Warren Buffet on Growing Mountain of Debt

warren-buffetWheeewwww! Taking a moment to exhale here. I have been working on the blog all night long at this point. About 7 hours thus far. I am working on my promised series on health care. To say that there is a lot to read and research is an understatement. With all the political games being played on this issue, you literally cannot take anyone at their word on either side of the aisle. So every statement requires some research. Tonight included the reading for two hours of a UN report on population (life expectancy, mortality, fertility, population growth, and factors). Boring read but essential to actually understanding the staggering numbers politicians throw at us. I had thought tonight would be the night I posted the first part to the series. After working all night on it, I have realized there is no way I can finish part one tonight. So it gets pushed to at least tomorrow. And instead of writing a nothing article with no coherent thought (which I am sure that some of you think all my articles are), I figured I would offer up a little bit of someone else’s thoughts that I found interesting.

NY Times LogoMost of you will recognize the name Warren Buffett. He is a financial heavyweight for sure. And he has found a way to make money in nearly every conceivable way. Whether you like Warren’s style or not (I do), It is hard to deny that he has a vast amount of knowledge on financial matters and the most likely consequences of any given scenario. I stumbled across an opinion piece that he wrote for The New York Times recently. So I figured I would share it and allow everyone to offer their thoughts. I added a link to the article at the bottom, but I did copy it here in its entirety so there isn’t much more to see!

But I know the financial stuff is not at the top of everyone’s list of things to discuss. So feel free to pull conversations from the open mic discussions over and continue them. I remember that Ray had asked me something that I said I would reply to that I didn’t get back to follow up on. I forget where it was, so if you want to copy it over here Ray, I will try to answer it today. I will also bring over the conversation started late tonight about social darwinism, because I think it is a good question that you asked.

The Greenback Effect

by Warren Buffet

IN nature, every action has consequences, a phenomenon called the butterfly effect. These consequences, moreover, are not necessarily proportional. For example, doubling the carbon dioxide we belch into the atmosphere may far more than double the subsequent problems for society. Realizing this, the world properly worries about greenhouse emissions.

42-15907293The butterfly effect reaches into the financial world as well. Here, the United States is spewing a potentially damaging substance into our economy — greenback emissions.

To be sure, we’ve been doing this for a reason I resoundingly applaud. Last fall, our financial system stood on the brink of a collapse that threatened a depression. The crisis required our government to display wisdom, courage and decisiveness. Fortunately, the Federal Reserve and key economic officials in both the Bush and Obama administrations responded more than ably to the need.

They made mistakes, of course. How could it have been otherwise when supposedly indestructible pillars of our economic structure were tumbling all around them? A meltdown, though, was avoided, with a gusher of federal money playing an essential role in the rescue.

The United States economy is now out of the emergency room and appears to be on a slow path to recovery. But enormous dosages of monetary medicine continue to be administered and, before long, we will need to deal with their side effects. For now, most of those effects are invisible and could indeed remain latent for a long time. Still, their threat may be as ominous as that posed by the financial crisis itself.

Problems Buffett CartoonTo understand this threat, we need to look at where we stand historically. If we leave aside the war-impacted years of 1942 to 1946, the largest annual deficit the United States has incurred since 1920 was 6 percent of gross domestic product. This fiscal year, though, the deficit will rise to about 13 percent of G.D.P., more than twice the non-wartime record. In dollars, that equates to a staggering $1.8 trillion. Fiscally, we are in uncharted territory.

Because of this gigantic deficit, our country’s “net debt” (that is, the amount held publicly) is mushrooming. During this fiscal year, it will increase more than one percentage point per month, climbing to about 56 percent of G.D.P. from 41 percent. Admittedly, other countries, like Japan and Italy, have far higher ratios and no one can know the precise level of net debt to G.D.P. at which the United States will lose its reputation for financial integrity. But a few more years like this one and we will find out.

An increase in federal debt can be financed in three ways: borrowing from foreigners, borrowing from our own citizens or, through a roundabout process, printing money. Let’s look at the prospects for each individually — and in combination.

Buffett Selling Power CoverThe current account deficit — dollars that we force-feed to the rest of the world and that must then be invested — will be $400 billion or so this year. Assume, in a relatively benign scenario, that all of this is directed by the recipients — China leads the list — to purchases of United States debt. Never mind that this all-Treasuries allocation is no sure thing: some countries may decide that purchasing American stocks, real estate or entire companies makes more sense than soaking up dollar-denominated bonds. Rumblings to that effect have recently increased.

Then take the second element of the scenario — borrowing from our own citizens. Assume that Americans save $500 billion, far above what they’ve saved recently but perhaps consistent with the changing national mood. Finally, assume that these citizens opt to put all their savings into United States Treasuries (partly through intermediaries like banks).

Even with these heroic assumptions, the Treasury will be obliged to find another $900 billion to finance the remainder of the $1.8 trillion of debt it is issuing. Washington’s printing presses will need to work overtime.

Slowing them down will require extraordinary political will. With government expenditures now running 185 percent of receipts, truly major changes in both taxes and outlays will be required. A revived economy can’t come close to bridging that sort of gap.

Buffett OracleLegislators will correctly perceive that either raising taxes or cutting expenditures will threaten their re-election. To avoid this fate, they can opt for high rates of inflation, which never require a recorded vote and cannot be attributed to a specific action that any elected official takes. In fact, John Maynard Keynes long ago laid out a road map for political survival amid an economic disaster of just this sort: “By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens…. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose.”

I want to emphasize that there is nothing evil or destructive in an increase in debt that is proportional to an increase in income or assets. As the resources of individuals, corporations and countries grow, each can handle more debt. The United States remains by far the most prosperous country on earth, and its debt-carrying capacity will grow in the future just as it has in the past.

But it was a wise man who said, “All I want to know is where I’m going to die so I’ll never go there.” We don’t want our country to evolve into the banana-republic economy described by Keynes.

Our immediate problem is to get our country back on its feet and flourishing — “whatever it takes” still makes sense. Once recovery is gained, however, Congress must end the rise in the debt-to-G.D.P. ratio and keep our growth in obligations in line with our growth in resources.

Unchecked carbon emissions will likely cause icebergs to melt. Unchecked greenback emissions will certainly cause the purchasing power of currency to melt. The dollar’s destiny lies with Congress.

.

Source

Op-Ed Contributor – The Greenback Effect – NYTimes.com

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Comments

  1. I like what Warren is talking about here. I am not always a fan of Buffett’s opinion, but I do recognize that he is far more intelligent when it comes to economics than I am. What is interesting about this article is that he has taken the subject and broken it down to a level where most people will be able to understand it.

    • I don’t like deficits. If the government won’t cut down on spending, I’m all for tax hikes (I may be for them anyway, as a huge amount of that spending just goes to paying off interest – if we can get rid of the debt taxes would be lower by default).

      Also, Keynes wasn’t advocating for inflation any more than Machiavelli was advocating for his practices in The Prince – he was simply showing how things would work given political realities of the US Federal government. He simply understood how things are and drew the logical conclusions.

      • I think you assume that the govt. will use the increased revenue from taxes to pay down the debt and not strengthen the SEIU and ACORN branches of govt. I feel this is where your beief in the Democrats in control of every aspect of the govt, will do the right thing. HAve they ever in this last generation? Why would anyone assume that if the NAncy Pelosi dems raised taxes, that they would use them to help Americans. I dont mean this fecitiously, i really distrust Pelosi that much. She would rather help a field rat than homeless tent families.

      • 1. Who said I wanted Democrats in charge of everything? I’m on record supporting divided government.

        2. Who said anything about what the government would do with the money? Only what I support. I support raising taxes and using it to pay down the deficit.

        3. She spooks me a little bit too, and I’m a California Liberal. Still, I do believe that she honestly wants to help – even if I disagree with her methods. Likewise, I thought the same of GW. However, there are people who I do not trust in the same way – Santorum, for example, or the new incarnation of McCain (old McCain was good though).

        • You are correct about you supporting raisng taxes and using it to pay down the deficit,many would support that, but many know that is the last thing on their list to pay for. Voting for or even supporting higher taxes in this veign, would just be a little less money for families to buy goods and stimulate the economy and more money for politicians to pay for mistresses and beach homes and $300.00 bottles of wine with their meals at very expensive restaurants on a nightly basis with none going towards paying the interest on the debt.

          Santorum? i feel he is too trustworthy, he did a nice job in PA and has a big family and genuinely cares about family values. Am i missing something on Santorum?

  2. Ray Hawkins says:

    Ray Hawkins said on August 30, 2009 at 10:21 pm e

    USW & others – one thing that has always gnawed at me – especially for those that have served in the military and subscribe to notions of social darwinism as morally acceptable or ‘right’ or necessary – I ask for your insight in relating your ‘no man left behind’ approach from the military to the notion that ’some have to be left behind’ when we’re discussing things non-military. Why in one context is no one ever left behind but in another someone always must be?

    I look forward to your responses.

    Thanks!

    • Black Flag says:

      Black Flag said on August 30, 2009 at 10:35 pm e

      The answer to the question is the answer to this question:

      If there was a calamity, would you leave behind a member of your family? If you lost a member of your family, would you return to recover their remains?

      One cannot demand the same level of emotional justification of action for stranger as one does for a family member.

      That is why I said – communism is a great way to run a family and a lousy way to run a society – capitalism is a great way to run a society and a lousy way to run a family.

      • Black Flag says:

        Black Flag said on August 30, 2009 at 10:37 pm e

        If it wasn’t clear – members of a combat team become family – they have to trust their lives on each other and such dependency drives an emotional attachment to their brothers-in-arms to the same level (if not deeper) as a family member.

        • Ray Hawkins says:

          Ray Hawkins said on August 30, 2009 at 11:23 pm e

          BF – you’re offering the easy part of the answer – often there is an inherent sense of family – or a “code”. Its naive to think the same family is together perpetually – it just doesn’t work that way – especially in battle where, depending on the unit, new faces are rotated in to replace others (who may leave for any number of reasons). The question is more tuned towards how does that code or in your words, “family” develop and how does it compare/contrast with notions of honor and family relative to our fellow citizens. You or I can guess, but as I have not, nor do I think you have served in the military or seen combat (I could be wrong). Know also that those who join and serve do so for a variety of reasons and often in varying degrees of importance. Thanks for the responses though.

          v/r

          Ray

          • Black Flag says:

            Black Flag said on August 30, 2009 at 11:27 pm e

            True – but that is the essence the Army tries to build in the troops.

            The men do not fight for country, or honor – they fight for the fellow beside them.

    • Ray,

      That is a fair question. BF kind of answered it for me but I will go a little more in depth. It is different in that those men on my team are like family to me. They are my brothers. I believe in social darwinism, yes, but look at that a bit deeper. My issue in society is that there are people who have no worth to society. I won’t try to place a number on that, but I don’t think it is high. Then the question is how do I define having worth to society. There are many ways, but remember in my explanation of social darwinism as I see it being able to and willing to ensure your survival in some way. An exceptional beggar has found a way to survive, and will therefore survive. But the caveat for me has never been that we simply help no one and then let the chips fall. I have always said that I am willing to help those that are willing to work to help themselves. Those who are not willing to help themselves will not get my help, and therefore will perish. Darwinism at its core.

      So apply that to the men you speak of. That mantra, “never leave a fallen man”, is generally accepted as belonging to the Special Ops community. It is a part of the Ranger Creed, “Surrender is not a Ranger word. I will never leave a fallen comrade to fall into the hands of the enemy…”. A couple of things to keep in mind. These are men that I depend on to keep me alive and who depend on me to do the same. They are family, plain and simple. Taken in the purest context of social darwinism as I see it, they are men who have volunteered to serve their country, who have proven themselves not only to be capable of surviving in the world, but to be the absolute best at surviving in the worst of worlds. They are men who not only sacrifice their service for themselves, but for millions of others, some of which don’t even begin to appreciate that sacrifice. They have more than proven themselves in the realm of social darwinism. They are at the top of the physical evolutionary ladder, for lack of a better way of putting it.

      But even if you take it to the lowest level. I stated that a person who learns to beg for survival well enough to gain charity has proven his worth to nature. These men, through their character, through their dedication, have persuaded me and all the other men on their team that they are worth saving. That, in and of itself, is a sign of something in a man’s make-up that is part of the selection process of Darwinism. I will do everything in my power to save them, because they have made me believe they are worth saving. And I will hope that I have done enough to ensure they will do the same for me.

      But one thing that I want to clarify in your statement. You said, “Why in one context is no one ever left behind but in another someone always must be?” I think I answered the first context and why no one is ever left behind. But I think your second part is not part of my equation. I don’t think “someone always must be,” Ideally in society, everyone would prove their worth to society in one form or another and therefore elicit charity when needed. What I do not want to see happen is “forced” charity, where society is forced to save those that will not save themselves. I have NEVER been against charity of any form, so long as it is not coerced. So there is never a point where I say someone “must” be left behind, only that through their own actions, in my version of social darwinism, that some probably will be left behind. And if their own actions warranted being left behind, then we are a better race for eliminating their genetic contribution.

      I hope that wasn’t too confusing. I tried to make it all make sense, but I can confuse myself sometimes… Does that answer help you understand or does this still stand as a contradiction that gnaws at you?

      USW

      • Greatergoodcs says:

        They have more than proven themselves in the realm of social darwinism. They are at the top of the physical evolutionary ladder, for lack of a better way of putting it.

        What makes them better than the guy raising a family of four on $25,000 a week because he has no opportunity for a better life (for whatever reasons)?

        Your rangers may have served during peacetime (no big deal) … they may be there for reasons other than altruistic. How can you make such a broad statement with such confidence?

        As regards social Darwinism … a bit too coldhearted for me since you don’t delineate between those who help themselves with great advantage versus those who can’t (from great disadvantage).

        • GG

          Your rangers may have served during peacetime (no big deal) … they may be there for reasons other than altruistic. How can you make such a broad statement with such confidence?

