? Obama is very good at understanding, but it doesn't make him any less of a Leftist. Funny how the only utterance that has come to light from his past is an NPR interview where he lambastes "The Bell Curve". There was no discussion about whether the central thesis, IQ stratification, had any merit; I doubt he even read it.
http://www.gnxp.com/blog/2008/09/barack-obama-on-bell-curve.php
1994 Barack Obama interview with NPR about "The Bell Curve"
Of course, McCain believes in the Blank Slate, too, but he is marginally for us and is pro-life. I don't subscribe to the Auster philosophy that we win by losing.
Well, Old Joe knew how to solve these "seemingly complex" problems.
For example, when the Soviet census takers discovered that there had been a mysterious "shrinkage" of the total population after collectivization, Old Joe just shot all the census takers as "wreckers" and the population figures immediately became much better.
I have the feeling some of our Presidential candidates have a similarly sophisticated view of our current financial problems.
But McCain is right in saying that the fundamentals of the U.S. are good. At the end of the day, all that matters is GDP per capita, and this is growing at about the typical rate.
It's like this, if you had a track team with 10 candidates, what would you focus on? Whose short or tall? Who wears a size medium shirt? Who prefers Olive Garden vs. Bob Evans? No, the only thing that would really matter is who can run the fastest. Period.
Likewise with the economy, at the end of the day it doesn't matter *that much* how many jobs are being created each month, what the DOW Jones average is, etc. What matters is "what's my standard of living"? And, "is it growing"? The answers to both of these are "good" and "yes". Mark my words, the collapse of two investment banks will have few repercussions on the vast middle class of the vast fly over country, but many in the media will bitch and moan about it because it's in their backyard of New York.
Am I evil for thinking that a financial collapse might turn this country very anti-immigration and anti-pointless wars and that it might in the long run be a good thing?
Anyways, I can't see how ignorant McCain is will matter. He's not going to make any economic decisions himself and his advisers and appointments won't be as statist as Obama's.
Millman is half right. McCain is clueless, and has basically admitted as much in the past. But Obama's comments are pretty much standard Democratic boilerplate, predictably blaming Bush and the lack of sufficient regulation for the near catastrophe we've had. And Obama's suggested policies basically move us in a socialist direction, which is where his heart lies.
I say "near" catastrophe because it was just announced twelve minutes ago (at 8:00PM) that the Fred would give an 85-90 billion dollar bridge loan to AIG and take an 80 percent stake in the company. This is the event the financial community (what's left of it) has been waiting for: look for a big rally tomorrow from the current depressed levels. This is good news for McCain, and bad news for the Obama camp, which had undoubtedly been rooting for more disaster.
BTW, speaking as pretty much of a free market conservative, Obama (and Paulson) are right about one thing: there's no way that anybody -- be they investment bank or hedge fund -- should be allowed to get leveraged to the point where they have $35 in assets for every $1 they actually own.
From what I have heard, I would say McCain knows that he does not understand the crisis thoroughly, and is uttering some banal do-gooder platitudes about it. Obama does not understand it either, is not particularly aware he does not understand it, so is booming the obviously advantageous political cliches.
Here is a hint for us financial amateurs in judging financial kerfuffles on Wall Street. Pay no attention to them. Look at the real flows in and out of the economy, present and future. These are what will ultimately determine both our own standard of living and, when it has straightened itself out or been straightened out, Wall Street's performance.
So look at 1) real oil prices and the portion of these that are paid abroad, 2) future entitlement growth for social security and medicare, 3) health spending, both public and private and 4) pensions, both public and private.
McCain's stingy instincts on these fronts will be a lot more important than a candidates's ability to memorize a few talking points about lax regulation.
"Anyways, I can't see how ignorant McCain is will matter. He's not going to make any economic decisions himself and his advisers and appointments won't be as statist as Obama's."
It matters because Obama's tax plan is half right and McCain's is pure fiction. Obama gets it right with increases taxes on the wealthy and breaks for the middle. However, he bombs it when he provides rebates to those who don't deserve it and calls for increasing capital gains taxes.
