patrick.net

native94027 says

tatupu70 says
How soon you guys have all forgotten reality. Do you not remember only 2 years ago? It’s very easy to sit back and Tuesday morning quarterback, isn’t it. Even with the bailouts that everyone despises, we had one of the worst downturns since the Great Depression. How much worse would it have been without the bailouts?? Would it have destroyed the whole economy? I’d say the risk was something greater than 0%.
Oh my god, how would we live without Citibank and AIG!!! Life would be meaningless and America would be a smoking ruin without them. Our WHOLE ECONOMY would be destroyed!!! Must. Save. The. Children. Thank goodness for TARP. Brawndo - its what plants crave.

AIG for example, underwrites a lot of corporate insurance. It can be daily Taxi cabs operating, vast numbers of operations who hing on freight and transportation, business and causlty, etc etc etc. The list is freaking huge. I dont think you comprehend what effect having 'no insurance on your operations' can have on the entire economy. Its like having a nation wide blackout. Everything comes to a halt. The risk of losses is to huge when not having insurance covering daily ops!

Default will cause a massive change in peoples personalities, which will ripple through everything we do. We will lock down our wealth, lock down our spending and change our entire consumer mentality. I'm sure many people have grand parents that went through the great depression and probably see how they spend money vs our parents and/or us and/or our children. Look to other 3rd world countries and see how they explode with job creation - they don't. Unless they have someone to sell to, eg China. If China locked up it's borders instead of exporting to the US decades ago, it wouldn't be anywhere. Someone has to buy stuff that we produce, whether it's goods or services and a massive default will change this entire generations way of thinking. It will be 30-40 years before we recover, not a few years.

Republicans will walk a fine line. They will drum up the press but they must fold. Banks will fall, wall street will collapse during a default and they are supporting the Republicans, therefore they aren't going to shoot themselves in the foot. They will take a little damage for the greater good, but they won't kill themselves. Neither will Republicans.

Obama made his mark on History, he be better off not running again. Let some other fool take over and deal with the countries budget deficit. I think he be better off remembered as the first black president the then the guy at the helm when the whole country went to hell because of an unsustainable debt.

thomas.wong1986 says

native94027 says

tatupu70 says

How soon you guys have all forgotten reality. Do you not remember only 2 years ago? It’s very easy to sit back and Tuesday morning quarterback, isn’t it. Even with the bailouts that everyone despises, we had one of the worst downturns since the Great Depression. How much worse would it have been without the bailouts?? Would it have destroyed the whole economy? I’d say the risk was something greater than 0%.

Oh my god, how would we live without Citibank and AIG!!! Life would be meaningless and America would be a smoking ruin without them. Our WHOLE ECONOMY would be destroyed!!! Must. Save. The. Children. Thank goodness for TARP. Brawndo - its what plants crave.

AIG for example, underwrites a lot of corporate insurance. It can be daily Taxi cabs operating, vast numbers of operations who hing on freight and transportation, business and causlty, etc etc etc. The list is freaking huge. I dont think you comprehend what effect having ‘no insurance on your operations’ can have on the entire economy. Its like having a nation wide blackout. Everything comes to a halt. The risk of losses is to huge when not having insurance covering daily ops!

When did AIG become the only insurance carrier on the planet? Last time I checked there were hundreds , maybe thousands, of insurance carriers. Life would go on just fine if AIG had been disassembled in an orderly manner in a bankruptcy court. Doesn't anyone know what bankruptcy court means? The business continues to operate, the creditors are put on hold, the mess is sorted out. It's not some kind of financial nuclear bombing where the business disappears from the face of the earth in a huge bang instantly.

bob2356 says

The business continues to operate, the creditors are put on hold, the mess is sorted out.

Oh, we just "sort it out". I didn't realize it was so simple. Thanks for the clarification.

Wow, these debt collectors are in serious shit. Setting up a fake curt is a dumb thing to do. If one of the debtors comes with their attorney, the whole scam would be exposed in a heartbeat.

Mr. Shrekgrinch, thank you for your good posts. A picture is worth a thousand words, so I am very fond of the short video link below: it explains the state of our economy. It makes the blame obvious. And should serve to wake up everyone who watches it. Would anyone in private sector expect to keep our jobs if we failed so miserably in our field of expertise, and created horrendous consequences? I've said for 2 decades the Fed has more power than the president over our everyday quality of lives.

http://www.youtube.com/watch?v=9QpD64GUoXw

My expertise is real estate. The re-default rates for modified loans is high based on reports by the Comptroller. Government modification have been inefficient, very costly. Keeping rates artificially low to help those that put no money down on a home purchase, lied about their income, and/or latter executed 100% cash out refinances (sucking out their accumulated nest egg of equity) is not my idea of a solution to the original problem created from previous similar nonsensical lending practices. Neither is the 2 year $50,000 non recourse loans to homeowners that meet the unemployment and at least 3 months behind in their house payments criteria. A $50,000 non recourse loan to someone already in trouble and unemployed with unemployment not on the mend...it's really just a $50,000 tax payer gift.