          Perhaps you missed the question from Ray… why do soldiers, in combat, have a mantra of never leaving a fallen man. By definition this means that they are in combat, so the peacetime argument makes no sense here. But even if they had not, you would only say “no big deal” because you haven’t been through the training required to wear that tab on your shoulder.

          What makes them better than the guy raising a family of four on $25,000 a week because he has no opportunity for a better life (for whatever reasons)?

          Who said they were better? And who said I wouldn’t help a guy raising his family. He is helping himself and his family, and thus proving his worth.

          If you are going to attempt to argue against my point, at least slow down a bit and really read what my point IS. Your interpretation of social darwinism is not accurate for how I have described it.

          • Greatergoodcs says:

            Fair enough USW. I am jumping in and out today (busy at work).

          • Greatergoodcs says:

            Fair enough … except for the badge bit. I don’t know enough about what it takes to be a ranger/navy seal, etc. and I suspect it’s very difficult, but I assume it isn’t much harder (if at all) as earning a letter playing big 10 college football (or its equivalent). That isn’t meant to degrade the Ranger badge, but the combat that goes on on a football field I suspect is more mano e mano than that in survival training … but I don’t know for sure.

        • GG – Here is a situation I feel where social darwinism applies

          When my husband was in the Navy and gone on a cruise, I had 2 small children and was running a day care out of my house with 4 additional kids I was caring for. I had little or no time to do yard work.

          After I fed the kids lunch and put them down for their naps, I would give the leftovers to the homeless people who were always walking up and down the street. One guy in particular stood on my corner daily with a “will work for food” sign. I asked him if he would be interested in doing my yard work and I’d pay him. He said “why would I work when I’m making around $100 a day just standing here?” OK…I turned and left.

          So I asked another guy who was by there that day and he was truely greatful for the opportunity to make an honest dollar. Jason was great! I not only paid him more than he asked for but fed him breakfast, lunch and dinner for the 2 days he helped me.

          Which one of these 2 people do you think truely deserve help and which one do you think is just wanting to leech off of others?

          BTW – Jason was seen repairing my sprinklers by a landscaping firm in San Diego and ended up getting a full time job with them. He sends me letters and cards telling me how he’s doing a few times a year. It couldn’t have happened to a greater guy.

          • v. Holland says:

            Thanks for telling that story-it brightened my day! and made a great point.

            • Glad to brighten your day V. My daughter recently moved to San Diego and when I go visit her in October for my grand daughters birthday, I’m getting together with Jason and his new wife for a BBQ. I’m really looking forward to it!

          • Greatergoodcs says:

            Kym: A bumb is a bumb and some people are just bumbs but others aren’t (and sometimes it has nothing to do with their being lazy regarding finding work). I suspect there are a lot of people who would love for people like yourself to offer them work that do not do so (never mind jobs where they can earn money AND benefits).

            I can’t get excited about the story you told (except to say you’re a very decent person). It tells me nothing about those disadvantaged from birth (for whatever reason) that can’t find work.

            Your story gives us obvious examples. I suspect there are many others that are much more difficult to pass judgment on … and then who does the passing of the judgment?

            • PeterB in Indianapolis says:

              What does “disadvantaged from birth” actually mean?

              There are plently of examples of people born in poor families that make poor decisions and end up being poor.

              There are also a lot (though perhaps not as many) examples of people born in poor families that make good decisions and end up quite well off.

              Your argument seems to be that the second type of story is not possible.

              As to the question of who passes judgement? We all do… pretty much constantly. “Do not judge others, lest ye be judged” is simply not reality. We judge others constantly, others judge us constantly.

              Whether these judgements are reasonable in any way is a more appropriate question.

              Perhaps the quote SHOULD HAVE BEEN “Judge not others unjustly, lest ye be judged unjustly” That one makes more sense… to me anyway.

              • Greatergoodcs says:

                There are plently of examples of people born in poor families that make poor decisions and end up being poor.

                Yes and perhaps because they didn’t have the same advantages you had they made those poor judgments.

                As for “we all do” making judgments … Geez, that sounds an awful lot like gov’t to me.

              • Kristian Stout says:

                A teacher once told me that life is 10% what happens to you and 90% how you react to it. I understand about being disadvantaged or poor, whichever makes you more comfortable, that’s how I grew up but it was up to me whether I stayed that way or not. I decided that wasn’t how I wanted to live my life and I did everything that I could to make the life that I wanted. I’m not rich but I’m comfortable. I have a good job, a wonderful husband and 2 great kids. I’ve got those things not because soemone gave them to me but because I worked my ass off for them.

            • A bumb is a bumb and some people are just bumbs ~

              So do you think its right for the government to take money from the working people to support these bumbs? Be it health care, financial or whatever program they see fit to give to these people?

              A woman on welfare for her entire life is basically no better than a bumb. There are all kinds of programs, classes and preferential hiring in city/county jobs to help these people off the governments tit but they choose to sit at home doing zip but collect money that we the taxpayer paid through our work.

              • Greatergoodcs says:

                Those are abuses and should be dealt with, I agree, but you might not like my way of handling mothers who have children for the sake of a check. I say steralize them (I can see BF pulling out his double barrel shotgun right now). Steralize not with a hot poker, but some humane form that precludes them having other children until they can fend for them.

                At some point, if bums (men or women) abuse the system enough, they should be given a one way ticket to Mexico (since they enjoy giving us their huddled masses) or Cuba. But there will always be those who legitimately can’t fend for themselves and will need help from others (gov’t). I don’t buy the charity bit. I don’t believe it would replace necessary gov’t welfare.

              • I actually agree with you for the most part with the exception of charity, I beleive most people will help out if needed. Everything else I would go along with. So we’re not that different after all, fancy that.

              • Greatergoodcs says:

                We’re probably a lot more alike than different.

              • agreed

    • I will not ignore, Ray. I will answer a little later this evening. Hope you and yours are doing well?

    • Ray….had to really think on this question and decide whether or not to answer it because I see some of the responses on this blog that, quite frankly, will never understand and be derisive towards the answer; however, I promised you and answer and here it is.

      Ray, you asked: I ask for your insight in relating your ‘no man left behind’ approach from the military to the notion that ’some have to be left behind’ when we’re discussing things non-military.

      The no man left behind concept in the military, has nothing to do with government, nor financial considerations, nor employment, nor health care, or anything relating to civilian. Your question primarily relates to combat. However, the military is an extended family. It does not just pertain to soldiers but to families as well. When a soldier is off fighting, military families will take care of each other in the soldiers absence. It has to do with loyalty, training, a common purpose and belief, and a great desire to country and flag. ( I have been reading diatribe on here about how people who cannot do other jobs go into the military. ) This type of thinking is uninformed and totally, if not completely, false. However, it is not the subject you asked.

      When we train as a unit, we are doing jobs that are dependent upon the other for survival and the accomplishment of a mission. It matters not whether peace time nor war time. We train to die. It is that simple. We know the risks when we take our oath. It is that simple. No one can say, and that includes the military haters on here…no one can say that they do not know the risk when men and women sign up. Whether and officer or enlisted, we are prepared to die and we are prepared to die for our country and a way of life we believe in….politics be damned. We are also prepared to defend those that are derisive. We know this up front. That forms a unique bond that is totally different than that of the civilian world. In a corporation, you may have a common goal, but once you collect your paycheck and protect your job, out the door you walk with nary another thought. In the military, when our shift is over, we are still a family and still brothers and sisters in arms. For example, I do not know USW other than here but I know that he is a brother in arms. We do not have to tell each other this, we know it and we feel it. If he was in trouble, or if I was in trouble, we both know that if we call on the other, we will do whatever we can to help each other…unconditionally.

      On the battlefield, we make a promise to each other. We will leave no man out there, living or dead. Everyone comes home. We know that when we go into battle and are killed, and others know where we are, nothing will be spared to get the dead home. Even if we cannot do it for days, we will go back and get whatever we can find, bag it, tag it, and bring them home.

      We have a pride in accomplishment. Much has been said about a “patch” on the arm. There is nothing in the civilian world that compares to the “patch” on the arm. As you know, I have three degrees: BBA, MBA, and Kinesiology. While great accomplishments, the patch on the arm means more. I was in the 5th Special Forces for my first 12 of 40 years. I was a combat medic and long range recon specialist. My job was to infiltrate into Laos and North Vietnam to locate SAM sites (Surface to Air Missiles) that were shooting our planes down and neutralize them by calling in air strikes. I was to gather intelligence data along the way and my secondary job was trying to locate downed enemy pilots before the enemy found them. We trained as a unit, fought as a unit, and never questioned whether or not our back was covered. We never had to worry about anyone “taking our job”. In the civilian workforce, when you leave your job, that is all there is to it. As a military veteran, we proudly wear our caps that says so and we all carry small identification coins that when we meet someone for the first time and we pull our coins, the one who does not have one buys the first round of drinks. We can watch a Memorial Day parade and understand why the person next to you is crying and we console each other as complete strangers without saying a word. This is a bond that does not carry forward to the civilian side of things. When we drive down a road and see a stranded car with a military identification on it, we stop and render aid. We just don’t drive by because we know that when we stop, there will be no robbery or gun pulled on us.

      As sailors, marines, army, air force, coast guard…whatever….we will fight each other like wayward children because we feel pride in our selective units….but if a sailor was in trouble, the army stands beside him. If a marine was in trouble, the air force stands beside him…this is in civilian and military confrontations alike. It is family. In the civilian world, 99% of the people out there will walk past a robbery in progress or not stop a rape. But, the military person will do something and not stand idly by. Why? Because he believes in who we, as Americans, are. His sense of loyalty and teamwork will demand it. I do not intend to leave the females out of this because the females have the same qualities.

      It is a belief we have….something that we believe in totally. It is trust and it is an unbreakable bond. It is a loyalty and it is emotional…deep emotion.

      it is very hard to explain to you because it is a feeling and, if you have it (that feeling) it goes unsaid, and most of all, it is unconditional. It matters not whether you are a cook, administrative, or mechanic in the military…it is still there. For even in peace time, there is the telephone and the sinking yet euphoric feeling that every time it rings, we may be going.

      I do not know if I helped or not but thank you for the question.

      D13

  3. Warren lost points for his being a carbon simpleton. In spite of a budget 1000 times greater than that of the scientists dismantling the alarmist dogma, its disciples use of mystery math in their models and at times destroying the original data ala HadCRUT, the “warmies” are losing ground daily. Stick to monetary matters Warren or actually buy yourself a clue.

    • Warren is Directing this peice to the Left. The Mentioning of GW is only there to buy credibility among those whom he wants to get through to. If he were “Complaining” about the Right leaning folks, he would used a different analogy. P.

      • Sad day then when a billionaire POTUS himself lauded has to sugar coat his message with “greenery” to get his knowledge of monetary matters accepted as credible.

  4. Mr Buffet seems to believe that Obama has the best interests of America in mind. I’m getting the feeling the US won’t be the most prosperous country in the world for much longer. I still think that the September 2008 meltdown was done just to get Obama elected. I expect another meltdown to arrive just when Obama needs it to.

    Alan F: I agree with you on Buffet losing credibility by blathering on about the warming. Let’s see, he thinks that people are heating up the planet and that Obama isn’t trying to destroy America. Hmmm…………..

    • You didnt expect the US to be a superpower forever did you? You need to look West for who the next superpower will be.

    • So, Cynid,

      If I understand this, you’re saying that Obama and his pals somehow created the banking collapse before the election so that he could win? Do I have that correct?

      • It did seem rather convenient Matt, didn’t it?

      • Sure, but I feel that we at WALNUT would have gotten a memo on it in advance so that I didn’t lose half of my 401k..

        I hate to break it you guys, but if we were so powerful that he can create a huge banking collapse at will, he would have no problem pushing through his legislative agenda, no?

        And, speaking of convenience, how convenient that this scenario allows you to blame Obama (who you think is out to destroy America) while holding Bush (who is an old-fashioned (Connecticut born) Texan) completely innocent.

        Which seems more likely, the man in control of the country for eight years crashed the economy into a brick wall by gutting necessary regulation while pursuing disastrous fiscal policy, or a secret cabal of super-powerful left-wing zealots willing and able to destroy banks in order to elect a Democratic president?

        • PeterB in Indianapolis says:

          The leading conspiracy theory is that George Soros orchestrated the removal of 550 billion in funds from the world money markets on September 18, 2008 which perpetuated the near-collapse of the financial markets about 8 weeks prior to the election.

          http://dailyreckoning.com/september-18-2008-edge-of-collapse/

          • It all makes sense now 😛

            • PeterB in Indianapolis says:

              Please note, I am not personally sure who, if anyone, was responsible for this, but it seems likely that it was orchestrated in some way.

              Pretty unlikely for that much capital to randomly flee the market simultaneously.

              • Ray Hawkins says:

                Peter – I cannot get off the word “likely”

                The poll numbers leading up to that time do not support a need to tilt the election.

                Would like to see something clearer that demonstrates how a Soros benefits long & short term from such a move.

              • “The poll numbers leading up to that time do not support a need to tilt the election.”

                Ever hear of Watergate?

                “Would like to see something clearer that demonstrates how a Soros benefits long & short term from such a move.”

                Obama as president benefits him much more than McCain if only for his liberal agenda.

                That being said, I believe in innocence until proven guilty.

              • PeterB in Indianapolis says:

                I merely assert that it is highly unlikely that 550 Billion simultaneously fled the money markets for no reason whatsoever or by sheer accident.

              • Oh.. you were serious..

              • PeterB in Indianapolis says:

                I do not necessarily attribute it to Soros. I just find it highly unlikely that there was not some sort of coordinated effort involved there. It may have had nothing to do with Soros or the impending election. Could have been some other people/motivation entirely.

        • Mathius,

          Both of your scenarios are incorrect. If you want credibility here, there are two premises you are going to have to learn to get past. The first is your assumption that the majority here are “OK” with George Bush and anything that he did. The second is this fallacy that those on the left tend to cling to that Bush and his deregulation caused all the problems. Continuing to believe that in the face of the actual facts in that area renders you as nothing more than someone who buys whatever the left tells you to buy.