The only man with any knowledge of the economy was Ron Paul. People like Henry Paulson or Carli Fiorina are not free marketers with a focus on liberty and markets; they are big business men and women who do not understand the concept of freedom. They live and die by government intervention. The Fed and government regulations are the true enemy. The people on Wall Street are plenty smart to install their own checks and balances. However, those checks cannot develop in parallel to a ridiculous assortment of government rules such as Sarbanes-Oxley.
So silly that we're worried about Obama's perceived leftism, when we're currently in the process of socializing the entire banking system of the United States.
Paulson just took out a subprime loan for the entire American population. Instead of companies and stockholders being awash in bad securities, now the already-overextended US taxpayer is. Frankly, prospects for the US are not good...
Nonsense. McCain’s initial instinct, that the economic fundamentals are strong but that there is a largely isolated financial crisis, happens to be 100% correct. Obama attacked McCain for this, with the emotional arguments “McCain is out of touch, people are suffering, boo hoo”.
McCains initials instincts about the housing crisis where also sound, actually better than most politicians.
http://www.boston.com/news/politics/politicalintelligence/2008/03/mccain_offers_t.html
(read the whole thing).
It is not statesmanship to take whatever happens around and cram it into your existing political narrative. It’s easy to play Latin America type populism with finance, since it’s complex, opaque and ideologically loaded. But Obama’s narrative “this happened because George Bush and John McCain don’t care about poor people, and will be solved when I raise the marginal tax rate on the rich and send people checks for 500 dollars” is just dumb. It doesn’t stand to one second of scrutiny (neither does “I will regulate”. Of course it’s easy, and useless, to say that once the crisis already happened. But why doesn’t Obama tell us what the next bubble will be, and regulate that? Why didn’t the Democrats last wave of Sorbonne-Oxley regulation do anything about this?)
People should either keep quite or stop using lazy heuristics and have a serious debate about the actual financial crisis, with actual arguments, causality, alternatives, facts and figures.
McCain is right not because he is an expert, but because his ideology in this instance (pragmatic laissez-faire), is sound and well suited to the problem. Capitalism suffers from bubbles and boom-bust cycles, but it’s good at recovering from crisis, and more importantly public hysteria following bubbles is not a good environment to conduct rational policy. Obama’s 1960:s retro post-modern liberalism is not a very useful economic ideology, but Obama seems to think the ability to give speeches and write memoires it makes him an expert on finance and economics. Maybe he should have taken the alleged Wall Street.
If no one knows where we are going isn't having a clueless person in charge better than having a confident,ignorant 'knowledgeable' person in charge if the clueless person is somebody who has stated he doesn't know as much about economics as he should?
None of the candidates can do anything about this situation. It's been building since the Clinton administration, at least. The debts and imbalances and market distortions exist, and they're all going to have to be worked out.
That's a given. The question that remains is, which candidate will most likely use the situation as cover to massively increase the power of government?
Real Obama speech, funny.
http://www.suitablyflip.com/suitably_flip/2008/09/how-come-i-woul.html
Halfbreed:
I even think there should be a law that put managers in prison if they can be proven to have made investment relying on the states implicit insurance.
Steve,
Your "diversity recession" theory is starting to go mainstream, emphasis on starting:
http://www.ibdeditorials.com/IBDArticles.aspx?id=306370789279709
I suggest that steveosphere readers forward it to mainstream conservative sites and writers. Investors Business Daily is reputable and not controversial in the conservative blogosphere.
Neither McCain nor Obama have any known economic expertise or managerial experience but McCain recognises his limits, Obama doesn't.
If you find humility in McCain, you truly have been drinking the GOP Kool-Aid.
Am I evil for thinking that a financial collapse might turn this country very anti-immigration and anti-pointless wars and that it might in the long run be a good thing?
You are not alone. All this rationalism is making my liver hurt. "I admit that two times two makes four is an excellent thing, but if we are to give everything its due, two times two makes five is sometimes a very charming thing too." -- Dostoevsky, "Notes from the Underground"
Obama claimed today ”in the middle of the second-biggest Dow Jones drop this century, McCain told an audience in Florida that "the fundamentals of our economy are strong."
Yesterday the Dow fell 4.4%.
On Black Monday in 1987 it fell 23%.
On April 14 2000 during the IT-bubble it fell 6%.
After 9/11 it fell 7%.