100% loans in non recourse loan states (California) are a time bomb. At least in recourse states homeowners have the risk of a judgment, garnishing of wages or attaching other assets and it pressures a borrower to be more honest about their income.

I would like to see interest rates rise and potential buyers that were prudent; who saved money while renting during the bubble now be rewarded by lower sales prices and lower property taxes based on the lower sales prices. We would be helping the thrifty and worthy with a chance at honest sustainable homeownership.

Yes, there are some homeowners that put money down and did not lie about their incomes that have been hit with unemployment and hard times. I would refer them back to the link above so they understand who is at fault. No leader with this track record should be tolerated.

theoakman says

The Republicans can’t even identify the cuts necessary to balance the budget.

What people sorta don't understand is that gummint spending doesn't disappear, it reemerges in the private economy as all the spending recipients turn around and buy stuff with their paychecks.

BRAC in the 90s saved $15B TOTAL, and was neutron bombs in the areas it affected. Cut $1T (15% of total spending), and good-bye middle class.

bob2356 says

I still haven’t heard why AIG and Freddie/Fannie couldn’t have operated under the protection of a bankruptcy court with the government’s only gaurantee to protect the process .

Sure in normal times you can just liquidate, and let other companies take over their business, but when the companies that have failed comprise most of the markets in their business, that doesn't work very well.

Really what would more likely happen in idealized classical capitalism is the failing company would be taken over by a stronger company before bankruptcy. Existing shareholders would be wiped out, bond holder would take a haircut, and the new company would take over. (See WaMu, IndyMac, Bear Stearns...) Liquidating a huge company is *EXTREMELY* inefficient, and causes lots of collateral damage, so it's much better for all parties to keep it as a going concern with new capital and new management.

But...Let's see, how many companies are big enough to absorb Frannie Mae? Would the "free market" work when the answer is "zero" or perhaps "one"?

Troy says

theoakman says

The Republicans can’t even identify the cuts necessary to balance the budget.

What people sorta don’t understand is that gummint spending doesn’t disappear, it reemerges in the private economy as all the spending recipients turn around and buy stuff with their paychecks.
BRAC in the 90s saved $15B TOTAL, and was neutron bombs in the areas it affected. Cut $1T (15% of total spending), and good-bye middle class.

At this point, you can cut 1 trillion or add 1 trillion. You still destroy the middle class either way. Had they actually cut spending in the late 60s and early 70s, the middle class would have grown even stronger. The main problem with government spending is that the allocation of money is completely batsh1t insane. They find more useless programs and causes to fund each and every year. My favorite of all time was the federal National Science Foundation grant that I was given in graduate school. They gave me it, 30k a year. Tax free. Then, when it came time to report, they had me checked off as Hispanic. I told them that I wasn't and they freaked out.

theoakman says

You still destroy the middle class either way

Disagree. All the middle class has in terms of wealth is their (quite leveraged) real estate under their feet.

Inflation saves them. Deflation kills them. cf Japan 1990-2010 for how that works.

The rich don't care since they have a better distribution of assets, and the worse things become the better the bargains are for them. cf. Buffett.

The poor don't care either, they have nothing that will be lost either way, inflation-wise.

I think Repbulican leadership doing something that would lead to a default is highly unlikely. It would have very bad repucussions, and would be political suicide.

There are lots of tax programs out there, but in reality the spending goes to 2-3 areas and those areas aren't going to change much. Education, Social Security, Military. Everything else is just little bits here and there.

Lots of waste, but the waste adds up to nothing. Just like someone pointed out before, they made it appear like billions saved was a miracle on their part, when it's really just the public not understanding the massive numbers they are dealing with. It's like getting a $10.00 toy for $9.99 and claiming you've done some hard bargaining, but come out way ahead.

pkennedy says

Education, Social Security, Military

http://www.usgovernmentspending.com/year2010_US.html

I'm sure that they were betting on the fact that their debtors were too broke for attorneys. Hope they get their day in court.

You know what -- I've changed my mind.

We are going to default on a part of the debt.

Specifically, we're going to default on all of the debt currently owned by the federal reserve.

It will be quiet and gradual, but those trillions that the fed owns will just vanish. They won't talk about it much, because then people will realize that they truly did just print money.

Kevin says

Specifically, we’re going to default on all of the debt currently owned by the federal reserve.

This shouldn't be surprising since any interest paid to the Fed by the Treasury is just credited back to the Treasury.

To sterilize this QE the Fed would have to sell the Treasuries to someone else.