          USW

          • I don’t think many here are OK with Bush, but I do think some of them would give him a pass on the economy where they would blame a man who had no power at the time. Cyndi’s “I still think that the September 2008 meltdown was done just to get Obama elected” very clearly vindicates Bush while implicating Obama (and/or his allies). You are not the intended target of my arguments concerning this.

            Also, I know that deregulation was a major factor in the financial collapse. I cannot go into details because of the confidentiality agreements I have signed (and because it’s somewhat technical and boring), but I have seen, first hand, the implosions of unregulated MSB’s. I know, first hand, how much chaos ensued as a direct result of removed regulations. This is hard fact. I have seen MSB’s implode to mind-numbing losses, and I have seen that the direct causes are removed regulations in the way they are issued and bundled.

            Is it necessary the sole cause? No, but it most certainly was a factor. I do not lay sole blame at his feet. But I do blame a great deal. Barney gets a good share too.

            • Mathius – I would be interested to hear your overall take on the financial crisis if you have on-the-ground experience and were a first-hand observer.

              My own conclusion is that it was complex; many factors combined to cause the problems. Some were regulatory (transactions that were not regulated, transactions that were poorly regulated), some were fiscal/financial (FED-caused), some were political, some were economic (spike in oil price), and some were human (incompetence, mostly).

              The Bush Administration certainly doesn’t get a pass, but I’m not sure they were the main culprits. There may have been too many culprits to pin primary blame on any one of them.

              • Absolutely, you are correct in the above.

                The war in Iraq and saber rattling with Iran caused increased oil prices. This, of course, put pressure on the economy.

                Heavy borrowing by the Federal gov caused uncertainty about the creditworthiness of US. This, of course, put pressure on the economy.

                There was quite a bit of incompetence in the economy ass well.

                There was also a very misused mathematical formula. This formula, which is far more complicated than I can hope to pretend to understand, allows you to control risk. This is done, in a broad sense by reallocation of risk/reward. That is, you cannot change your expected payout of a bet. If you’re betting on coin flips and you’re betting a dollar, no matter how you bet, your payout is 50 cents. But what you can do is say “let’s flip twice, if both are tails, I’ll pay $3, otherwise you pay $1.” This is a fair bet. So what happens is you flip twice, and probably win a dollar, but maybe you lose three. Over time this normalizes and you’re back at 50 cents expected payout. Follow? OK, so what happened was the financial wizards got hold idea of this and stretched it out. They pushed it so that it was highly highly unlikely that anything bad would happen, but if it did, it would be catastrophic. This is tantamount to flipping the coin 20 times, but paying 1,048,575 if it loses (yes, you’ll probably win, but if you lose, boy are you screwed).

                So what did they bet on? Mortgage backs. These were bundled in an opaque manner (in ways that were not previously possible). Because the asset base was diverse, the the likelihood of default was relatively minor. The problem was systemic failure. The credit worthiness of the MBS was based on the underlying mortgages. While generally accurate (predictive models are complex, to say the least), a few loans in many bundles were what are called liar-loans. These required little actual documentation. And ARMs with predator rates (these were safe as long as home values were rising and people could re-fi if necessary, but if they didn’t or if credit was hard to come by, they could be lethal).

                So a few defaults caused a few more. This knocked down the value of homes in an area and made re-fi more difficult, which caused more defaults and BOOM, cascade failure.

                So, all of this would have been fine, except the risk of these MBSs wasn’t on the books. Because of a process called a REPO, the MBSs, were bought by banks and hedge funds which then loaned them out to someone else on a short-term basis. So the “risk” of the MBS on the books was negligible. When nobody wanted to borrow them, companies needed to suddenly finance huge positions which were rapidly losing money. Thus huge unexpected losses across the board. Because nobody wants new MBS’s, credit evaporates overnight. Refinancing becomes next to impossible, ARMs start defaulting even more and there you have it.

                At any point this could have been stopped. Regulate the predatory lending, regulate the liar-loans, don’t force fanny to loan to under qualified applicants, give transparency on the mortgage bundles, force banks to keep MBS’s on their books. But none of these things actually happened.

                CDS’s are a convo for another day, for now, I need to get some work done.. hope this helps.

              • Black Flag says:

                See reply #20, Matt

            • What a lefty saying Barney Frank had a hand in things? Can we get that in writing, a photocopy of your last donation to the Democrat party and a photo of your passport amidst a hoard of Obama collectibles?

              • It is in writing.. feel free to take a picture of the screen and send it the DNC for verification.

          • Greatergoodcs says:

            You guys like the word fallacy. There’s no doubt Deregulation was the genesis of the financial crisis. It is the nature of the beast (greed). Just enough “oversight” was removed to permit greedy capitalists to rape the global market … then they got to walk away with golden parachutes (some paid for with bailout bucks).

            You can’t just call something a fallacy and expect us on the left to swallow it. BF likes to use ALL CAPS sometimes. That doesn’t change the gibberish factor in some of what he states (rather than answer a question without six pounds of philosophy stuffed into a 1 pound bag).

            Bush removed a ton of oversight when he took office and the Dems were happy to let him do it.

            Only a democratically elected socialist gov’t would have the potential to protect its citizens (not a gov’t by the money for the money).

            • PeterB in Indianapolis says:

              Exactly HOW would the type of government you propose eliminate the problem you have described?

              You state that such a government would either prevent or solve the problem, but you didn’t say HOW this would be accomplished.

            • I think you have to delineate between oversight and regulation…IMO deregulation is not such a bad thing…IF the proper oversight is maintained…

              • Greatergoodcs says:

                so long as it has the greater good in mind, I’m fine with it.

              • Black Flag says:

                What is the “greater good”?

                How do you know it is?

                What is your measure?

                How do you know it isn’t a Greater Bad?

            • Just enough of capitalism was scraped away to afford handing out mortgages to those flipping a coin between paying the electric or the gas. All for profit is too simplistic a view. It’s also profitable to only extend to those able to meet a net 30 over those requiring a net 90 as it enables that bound currency more time in play to generate even more wealth. Any loans meeting such unacceptable standards as intermittent remittance, minimum interest or over a long timeline is BAD BAD BAD business unless you are getting a taste of something else because of this. Ask Marius if a conservative liberal whose successful business generates both wealth and opportunity is not to be believed.

              • Black Flag says:

                Was it BAD BAD BAD?

                The calculation is easy:

                $400,000 home @ 3.5% @ 25 years – 1 yr. variable.

                By Mortgage calculator,

                Payment = $2,002.49/month

                Property value increase 10% per annum.

                Equity increase = $3,333/month.

                Net increase in net worth – $1,330/month. PLUS $660 per month of interest was tax deductable… for a total gain of just under $2,000/month.

                Flip in one year, net gain of nearly $24,000.

                Why wouldn’t everyone take this deal?

              • 3.5% is unimaginable here.

              • According to the Bank of Canada web site

                http://www.bank-banque-canada.ca/cgi-bin/famecgi_fdps

                In Aug 2003, it was as low as 2.9%, in Oct, it was 2.75%, Mar 2004 it was 2.25%, Aug 2005 it was 2.23%, Jan 2007 it was 2.8%, May 2008 it was 2.75% and June 2009 it was 1.65%

            • You bet I like the word fallacy. That is because when it comes to political discussions, both sides seem to use fallacies as their stock in trade.

              So I spend a lot time pointing the fallacies out, hoping that those using them will see the error of what they are saying. They are then free to discuss without making the same mistake again.

            • And likewise my friend, you can’t simply say deregulation by Bush caused it and expect all of us on the logical side of things to swallow it. I can prove to you that Bush offered MORE regulation than most recent Presidents. Can you show me where exactly his “deregulation” caused the situation, or are you simply willing to believe it when the left tells you so.

      • Only partly correct, Mathius. Some entity took advantage of the situation.

        Obama is not powerful enough to do it on his own. His sponsor is. Obama is just a very charming puppet.

        If there’s another big financial crisis with great timing for Obama, will that also be a coincidence?

        • Probably. I tell you that no one is sufficiently powerful to crash the economy without leaving plenty of obvious evidence. No one. You make an extraordinary claim and I demand extraordinary proof.

          • Black Flag says:

            No one is.

            The FED is not a “no one”.

            The FED has all the power to crash the economy – in fact, they have.

            Artificial low interest rates and the fractional reserve system are the root causes of economic collapse.

          • I would not argue that the Fed has the power. But I deny that they could do it without getting caught at it.

            And I challenge your assertion that the fractional reserve system is the root cause of our problems. Likewise, artificially low interest rates are necessary to ensure the flow of credit to increase spending which increases jobs which increases spending etc.

            The root cause is a failure to regulate powerful forces. This enabled sketchy business practices. Banks took on billions of dollars of off-budget risks. When the defaults started (as they inevitably did), the house of cards started to fall. Were there other factors? Of course. But this is a major one, if not the main one.

            • Mathius – Can you be more specific about the powerful forces that were not regulated? I know about the derivatives and the credit default swaps. Is that what you’re talking about? Are these the off-budget risks by banks that you’re talking about? Are there other similar forces you have in mind? What are they?

            • We here avoided such with relative ease. Its never been a practice here, as liberal as Canada is, to force the banks into accepting risk. Even the Farm Credit Corporation who bent over backwards to afford loans to any in that community had to see both viable collateral AND business plans before releasing a dime.

              • Black Flag says:

                No, Canada has different problems.

                The Canadian dollar is discounted to the US$ by 20% – no matter where the US$ goes, CAD$ follows lock-step – and down into the toilet.

                Second, most of the Big Boy Banks in Canada invested in the “hot market” of the US – it maybe Canadians avoided -but just partially- the housing craziness, the banking system still entwined itself in the US market.

                Thirdly, Canada relies on US trade. The loss of the car industry will devastate Eastern Canada and the Federal Gov. will go hunting for taxes with another NEP on Alberta and Maritimes and maybe Quebec (Hydro) for additional funds.

              • Our government works hard to keep our currency undervalued. Gotta give them credit. Must be the glut of accountants in the Canadian government such as the wife’s uncle Freddie.

                As for Quebec being taxed, wrong-o! That hasn’t happened to match their “programs” since I’ve been a tax payer.

                The auto industry was a farce for some time, like Bombardier, Stelco Steel and a host of others who cost the Canadian tax payer a fortune. Time will tell there.

                If you look at the raw numbers it looks like we get the good end of trade between Canada and America but then you look for finished goods which is where the jobs are and its an about face. Natural gas, oil, minerals, lumber and food products are not bastions of job creation. To us, Free Trade stuck it in a broke it off. Oh and the companies doing business with America are American. Look it up. I don’t see the gift of a dime on the dollar staying in Canada for the country’s natural resources as anything to celebrate. We do have China making inroads here throughout Western Canada so maybe they need raw materials too? Next year will be the tell.

          • Mattius,

            You know full well that as a common nobody US citizen I don’t have the connections and resources to prove anything. That is the job of the media. Unfortunately, they’re too busy worshiping Obama do their job.

    • Ray Hawkins says:

      Cyndi – the meltdown was inevitable and a result of events in play since even before Obama was a stain in his Dad’s underwear.

        • Ray Hawkins says:

          You should read the long discourses regarding birthers that happened on this blog a while back. It’ll make your skin crawl.

          My ‘joke’ was that even before Obama was a twinkle in the eye of his Dad (or you can use my more distasteful phrase), there was a dream in America for everyone to have a piece of the pie – everyone wanted, in some way, to become like Ward and June Cleaver. Along the way the process and system became screwed – controls that would have provided some fiscal soundness were removed and everyone saddled up to that bar, heaved their fat guts up onto the bar and kept right on eating. Those we entrust with the innerworkings and backroom Wall Street deals figured out how to jackpot us all – and not even while we weren’t looking – we were looking – we just ignored what we saw and let it all march right on.

          Rather than take a cold, hard, dispassionate look at facts and the why’s and what for’s we instead devolve into deranged conspiracy theories. These theories speak to an underlying element of a psychosis we all – that willingness to suspend truth and fact and instead advocate and support the seedier side of our thoughts – we all love fiction – its just some of us love it more than others.

          😉

          • PeterB in Indianapolis says:

            The thing that I find entertaining is people are fully willing to believe that mega-corporations are evil, yet very few will believe a “conspiracy theory” in which a mega-corporation ACTUALLY DOES something evil.

            🙂

          • There’s nothing inherently evil about “mega-corporations,” but I do not believe there’s anything inherently good either. They simply do whatever makes them the most money.

            • PeterB in Indianapolis says:

              Ah, yes… but according to some people (you may not be one of them)… the blind pursuit of profit for the sake of profit is evil, since it can only happen by exploiting the little guy.

            • Naw.

              I don’t think the pursuit of money is evil. Nor do I think it can only be accomplished by exploiting the little guy. But I do think that exploitation of the little guy is bad.* Companies want money. If they can make money without hurting anyone, mazel tov. If they treat their employees like cogs, underpay them, etc, or if they abuse the customers (say, lock them into a three year contract with large hidden fees, etc), this would also be bad.*

              *I say bad rather than evil, because evil denotes more sinister motives. For example, if they did so in order to establish a secret cabal of super powerful left-wing ideologues willing and able to destroy banks in order to get a Democrat elected, that would be evil. If they’re just trying to make money, I don’t think that’s “evil” per say, just “bad.”

              • Just to clarify, if you rob a bank, that’s bad, but not evil. If you barge into a building a wave a gun and threaten people for no reason just because you enjoy it – that might be considered evil.

              • PeterB in Indianapolis says:

                I am curious as to what the difference between “bad” and “evil” is.

              • It’s complicated to me. I guess it’s just a matter of degrees, but I tend to think of it as a matter of intent. If you hurt someone, that’s bad. If you mean to hurt someone that’s evil.