July 2002 it fell 6.4%
In fact far from being the second biggest drop in this century it was the sixth biggest drop in the last century. How high on the ignorance counter does this go, for a guy running as “the high IQ candidate”?
Also notice the cluelessness in the argument, beside the factual error: The Fundamentals of the economy are the underlying values that one refers to AS OPPOSED to the price. As in “well the stock price is high, but I don’t think the fundamentals justify it”.
People talk about fundamentals precisely because they deviate from day-to-day prices. This makes Obama’s argument ‘stocks fell, so fundamentals cannot be strong’ completely nonsensical.
(its another argument to say that the economic fundamentals are also bad, certainly one could make this argument. But that it is not what Obama does, he doesn’t even seem to understand the differences between stock prices and fundamentals, so he just refers back to the stock prices again).
Anyone who knows anything about finance and economics knows this, but supposed genius Obama, his audience, his English major college voluntaries and his base in the media are too ignorant to understand it.
He has "some idea of what he is talking about"?!?! This guy, together with Hillary are the biggest Democrats on the take with Fannie Mae and Freddie Mac.
They are the ones who, with George Bush and all their damned ACORN "community activists" and bruthah man Richard Raines pimped the new "give po' folks as much money as they want" liar loan mortgage plan.
No. Now that Obama and McCain have showed they fscked up th economy, jerk them both out of the saddle aand elect Ron Paul.
But let's not go suck up to Saint Obama, just because he is supported by a bigger bunch of Harvard-educated thieves than McCain. He just does what his Harvard and Chicago mafia tell him to do anyway.
Thie collapse has been coming like a train wreck for the last two years at least, and Obama has been ducking all the hard issues with the same frantic urgency as McCain. He ain't no saint, he is a gutless politician just like McCain.
We have got $500 billion in option ARMS that haven't even hit yet. Peruse DoctorHousingbubble.com
I don't subscribe to the Auster philosophy that we win by losing.
AndI don't subscribe to the view that we win by bending over, as long as the guy has an "R" after his name.
Not that I'm an Obama supporter, I'm a Baldwin guy myself...
"A- Someone who admitted he knew nothing about it and would do whatever the voice on the radio said..."
Good analogy, except that in this case, the voice has a strong Saudi accent and every line of advise is followed by "ALLAH O'AKBAR!"
What exactly is the president supposed to do? Hope the country out of debt? Bomb wall street?
Nobody, not even ~160 IQ hedge fund guys, knows how to evaluate the mortgage securities. How are they supposed to calculate the value of a McMansion in [insert your local over-developed suburb here]?
The longer the properties remain vacant, the more complicated it becomes. Investment Banks don't maintain their properties, and in many cases they're being looted for pipes and what not. Not to mention hurricanes and wildfires.
Mark my words, the collapse of two investment banks will have few repercussions on the vast middle class of the vast fly over country.
The bank failures don't harm the middle-class. But the bank failures are being caused by the decline in home prices, and that does harm the members of the middle-class who bought over-priced homes, and/or bought homes with 16-tons-and-what-do-you-get mortgages, and/or took a 2nd mortgage.
The non-subprime ARMs haven't even hit yet. It's not a matter of being able to make your payments. It's how people react when they owe more than their house is worth.
Obama's instinct is to wear his community organizer hat and blame the fat cats, making people with upside-down mortgages resentful and more likely to walk away. That will be bad for the economy. However, he might have more success getting help from Europe.
Now might be a good time to take another look at the ninth commandment.
Halfbreed Said: ... the Fred would give an 85-90 billion dollar bridge loan to AIG .
Wow. How can I get in touch with this Fred character. I could use a cash infusion about now....
"But there is a hierarchy of ignorance. And one thing is clear: Senator McCain is way too close to the bottom of that hierarchy for comfort."
If it's a hierarchy of ignorance, and you're at the bottom, then you know more than than those above you.
tino said: "But why doesn’t Obama tell us what the next bubble will be, and regulate that?"
Excellent point. The situation now is bad (I guess), and a lot of gunk is going to have to be worked out of the system (I guess). But I don't have much faith in pre-emptive regulation (particularly with all the political distortions involved) to prevent future market bubbles.
