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Whose side is the Treasury on?

By SP follow SP   2008 Oct 15, 3:09pm 36,497 views   353 comments   watch   nsfw   quote   share    


Traitor!

According to this article in the NY-Times:
http://tinyurl.com/3hzwmp

In its latest questionable tactic, the Treasury is forcing banks to take billions of taxpayer dollars and lend it out - effectively trying desperately to blow some air back into the lending bubble. They know it will ultimately lead to an unsustainable debt burden on the US taxpayer, and very likely US government default but they don't care. This can't just be stupidity or greed - it is treason.

(Mish's take on this is over here: Compelling Banks To Lend)

The actions taken by the Treasury in recent days show a pattern of putting U.S. citizens/taxpayers under a huge public debt burden, and also encourage every possible way to get them into private debt. Simultaneously, avenues that would _reduce_ private debt, or reduce risk to taxpayers are being blocked, derailed or discouraged.

Why?

Why is there a systematic policy bias towards forcing the US into default? Why is the Treasury making decisions that push generations of Americans into debt-slavery and eventual destruction of US sovereign currency?

Which team is Paulson batting for?

SP

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314   EBGuy   ignore (1)   2008 Oct 24, 5:32am     ↓ dislike (0)   quote   flag      

Peter,
What about GDH (gross domestic happiness)?

315   Peter P   ignore (0)   2008 Oct 24, 5:37am     ↓ dislike (0)   quote   flag      

What about GDH (gross domestic happiness)?

For that, we go to Bhutan. :)

316   Rafael   ignore (0)   2008 Oct 24, 6:15am     ↓ dislike (0)   quote   flag      

Incentives to prop up demand!!!

>Maybe if we spread this idea it can get to somebody that can implement it.

>It is based on a successful implementation that they did in the 70’s.

>This deleveraging problem has three fundamental issues:

>The market has recognized that energy production and other essential materials are not going to be in expanding supply. Therefore the model for economic expansion is not going to be sustainable anymore. America will have to think about sharing the resources of the planet or follow the path of war and self destruction. The new focus has to be in sustainability.

>In USA the baby boomer generation is starting to retire and the following X and Y generation don’t have the capital to buy the asset that the previous generation has amassed. There is a generational shift happening.

>Credit creation and management has been the focus on this economy, credit has been our main product and a big part of the problem.

>So, to stabilize the markets there has to be a focus on the assets the system is based on (housing).

>Government has a key roll in propping up demand, but at the same time let some of the natural correction to continue.

>Create a tax incentive to new home buyers (Between $10,000 to $25,000) depending of the value of the home.

>Support a mortgage plan backed by the government (Fannie and Freddy). 30 yr. fixed only!! with 4% to 5% annual interest rate.

And some of the restrictions should be:

>Buyers will need a 10% to 20% down. And the more you put down the more you can move the interest rate.

>For the incentive to work the buyer should not be able to sell the house in three years.

>And finally it should have a cap in the mortgaged amount of 5 times the amount of gross income. Use tax return in 2007 for proof.

>Now, for the stock market, we should move the cap for the ROTH IRA accounts and 401K to double what they are.

317   justme   ignore (0)   2008 Oct 24, 6:17am     ↓ dislike (0)   quote   flag      

MST,

>>Therefore, a government that most often thwarts the will of the majority in its day-to-day passions is more what I’m looking for.

In my book, this is an ANTI-democratic government. Basically, it is a government that is based on a constitution (handed down from some mythical figures, revolutionaries or otherwise), and whose purpose is mainly to avoid changing.

Now that we have established that you are in fact an ANTI-democrat, it is perhaps not so surprising that you are against forms of government that are most likely to enact the true will of the people. I think we need to discuss no further.

George Orwell would be proud of you, he could not have created a better parody of the concept of Democracy himself.

Something you can think about over the weekend. Happy thoughts.

318   Peter P   ignore (0)   2008 Oct 24, 6:19am     ↓ dislike (0)   quote   flag      

In my book, this is an ANTI-democratic government.