                For example, consider theft. If you are starving and you steal bread, that is still a bad thing to do, but hardly evil. If you steal because you are too lazy to work and would rather just take, that could be considered evil. (Though I still think evil has much stronger connotations – Nazis, Slavery, Nancy Pelosi, my older brother, etc).

            • As they indeed should. The corporate entity is beholding unto its shareholders first and foremost. Its workers are the tools necessary to function and as such are best served by being well cared for too. However, should one break it needs to be replaced and should one not work correctly or at all, it too needs replacing without hesitation.

              When this capitalistic model is carried out in absolute terms, there is no “overpayment” to executives as they too are just tools to the corporate entity and as such are also subjected to the same criteria as any other worker.

              Want to cure capitalism’s only flaw? Find a way to completely separate it from the state. No lobbyists and no contributions from the corporate be it actual businesses or labor corporations (unions) and no solicitations or favoritism by the politico. After you have managed this, then just get out of the way.

          • The American dream was to get a good job, afford a home for your family and a better future for your children than that which was possible elsewhere on this planet. There was also back then the notion of hard work not handouts, pride in working hard without ever uttering the phrase “that’s not in my job description” and gratitude to the country that again afforded you this opportunity where another country couldn’t or wouldn’t.

            Of the 40,000 years we’ve been about town doing our best for 99.999% of that timeline, the last decades of “deserving” are a blight.

          • RAy,

            Can you tell me why it is that the little guys (us) alway seems to get screwed? No matter what the politicians and financiers do, it is always us that looses. How could such incompetent nincompoops always come out ahead? If they’re so stupid, how do they rise to such wealth and power?

      • That may be accurate Ray, but that doesn’t mean that some entity didn’t use it to its advantage.

        • Ray Hawkins says:

          What NASCAR teaches us on regulating banks……………..

          First and foremost – I am a big fan of regulating the financial institutions – read on to see why…..

          Here is some timeline data worth looking at – funny to see which hands have been on this over time (or praised it): http://www.historycommons.org/timeline.jsp?financial_crisis_the_80_s=financial_crisis_monetary_control_act_of_1980&timeline=financial_crisis

          I support the argument from my opposition on this is that we haven’t de-regulated enough.

          I love the analogy of NASCAR – at the Super-speedways (Daytona and Talladega) all the cars are required to use a restrictor plate on their carburetors. The reason being is that w/o this the cars would reach speeds upwards of 225 mph or more – at speeds that high most all safety measures fail and you are almost guaranteed a fatality – the driver, the fans or both. The plates help bring speeds down to around 200 mph and are intended to increase safety and the competitiveness of the race (w/o plates only a small number of teams were ever likely to reach the higher speeds – thus there was almost zero competition – the same 2-3 guys win and everyone else gets screwed). Now – w/ the plates there can still be wrecks – these are referred to as “the big one” and usually occur due to control failure or someone acting like an idiot. The idiots (e.g. Jimmy Johnson) learn to drive better and thus do not create more ‘big ones’ over time. The control failures are researched and remedied every time out of the gate to ensure the races can stay competitive and safe (e.g. better tires, chassis, etc).

          Just my .02

          • Black Flag says:

            Of course, Ray uses a free market system to try to prove regulated system.

            No one forced NASCAR to make its rules – NASCAR makes its own rules. Free men can make rules to govern themselves just fine, don’t they? Notice they don’t need “Law Enforcement Officers” shooting bad drivers.

            If Jimmy Johnston doesn’t like NASCAR rules, he can leave NASCAR and build his own racetrack.

            If I do not like the US banking industry….. I cannot build my own banking industry …. I am prohibited from doing so.

            • Ray Hawkins says:

              You totally missed the analogies BF – but that is what I expected you to do. NASCAR is not completely free of government intervention – it is ‘controlled’ if anything.

          • Interesting analogy Ray, but how does that explain someone using something to their advantage? That’s what I believe happened. Obama is portrayed as the Messiah to the World. Since Obama really isn’t divine, and has a resume that’ll fit on a small post-it note, I’m still leaning toward his having massive help in getting where is today.

    • Richmond Spitfire says:

      Hi all,

      Posting to receive emailed comments.

      Have a great day,
      RS

    • Better yet look to the UK’s worst carbon criminal.

      “The Met Office has caused a storm of controversy after it was revealed their £30million supercomputer designed to predict climate change is one of Britain’s worst polluters.”

      http://wattsupwiththat.com/2009/08/28/met-office-supercomputer-a-megawatt-here-a-megawatt-there-and-pretty-soon-were-talking-real-carbon-pollution/

  5. Good Morning, I will, sometime today provide my opinion on Ray’s question, it’s just alittle too early for thinking that hard (still woring of first cup of coffee).

    I will agree tha Buffett’s words on GW takes away from his credibility alittle, but the man knows money, not science, therefore, some thought must be given on the inflation subject.

    I’ll follow today and post as I can.

    G!

    • The man was trying to draw an analogy. Cut him some slack.

      Also, it’s hard to argue that no amount of carbon emissions would cause global warming – he didn’t go into specifics as to how much, when, etc..

    • Ray Hawkins says:

      G – I’m still waiting for my first cup of Joe to soak the brain – am interested in response though – not a setup here – just trying to understand.

    • I don’t drink coffee.. it’s Red Bull all the way for me!

  6. Where I differ from Buffet is that I do not believe that we are out of the woods on on the slow road to recovery. I don’t think Bush and Obama rode in like the fabled knight to rescue the lady from the dragon.

    It’s more like they put off. And now it’s set to come back and bite in the ass at a later date. Putting it off will also make it far worse when it does. They have only delayed the resetting of the economy.

    And if Mr. Obama gets even one of those boondoggles of his passed(UHC, C&T), we will be so screwed. Hell what am I saying? We will be screwed even worse than we already are.

    The runaway spending MUST stop. Not, NEEDS to stop. It MUST if we’re to even have a run at recovery. SOmebody needs to be in office, at Presidential or Congressional level, to make the hard choices and make the spending cuts necessary to save the Country.

    Instead we have a President and Congress willing to pass these bills even if it casts them their offices in the next elections. What a passel of arrogant assholes!

    • So, just out of curiosity here. You are of the opinion that you are a better predictor of the economy than Warren Buffet, correct?

      • PeterB in Indianapolis says:

        Warren Buffet makes “predictions” based on his desire to protect and grow his nest-egg of $29 Billion or whatever it is.

        Because he is “respected” in the financial world, many of his “predictions” are self-fulfilling. If Buffet says, “it is getting better” then it WILL get better, at least in the short-term, simply because of his influence.

        That doesn’t NECESSARILY make him correct though.

      • if Buffet says, “it is getting better” then it WILL get better

        It sounds like that does make him correct to me.. but maybe you have some other definition of “correct?”

        • PeterB in Indianapolis says:

          Please note the rest of my sentence, which was “in the short term”.

          Buffet has a lot of influence. If he claims that things are getting better, then the market tends to react positively. It MAKES NO DIFFERENCE whether things are ACTUALLY getting better or not.

          In the long term, if things are not really getting better, enough people will eventually realize that things are not really getting better, and then the positive influence of Buffet’s words will evaporate.

          If things really are getting better, then he is, of course, correct. My point was, even if things are not really getting better, Buffet saying that they are has at least a temporary and noticeable self-fulfilling prophecy effect.

      • Mathius,

        Warren Buffet said:

        “United States economy is now out of the emergency room and appears to be on a slow path to recovery.

        This fiscal year, though, the deficit will rise to about 13 percent of G.D.P., more than twice the non-wartime record. In dollars, that equates to a staggering $1.8 trillion. Fiscally, we are in uncharted territory.

        Once recovery is gained, however, Congress must end the rise in the debt-to-G.D.P. ratio and keep our growth in obligations in line with our growth in resources.”

        Esom does not believe we are on the road to recovery. Buffet also says we are in uncharted territory. That’s a nice CYA statement, so if things turn south, he can claim it matched his predictions.
        I have also heard many on the business programs say they are not convinced the worst is over.

        Your words,
        “I don’t like deficits. If the government won’t cut down on spending, I’m all for tax hikes (I may be for them anyway, as a huge amount of that spending just goes to paying off interest – if we can get rid of the debt taxes would be lower by default).”

        It appears the current government will not cut down on spending.
        They are OK with tax increases, but not enough to offset their spending, much less to reduce the deficit.

        Democrats are historically painted as having a tax and spend policy.
        Can you see the elephant in the room?

      • I am not claiming to be smarter than Mr. Buffet. But we ain’t never been here before. And there ain’t no way we can continue to spend until we are 10 trillion dollars in debt and be able to sustain that. I don’t care WHO says we can.

        Mr. Buffet is predicting options for Best Case Scenario. We’re already past that. Especially if the Democrackpots stay in Tax and Spend mode. We need to slow down and cut spending. What we ARE doing is growing the Government and Spending even more money. I do not believe our economy can sustain it.

        I guess we’ll just have to see who’s wrong, won’t we?

      • I really need to make this abundantly clear. If the government stops spending, money stops getting pumped into the economy. This means fewer goods and services are bought. This means that there are fewer jobs. This means that fewer people have the money to buy goods and services. This means even fewer jobs. Et cetera, et cetera, and so forth.

        Drastically cutting back on spending sounds great, but it is a recipe for disaster.

        However, as a tax and spend Democrat*, I am in favor of taxing to support the spending which is going on, and streamlining and cleaning up the bureaucracy so that the money is better spent.

        *Democrackpots is an unnecessary slur. I don’t refer to the right as RepubliNuts, the Reich Wing, et cetera. Demonizing your opposition will get you nowhere. It will simply make it harder for you to see eye-to-eye.

        • You assume that people wouldn’t spend money? I would rather see people keep their own money and spend it how they wish than the government do it for them.

          In my opinion either little government spending with small taxes or large government spending with large taxes will work to some degree of effectiveness (IMO Bush taxed little but spent much, one piece of the disaster pie the economy ate). I just think the former is more savory.

        • People won’t spend like the government. What would you do with double your income? Would you go nuts and blow it all on stuff you were just fine without? Or would you save some of it?

          If you, and everyone else, were going nuts and buying stuff, that would drive the price up, no? (Supply and demand 101) and you’d be no better off.

          If you saved it, it wouldn’t be getting spent, the aforementioned cycle of destruction would ensue, chaos would reign, and the dead would rise from their graves.

          Neither looks very attractive.

          • PeterB in Indianapolis says:

            Of COURSE the people won’t spend “like the government”.

            People are not allowed to routinely spend 185% of what they take in.

            If the government drastically cut back on spending, it would be painful, but the economy would adjust.

            You do provide an interesting RATIONALIZATION for government spending however.

          • The economy would implode. Please provide me one expert opinion which says that if the government stopped spending, the US economy survive.

            There are many levels of survival, so I suppose it’s possible the economy would “survive” where we’re all goat herders. I mean in a manner similar to what we have today.

            • I don’t propose to stop ALL spending by the government. Just the wasteful parts. I think it is necessary, for instance, to fund the police dept, welfare, etc, but not $800 billion on pet projects that are mostly waste…

              • The problem is that the “pet projects” are there for a reason too. Not that I’m entirely ok with them either, but take the Alaskan volcano funding that was so derided a while ago. The thing is, aside from the practical benefits of being able to monitor nearby volcanoes, this put people to work doing the monitoring, they then had money to spend and so on and so forth..

                I do agree, however, that we need to reallocate to more important priorities. Ah, but how? And who decides what’s important?

              • Welfare? I thought GG, Ray, and I were the only ones here who supported welfare.. welcome to the dark side. 🙂

              • Welfare is needed to a certain extent as short term help, not a lifestyle choice. I’m all for helping those unable to help themselves, not those who don’t even try.

            • PeterB in Indianapolis says:

              So, just because the government has set itself up as the main driver of the economy, that makes it a GOOD thing?

              It is unsustainable for the government to be the main driver of the economy. In my book it is better to stop an unsustainable course of action sooner rather than later.

              If we stop the unsustainable course of action NOW, then it is GOING TO HURT A LOT. If we wait for the unsustainable course of action to implode on its own, IT IS GOING TO HURT A LOT MORE, OR PERHAPS BE FATAL.

              If you go to the doctor when you first feel a lump in some part of your body that has not had lumps before, having a biopsy and having the lump removed certainly sucks.

              Waiting to go to the doctor until the cancer has spread throughout your entire body sucks MORE however….

              • I have given up trying to explain. WE AS A NATION CANNOT CONTINUE TO SPEND AS WE HAVE WITHOUT DIRE CONSEQUENCES DOWN THE ROAD.

                As Peter said, I’d rather hurt bad now than hurt worse later.

              • Perfectly fair.

                This is why I advocate for a healthier approach to government spending, complete with sustainable taxation to support it.

              • Then institute a fair and flat tax….say 10% w/ no deductions paid by everyone. No tax brackets, no levels, no exclusions. Everyone, even the poorest of the poor pay their fair share and fair means just that. Fair is not dependent upon how much is made. Eliminate the corporate tax loopholes. NO deductions…nothing. 10%…. Run the numbers. I have. Surpluses each year…even with the stupid spending that is going on.

              • PeterB in Indianapolis says:

                Well, currently the taxation rate would have to be about 125% in order for current spending levels to be sustainable.

                I would be interested to see how the government would propose to collect 125% of everyone’s income in taxes 🙂

              • Black Flag says:

                Exactly – impossible.

                Therefore, if the impossible is demanded, expect something else will happen!

              • Run the numbers….take the gross of individual income, and the gross corporate income….NO DEDUCTIONS….None…..According to the CBO numbers it is amazing. Apply 10% and observe.

              • Black Flag says:

                Tax is not just for income – its number one role is to manipulate the economy.

                Deductions are vital for that role to exist.

                Flat tax will never come to pass – the government will never let a tool of manipulation disappear.

              • Black Flag says:

                The gross income, all sources (not including Government) is ~$10 trillion.

                10% is $1 trillion – the entire US budget is $3.5 trillion

                We’ve missed $2 trillion “somewhere”

        • Why should I not use slurs? I am not a Republinut or Reich Wing or Democrackpot. I am a Conservative. I thought you were a Liberal.