I suspect most of these politicians don't understand this situation any better than I do. And I certainly wouldn't trust myself to figure how to prevent something like this from occuring.
Obama's suggested policies basically move us in a socialist direction, which is where his heart lies.
Socialism bad, got it. McCain not socialist like Obama.
I say "near" catastrophe because it was just announced twelve minutes ago (at 8:00PM) that the Fred would give an 85-90 billion dollar bridge loan to AIG and take an 80 percent stake in the company. ... This is good news for McCain, and bad news for the Obama camp ...
Socialism good? Socialism good for McCain? I don't get it.
BTW, speaking as pretty much of a free market conservative ...
Socialism bad again? Head hurts.
Barack Obama is second only to Chris Dodd in contributions from Freddie Mac and Fannie Mae. More to the point, Wall Street has contributed mostly to Dems since Clinton's era. Which continues today -- Lehman was Hillary's biggest contributor, and and Obama's fifth IIRC.
Barney Frank, of course, pretty much mandated a lot of the mess Freddie and Fannie created ... so he could have a hand in the distribution of the pork. Same with Charlie Rangel. And Obama.
McCain, for whatever his faults, has been consistently pro-regulation, and anti-assumption of risk by the taxpayer for Freddie and Fannie. While Dems have pushed this crisis to the max starting with Clinton.
If you liked THIS bailout, wait till Obama ladles out even more trillions to ACORN and other groups, under the rubric of "social justice" and atoning for "racism."
Ron Paul has knowledge of the economy? Really? The Gold Standard? I must stifle my laughter.
Oh yes McCain can be at times humble. He said so in his acceptance speech that his country saved him (in the NVA torture cells) along with the men he was imprisoned with. He can be a pain in the ass, but recognize the mans good points along with his flaws.
From Govtrack.us:
http://www.govtrack.us/congress/record.xpd?id=109-s20060525-16&bill=s109-190
McCain in may 2006:
"For years I have been concerned about the regulatory structure that governs Fannie Mae and Freddie Mac--known as Government-sponsored entities or GSEs--and the sheer magnitude of these companies and the role they play in the housing market. OFHEO's report this week does nothing to ease these concerns.
In fact, the report does quite the contrary. OFHEO's report solidifies my view that the GSEs need to be reformed without delay."
Doesn't seem terribly "bottom of the barrel" to me. Might even qualify as prescient.
/st
"this whole mess was created by a bunch of zealot fanatics who believed in the laissez faire ideology of free markets unbound by propers rules, regulation and supervision.."
- Nouriel Roubini
The "zealot fanatics" Roubini is referring to are the neoconservatives.
By the way, Roubini is an Iranian Jew.
The economist Nouriel Roubini, expanding on the current financial crisis:
Claims that, theoretically speaking, financial markets can never be trusted to be totally self-regulated.
Yet, for some reason the neocon laissez faire crowd operating under the ideas of Milton Friedman, insisted this was the way to go for years.
The predictable result is what we are seeing: left to its own devices, Wall Street gambled recklessly - and had to be bailed out. And taken over.
Roubini: "The ideologue “regulators” who literally held a chain saw at a public event to smash “unnecessary regulations” are now communists nationalizing private firms and socializing their losses.. these Bush hypocrites who spewed for years the glory of unfettered wild west laissez faire jungle capitalism (and never believed in any sensible and appropriate regulation and supervision of financial markets) allowed the biggest debt bubble ever to fester without any control, have caused the biggest financial crisis since the Great Depression and are now forced to perform the biggest government intervention and nationalizations in the recent history of humanity, all for the benefit of the rich and the well connected."
The blogger Fabius Maximus, on the "politically powerful groups" taking power here:
"The new system for America is private risk-taking by politically powerful groups, with the taxpayers stepping in when necessary to take the losses. This is not the capitalism taught in grade-school. Or in Economics 101. Or Economics 901."
"More regulation" under Obama is likely to mean more government aid so that minorities can buy houses. Perhaps enough aid that they can't default. Of course that aid will come from non-minorities via taxes.
One question is whether the minorities will feel enough "ownership" of these homes to maintain them well ... or will they turn into "the projects"? If they have very little of their "own" money in them then perhaps they will feel that it is fine to leave that house behind and "buy" a new one.