(bow down before my expert knowledge of macro)

Well, regardless of what happens to the US Govt, the Fed has set the stage for a rise in all kinds of assets. The people piling into fixed income won't have that option anymore. Coke just issued 10 year debt at .75%. 1k yields $7.50 a year. Any high yielding bonds out there are being called in and anyone who piled into high yield debt with the plan on holding it to maturity is now staring at their account earning less than 1% again. They can either buy new bonds that earn next to nothing, let it sit in a CD earning next to nothing, or step up and buy dividend stocks, speculate, buy gold, or buy anything. Then inflation comes and everyone who stayed in bonds gets wiped out. Sad thing is, the banks literally have their employees directing all their customers into bond funds.

The only thing we know for sure is that we can't fully comprehend this and we can not predict very well how it will play out. The global interactions make it far too complex to predict. People talk about default or inflate when in fact we don't really know exactly how either of these would unfold, because the world is different than it was in any previous financial crises.

About inflation, I think the powers that be have been trying to inflate for some time now. But there is no inflation button the government can push at this time. If there were, it would already have been pushed. Banks won't lend at these low rates in a big way, so it would seem that inflation can only occur with massive government spending, but that won't happen in this political environment (except the spending that is done to support bonds.)

I just don't know.

I've seen the Russian 1998 default first-hand.
Nothing all that dramatic happened.
The instant drop of ruble rate by 75% has made all imports extremely expensive,
spawning a huge increase of domestic industry of all sorts that previously couldn't compete.
Within 2 years, the country was booming and prices of RE, stock market, and all other assets
expressed in foreign currency (e.g., USD) have more than recovered and are now far above the pre-default 1997 levels. For example, my condo in Moscow was ~80 K USD pre-default, dropped to ~40 K in the year after (because of ruble devaluation), now ~300 K.

theoakman says

Now watch as the Republicans only allow us to run a deficit of 1 trillion a year as the Democrats scream that reducing government spending doesn’t work.

I'm just waiting for the republicans who still say that lower taxes mean higher government revenues, to go ahead and figure out exactly how much they should lower taxes in order to balance the budget and solve the problem for once and for all.

IT wouldn't be good though for them to lower taxes too much, causing a surplus, because we all know that the fools would just spend it.

marcus says

theoakman says

Now watch as the Republicans only allow us to run a deficit of 1 trillion a year as the Democrats scream that reducing government spending doesn’t work.

I’m just waiting for the republicans who still say that lower taxes mean higher government revenues, to go ahead and figure out exactly how much they should lower taxes in order to balance the budget and solve the problem for once and for all.
IT wouldn’t be good though for them to lower taxes too much, causing a surplus, because we all know that the fools would just spend it.

The only way to balance the budget has always been to drastically reduce spending on a massive scale. Democrats want to increase spending and taxes. Republicans want to increase spending and lower taxes. Neither of them was ever willing to reduce spending.

theoakman says

The only way to balance the budget has always been to drastically reduce spending on a massive scale.

There are exactly two ways to have a balanced budget at any level of the economy:

1. Spend less
2. Earn more

In government, "Earn more" can come in a few flavors:

- Taxes
- Profits on government-owned businesses
- Various fees for services
- Grow the economy (indirectly increases taxes)

Spend less can come in a few flavors too:

- Reduce waste (there's plenty of it, particularly in the military and health care)
- Reduce benefits (medical coverage, social security payouts, end some wars)
- Find ways to make services cheaper to provide.

So, yeah, "the only way" is a pretty bold claim.

You definitely won't be able to balance the budget without increasing taxes or reducing spending on at least two of the big 3 spending programs.

Even if we assume that tax increases are out entirely, "on a massive scale" is also a pretty bold claim. We currently overspend income by about 30%. Reducing total spending by 23% would bring things back into balance.

But, yeah, you won't be able to cut 23% of spending without touching the big three programs.

theoakman says

Democrats want to increase spending and taxes. Republicans want to increase spending and lower taxes. Neither of them was ever willing to reduce spending.

Very true.
But even more important than reducing spending is CHANGING it, to drastically cut the spending on "consumption" in the broadest sense and increase that on investments into the future. The three top areas of spending should be not "SS, Medical, Defense" but "Infrastructure, Education, RDTE (Research, Development, Test, Evaluation)"
In fact, our military should (and largely could) pay for itself.

What no jail time? You can get 5 years in prison for Impersonating a Police Officer, your telling me impersonating a judge isn't a crime? Shut the company down? Hell these people should be in leg irons appearing in criminal court.

