patrick.net

Malcolm,

I don't think anyone short of FDR has a chance of fixing the problem, but even FDR needed a Hoover to f*ck it up further so that he could rally all the country behind his "new deal" to wipe out all stupidity.

I am doing Obama a favor for noting voting him into office when things are CERTAIN to go very very bad in the next 4 years. He doesn't want to go down in history as the first black President who screwed things up.

The best person to be put in office is an idiot that we don't care about, because he will become a scapegoat. I dislike McCain, and I'd like to see him go down in history as the President who STARTED the Great Depression Episode II.

Credit and lending is about to finally seriously contract.
Here, here NoVARenter! I don't mean to table pound on this point as I already mentioned it last week, but I really think this is what's going on behind the scenes of the HELOC freeze. From Socketsite, via Julian Hebron at RPM Mortgage:
Be advised that most banks and lenders nationwide have begun freezing Home Equity Line of Credit 2nd mortgages. Even borrowers with significant equity and perfect credit have been receiving HELOC freeze letters. In many cases, it's not about borrower creditworthiness but rather the institutions shoring up their balance sheets. The banks need for open lines of credit are significant, and with mass losses reported by nearly all major financial institutions over the past 2 quarters, the strategy to freeze HELOCs is a quick way for them to gain some footing.

Take two! From Socketsite, via Julian Hebron at RPM Mortgage:
Be advised that most banks and lenders nationwide have begun freezing Home Equity Line of Credit 2nd mortgages. Even borrowers with significant equity and perfect credit have been receiving HELOC freeze letters. In many cases, it's not about borrower creditworthiness but rather the institutions shoring up their balance sheets. The reserve requirements banks need for open lines of credit are significant, and with mass losses reported by nearly all major financial institutions over the past 2 quarters, the strategy to freeze HELOCs is a quick way for them to gain some footing.

EBGuy,

Do you know where I can dig up the balance sheet of Federal Reserve? Hopefully historical B/S info too. I can't locate this info on the internet.

I wonder how powerful a voice the blog communities might be in organizing an effort to influence any bailout plan.

I'm having serious issue with talk of the government buying up below market mortgage debt and subsequently forgiving loanowners balance above a new "current" market value. NY Times is reporting this is what countrywide BOA is after. Keeps people paying mortgages and keeps them in houses. Prevents mass upsidedown jinglemail. Puts a serious brake on declining values.

Wow, talk about moral hazard. This would truly make the savers and responsible spenders the chumps. No, I'm really not happy about this proposal at all.

I don't believe we are going to make it to the election before it hits the fan in a very noticeable way. IMHO whoever is sitting in the oval office will have zero ability to influence the velocity of the fall in any way that is beyond trivial and temporary. It’s really a matter of the timing of massive inflationary policy, this is the only uncertainty.

The deflationistas are smoking crack. Just this past week, my favorite unrecognized secret Mexican restaurant raised its pricing 10%, my cheap haircuts rose from $17 to $24, my dry cleaner raised shirts from $0.99 to $1.49, and my private monthly trash service raised from $30 to $38 monthly. This is not trivial, nor isolated. Those who are able to raise prices are doing so.

Maybe votes should go to the candidate who has the best skills at coalition building and whose values speak to the greater good. The misery will be so deep that it will be a term where substantive change has an opportunity to occur. Who will be the most effective at bringing bipartisanship policy together? Hillary? Yikes.

I hate the big spending republicans BUT - I like the theory that you should have a diffrent party in congress vs white house so that you get as little done as possible - Government Gridlock = awsome.

Look at all the bailouts, Obama/Hillary will sign all of them and think up new ones. I do not hear McAmnesty thinking up ways to reflate house prices. He is too busy re-fighting Vietnam war.

oh what horrifying choices we have. and I dont believe the Dems will pull outta Iraq either - they are real quiet about what to do there huh. They must be glad the economy sux so they can talk about that and not iraq.

Sure Joe Lents is a sleazebag. At least the SEC thinks so? After they froze his assets, he couldn't continue to make the payments (but stuck around anyway)

So now we have a hangover from the LAST bubble (CEO of voice rec. s/w firm) bleeding over into the CURRENT bubble! That is just... too much.

Whom exactly are we supposed to be cheering for here? WaMu is as f@cked up as the day is long, obviously they couldn't be bothered to check on critical doc's and Joe is only too willing to take advantage of the situation. (Notice the process started in 2002!)

NVR,

>>The deflationistas are smoking crack.

Of course you know this already, but it is worth pointing out that the deflation scarecrows are not worried about consumer price deflation, they only care about ASSET DEFLATION, including real property, stocks, bonds and other investables (new word analogous to consumables). So when they whine about deflation they conveniently ignored food prices.