Does Nouriel Roubini mention the government lawsuits which forced bad loans to Hispanics and blacks: the core of this debacle?
No?
Then he's full of it.
This is what the left always does. Set up some stupid government policy. Observe catastrophic failure. Blame the outcome on not enough government intervention. Repeat until the government controls your every move, taxes you to the hilt, and seizes your weapons.
Examples:
1) Cry racial profiling and concentrate lots of blacks in DC. Observe gun violence. Try to seize the guns of whites.
2) Allow millions of illiterate Mexicans into the US by setting up "sanctuary cities". Observe no health insurance. Try to seize money from whites to pay for them.
It goes on and on like this.
Someone pulls out a reference to Bill Ayers, and Obama pulls out a DDOS (= distributed denial of service attack)
http://www.chicagotribune.com/news/nationworld/chi-obama-mediasep17,0,6325137.story
This is what a "community organizer" does best...rabble rouse.
"The "zealot fanatics" Roubini is referring to are the neoconservatives."
Since when has "neoconservatism" been about financial deregulation?
"...allowed the biggest debt bubble ever to fester without any control..."
Indeed - because the Democrats have been fruitlessly arguing for much tighter lending standards for years.
In a parallel universe somewhere.
"This is not the capitalism taught in grade-school. Or in Economics 101. Or Economics 901."
Socialization of debt is not an exotic concept - it's been used during debt crises around the world many times, to some success.
The standard approach is to require beneficiaries of state support to repay the cost of intervention when they are back from the brink, to the extent that they don't lose their investment.
t99,
Ron Paul and the Austrian school are the ONLY people whose analysis of the US economy is correct. If their thesis is so easily dismissed, kindly type up your syllogism and submit it.
--Senor Doug
Of course, McCain believes in the Blank Slate, too, but he is marginally for us and is pro-life. I don't subscribe to the Auster philosophy that we win by losing.
Objectively, Obama is better for "us" because he is far less likely to deliver on illegal alien amnesty.
http://www.slate.com/id/2200209/#ilwmccain
http://www.miamiherald.com/news/florida/story/687993.html
ORLANDO --
Speaking to a predominantly Hispanic audience considered crucial to winning Florida, Republican John McCain vowed Monday to make immigration one of his ''first priorities'' if elected president and accused Democrat Barack Obama of spiking reforms in Congress.
McCain spearheaded a bill in 2006 -- reviled by the right wing of his own party -- that would have allowed illegal immigrants to earn citizenship. Obama supported the overall goal but backed controversial amendments that would have limited a guest worker program.
''The fact is that Sen. Obama proposed amendments that would have killed the legislation. I fought for it,'' McCain told more than 350 people at a town hall meeting.
(...)
"The longer the properties remain vacant, the more complicated it becomes. Investment Banks don't maintain their properties, and in many cases they're being looted for pipes and what not. Not to mention hurricanes and wildfires."
A colleague is currently looking for housing in the Portland, Oregon metro area. He describes most of the bank owned homes that he sees as wrecks. Bear in mind that Portland’s real estate prices have held firm until the first quarter of 2008 and that it is demographically less vibrant than most metro areas in the US. Also most of these homes have not been in distant, recently established suburbs or exurbs, rather in established and well populated communities. I shudder to think what will happen as the economy sheds jobs and organized; systematic looting of empty houses becomes a shadow industry. Detroit from sea to shining sea, anyone?
The new system for America is private risk-taking by politically powerful groups, with the taxpayers stepping in when necessary to take the losses.
Whether these deals are wise and good is, um, above my pay grade. But to suggest that such terms would entice managers to go out and risk their entire company on the hopes of a government bailout if they really screw up? Hmmm.
Consider:
The interests of taxpayers are protected by key terms of the loan. The loan is collateralized by all the assets of AIG, and of its primary non-regulated subsidiaries. These assets include the stock of substantially all of the regulated subsidiaries. The loan is expected to be repaid from the proceeds of the sale of the firm’s assets. The U.S. government will receive a 79.9% equity interest in AIG and has the right to veto the payment of dividends to common and preferred shareholders.