          • I am liberal (some may debate the extent of my liberalness), but that doesn’t mean that I would say it’s ok to slur my fellow leftist anymore than it is ok to slur your fellow right-leaners. If you demonize The Others, if you make them inhuman, if you stop thinking of them as people, as good, well-meaning people, you will never learn from them. How can you ever hope to persuade someone you don’t understand, who you thinking of as a crack pot? We have more in common than we have differences.

          • Can someone here please back up my assessment? If you are in Iraq and your view is that all Arabs are the evil, will you get anywhere? It helps to have an understanding of Sunni / Shia and to realize that neither is actually evil per say, but that they just have differences of opinions. (Granted some are evil, but not the people as a whole).

            • v. Holland says:

              It is always better if people refrain from using derogatory names. Although in this instance I believe the reference was too the party(politicians) not the actual citizens who are in either party.

            • Here Matt, I’ll back you up. I am not really meaning ANY Democrat. But if Nancy Pelosi, Barney Frank, Barby Boxer and some other aren’t crackpots I don’t know who is. The same goes for some Republinuts like George Bush, Olympia Snowe, and Maybe Rush Limbaugh.

              Oh, and some of the Riech Wingers are just as bad as the Looney Left. 🙂

              Now do you feel better?

              • Yup.

                Also, Snowe’s not so bad…

              • Snowe is a Rhinocerous. That makes her bad in my book. If you say you’re a Republican, you should at least vote as a Rep every now and then.

                Why doesn’t she just change to Democrat like Specter?

              • How can people deride Dean for pushing Dems to vote along party lines, but then blast Snowe for being a “RINO?” She is that most endangered of species: a moderate. Somebody grab the torch and pitchforks.. we got us a RINO to hunt!

              • If it looks like a duck, talks like a duck,
                Walks like a duck, it must be a duck.

              • I submit that Snowe is NOT a moderate. She is a Liberal. She votes with the Democrats Almost every time. She might as well BE a Democrat. Mind you I am close to throwing John McCain right down beside her.

                Of course I could be wrong. I was once you know. At least I was told I was.
                And then there’s that part where I’m not Dem OR Rep. Like BF, I see them as two branches of the same Party.

  7. “Legislators will correctly perceive that either raising taxes or cutting expenditures will threaten their re-election. To avoid this fate, they can opt for high rates of inflation, which never require a recorded vote and cannot be attributed to a specific action that any elected official takes.”

    How sad. Rather than do the right thing, taking care of the country, they do the politically expedient thing. How are we supposed to have faith in the government when this happens?

    • democracy is the worst form of government – except for all the others..

      BF: I include VDLG in the “everything else” category.

  8. Ray Hawkins says:

    There is also an article in today’s NY Times with respect to profits being shown in TARP money that has been repaid. A few unreferenced comments:

    – The so-called profits are minimal compared to the monies still in play with AIG, Fannie, Freddie, GM, Chrysler, etc. Maybe I am becoming a cynic, but I assume that ‘re-payment’ is being made via the backsides of the customers (and in some cases – the employees) of those same companies.

    – It was but a few weeks ago that an analyst (from CBO maybe?) offered that many of these TARP banks still have extensive toxic assets on their books. Not good.

    – I’m in budget cycle now at work – we’re flat going into 2010 – no new goodies, no more new hires. Every line item must show business value / be a value to our customers. No fluff, no b.s., everything must be a ‘have to have’ not a ‘nice to have’.

    – I fear more that our domestic policy may soon be driven those who ‘own’ us rather than those we elect. Sorta that GM/AIG phenomena but the US becomes GM/AIG and China becomes the US Government.

    • PeterB in Indianapolis says:

      I can tell you EXACTLY how TARP money got repaid.

      1. The government gave large financial institutions lots of monopoly money.

      2. Rather than lend any of this money to consumers (which would have been a horrible risk), these large financial institutions BOUGHT STOCKS in the horribly down-trodden stock market.

      3. The infusion of that much monopoly money into the stock market caused the Dow to rise from < 7000 up to 9500.

      4. The large financial institutions sold enough stock to repay the TARP money, but not enough to drive down the value of stocks much.

      End result, the banks "got healthy" without helping the poor, downtrodden consumers in any way whatsoever other than driving up the price of stocks for those of us that still hold any.

      • Ray Hawkins says:

        Well put – I’ll buy you a steak at St. Elmo’s next time I’m in Indy.

        • PeterB in Indianapolis says:

          I like St. Elmo’s. Too bad I am not a huge Shrimp Cocktail fan… I hear theirs is among the best in the country 🙂

          • Ray Hawkins says:

            Ha! This is way way off topic Peter – but I remember a place at the corner W. 21st and N. Illinois Street – small sandwich joint – but they always had jazz musicians playing – inside and out depending on weather. One day there was this young kid that was going to town on saxophone – he was amazing. Wish I’d given him 10 bucks for one of his CDs – figured I’d catch him ‘next day’ and he wasn’t there and I have not been back to Indy since. My loss.

      • Peter,

        I have read this explanation in other sources as well. Good post.

  9. “Once recovery is gained, however, Congress must end the rise in the debt-to-G.D.P. ratio and keep our growth in obligations in line with our growth in resources.”

    Fat chance that will ever happen. Con-gress is there to line their pockets at the expense of the country 😦

  10. Black Flag says:

    Warren Buffet, a man who made his billions in the free market who wants to have government take over the free market (after, of course, Buffet has made his billions)

    • PeterB in Indianapolis says:

      BF,

      I would argue that we have never had a technically “free” market.

      Buffet wants MORE regulation of an already regulated market that he has made billions from, probably quite often from understanding the implications of the existing regulations and knowing where to put his money.

      With even MORE regulation, he will be able to even more clearly define where to put his money and where to avoid putting his money, and he will profit even more.

  11. Good Morning All

    Just reading comments for now.

    Hope all has a good day.

    Judy

  12. Black Flag says:

    Mathius

    It’s complicated to me. I guess it’s just a matter of degrees, but I tend to think of it as a matter of intent. If you hurt someone, that’s bad. If you mean to hurt someone that’s evil. For example, consider theft. If you are starving and you steal bread, that is still a bad thing to do, but hardly evil.

    It is evil – you are destroying another man’s rights.

    Further, you hold a God’s view of your scenario – you are judging the theives actions by the Perfect Knowledge that he has absolutely zero other option – which in the Universe, is simply not true – he has many options that do not require theft.

    If you steal because you are too lazy to work and would rather just take, that could be considered evil. (Though I still think evil has much stronger connotations – Nazis, Slavery, Nancy Pelosi, my older brother, etc).

    Evil is simple – a contradiction. Some consequences of a contradiction are small (I throw a pen in the air – believing I control the direction of gravity and the pen hits me on the head) and many are great (I throw a hammer in the air….) – but they are all evil.

    A bad play in poker is a bad play in poker, whether you win or lose a large or small amount.

    • Black and white is no way to view the world.

      I am not judging – I am refraining from judging. I cannot claim the thief is evil, perhaps he is just desperate. You say his actions are what speak, but say the intent behind the actions. For a thought experiment, consider that you fail to notice someone in your bind spot and run them off the road. Your argument would say that because you injured them (destroyed their right to not be driven off the road), your action was evil. I would argue that at worst it was negligent. You had other choices, you could have double-checked, you could have hired some one to sit in your passenger seat to check for you, you could have installed a camera to watch your blind spot etc. You didn’t, so are you evil?

      Lastly, how do you do those block quotes?

      • PeterB in Indianapolis says:

        Black and White is a very logical way to view the world. If the world is all grey, it is possible to rationalize darn near any action whatsoever 🙂

      • Greatergoodcs says:

        Mathius, you have it right. There is ALWAYS grey.

        Jean Valjean stole a loaf of bread … to feed his sister’s family.

        My kids are starving, I’m ripping off the next guy I see wearing a Rolex he clearly doesn’t need (he can use a Timex), pawning it, feeding my kids and going out to look for a legit job the next day … until my kids are starving again.

        • PeterB in Indianapolis says:

          If you believe that stealing someone else’s Rolex (whether they need it or not) to buy yourself a loaf of bread (because you are starving) is not theft, then that explains a lot.

          • Greatergoodcs says:

            I believe it is necessary for my survival. If that isn’t a free choice, I don’t know what is.

            Which has been one of my questions to BF all along; what do you do when some of 304,000,000 people decide they are starving?

            Freedom doesn’t smell so good in that scenario, eh?

            • Black Flag says:

              Of course, you cannot explain how you will feed 304 million people by stealing from everyone.

              • Greatergoodcs says:

                I can assume that with people cooperating the chances of feeding 304 million are greatly enhanced rather than let everyone run amok.

              • Black Flag says:

                What is the basis of this cooperation?

                Is your son more important then a stranger 1,000 miles away? Why or why not?

              • Greatergoodcs says:

                Of course not; why socialism is the only way to provide for both.

              • Black Flag says:

                How can something provide everything for everybody?

                Where does it come from?

                How does “Socialism” chose what your son needs and what a 300 million strangers need?

                What happens if there is only one of something and two people want it? Who gets it? WHo decides?

        • Black Flag says:

          A savage sees no pain in his victim, no risk to himself, and a rationalization to use violence on non-violent men regardless.

          A savage cannot conceive of rights – which is why he is a savage.

          • Greatergoodcs says:

            But a free one. You gotta’ give him that much …

            • Black Flag says:

              No, not “free”

              A savage cannot conceive what freedom means – his belief “Good for me, but not for you” cannot build a sustainable society – which is why he remains a savage.

              Civilization, however, it built upon “Freedom fro me and for you”.

              • Greatergoodcs says:

                We’re back to that 304 million, BF … there are going to be those in that mix who think it is their right to take from you and me unless there’s something (i.e., gov’t) to tell them they don’t have to.

              • Black Flag says:

                On what basis does this government form?

                Randomly, or by design?

                Who has the right to tell someone else what to do?

                How do you know what they say is “right” and not “wrong”?

                What happens if they are “wrong”?

                And lastly, how do you determine a ‘right’?

                What is your method to difference a want from a need from a right?

      • In other words, Matthius, the ends always justifies the means?

  13. Black Flag says:

    IN nature, every action has consequences, a phenomenon called the butterfly effect.

    Few things grate me as much as those that use analogies badly. Buffet qualifies.

    He does not understand the butterfly effect at all.

    Every action has a consequence is the theory of thermodynamics, not the butterfly theory. The butterfly theory is small disturbances in a dynamic system could cause a transitional effect within the system.

    These consequences, moreover, are not necessarily proportional. For example, doubling the carbon dioxide we belch into the atmosphere may far more than double the subsequent problems for society. Realizing this, the world properly worries about greenhouse emissions.

    He is an utter moron outside the business world.

    He, here, is a fine example of someone who has no concept or understanding of atmospheric dynamics making a bizarre claim that simply cannot be true – and then using this bizarre claim to justify even more bizarre actions.

    I should have known.

    As soon as someone misunderstands the “Butterfly effect” example, I’m almost always assured they will use it to demonstrate an even more bizarre theory.

    The butterfly effect reaches into the financial world as well. Here, the United States is spewing a potentially damaging substance into our economy — greenback emissions.
    To be sure, we’ve been doing this for a reason I resoundingly applaud. Last fall, our financial system stood on the brink of a collapse that threatened a depression.

    Buffet is a Keynesian, and it has made him a billionaire.

    Cheap credit is fundamental to Buffets success – the ability for him to borrow cheap, and purchase real assets of value (which he has, with his partner, a spectacular talent for picking under priced assets).

    Being a large debtor, the threat of depression would be his Freddie Kruger nightmare – he would have to pay off his debts with more valuable currency than when he borrowed.

    His scream “Anything BUT a depression please!”

    The crisis required our government to display wisdom, courage and decisiveness. Fortunately, the Federal Reserve and key economic officials in both the Bush and Obama administrations responded more than ably to the need.

    The elite saluting the elite on trying to save the elite.

    They made mistakes, of course.

    Of course! They’re Keynesian! They are a bunch of walking mistakes – if they make a correct economic decision, it is purely by accident.

    How could it have been otherwise when supposedly indestructible pillars of our economic structure were tumbling all around them? A meltdown, though, was avoided, with a gusher of federal money playing an essential role in the rescue.

    A gusher of money to solve the problem of gushing money.

    Keynesian through and through.

    The United States economy is now out of the emergency room and appears to be on a slow path to recovery. But enormous dosages of monetary medicine continue to be administered and, before long, we will need to deal with their side effects. For now, most of those effects are invisible and could indeed remain latent for a long time. Still, their threat may be as ominous as that posed by the financial crisis itself.

    Invisible? Only to those that put hands over their eyes.

    To understand this threat, we need to look at where we stand historically. If we leave aside the war-impacted years of 1942 to 1946, the largest annual deficit the United States has incurred since 1920 was 6 percent of gross domestic product. This fiscal year, though, the deficit will rise to about 13 percent of G.D.P., more than twice the non-wartime record. In dollars, that equates to a staggering $1.8 trillion. Fiscally, we are in uncharted territory.

    The US has been in “uncharted territory” since 1972.

    An increase in federal debt can be financed in three ways: borrowing from foreigners, borrowing from our own citizens or, through a roundabout process, printing money. Let’s look at the prospects for each individually — and in combination.

    He would fail first year economics.

    There is a 4th way – taxation. But note, increasing income tax on the low/middle class is impossible – so the only increase in taxation would be in his class – God forbid! So pretend it doesn’t exist as an option!

    The current account deficit — dollars that we force-feed to the rest of the world and that must then be invested — will be $400 billion or so this year. Assume, in a relatively benign scenario, that all of this is directed by the recipients — China leads the list — to purchases of United States debt. Never mind that this all-Treasuries allocation is no sure thing: some countries may decide that purchasing American stocks, real estate or entire companies makes more sense than soaking up dollar-denominated bonds. Rumblings to that effect have recently increased.
    Then take the second element of the scenario — borrowing from our own citizens. Assume that Americans save $500 billion, far above what they’ve saved recently but perhaps consistent with the changing national mood. Finally, assume that these citizens opt to put all their savings into United States Treasuries (partly through intermediaries like banks).