Asset deflation is bad for the wealthy. Given the choice between asset DEflation and consumer INflation, they will choose the latter if at all possible.

Inflation/Deflation is relative. People spend too much time worrying about the cost of a gallon of gas or a tomato when they should be more worried about things that really make an impact like taxes, interest, and housing. For the most part, the rest to me seem pretty insignificant.

Permarenter,

I ask you please to reconsider your view of democrats as being sloppy on immigration. They are not. It is the (republican) establishment that wants cheap labor. They allow illegal immigrants to take jobs without imposing citizenship checks on the employers, and that is the real problem of unchecked immigration. No jobs, no immigration.

You don't seriously think McCain is going to put all the illegal immigrants in a lockbox(TM) and ship them back out, do you?

Immigration is being used by the Republicans to create a false "wedge issue", designed to make people who feel passionately about immigration reform to vote Republican at any cost. This is how they "won" the 2000 and 2004 elections, by setting up strawmen (abortion, generic holiness, national security, gay marriage) that they would claim only they could knock down. And with good help from the media, they made enough people believe it that in they end they were close enough to 50% to steal the election. Please do not let this happen again.

Malcolm,

Agreed, it is not going to kill me if gas is $6 per gallon, in fact I think it may be a good idea. But for the poorest 25% it is going to be a tremendous hardship.

I hate to sound like the media with their generic "both parties are equally guilty" in depth analysis, but on illegal immigration issue it is hard to say one party is more hypocritical than the other. Republicans are influenced by the cheap labor and further disgust me because on top of that they then turn around when it is convenient and say "these people are here illegally. They are not entitled to workers comp or disability, or fair labor laws.....etc." They then straddle the fence and court the hispanic voting block.
Democrats just seem to overtly court the same voting block and seem to go out of their way to attract these people with their constant expansion of entitlements. Then claim it is an invasion of privacy for someone to prove they are here legally in order to qualify for assistance. Worse yet, I believe they know these people actually illegally vote for them so they actually have an interest in preserving these identity thieves' presence. They are the masters of the double talk with their "no amnesty" pitch, and then all the proposals avoid the full deportation of illegal aliens. Their political correctness has even forced the media to no longer even use the term illegal aliens.

Justme,

On target post sir and agreed, and no I had not thought of framing it based on wealth class status. Yes sound understanding of the action of the specific classes, but interesting to frame all the noise in that manner. Makes absolute sense.

What is actually being "destroyed" is not so much wealth or money which never existed, but rather liquidity. There was a thread here recently about wealth destruction that I didn't entirely follow. IMHO, what is happening is simply a destruction of liquidity in certain asset classes, like bonds and housing. Stocks soon to follow.

@Malcolm

I think I disagree, though not entirely sure of your argument. If you mean that inflation deflation affects different wealth classes in different areas, this speaks directly to justme's point. For those with the "fat" housing assets, sure deflation might be a big factor. And for those at the lower rungs, which is vast majority of American's btw, the food inflation that is occurring is a HUGE deal.

I highly recommend this piece on front page NY Times today; we are exporting inflation in a massive way right now leading to significant run on effects all over the world. The article shows how we are effectively hollowing out the middle class in the Middle East right now, folks are struggling to afford food. This has the potential of becoming very destabilizing, obviously. Scary. And a nice illustration of the downside of inflation.

http://tinyurl.com/yo2o5f

It still seems relative to me because the price of gas going up makes the price of gas guzzlers (For some reason poor people love driving them which is part of the stupidity which makes them poor) go down. If they were smart, they would fix their credit, trade that piece of shit in and lease a Prius for $300/month. The net savings in gas means that you drive a pretty kick ass new car for under $200 per month (present gas dollars). Talk about deflation. When you invest in yourself like that, it them becomes fun to sit back and watch prices spike knowing that as they do, your investment is paying you back even more than you signed up for.

Not saying classes, although classes react differently to changes. I'm saying sure food and some stuff might go up, but then a laptop is cheaper now. Percentage wise, if housing drops 10% in cost (owning or renting) the proportions make it so that everyone is basically richer. I'm looking at it from the buyer's persepective, not someone who is losing value on an asset. Right? That's the measure of inflation, what things costs to buy. Admittedly, it is dynamic so no matter what happens you have winners and losers.