Correction or no correction, the train is starting to leave the building. Everyone's chips should have been placed by early 2009 when the markets turned around. Now, people who have been sitting around on cash waiting for housing prices to decline will have to compete with everyone who watched their stocks, bonds, gold, and whatever else go back up in value. The dollar is a train wreck in slow motion and too many people fool around trying to trade in and out of the market. I'm even guilty of this to some extent. Those who positioned themselves in the lifeboat early have been the biggest beneficiaries.

I think this is vastly overhyped, as is usual for anything to do with radiation. A release of radioactive nuclides 50 years ago (large or not) might have affected the people who lived there then, and might (I emphasize might!) have caused some cancers decades later. Even that is a huge strecth, given that the cancer rates for those who actually WORKED in the lab at the time, but not with the leaked experiment itself are not statistically abnormal. In any case, there can be ABSOLUTELY NO effect on anyone moving in today: the iodine released then has the half-life of 8 min.! Otherwise, nobody could live in Hiroshima or Nagasaki today - the radioactivity released there was thousands if not million times greater. You are welcome to bring a Geiger counter to that property and see if the level is any higher than in other places. While at it, do the same in Denver - the "radioactivity" there is much higher (1 mile above sea level + rocky mountains granite exposed around). Chemical contamination is trickier as it doesn't decay so quickly. I'd probably not drink from streams there while camping :-) But drinking water is extensively tested, and the levels described there are really way below permissible limits. Out of abundance of caution, it may be worthwhile to buy a water filter (as in other areas), but that's about it. I'd sure not base house purchasing decisions on such factors.

Jesus, may I ask where is that?

We can't all be geniuses.

I had a hud 203k loan on my first house in 1990 in Albany NY with no problems at all. The repairs to meet the terms of the loan are spelled out clearly along with the timelines. They were very reasonable and willing to work with me. I don't know if any of this still applies. Good luck.

I'm with fisk - where on earth did you get a deal like that?

I think he lives in Nevada. Was that Reno?

Must be one of those used to be 450K home, and now is foreclosed on less than half the price. So, Bubble Bobble, do you think the market in your area is almost bottomed out, and you feel like it won't go down much further? Then, it maybe is the right time for you to take an action. And about that 22K repair/fixing cost, you may want to have some cash set aside for that, for it always costs more than you think.

Anyway, I'd go buy it w/ cash if I see a house like that at 175K in my area. The reality is, 175K won't get me a small condo. Awww, sounds so unfair. LOL.

Prices in Phoenix are well below build costs from what I'm told. I know I'm off 70% from the peak.

Do you really think the East German unemployment rate is accurate? The Soviets lied about everything they possibly could.

So whats the Chinese motive? While any nuclear armed government can launch a sneak attack to take out coastal cities, then will never be able to take out the entire countries defenses before a counterstrike in launched. Even if hypothetically a sneak attack resulted on the total destruction of the United States without us firing a return shot the resulting radiation and smoke from fires from hundreds of cities would block out the sun as the weather distributed it around the earth. The end result would be pretty much the elimination of most of the world wide population with the exception of those who have prepared themselves in shelters for just such an event. There really no upside this point in time.

Whacky. Maybe a "Crimson Tide" incident?

Or maybe the SGC taking out a Ha'tak that popped into orbit:

Here is the #1 thing to watch out for when using an FHA 203(k) loan. Use experienced professionals who have experience with the 203k.

According to HUD/FHA, any FHA lender can do a 203k, but you need to work with a loan originator who has 203k experience.

Realtors should also have training, education and/or experience with the 203k, especially with writing and submitting offers. Here's some verbiage that HUD recommends to be placed in a 203k offer: The contract should state that the buyer is seeking an FHA 203(k) loan and that the “contract is contingent on loan approval based on additional required repairs by the FHA or the lender” or the “contract is contingent upon buyer(s) obtaining an FHA 203(k) loan without conditions and contingent on loan approval based on additional required repairs by
the FHA or the lender.”

While HUD/FHA permit the borrower to hire any contractor they want, HUD/FHA require the lender to "approve" the contractor by verifying their client references, credentials, licensing information, type of work performed, work experience, and experience. But since lenders do not educate contractors on the complexities of the 203k, contractors who want to do 203k work can obtain their 203k contractor education and 203k Contractor Certification at http://203kContractors.com .

-----
203kContractors.com®
203k Contractor Directory for the FHA 203(k) Loan
Direct - 480.463.4663
Paul Welden

and now for a commercial break.... geez.

So whats the Chinese motive?
South China Sea. You come to our backyard -- well, we can come to yours. See Obama: Asian Sphere of Influence Tour 2010. That would be quite an escalation, though...

If the rest of USA put into California (per capita) what West Germany put into East Germany over 20 years, streets would be literally paved with gold there.

As for the military expense, sure.
For a change, would Germany kindly station Bundeswehr troops in all major US states and on our Southern border to defend us for the next 60 years while
we re-build our economy?