    Of course, he doesn’t explain that all this borrowing is from the same marketplace where business (especially small business) also borrows from.

    In essence, the government is sucking dry as a desert the credit markets – leaving a disastrous drought for the economy.

    Even with these heroic assumptions, the Treasury will be obliged to find another $900 billion to finance the remainder of the $1.8 trillion of debt it is issuing. Washington’s printing presses will need to work overtime.

    Slowing them down will require extraordinary political will. With government expenditures now running 185 percent of receipts, truly major changes in both taxes and outlays will be required. A revived economy can’t come close to bridging that sort of gap.
    Legislators will correctly perceive that either raising taxes or cutting expenditures will threaten their re-election. To avoid this fate, they can opt for high rates of inflation, which never require a recorded vote and cannot be attributed to a specific action that any elected official takes.

    Ah, he does see taxation – but, let’s threaten the “no re-election” clause – so that taxation is not an option.

    In fact, John Maynard Keynes long ago laid out a road map for political survival amid an economic disaster of just this sort: “By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens…. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose.”

    Yet, he applauded earlier exactly this strategy. Buffet wants cheap money, but doesn’t like the consequence of cheap money.

    I want to emphasize that there is nothing evil or destructive in an increase in debt that is proportional to an increase in income or assets.
    As the resources of individuals, corporations and countries grow, each can handle more debt. The United States remains by far the most prosperous country on earth, and its debt-carrying capacity will grow in the future just as it has in the past.

    Perpetual debt is a drain.

    One must be careful not to confuse a business case of debt with going into debt to pay for food on the table.

    But it was a wise man who said, “All I want to know is where I’m going to die so I’ll never go there.” We don’t want our country to evolve into the banana-republic economy described by Keynes.
    Our immediate problem is to get our country back on its feet and flourishing — “whatever it takes” still makes sense. Once recovery is gained, however, Congress must end the rise in the debt-to-G.D.P. ratio and keep our growth in obligations in line with our growth in resources.
    Unchecked carbon emissions will likely cause icebergs to melt.

    Can’t help throw in Socialist-science dogma.
    Believe me, he will not cut back his ‘carbon footprint’ at all.

    Unchecked greenback emissions will certainly cause the purchasing power of currency to melt. The dollar’s destiny lies with Congress

    The dollar’s destiny does not reside with Congress – it resides in the People.

    The People will determine the dollars fate – they will accept the perversions of government or they will not.

    The People have spoken. The perversions are unacceptable.

    The Elite are not in control – they will continue to try to wrestle the economy away from the people – and the Elite will lose.

    The government will default on its obligations – there is no other option.

    It may chose not to default on some obligations, while defaulting on others (asymmetrical default).

    The government is going broke. You have to ask yourself – How will this affect me?

    A default means a major broken promise. There may be several broken promises.

    The government will not go broke by ceasing to make all payments.

    It will cease to make payments to specific creditors.

    It will default the way that any debtor does. He keeps on spending. He ceases writing checks to certain creditors.

    The government default will not be an all-or-nothing default unless it is total currency destruction: hyperinflation which will produce total destruction of an advanced economy.

    It destroys the rich, too. The rich know this.

    They will see to it that the Federal Reserve tries to put on the monetary brakes before hyperinflation hits. The financial system is run for them, not for the rest of us.

    Default may be through mass inflation: a loss of sound money. That could send the dollar down by 50%. It could be more.

    Assume that the dollar will be much weaker in purchasing power. Also assume that middle-class America will not keep pace with price inflation. The middle-class will carry the majority of the load of refinancing America – it will take generations.

    There will be a default with respect to paying foreigners what the government owes them.

    They will stop buying our debt. That means high interest rates at home, especially mortgage rates. Housing will suffer. Rents will rise. Buy houses from distressed sellers at bargain fixed mortgage rates while you still can.

    Imports will rise in price when the dollar’s value falls internationally. This will let American manufacturers raise their prices. I think U.S. manufacturing will have a larger share of the economy in 2020 than it does today.

    There will be major shortages of many goods at the same time prices for the goods climb to new highs.

    Assume that Social Security and Medicare will not be there.

    There will be a default on Medicare/Obamacare.

    This might take the form of special taxes on the upper middle class, or means-testing, or rationing. Call it what you will: it’s a default.

    The rich have their own physicians. They are not dependent on Medicare. They will not intervene politically to save Medicare/Obamacare the way they will intervene through the FED to save the dollar.

    The default will not be announced as a default.

    It will be announced as an efficiency measure, or a measure to “save” the system. It may be announced as a temporary emergency measure. But the emergency will not go away.

    This probably will not happen tomorrow. Many pundits think it will happen after this presidential term – 2013-2017. Pass the buck to the next fool.

    The winners will be people who own income-producing real estate that they can pay off before the post-inflation depression. But most people pyramid their debt and get caught when the economy moves from inflation to stability, which produces recession or depression. You must get out of debt while the getting is good.

    • Alert in Michigan says:

      This sounds kind of like a Harry Dent book I’m reading. “The Great Depression Ahead: How to Prosper in the Crash Following the Greatest Boom in History.”

  14. Black Flag says:

    Mathius

    Black and white is no way to view the world.

    There is moral and immoral action. As I noted, there are varying consequences.

    Do not confuse the gray shades of consequences with your apparent inability to know right from wrong.

    I am not judging – I am refraining from judging. I cannot claim the thief is evil, perhaps he is just desperate.

    Evil is a definition – “a contradiction”.

    Destroying another man’s rights is a contradiction to human rights – hence, evil.

    Whether you steal a penny or a million bucks – it is evil.

    It says “Thou shall not steal”

    It does not say “Thou shall not steal, except if you’re hungry, or its really small, or its only a penny”

    You say his actions are what speak, but say the intent behind the actions.

    Again, invoking the God’s Knowledge?

    For a thought experiment, consider that you fail to notice someone in your bind spot and run them off the road. Your argument would say that because you injured them (destroyed their right to not be driven off the road), your action was evil.

    No, that was an accident. I did not act in contradiction to my belief – I was not willfully attempting to destroy his rights.

    Your thief did not steal “by accident” – he willfully did so.

    I’ll revise my future comments to make that more clear.

    Further, because it was my FAULT, I am obligated to repair the damage I inflicted on the other person (“attempt to make whole”) – but accidents are not evil.

    I would argue that at worst it was negligent. You had other choices, you could have double-checked, you could have hired some one to sit in your passenger seat to check for you, you could have installed a camera to watch your blind spot etc. You didn’t, so are you evil?

    Negligent is not the same as willful.

    Lastly, how do you do those block quotes

    A secert of wizards 🙂

    • v. Holland says:

      I am assuming BF, that you do feel that “intent” comes into play when one is assessing punishment for the crime.

      • Black Flag says:

        Intent is very important – however

        No man has the right to punish another man no matter the crime.

        A man has a right of redress to consequences caused by another man.

        • v. Holland says:

          I will give an example please tell me what you think the proper redress would be-A man rapes my daughter-right now a court decides the punishment-How would this work in a world without government?

          • Black Flag says:

            V. Holland,

            Most certainly – however, you are not prepared.

            Before you jump into the complexity of calculus, you need to understand polynomials. Before you can understand that, you need to understand multiplication. Before you can understand that, you need to understand adding.

            I purposely and continually work from first principles, and refuse to advance further with anyone until they fully understand the basics. If I don’t, all that happens is the person simply ‘blinks out’ and falls back to the old paradigm.

            Once you fully grasp the basics, we’ll move up to the next complexity – but no faster.

            • v. Holland says:

              You are certainly free to follow whatever steps you want -but unless you can show me how the world can work without government-even if I agree that government is bad-I still see a world without government as bad too.( and I still doubt that we will ever be without government at least for any extended amount of time, either way)

              • Black Flag says:

                Alright – Step One:

                Do you accept the reason should be our choice vs. irrational?

              • v. Holland says:

                I’m not quite sure how you telling me how you see this world working without a government turned into me answering questions. 🙂

                Please explain that to me but none the less I will answer the question but in all truth I am just to tired tonight to get into a long dialogue-so I probably won’t do much more tonight except answer that question(because it seems relatively easy) and think about the next one, we can pick this up again later.

                Reason

              • Black Flag says:

                See below

            • GreaterGoodscs says:

              BF wrote; “and refuse to advance further with anyone until they fully understand the basics.”

              Translation: He doesn’t have an answer and so long as he plays this game he never need provide one. He can call Warren Buffet an idiot and insinuate the same of anyone taking an opposing view to his … he refuses to advance further because his starting point is so absurd there is nowhere to go.

              Thus he is a voice from heaven (for too many here, you ask me) … and should run on the Democratic ticket because his solutions are as useless as theirs.

              • v. Holland says:

                I have found that my interactions with BF-have helped me to clarify to myself what (I) actually believe and why I believe them-I have had to look at my beliefs and actually defend them not just except them because they seem right to me-he doesn’t demand that you agree .

                Quote: Face what you believe and you may be surprised.

    • Do you not willfully choose to refrain from installing a camera in your car to ensure that you do not cause damage? If you willfully do not prevent yourself from doing damage, how is your deliberate negligence not the same as willfully causing the damage?

      And.. attempting…

      BWAHA HA HA (if it worked.. otherwise, nevermind)

      • PeterB in Indianapolis says:

        I like your attempt to come up with hypotheticals.

        You are so good at it, I nominate you to design a completely accident-proof car so that no matter what happens, it REALLY IS always the driver’s fault by his own direct action and there are never any actual accidents, only “on-purposes” which can clearly be blaimed on the intent of the driver.

        • You wouldn’t like my solution.

          I suggest putting all cars on a network and driving them by remote control. You tell it where you want to go, and it takes you there. There are already cars which have logged thousands of miles this way. The difference would be that they would be aware of each other via the network and could coordinate for the best result for everyone (notice a trend in my thinking?) This, of course, would require massive infrastructure upgrades and changes to the existing auto fleet as well as regulations to enforce installation of the system in new cars and a program to get it into old one.

          This, however, is irrelevant, since my argument is that if willful actions are what deems something as evil, willfully failing to do everything in ones power to avoid causing harm is evil. It works like this:

          Premise:
          1. If an willful action causes harm it is evil.
          2. An accident causes harm.
          3. A willful choice not to take all possible precautions is an action.
          4. Driving your car with a co-pilot to check your blind spots is a possible precaution.
          5. You have willfully chosen not to hire a co-pilot.

          Therefore:
          An accident is a result of a willful action and causes harm.

          Therefore:
          If you have an “accident” it is evil.

          QED.

          • Black Flag says:

            First, your case requires a contradiction of language.

            A willful act is not an accident – your argument depends on this contradiction of language.

            Next –
            A willful choice not to take all possible precautions is an action

            Fallacy.

            Taking all possible precautions will not prevent all accidents.

            Not taking some precautions will not guarantee an accident.

            Precautions and accidents are not guarantees of causation.

            Sorry, no QED

            • Black Flag says:

              Oh, and PS:

              The auto-pilot car has been feasible with current infrastructure for decades.

              The problem is not capability – it is responsibility.

              If there is an accident, who is at fault? The human non-driver? The computer? The manufacturer?

              Manufacturers will not agree to infinite responsibility to develop failure-less systems.

              Computer companies will not agree to infinite responsibility to devolp flawless code.

              A human not driving the car will not agree to being responsible for a car crash he was not driving.

              Solve this, Matt – and you may be come rich.

        • PeterB in Indianapolis says:

          Mathius,

          There is only ONE way to ensure that no man will ever again accidentally harm another man. However, the solution would render these discussions irrelevant, because none of us would be around anymore to have the discussions.

  15. Black Flag says:

    Mathius

    I would not argue that the Fed has the power. But I deny that they could do it without getting caught at it.

    Get caught…by who?

    And I challenge your assertion that the fractional reserve system is the root cause of our problems. Likewise, artificially low interest rates are necessary to ensure the flow of credit to increase spending which increases jobs which increases spending etc.

    Artificially low credit makes unprofitable economic enterprises suddenly profitable – without the sustainability required.

    Low interest rates fool entrepreneurs in believing that the economy has a shorter time preference for goods than actually exists. The entrepreneur invests into expansion where expansion is not required or needed.

    Capacity is extended where there is already overcapacity.

    Without the economic calculation mechanism of interest rates – balancing savings (long time preference) vs. capital consumption, the entrepreneur makes a critical (and importantly, systemic) mistakes.

    An economy grown on artificial interest rates (and hence an unsustainable increase in the money supply) requires even more injection of currency and even lower interest rates.

    The problem is there is a limit to how low interest rates can go – 0%.

    Once that is reached, the ability to continue the injection game ends – and the economy powerfully corrects itself – massive deflation (elimination of inventory that was built on easy credit) and depression (retraction of currency) and massive unemployment (closing of unprofitable business built on easy credit).

    Note: the US is essentially at 0% interest, in a deflationary spike, with high unemployment….hmmm…

    The fractional reserve system is a contradiction.

    It claims there is more capital in the system then actually exists.

    Thus, during minor corrections of the economy, the leverage created by the fractional system multiplies the corrections by magnitudes. Thus, minor corrections become major economic events – the sea-saw of boom/bust is a direct cause of the fractional system.

    The root cause is a failure to regulate powerful forces.

    Socialists complain about monopolies as being a bad thing, yet believe a monopoly on money is a good thing.

    Regulation creates a monopoly on money – and hence, money suffers all the defects of a monopoly.

    This enabled sketchy business practices. Banks took on billions of dollars of off-budget risks. When the defaults started (as they inevitably did), the house of cards started to fall. Were there other factors? Of course. But this is a major one, if not the main one

    This is a consequence not a cause.

    Easy credit makes marginally profitable and unprofitable business more profitable.