Just glanced over the article and it's been a long held reocurring view that a declining dollar will hurt people overseas who have dollars. It is perfectly logical. In a way we enjoy the best of both worlds by the phenomenon because if you tie that to what I'm saying, domestically your dollar buys more here (net average) but to the oil sheik who has a mountain of cash; internationally he becomes poorer because his pile of dollars is worth less than it was before.

recurring~

Maybe what I'm saying is that a dollar has different value to different people here and abroad. If you're a buyer in the market for a house, your dollar is getting more valuable. If you bought gold when gold was cheap, you did even better because now you can cash in and get more dollars that are even house stronger than before. For someone barely scraping by who doesn't do anything other than work to live their dollar is weaker when they go to fill the gas tank.

The last 8 years have shown with total clarity the risks of having a war-hawk/republican in the white house, and people will vote to ensure it does not happen again.

Again, Americans care more about the economy than the war. They do not like higher tax. We must find a way to get the Bush tax cut permanent, and then get another tax cut.

Republicans are influenced by the cheap labor and further disgust me because on top of that they then turn around when it is convenient and say “these people are here illegally. They are not entitled to workers comp or disability, or fair labor laws…..etc.”

But they proposed the Guest Worker Program, which would take care of that issue.

Lots of heated partisan rhetoric all around. Let's all take a collective deep breath and re-examine the facts, shall we?

Obama is not a Muslim terrorist, despite his infamous middle name "Hussein". Despite what you may have heard on Rush or Savage Nation, he is not related to either Saddam Hussein, or Osama bin Laden. He did not attend a madrassa when living in Indonesia as a child, but instead attended Catholic or non-religious schools. His Kenyan grandfather was a muslim, yes, but American Obama is a Christian. Regardless of what you may have read in biased, partisan "expose" smear pieces from The New York Sun, he is not some kind of Arab "Manchurian candidate" trying to transform the U.S. into a radical Wahhabi Muslim nation with Luis Farrakhan as the new American Imam.

Obama sets record straight on his religion"
Foes Use Obama's Muslim Ties to Fuel Rumors About Him

He is not pro-bailout, and in fact was recently criticized from extremely pro-bailout Hillary for being "to the right of President Bush" on the subject. This should make us all like him more, not less.

Clinton: Obama "Right Of" Bush On Housing Crisis

This is how they “won” the 2000 and 2004 elections, by setting up strawmen (abortion, generic holiness, national security, gay marriage)

Those are real issues faces by many Americans.

At least, republicans know what the definition of the word 'is' is.

I believe Obama can be a fine president. It is just that he looks like someone who will raise tax.

I don't think McCain is the Devil-in-disguise, either. Though his extreme hawkish stand on Iraq and his Illegal Amnesty proposal (recall it was named the "McCain-Kennedy" bill --as in Ted Kennedy) have compromised him to such an extent I doubt I can bring myself to vote for him.

If they were smart, they would fix their credit, trade that piece of shit in and lease a Prius for $300/month.

If they were smart (financially savvy), they would not be in that predicament.

Admittedly, it is dynamic so no matter what happens you have winners and losers.

Yes. Instead of striving for a "fair" society, we should try to become the winners in an "unfair" society.

Peter P Says:
February 25th, 2008 at 10:22 am
"But they proposed the Guest Worker Program, which would take care of that issue."

Right, but that then falls into the dreaded 'A' word category.

Peter P Says:
February 25th, 2008 at 10:50 am
"Yes. Instead of striving for a “fair” society, we should try to become the winners in an “unfair” society."

I struggle with this. Are poor people poor because of the system or because of decisions? I always seem to end up concluding it is due to their own decisions. Big oil isn't turning middle class people into poor people.

I struggle with this. Are poor people poor because of the system or because of decisions?

As someone who grew up dirt poor (something Randy H and I have in common), I can attest that it's a little of both. Bad personal choices may or may not have gotten your parents where they are, but children of poor parents must surmount incredible odds in order to rise above the muck of their upbringing --unlike their privileged elite peers, for whom success is all but guaranteed (think the Hiltons & Trumps).

The problem with being born poor --even if you're the most brilliant, inventive mind on the planet-- is, it stunts your opportunities and limits your options. Being born poor means you do not get to attend the best schools, just whatever public school in the neighborhood where you live. Being born poor means you do not get to attend top Universities, unless you are so brilliant, you are one of the lucky scholarship "Lotto" winners (and even then, you get looked down upon by snobby, rich legacy classmates as some sort of "welfare" case). Being born poor means you do *not* get the prep school/Ivy league friends growing up, who can later provide the backbone of a business network/rich insider's club. Being born poor means, you get to spend a very significant part of your critical early adult years paying off debts incurred for higher education, and paying for Prodigal parents (see SQT's earlier posts).

In short, yes, some people end up poor because of bad personal chioices. However, being born poor is a tremendous disadvantage imposed on a person from birth that hard work, discipline, and smarts alone *may not* be enough to overcome.