So: your earnings take a big hit, then you teeter on the brink of collapse, then the government comes in and gives you a big loan in exchange for a major equity stake while they break your company apart and sell it off.
Yep - I can see CEO's by the hundreds chasing down a deal like that.
The only people I can see whose behavior might be seriously affected by such deals are employees who feel they have little to lose by pushing the company to the edge - like, to pick a totally random company, Chrysler employees.
I say "near" catastrophe because it was just announced twelve minutes ago (at 8:00PM) that the Fred would give an 85-90 billion dollar bridge loan to AIG and take an 80 percent stake in the company. This is the event the financial community (what's left of it) has been waiting for: look for a big rally tomorrow from the current depressed levels.
wow, didn't take long for that to be proven wrong.
Also, Fannie and Freddie were not the cause of what's happened here, the private sector was.
Republicans create disasters and then media figures demand Democratic candidates explain how to fix GOP disasters.
The Democrats are off-base or wrong on a bunch of stuff, but it's perfectly legitimate to say, "Democrats should be elected because we opposed the policies that led to the disasters. And Democrats would be less likely to create new disasters."
Unfortunately, too many Democrats went along with the GOP disasters like the Iraq War and deregulating the financial sector.
Added to which, McCain just (9/15) told the Spanish-language station Univision that, if elected, he will pass amnesty for illegal immigrants on his first day in office:
http://www.univision.com/content/content.jhtml?cid=1669256&pagenum=3
McCain and Obama. What exactly did Americans do to deserve these cretins? God must really have it in for us right now.
"The fundamentals are strong" has the merit of having history behind it. It was often asserted in 1929, 1930, 1931.....
Anonymous,
The talk of anti-regulation "neocons" is nonsense. Bush signed a huge package of strict financial regulations into law: Sarbanes-Oxley. It also put a lot of corporate criminals in jail, with tougher sentences than any previous administration. Look it up.
"Ron Paul has knowledge of the economy? Really? The Gold Standard? I must stifle my laughter."
Is that all there is to understanding economics? The gold standard?
The benefit of the gold standard is the government cannot steal the value of your property (i.e. your money) by printing upon demand. Moreover, what will you do when a nuclear bomb takes out DC? What will be the effect on currency valuations? If the currency were backed by Gold, the answer is clearer.
Moreover, Paul advocates for competing currencies. How is this a bad idea? The more freedom the better
Paul also clearly understood that government backed initiatives for college loans and housing loans increases the total market cost. What other candidate has ever mentioned these dynamics? None.
Perhaps you are right to doubt Paul over the Gold standard, but what about everything else? Do you support funneling 90 IQ candidates into university where they will graduate with the same basic skills they possessed upon entry? This is the type of economic prescription promoted by McCain and Obama: pretend HBD does not exist and fight it at all costs.
So much for my prediction of a rally. Yikes.
"Who [McCain or Obama] got the most money from the two financial giants now in the news–Lehman Brothers and AIG?"
"The new system for America is private risk-taking by politically powerful groups, with the taxpayers stepping in when necessary to take the losses. This is not the capitalism taught in grade-school. Or in Economics 101. Or Economics 901."
Correct. It's the choice of capitalism when those "politically powerful groups" stand to gain financially, and the socialism of a taxpayer financed bailout, when they face a loss. We don't get the choice.
McCain has admitted that he doesn't know anything about economics, and on that ground, I think he may have meant something different by "fundamentals" than those who are schooled in economics and can place the word academically assume he meant. He may have meant the fundamentals of a capitalist system, hard working Americans who will soldier through the crisis, etc. As in, a football game is being played with a strong, talented team on each side, but the weather sucks and the field is a mess. The fundamentals are in place, but the conditions are bad.
I'd like to point out that falling Real Estate values would be a damn good thing for the masses of American citizens who don't yet own a home. They, of course, generally have less of a say in the public discourse than do people who already own a home (to one degree or another) which is why their interests are being ignored.
The Gold Standard was pretty good in the 70's. The 1770's. No modern nation holds to the gold standard, despite many having ample gold reserves to do so.
THAT ought to tell you something.
The Gold Standard restricts financial policy, look at any 19th Century crisis and how it constricted government policy, causing huge contractions.