    It makes risky business (a measure between profit and loss) less risky. By lowering the cost of credit, the margin of profit increases. The margin of profit offsets the potential losses. Those businesses, under free market system, would not get a loan – but under manipulated market of easy credit – would get a loan.

    However, the underlying business has not improved its risk – it is still as likely to go bankrupt but the measure of risk evaluation has been distorted. The ability to economically calculate has been distorted.

    It is like trying to measure the length for a bridge over a cliff – while the yardstick is being manipulated in its length – the calculation that it may take 100 yds. of bridge – but the yard stick is has been ‘shortened’. The physical bridge will not make it and falls into the cliff.

  16. Black Flag says:

    Mathius

    Do you not willfully choose to refrain from installing a camera in your car to ensure that you do not cause damage?

    The “willfully” applies to the action, not an investment.

    If I willfully (meaning purposely – that is, I knew he was there and drove into him) then I would do an act of evil.

    If you willfully do not prevent yourself from doing damage,

    Installing or not installing does not necessarily change an event. I could not install and not hit the other guy.

    However, willfully hitting the guy is a direct event of action and purpose.

    If I do not willfully hit the guy, the only way I could cause harm is by accident.

    how is your deliberate negligence not the same as willfully causing the damage?

    Because it is not negligence to provide a mirror or not.

  17. I am not saying that ALL Government spending will have to stop. Considering that we HAVE a Government, a certain amount of spending is not only inevitable, but necessary to keep said Government running.

    But to sit and say: “we have to spend money anyway! We might as well spend ourselves into bankruptcy.” or “there is no bottom in this money bucket because we have a printing press to make more if we get low.” is pure insanity.

    We have been deeper in debt with every President. The breaks need to be set and set quick. All these pie in the sky, all things to all people programs need to AT LEAST be put on hold until better days. Waste needs to be stopped. Programs need to be cut back. Pork needs to be stopped.

    Don’t think from this that I believe any of this will happen. This is just what I think needs to be done. Of course our Government will continue to do what it does best; malfunction along and waste money by the ton. Eventually the whole house of cards IS going to collapse.

    • The lesson I took from the 90’s is that restraining government spending, even modestly, benefits the economy. I think the reason is that government spending so seldom adds any real wealth to the economy and so often is totally wasteful.

      When people and businesses spend money, they have a real interest in getting their money’s worth. Although they sometimes fail in this endeavor, they are successful much more than the government.

      We also know that high tax rates impede economic growth and that tax increases seldom yield the increased revenue that was expected. This is because people change their behavior when taxes rise and have less taxable income.

      So, I think we need to restrain government spending and keep taxes relatively low, especially top marginal rates where there is lots of room for income growth and accompanying tax revenue growth. The booming economy will provide so much tax revenue, deficits will disappear over time, maybe very little time as happened in the 90’s.

      Will this happen? No way. Politicians (both parties) can’t resist spending all that money.

  18. PeterB in Indianapolis says:

    The choice to live in freedom is incredibly limiting 🙂

    A whole bunch of you just went, “Say WHAT???”

    Those of you that did that are scratching your heads and saying, “how does freedom imply limits? Isn’t that contradictory?”

    Au contraire my dear Watson.

    Freedom has limits (“liberals”, you can applaud now :))

    However, they are not the limits that liberals think. (“liberals” frown now :()

    So… what the hell am I talking about?

    (Oh, and by the way, let’s not bring up the tired “but what about children?” argument. Children require guidance, the best source of that guidance is their parents… sometimes kids are not free to do as they would like. If you think that kids have brains that are well developped enough to make all of their own decisions, then we probably have no common basis for a conversation on this subject.)

    In order for me to be free, you must not impose upon me in any way.

    In order for you to be free, I must not impose upon you in any way.

    This limits my actions. Before I act, I must evaluate whether my action will be an imposition upon the freedom of another. If I determine that my action would indeed oppose upon another, then I need to find a better course of action.

    If someone does something which is an imposition on my freedom, I must also have the necessary ability to be able to respond appropriately. If someone comes into my yard at night and steals a garden-gnome, killing the perpetrator would be an asymmetrical response. If someone breaks into my home, is armed, and is a direct threat to me and my family, killing him would be justified.

    If several free people wish to accomplish a certain goal, we are free to associate with each other and cooperate to obtain the goal which we are mutually interested in. However, our cooperation on one particular goal does not necessarily mean that we share other specific goals. It would be an imposition to use our association to attempt to force certain members to adopt other goals which they did not agree with.

    Some of you here are now saying, “Gee that sounds great in theory, but not everyone is going to agree, and not everyone has the capability to make these sorts of decisions on their own.

    I will respond to these thoughts individually.

    1) It is not a requirement that everyone agree.

    2) People can be taught to be self-reliant and taught to be able to think for themselves and make good decisions. People can also be taught to be reliant on others to think and make decisions for them. It is all up to you what you want your kids to be taught. If you want your kids to be taught that they should let the government think for them and make decisions for them, then yes, they will most likely be incapable of thinking for themselves and making good decisions on their own. GIGO principle – garbage in –> garbage out. Good stuff in –> good stuff out. You CAN teach people to have respect for themselves and respect for others, or you can teach them that there are no right answers and no wrong answers, just a whole lot of “grey area”… it is up to you!

    A lot of you are still saying, “Doesn’t matter, that would still never work.”

    That MAY be true, but I submit that we have no evidence one way or the other whether it would work or not, so any claim that it definitely would not work is mere speculation.

    Right now, the vast majority are taught that government = God.

    Government must be feared

    Government must be praised

    Government will provide

    Government has the knowledge of good and evil, common man must not eat from this tree

    Government will judge whether thou hast sinned against it

    Government knows best

    If you enjoy government playing God, I guess that is cool… the problem is government IS NOT GOD, and therefore government has no idea what is best for any particular individual, much less EVERY individual. Pretending that government has the actual ability to determine this is mere fantasy.

    This ends your massive thread interruption on freedom for today 🙂

    • Black Flag says:

      Nice flag you have their – seems to share the same color as mine 🙂

    • Greatergoodcs says:

      I’m in parens, brother:

      Right now, the vast majority are taught that government = God (most of us don’t believe in God).

      Government must be feared (that is your shtick, not mine/ours)

      Government must be praised (where did you come up with this?)

      Government will provide (only if prompted to do so)

      Government has the knowledge of good and evil, common man must not eat from this tree (now you’re sounding paranoid)

      Government will judge whether thou hast sinned against it (There you go again … that God speak I just don’t buy)

      Government knows best (you mean like father over his children?)

      If you enjoy government playing God, I guess that is cool… the problem is government IS NOT GOD, and therefore government has no idea what is best for any particular individual, much less EVERY individual. Pretending that government has the actual ability to determine this is mere fantasy. (Fantasy is you believing for a second that 304,000,000 without government wouldn’t result in absolute chaos).

      • PeterB in Indianapolis says:

        GG,

        Fantasy is persisting in believing that government has god-like abilities and powers while denying that you believe it.

        • Greatergoodcs says:

          oy-vey …

        • PeterB in Indianapolis says:

          Apparently you fail to understand what I am saying.

          You claim that the more powerful the government is, the better it would be for the people.

          If this is true, then the government (which is made up of people) must possess some power superior to the power of people, hence a god-like power.

          So, what I am saying, as basically as possible, is that if you truly believe that the more powerful the government is, the better decisions it will make, and the better it will be for the people, then you must believe that government has super-human powers.

          Substitute Superman or Wonderwoman if you don’t like the term “God” I suppose…

          • Greatergoodcs says:

            You claim that the more powerful the government is, the better it would be for the people.

            Where did I state that? Or are you assuming that because I propose socialism, it means “more powerful”? The more people have a say in their government (the more voices), the greater than chance to serve the greater good. The less voices, the less represented they are. Fascism was huge in scope and non-existent regarding representation of the people (masses).

            So long as private property rules the day, the greater good suffers.

            • PeterB in Indianapolis says:

              Oy-vey.

            • PeterB in Indianapolis says:

              Without private property, you have no rights whatsoever. If you enjoy having no rights whatsoever and think that that helps the mythical “greater good” in some way, go for it.

              • Greatergoodcs says:

                Why “no rights whatsoever”? Who says this (besides BF)?

                What gives you the right to own a parcel of land and the guy next door a collection of rocks? Why not share both?

              • Black Flag says:

                Because at some point in time one or the other has the final say on what to do with that piece of land.

                It cannot be both a plot for a house and a plot for a garden.

                Who gets to chose? How is this determined?

              • Greatergoodcs says:

                You, my man, tell me!

                That is my point … you can’t!

              • Black Flag says:

                So, in a Socialist system, no house is built and no garden is planted.

                Hmm…

              • Black Flag says:

                In a capitalist system – it is commonly referred to as “right of first use”.

                That which uses property gets to determine what that property is used for…

              • Black Flag says:

                That which uses THE property FIRST gets to determine what that property is used for…

            • PeterB in Indianapolis says:

              One other question:

              Do you believe that the “masses” are capable of determining what is best for them, or do you agree with Mathius that the masses are basically ignorant and don’t have any idea what is best for them?

              • Greatergoodcs says:

                I wasn’t aware of Mathius’ statement. I believe because of the greater good (the goal), people will have to reason with each other (form a social contract/gov’t) and try as best they can to work together (rather than individually).

            • Black Flag says:

              But you have not defined the “greater good”.

              What is your measure?

              How do you know one action promotes this undefined concept and another action does not?

      • PeterB in Indianapolis says:

        GG,

        I believe that YOU believe that the government knows best, like the father over his children.

        I, however, realize that once a person has achieved what we term “adulthood” we may still look to our father for advice and guidance, but we tend to rebel if he tries to shove it down our throats past a certain age.

        Are you arguing that we require government because we are all children? If so, who runs this government (hint: people do… if the people are children that require the guidance of a father, why are they looking to an organization made up of more children for guidance?)

        • Greatergoodcs says:

          We require gov’t because left alone, 304 million people would wind up killing one another. Why is that so hard to imagine?

          • Black Flag says:

            How does the government become… a government?

            Why would 304 million people kill themselves?

            Why hasn’t that occurred? There are not that many policemen in the world to stop it, if the people wanted it?

            So why don’t the people want it?

            • Greatergoodcs says:

              Because people formed gov’ts to preclude might makes right.

              which you still haven’t addressed; why 304 million left on their own would manage to avoid chaos.

              • Black Flag says:

                But how do these people – you claim are in chaos – organize themselves to make a government?

              • GreaterGoodscs says:

                I guess you’ll be forced to read history books to learn that one, BF. But I suspect you’ll refuse to accept history as precedent.

                How did this gov’t form? It did, didn’t it?

                Right or wrong, it formed.

                Why did it form? I ask you.

              • Black Flag says:

                Below reply exists as if by magic.

              • Black Flag says:

                How do people walking down the sidewalk avoid running into each other?

              • GreaterGoodscs says:

                That is almost funny. Your analogy; people walking on a sidewalk vs. people with common needs and finite resources. I don’t think it’s the same thing. Or, did you ever trying avoiding someone on 6th Avenue at noon? Impossible, my brother.

              • Black Flag says:

                BeBelow, the answers you seek are under your feet

  19. Is France Doing Better Than The U.S.?
    From the desk of Richard Rahn on Wed, 2009-08-26 19:57

    Marseille, France. Why does it appear France is bouncing back more quickly from the recession than the United States?

    France has long been known for having an economy that suffered from too much government interference, too-high taxes and destructive union activity. Yet it grew 1.4 percent in the second quarter of 2009, while the U.S. economy continued to decline.

    http://www.brusselsjournal.com/node/4064

    If the tax-rate increases proposed by the Obama administration and the Democrat Congress are passed into law, all upper-income Americans will be paying higher personal tax rates than the wealthy in France.

    • Greatergoodcs says:

      I’m not sure, but Holland sure is.

      • Black Flag says:

        I am never clear why you use the Netherlands to support your arguments.

        The Netherlands has one of the most free market capitalist economies in the world, ranking 12th of 157 countries according to the Index of Economic Freedom.</I.

        • Greatergoodcs says:

          Here’s why:

          Today, the Netherlands is regarded as a liberal country, considering its drugs policy and its legalisation of euthanasia. Same-sex marriage has been permitted since 1 April 2001.[

          • Black Flag says:

            Laws regarding drugs has nothing to do with economics in the sense you are describing.

        • Greatergoodcs says:

          Also, they sport national health insurance for about 30 years and treat their elderly the way we should; top priority for having given so much of their lives (whether in taxes, civil service, military service, etc.).

          It is the kind of socialism we could use here.

          • Black Flag says:

            The Netherlands has a prosperous and open economy in which the government has reduced its role since the 1980s

            I agree – Socialism in reverse….

            • Greatergoodcs says:

              And it still PROVIDES national health care, education, enforced vacations (6 weeks and as much as 12) by law.

              My ALL CAPS trumps your bold.

              • PeterB in Indianapolis says:

                By the way, I believe that you will find that BF probably supports the right of any person to marry any other person, the right of a person to use “illegal” drugs in their own home, and probably even the right of someone to die in the manner of their own choosing if they are terminal and do not wish to suffer.

                These ideas are actually “liberal” in the true sense of the word liberal, but they have nothing whatsoever to do with government, socialism, or communism or whatever.

                Didn’t want to put words in your mouth there BF, but it seems clear that GG is confusing the governmental recognition of freedom with government control in the cases which he is citing here.

                If I mis-spoke in any way, please correct me.

              • Black Flag says:

                Correct, Peter – err, Dread Pirate Robert!

              • Black Flag says:

                The case in point is, it is reducing government and gaining prosperity.

                The government STILL is in the economy, and every step it takes OUT of the economy improves the economy. That is its fact.

  20. Black Flag says:

    Greatergoodcs

    You guys like the word fallacy.

    It happens a lot with people who have a hard time understanding logic and reasoning.

    Have you gotten around to answering my questions, GG?