I agree that being born poor is a tremendous disadvantage. However, what are we going to do about it?

Strangely, US is known for its ruthless capitalism, yet it provides the best opportunities for upward mobility in the world.

hard work, discipline, and smarts alone *may not* be enough to overcome

The secret sauce has a "secret" ingredient: luck.

Note that luck needs not be random. It is definitely possible to attract luck.

Did I mention that I have great respect for Oprah Winfrey?

Are poor people poor because of the system or because of decisions? I always seem to end up concluding it is due to their own decisions.

I always end up concluding that it is largely due to the system. Agreed that mobility is the key strength of our empire, and without it the entire system crashes. Our education system creates all kinds of barriers to mobility, our corporate culture does the same. Try to imagine how difficult it would be to "escape" out of the barrio if you are a young african american born to a dad in prison and a mother addicted to drugs. I think if Malcolm, Peter P, and myself were born in this state we would currently have lots of tats and neon under the floorboards. Maybe if we were lucky we'd be sitting on a nice pay option arm or two, maybe we'd have turned out to be subprime peddlers. If we were lucky enough to survive.

It doesn't matter who will be the president. Here is the fate that the next President will have to succumb to be it Hillary or Obama or McCain.

1. Raise tax - or pull money out of his ass. If the next President doesn't raise tax, he will charge you more on the inflation tax, just simple as that. This is just the law of gravity that you cannot defy.
2. Massive bailout of the banking system - NO ONE in the oval office can bear to see the collapse of the financial system. All sorts of imaginable programs will be put in place, there is no consideration for moral hazard, because one needs to deal with the hazard right now.
3. Shut the door on illegal and legal immigration - this is a knee-jerk reaction for any country facing recession / depression.

In fact, if you do care about your job, you should welcome illegal immigration but NOT legal immigration. Because illegal immigrants are not those who can compete with you on job offers, legal ones are. Do you want the Congress to import another sharp guy just like you, a younger and healthier version, that can eat your lunch? I frankly don't dislike illegal immigrants, they clean my pool and mow the lawn for such a reasonable cost that I can hardly hate them.

Malcolm Says:

> Are poor people poor because of the system or
> because of decisions?

Most poor people are poor because they are both lazy and stupid. The dirt poor are very lazy and very stupid.

Then HARM Says:

> The problem with being born poor –even if you’re the
> most brilliant, inventive mind on the planet– is, it stunts
> your opportunities and limits your options. Being born
> poor means you do not get to attend the best schools,
> just whatever public school in the neighborhood where
> you live.

If you are born poor it will be very hard to become “rich” but it is not hard to avoid being “poor”. My tree guy and my gutter/sheet metal guy both make over $200K a year and anyone with a basic skill like painting, plumbing or fencing can easily make over $100K a year with just basic smarts and a good work ethic…

Our education system creates all kinds of barriers to mobility, our corporate culture does the same.

It is therefore necessary to think beyond what we were told.

Most top billionaires did not finish higher education when they created their own corporate culture.

If one considers making 300K - 1M a year "successful" then perhaps it is sufficient to have a "rich" dad paying for business school.

What is worse? Being born in a poor family or being born into a poor mindset?

If the next President doesn’t raise tax, he will charge you more on the inflation tax, just simple as that.

I will take inflation "tax" any day. I want more after-tax money to buy gold.

I like a socialist system. Even a feadal aristocratic system isn't as bad as a plutocracy. In the latter, men who should never procreate try very hard to make money and "succeed" in order to have a better shot at reproduction. Capitalists are ruthless and mean. It's because they were born with low level of testosterone to begin with. Men with high amount of T are dominant, but they are fair.

It's not that I came from a poor and/or uneducated family. But I have to say, "Fuck rich people." They are all greedy cowards. Sooner or later, the military caste in this country will have enough of it and stage a coup to topple the rich and their clowns (Obama that is).

northernvirginiarenter Says:

> Try to imagine how difficult it would be to “escape” out
> of the barrio if you are a young african american born
> to a dad in prison and a mother addicted to drugs.

It will be very hard for a guy like this to get a job at a top 5 VC firm or get in to the Pacific Union Club, but not many people will ask about your Dad or Mom when hiring a painter. If you have a reputation of showing up on time and doing a good job cutting trees or painting apartments you will have plenty of work and make plenty of money…

Unless you are already very well off, you won't benefit much from inflation, because your pay typically lags inflation, and gold has long gone off on a wild run, your after-tax money won't be able to buy much anyway.

Be it deflation or inflation or stagflation, only smart money on the top of the food chain will be able to benefit the most.

please unmoderate my comment.