Paul is a crank. He knows about as much about the economy as I do about gynecology -- he ought to stick to what he knows.
McCain doesn't understand what's going on. Obama can't understand what's going on.
Bill O'Reilly (another clueless pundit) the other night screamed that the government should have kept those financial institutions from making all those bad housing investments. The truth of course is that the government required those bad investments.
The government has combated "red lining" for years on the theory that financial institutions were being mindlessly racist. The government believed that blacks would be good credit risks because to think otherwise was well... unthinkable.
Blacks have lower IQs, lower wages, higher levels of criminality, and lower creditworthyness. I wish it weren't so but wishing is just wishing.
A government that had accepted that poor people were likely to be poor credit risks would never have allowed this kind of stupid housing crisis to develop.
It will come to pass that some corrupt people will be uncovered and blamed for the crisis. But the problem isn't from a few greedy officials. It is the systematic and widespread failure to base public policy on what is now called race realism.
The price tag for our "nice" ideas that preserve the self image of blacks is now several hundred billion dollars.
Obama as a black man intent on expanding the role of government will have great difficulty understanding how government policies based on a mythical race ideology got us into this mess.
What is it with paleocons and the Gold Standard?
Do they really think if only the Feds went back to the standard, politicians would not find alternative avenues to get around the constraints of a true gold standard?
The gold standard will not solve any of our problems because the elites will just find neat loopholes to avoid the restraints of a gold standard.
And forget about "getting rid of central banking".
The Great Depression and WWII could not get rid of The Federal Reserve.
If the Depression and the largest war history could not get rid of the Reserve, nothing short of a nuclear war will - if even that.
The Gold Standard restricts financial policy, look at any 19th Century crisis and how it constricted government policy
It's a good thing our government hasn't been constricted from growing into the massive behemoth it's become, right?
I mean, how are we supposed to win the war with eastasia with a constricted government!
From Ron Paul 07/16/2002:
http://www.house.gov/paul/congrec/congrec2002/cr071602.htm
"Mr. Speaker, I rise to introduce the Free Housing Market Enhancement Act. This legislation restores a free market in housing by repealing special privileges for housing-related government sponsored enterprises (GSEs). These entities are the Federal National Mortgage Association (Fannie), the Federal Home Loan Mortgage Corporation (Freddie), and the National Home Loan Bank Board (HLBB). According to the Congressional Budget Office, the housing-related GSEs received $13.6 billion worth of indirect federal subsidies in fiscal year 2000 alone.
One of the major government privileges granted these GSEs is a line of credit to the United States Treasury. According to some estimates, the line of credit may be worth over $2 billion. This explicit promise by the Treasury to bail out these GSEs in times of economic difficulty helps them attract investors who are willing to settle for lower yields than they would demand in the absence of the subsidy. Thus, the line of credit distorts the allocation of capital. More importantly, the line of credit is a promise on behalf of the government to engage in a massive unconstitutional and immoral income transfer from working Americans to holders of GSE debt.
The Free Housing Market Enhancement Act also repeals the explicit grant of legal authority given to the Federal Reserve to purchase the debt of housing-related GSEs. GSEs are the only institutions besides the United States Treasury granted explicit statutory authority to monetize their debt through the Federal Reserve. This provision gives the GSEs a source of liquidity unavailable to their competitors.
Ironically, by transferring the risk of a widespread mortgage default, the government increases the likelihood of a painful crash in the housing market. This is because the special privileges of Fannie, Freddie, and HLBB have distorted the housing market by allowing them to attract capital they could not attract under pure market conditions. As a result, capital is diverted from its most productive use into housing. This reduces the efficacy of the entire market and thus reduces the standard of living of all Americans.
However, despite the long-term damage to the economy inflicted by the government’s interference in the housing market, the government’s policies of diverting capital to other uses creates a short-term boom in housing. Like all artificially-created bubbles, the boom in housing prices cannot last forever. When housing prices fall, homeowners will experience difficulty as their equity is wiped out. Furthermore, the holders of the mortgage debt will also have a loss. These losses will be greater than they would have otherwise been had government policy not actively encouraged over-investment in housing.