So what? That is your book. You love for fundamentalist democracy exceeds mine for free market conservatism.

319   justme   ignore (0)   2008 Oct 24, 6:21am     ↓ dislike (0)   quote   flag      

>>Facts speak for themselves. A successful system IS the perfect system.

Until reality sets in. Those pesky Romans again. And the Nazis. And the Soviets. And Khmer Rouge. And South Africa., And the British Empire. And on and on and on.

320   justme   ignore (0)   2008 Oct 24, 6:24am     ↓ dislike (0)   quote   flag      

>>So what?

So nothing, if you are feudal totalitarian to begin with.

321   Peter P   ignore (0)   2008 Oct 24, 6:26am     ↓ dislike (0)   quote   flag      

I don't know... Americans have more iPods than Europeans. That is something, isn't it. ;)

322   justme   ignore (0)   2008 Oct 24, 6:29am     ↓ dislike (0)   quote   flag      

"Fundamentalist democracy"

You gotta love it,.

It would have been so much easier if MST and Peter P just came out right away and acknowledged that they are against democracy in the first place.

Then everyone could just ignore them when they would state that one system is more democratic than the other, since one would know that the truth was exactly the opposite of what they say.

Peter P, you just declared intellectual bankruptcy. I'm not going to bail you out.

323   Peter P   ignore (0)   2008 Oct 24, 6:34am     ↓ dislike (0)   quote   flag      

I fully support democracy as the best system to protect individual liberty. That said, democracy is the means, not the ends.

325   snmr   ignore (0)   2008 Oct 24, 6:44am     ↓ dislike (0)   quote   flag      

Two party / multi -party discussion make good tea time conversations.
The discussion has very little to do with current crisis unless you guys can prove that multi-party system can magically eliminate the influence of the the Rich&powerful on US politics.
A system which can prevent the powerful from gaming the system is an elusive one.

326   HeadSet   ignore (2)   2008 Oct 24, 6:47am     ↓ dislike (0)   quote   flag      

Rafael,

Why should government "prop up demand" for housing?

Why should home buyers get a tax credit (especially a large tax credit) over renters?

Why should government back up and subsidize mortgages?

327   Peter P   ignore (0)   2008 Oct 24, 6:49am     ↓ dislike (0)   quote   flag      

A system which can prevent the powerful from gaming the system is an elusive one.

Absolutely. Any power in the human world eventually corrupts.

328   Rafael   ignore (0)   2008 Oct 24, 7:17am     ↓ dislike (0)   quote   flag      

Propping up demand for housing will bring some trust back to the system.
And trust will eventually put a stop to the deleveraging cycle.

There are people in the sidelines that can be convinced to jump in the water.
Something has to be done in housing, and bailing out existing home owners is much more difficult.

If we cap the mortgages to 5 times the amount of gross income we make sure that new owners can sustain the debt.

329   Peter P   ignore (0)   2008 Oct 24, 7:21am     ↓ dislike (0)   quote   flag      

Why do you want to put a end to the deleveraging cycle?

Mal-investments must be purged.

"Liquidate labor, liquidate stocks, liquidate the farmers, liquidate real estate.... That will purge the rottenness out of the system. High costs of living and high living will come down. People will work harder, live a more moral life. Values will be adjusted, and enterprising people will pick up the wrecks from less competent people."

Andrew Mellon

330   Paul189   ignore (0)   2008 Oct 24, 7:26am     ↓ dislike (0)   quote   flag      

Happy bank failure Friday!

http://www.fdic.gov/bank/individual/failed/alpha.html

What is it about Alpharetta, GA???

331   justme   ignore (0)   2008 Oct 24, 7:59am     ↓ dislike (0)   quote   flag      

snmr,

>>A system which can prevent the powerful from gaming the system is an elusive one.

That is the overall idea of democracy, at least for those who support it,.