Perhaps the Federal Reserve can stave off the day of reckoning by purchasing GSE debt and pumping liquidity into the housing market, but this cannot hold off the inevitable drop in the housing market forever. In fact, postponing the necessary but painful market corrections will only deepen the inevitable fall. The more people invested in the market, the greater the effects across the economy when the bubble bursts.
No less an authority than Federal Reserve Chairman Alan Greenspan has expressed concern that government subsidies provided to the GSEs make investors underestimate the risk of investing in Fannie Mae and Freddie Mac.
Mr. Speaker, it is time for Congress to act to remove taxpayer support from the housing GSEs before the bubble bursts and taxpayers are once again forced to bail out investors misled by foolish government interference in the market. I therefore hope my colleagues will stand up for American taxpayers and investors by cosponsoring the Free Housing Market Enhancement Act."
So someone would rather vote for Obama or McCain because Ron Paul favors the gold standard and was prescient enough in his views to predict the crash 6 years in advance. I find no evidence that any Republican or Democratic candidate for President in the last 20 years has commanded such a forceful and complete view of economics as Ron Paul. Hate him if you will, but did you predict the housing bubble prior to July 2002 and advance a bill to do prevent the burst?
Blacks have lower IQs, lower wages, higher levels of criminality, and lower creditworthyness. I wish it weren't so but wishing is just wishing.
There is new c-span footage out linking the CEO of Fannie Mae and the Congressional Black Caucus. We all know how this is going to end. Obama is going to wreck this country just like his daddy wrecked his car. There is no escaping destiny.
"Republicans create disasters and then media figures demand Democratic candidates explain how to fix GOP disasters."
I am really curious here - could you point me to the Democratic plan to tighten housing loans from 2004 or so, that Bush viciously shot down in an anti-regulation frenzy?
/st
The Gold Standard was pretty good in the 70's. The 1770's. No modern nation holds to the gold standard, despite many having ample gold reserves to do so.
THAT ought to tell you something.
It does: that the gold standard keeps government small and people living within their means.
--Senor Doug
KlaosOldanburg said...
However, he might have more success getting help from Europe.
Now that is humiliating as a country.
Yes, I definitely believe in major tax increases for the (truly) wealthy. And by "wealthy" I don't mean someone earning $80,000 in coastal California...such an individual is hardly "wealthy."
For individuals earning over $250,000 (double for couples*), the top marginal rate should be increased from 36% as follows:
250k-300k 39%
300k-350k 42%
350k-400k 45%
400k-450k 48%
450k-500k 50%
500k-750k 52%
750k-1M 55%
1M-2M 60%
2M+ 70%
Additionally, there should be cuts in the marginal rate between $40K and $100K. Also, there should be some kind of deduction for state income taxes (there may be already, I'm not sure) or it should be increased. This would help both to control for cost of living (since high-tax states tend to also be high cost-of-living states) and reduce the effective state tax burden for people in high-tax states.
Yes, the truly rich *should* be taxed. But on the other hand, (say) a typical professor, scientist, doctor, engineer, or lawyer should not considered "rich" and lumped in the same class as multimillionaires. That is plainly ridiculous. Especially because the real rich tend to see the upper middle class as serfs to be kicked around, really just high-tech "migrant workers." I think this really fits, too. Looking in most of my science classes, I see a whole lot of females, Asians, and a surprising number of Latinos (tho I guess in a state that is 40% + Latino you'd expect *some* to do well)...perfect maids/serfs/coolies etc. And hell, even though I am a white male, I have discovered that I am of substantial American Indian, East Asian, Jewish, and possibly even African descent being one of the "30 percent of white Americans who are of less than 90 percent European ancestry" as described by Scientific American's "Does Race Exist" article--tho my grandparents, and even more so my great grandparents, tried to keep this hushed up, thus my being largely ignorant about it. Many WNs have accused my of being part Jewish, East Asian, etc, and I denied it. Well I guess they're probably right.
*I think the best way to solve the "marriage penalty" is to allow couples to file *as if* they were single (yes, married people can file as single, but the limits for higher marginal rates are lower than for actual singles)...that way there would be no BS about "increasing the marriage benefit" and/or "not completely eliminating the marriage penalty."
http://arthurdevany.com/
Arthur De Vany's site may be of interest on this subject and movie economics too.
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