332   Peter P   ignore (0)   2008 Oct 24, 8:10am     ↓ dislike (0)   quote   flag      

That is the overall idea of democracy, at least for those who support it,.

Is an idea still an idea if it is infeasible?

I am still for democracy. It just need supervision and regulation.

333   justme   ignore (0)   2008 Oct 24, 9:15am     ↓ dislike (0)   quote   flag      

A fun quote from Valleywag today:

"Tech workers are Ron Paul-voting, Ayn Rand-reading rugged-individualist übermenschen who believe they can create their own reality through sheer individual brilliance and force of will. Did you need to read a survey to know that?"

334   Peter P   ignore (0)   2008 Oct 24, 9:23am     ↓ dislike (0)   quote   flag      

Perhaps not though individual brilliance and force of will... but instead the interactions of intrinsic human flaws and power struggles.

335   PermaRenter   ignore (20)   2008 Oct 24, 11:41am     ↓ dislike (0)   quote   flag      

Alan Greenspan is an economic terrorist. Do google search on "Alan Greenspan" and "Osama Bin Laden"

The U.S. economy as well as economies around the world have been going through wrenching experiences lately, and much more is likely. Former Federal Reserve Chairman Alan Greenspan is the architect of the enormous economic "bubble" that has burst globally. No longer is he revered as a "potentate." His reputation is in tatters. Giulio Tremonti, Italy's Minister of Economy and Finance, has said: "Greenspan was considered a master. Now we must ask ourselves whether he is not, after [Osama] bin Laden, the man who hurt America the most." That speaks volumes.

336   PermaRenter   ignore (20)   2008 Oct 24, 11:47am     ↓ dislike (0)   quote   flag      

The treatment was a striking contrast with one of Mr. Greenspan's last appearances before Congress as Fed chairman, on Nov. 3, 2005. "You have guided monetary policy through stock-market crashes, wars, terrorist attacks and natural disasters," Rep. Jim Saxton (R., N.J.) told him then. "You have made a great contribution to the prosperity of the U.S. and the nation is in your debt."

337   PermaRenter   ignore (20)   2008 Oct 24, 1:55pm     ↓ dislike (0)   quote   flag      

Some highlights, during which former Treasury Secretary John Snow makes his most profound comment during the entire hearing:

Mica: Do you know what comes before November 20th?

Snow: The 19th.

Mica: Of course as you might recall, it's a little thing called the election and we wouldn't want the trail to lead to people who have done the wrong things. What we don't want is for this committee to hold people who started this whole mess accountable. What we've been doing is tip-toeing around the tulips, when somebody's driven a bulldozer through our financial garden.

I have some questions for you...

338   justme   ignore (0)   2008 Oct 24, 2:06pm     ↓ dislike (0)   quote   flag      

Perma,

I can dig it. Greenspan is an economic terrorist. Send him to Guantanmo.

339   SP   ignore (0)   2008 Oct 24, 2:10pm     ↓ dislike (0)   quote   flag      

Rafael Says:
Propping up demand for housing will bring some trust back to the system.

Bullcrap. If you are "propping it up" - i.e. setting an unnatural price - you are actually destroying trust by distorting price-discovery.

And trust will eventually put a stop to the deleveraging cycle.

Letting debt crash to sustainable levels is the only thing that will stop deleveraging.

There are people in the sidelines that can be convinced to jump in the water.

If by "convinced", you mean "fooled", then yes - but there is nothing noble about conning people into jumping into water when it is actually in their best interest to stay on the sidelines.

Something has to be done in housing

Why? Because your commission depends on this?

340   Peter P   ignore (0)   2008 Oct 24, 4:52pm     ↓ dislike (0)   quote   flag      

As usual, SP is right.

341   Peter P   ignore (0)   2008 Oct 24, 5:14pm     ↓ dislike (0)   quote   flag      

Question: how safe is the options clearing process? Will the clearing houses for US listed options become compromised?

342   kewp   ignore (0)   2008 Oct 24, 6:12pm     ↓ dislike (0)   quote   flag      

Propping up demand for housing will bring some trust back to the system.
And trust will eventually put a stop to the deleveraging cycle.

There are people in the sidelines that can be convinced to jump in the water.

Propping up prices reduces demand for housing.

There are hundreds of thousands of eager buyers waiting on the sidelines to buy up real estate. RE this is priced right sells almost immediately.

343   Lost Cause   ignore (0)   2008 Oct 25, 12:32am     ↓ dislike (0)   quote   flag      

There are millions of vacant (even boarded up) houses and condos as well.

344   frank649   ignore (0)   2008 Oct 25, 12:38am     ↓ dislike (0)   quote   flag      

"Propping up demand"

What the fuck does that mean? Seems like an oxymoron. If you mean propping up "prices" then it's obvious that demand will continue to drop.

Face it, the times where you can just plop money into real estate and watch it appreciate overnight are gone forever. You have to get a real job now.

345   Malcolm   ignore (2)   2008 Oct 25, 1:51am     ↓ dislike (0)   quote   flag      

deflation Says:
October 25th, 2008 at 7:38 am
"Face it, the times where you can just plop money into real estate and watch it appreciate overnight are gone forever. You have to get a real job now."

Are you trying to incite a riot?

346   DennisN   ignore (1)   2008 Oct 25, 4:06am     ↓ dislike (0)   quote   flag      

Even Suze O says wait until 2010....
www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2008/10/25/BUJI13NAC9.DTL

Q: When might the housing market bottom out?

A: I think it's going down another 10 percent, 20 percent, and I think you're looking to 2010.

347   snmr   ignore (0)   2008 Oct 25, 6:17am     ↓ dislike (0)   quote   flag      

Successful investors have various styles of investmens and different means to achieve money but they all have one thing in common, they all admit that they never attempt to buy assets by timing bottoms. You are always better off waiting for the the first 5%-10% increase in the asset prices.Its small price to pay in order to avoid catching a falling knife.

348   snmr   ignore (0)   2008 Oct 25, 6:18am     ↓ dislike (0)   quote   flag      

*the above comment is not an investment advice *

349   HeadSet   ignore (2)   2008 Oct 26, 6:17am     ↓ dislike (0)   quote   flag      

If we cap the mortgages to 5 times the amount of gross income we make sure that new owners can sustain the debt.

This statement is mutually exclusive with your post about having the gov stabilize prices. There is nowhere near enough $100k+ earners to buy all the would be "stabilized" $500k+ houses out there. Plus, we may see the pool of high earners shrink in the next few months.

Why not cap at 3 times gross income, the Patrick Safe Mortgage? After all, a family with $100k gross is about $72k take home, or about $6k/mo. A payment on a $500k home would be about $3200 before taxes and insurance. Not a good thing to spend over half ones take-home pay on house expense.

350   Peter P   ignore (0)   2008 Oct 26, 6:36am     ↓ dislike (0)   quote   flag      

Again, Free Market is very good at pricing risks *IF* bailouts are not expressed, implied, or assumed. We certainly do not need a government-imposed mortgage cap based on gross income.

351   kewp   ignore (0)   2008 Oct 27, 1:11pm     ↓ dislike (0)   quote   flag      

Again, Free Market is very good at pricing risks *IF* bailouts are not expressed, implied, or assumed. We certainly do not need a government-imposed mortgage cap based on gross income.

Unfortunately, the Free Market has a nasty habit of showing up with a bundle of dynamite strapped to its chest and threatening to blow up the free market if it doesn't get a bailout.

352   Peter P   ignore (0)   2008 Oct 28, 3:04am     ↓ dislike (0)   quote   flag      

That is not Free Market... that is people hijacking Free Market.

353   kewp   ignore (0)   2008 Oct 31, 8:51am     ↓ dislike (0)   quote   flag      

That is not Free Market… that is people hijacking Free Market.

That is because the Free Market rewards hijacking.

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