    There’s no doubt Deregulation was the genesis of the financial crisis. It is the nature of the beast (greed). Just enough “oversight” was removed to permit greedy capitalists to rape the global market … then they got to walk away with golden parachutes (some paid for with bailout bucks).

    One cannot expect economic reasoning from a man whose underlying economic understanding is incalculable.

    You can’t just call something a fallacy and expect us on the left to swallow it. BF likes to use ALL CAPS sometimes. That doesn’t change the gibberish factor in some of what he states (rather than answer a question without six pounds of philosophy stuffed into a 1 pound bag).

    I have await your reasoned repose – futile though it seems.

    Bush removed a ton of oversight when he took office and the Dems were happy to let him do it.

    Only a democratically elected socialist gov’t would have the potential to protect its citizens (not a gov’t by the money for the money

    Socialism destroys economic calculation, hence they are the cause of economic disaster.

    • Greatergoodcs says:

      As I an answer from you … which actually proves my 304,000,000 left in chaos theory.

      Thanks.

      • Black Flag says:

        You are not an example of 304 million.

        I’ve asked specific questions – why are you not able to answer them?

        • PeterB in Indianapolis says:

          BF,

          Perhaps you should reformulate the questions more clearly if at all possible. I would like to see his answers as well instead of evasion, but perhaps the questions were simply not clear enough?

          • Black Flag says:

            They are very clear – he simply cannot answer them rationally.

            A position of savagery and coercion cannot be reasoned – which is why they are savages – “Might is Right” is all they know – with the belief that they, somehow, will prevail as the most violent.

        • Greatergoodcs says:

          Your specific questions are theoretical only. You are the one avoiding a direct answer, pal. The 10-20 other conservatives in here may buy into your gibberish, but I don’t come close to buying into it.

          Then again, I’m a savage, aren’t I?

          • Black Flag says:

            My questions are specific. They have to do with your understanding and ability to reason. And, yes, at this time your ability it wholly theoretical – it has yet to be demonstrated.

          • PeterB in Indianapolis says:

            If one is incapable of answering a theoretical question, then one claims that change can never occur and that all theory is meaningless.

            If scientists never came up with new theories on how the universe worked, we would still be convinced that the earth was the center of the universe, or perhaps that the earth was flat, or any other number of things which have since been disproven.

            You cannot dismiss a theoretical question by claiming theory is irrelevant. It is not.

            • Greatergoodcs says:

              You’ve convinced yourself of this stuff and I guess it works in here, but out in the real world, application is what counts (not theory). And there are still 304 million waiting to learn how they are to survive without gov’t and/or chaos.

              • PeterB in Indianapolis says:

                Yes, 304,000,000 (or 6 Billion) people are indeed waiting to learn this.

                In order to learn this, they must first be taught that it is ok to think for themselves and learn to make good decisions on their own. That will be the beginning of their education.

              • Greatergoodcs says:

                “they must first be taught that”

                Sounds like something out of Mein Mein Kampf. What happened to all that freedom?

              • PeterB in Indianapolis says:

                Are you saying that any education is contrary to freedom?

              • Greatergoodcs says:

                Peter: Who is doing the teaching?

              • PeterB in Indianapolis says:

                GGcs,

                Why does that matter?

                You do realize that saying that equating teaching children about freedom with Hitler simply because I used the term “must” is ridiculous, right?

                I plan to teach my children to be free. If you have children and want to teach them that it is ok to not be free, that is your choice. I cannot force you to teach them to be free.

              • PeterB in Indianapolis says:

                Once again, you say “you have convinced yourself of this stuff” without providing any answers to perfectly legitimate questions.

      • PeterB in Indianapolis says:

        I have seen absolutely nothing yet which “proves” your 304,000,000 left in chaos theory, other than your assertion that it has been proven.

        Do you believe that repeating the same thing again and again will convince you (or others) that it is true?

        • Greatergoodcs says:

          You’d have to ask BF that question about repeating oneself. I’m asking a legitimate question.

          • PeterB in Indianapolis says:

            You have not provided answers to BF’s legitimate questions. I could attempt to answer your question, but I have no frame of reference for providing the answers because I have not seen how you would answer his, and my answer to you is dependent on how you answer the questions he posed to you.

  21. Black Flag says:

    Mathius

    There was also a very misused mathematical formula. This formula, which is far more complicated than I can hope to pretend to understand, allows you to control risk.

    There is an underlying paradox in risk-mitigation market place; the one least able to absorb the risk tends to absorb most of the risk

    Each trade of risk increases the required ROI to absorb the risk – yet, each trade reduces the ROI. Those that require cash flow are willing to take an increase in risk vs. ROI simply for the cash flow.

    If a policy for insurance is written, and the expected profit is $100/yr. If Player #1 turns around and sells it, it will sell a portion of its profit and its full risk to another entity, say for $90. It keeps $10/yr and with that transfer, expects to have mitigated all of the risk – it has been transferred to Player #2, who then sells it to Player #3, keeping $10, but transferring the risk.

    The end is where an entity that is the most desperate for cash flow – will buy the risk, but only earn $10/yr.

    This entity cannot earn enough profit to absorb the potential loss; it is gambling that the loss will not occur at all – and should a loss occur, he defaults.

    However, since none of the participants earned enough profit, none can absorb the loss either, and such a cascade of defaults – because all but the last player believed they had transferred the risk when in fact they merely were sharing ALL the risk – but transferring the potential of default to the weakest member of the group.

    This example is a simplification of the housing crisis – where mortgages were sold and resold – each sale subtracting a bit of profit for every flip – and ended up in the hands of holders that were earning less income then the risk of the property provided.

    This is done, in a broad sense by reallocation of risk/reward. That is, you cannot change your expected payout of a bet. If you’re betting on coin flips and you’re betting a dollar, no matter how you bet, your payout is 50 cents.

    Uh, no. Your expectation return of value is zero.

    Heads you win $1 – Tails you lose $1. Odds are 1/1 for either heads or tails. Over a number of trials your “expected value” or EV, is zero: EV=0

    Or are you trying to create an example of “Head I win, Tails – we merely flip again”. If so, I know of no such thing as a sure thing. Can you explain?

    • Yes, apologies. Again, you catch me typing faster than I think. Yes, I win I get a dollar, you win, you get a dollar = average flat.

      But the premise holds. I can squeeze my risk into an unlikely outcome of catastrophic loses or probable small wins. If you make the likelihood of loss small enough (though the loss would be huge), you can easily fool yourself into thinking you’ve erased the risk.

      However, your claim that they were all sharing the risk, while true to some degree misses the point due to the fact that they didn’t need to put it on their books. You would never be allowed to borrow $100million, but if you turned around and loaned it back out and said “I’m only borrowing $1,000,” you would fundamentally dishonest. In the even of risk of default you would still owe that money since these (short term) borrows wouldn’t be re-upped. If the banks had to acknowledge holding 10’s or 100’s of billions of dollars in debt, someone would have made sure they were adequately prepared in the event of losses. Since they only “held a small portion,” this was was what was protected. Not nearly enough.

      • PeterB in Indianapolis says:

        Mathius,

        I appreciate the explanation. Makes it a lot more clear how the banks accomplished what they did.

        However, it must be remembered that it was the government which was in favor of forcing the banks to make loans to people that in all likelyhood would be unable to repay the loans, so it is highly unlikely that the government would have passed any meaningful regulation against the banks which were trying to mitigate the risk of making loans which no sane bank would make.

        That doesn’t make ANY of the situation “right”… it just means that it is highly unlikely that the government would have made regulations AGAINST a plan that the government was FOR.

      • Black Flag says:

        But the premise holds. I can squeeze my risk into an unlikely outcome of catastrophic loses or probable small wins. If you make the likelihood of loss small enough (though the loss would be huge), you can easily fool yourself into thinking you’ve erased the risk.

        I agree.

        Just trying explaining that to someone who believes that if they ‘doubled up’ their bet on Red/Black on a Roulette wheel, eventually they’ll win a fortune!

        However, your claim that they were all sharing the risk, while true to some degree misses the point due to the fact that they didn’t need to put it on their books.

        IMO, whether they accounted for it or not doesn’t change the situation.

        The reason they were able to rebuy and resell the instruments over and over again was due to the easy access to cheap money.

        If at 1% or 2% interest rates, the risk/profit ratio changes so that more risk is entertained.

        If interest rates were free market, every extraction of capital out of the system to fund these instruments would cause the rate to increase – reducing the profit and changing the risk/profit ratio – causing a reduction is such trade.

        Without the free market mechanism, there is no feedback, and there is no brake – except systemic default.

        If the banks had to acknowledge holding 10’s or 100’s of billions of dollars in debt, someone would have made sure they were adequately prepared in the event of losses. Since they only “held a small portion,” this was was what was protected. Not nearly enough

        Who is this “someone”?

        The brake factor is the market – when it becomes to expensive for the risk – without that mechanism, no economic calculation can be made and everyone is a drift in the ocean without a compass.

  22. Ray, I can only give my personnal view of “no man left behind”. Other than actual training, there’s was something I came to learn about why vets feel so strongly as they do. Yesterday I wrote a post to GG and said this:

    There are five circles in my life, the first circle is the smallest, it represents me. The next circle is my inner family circle (within my household). The next is bigger, that’s my outer family circle (all my relatives). Then the next circle is my social circle. These are my friends, coworkers, and anyone that I chose to be in that circle. I have control of who is in this circle. The biggest circle is everyone else on the planet. The folks in this circle should not interfere with my other circles, it’s not their business, and I don’t want in their business. My other circles keep me plenty busy and I do not have time for all the rest.

    This was my counter to one of GG’s posts about 304 million needing direction (which I still think is absurd, no offense GG). But it can aplly to the military mindset as well. When I went in at age 18, I left all my circles behind, especially the inner family circle, which was my protection from the world for 18 years. This change is not easy. Over a short period of time, those circles get replaced temporarily with a group of like minded paople, all experiencing the same thing, hence a temporary inner family circle, with the other members out side your unit, picking up the outer family circle.

    As time went on, I got married and had children, hence a new inner family circle. Then came the call to go far away and engage in war. Once in place, the men and women with me became my new temporary inner family circle (we provided protection for one another). We acted as a family, just more organized, for a single goal, survive and win. That’s were that strong feeling of noone left behind comes from. It’s just human nature to protect those closest to you.

    You can look at most natural disasters and see the volunteerism, and generousity that follows. I think of Greensburg Kansas, and everything that the neighbors from other towns did afterwards to help them people out. I guess you can ask yourself a question, if the neighborhood two blocks away was leveled by a tornado, once youo knew your family was safe, would you go help to rescue people buried in the rubble? I would!!

    Hope that explains my thoughts on the subject.

    Hope your day finds you in good health!

    G!

  23. Black Flag says:

    v. Holland

    I’m not quite sure how you telling me how you see this world working without a government turned into me answering questions. 🙂

    Ah, good friend – I shall explain.

    If I merely stood up on a chair and proclaimed “..it is so!” – you’d think me bizarre and weird (like GG).

    You will never accept my claims, nor pontifications nor rhetoric.

    So I am thrust into the only weapon left that I have – reason and logic.

    I am forced to prove my position because you will accept nothing less.

    But, you will not even accept that, will you? You may think I am tricking you because you may believe I am a skillful master of counter-illusion, capable of mind tricks and handwaving..!

    So, the only proof you will accept is your own – because you will, eventually, only trust your own self.

    So, all I can do is this very simple thing – let you lead the journey and when we reach a fork, only ask a question to determine whether we follow “that one” or “this one”. If you wish to dialogue (very particular use of wording here – not debate -I’m right and your wrong- nor discussion -figuring out an ‘answer’ FOR you) we will dialogue; because you will always find the right answer…that I promise.

    And it is a gentle walk – no rush, and we can rest anytime you want to…. and don’t forget to smell the flowers and feel the sun on your face as we meander away…

    You’ll meet all sorts of different characters you thought you knew – who go by their current names, like JAC, USWep, Peter, G-Man, LOI, etc…. they’ll all chip in…

    So, no rush, no pressure – you’ve got the rest of your life left to take the walk…

    Cheers!

  24. Black Flag says:

    GreaterGoodscs

    I guess you’ll be forced to read history books to learn that one, BF. But I suspect you’ll refuse to accept history as precedent.

    As many here will agree – history is one of my polymath talents.

    But that doesn’t answer my question – you often ask how ‘X million’ can organize; yet you refuse to recognize that they did.

    …and they you say “See! They did!”….without really understanding ‘why’ or ‘what basis’?

    I will help, but only a little – you need to pony up some effort least you fall into a pit of irrationality from which you will not be able to leave.

    How did this gov’t form? It did, didn’t it?

    Exactly. So why do you question such a thing in the first place?

    A society forms upon a paradigm – successful paradigms are based on reason; the closer they are aligned to the ways of the Universe, the more successful the paradigm is…

    Reason and logic are the tools we use to move closer to alignment with the Universe. If we discard these tools, we will be lost and eventually destroyed.

    If the paradigm we hold is not aligned well with the Universe, the system will -eventually- collapse, and probably, badly.

    If we cannot measure right or wrong, we are in trouble.

    If we cannot reason, we are in trouble.

    If you cannot understand this, you are in trouble.

    • GreaterGoodscs says:

      Maybe it’s just you’re reason comes from another universe but brother, you’re selling a cart full of baloney.

      aligned with the universe?

      Earth to BF … me and most of the world don’t have the time or desire to understand your logic. What we want are answers, not gibberish. You’re a pro at ducking questions (why I said you should run for Democratic office).

      • Black Flag says:

        As you still have refused to offer reason, only the irrational world is your friend.

        The cave has consumed you.

      • PeterB in Indianapolis says:

        BF answers questions just fine. If you do not like or do not understand the answer, perhaps you should strive to understand it rather than reject it as a non-answer.

  25. Black Flag says:

    GreaterGoodscs

    That is almost funny. Your analogy; people walking on a sidewalk vs. people with common needs and finite resources. I don’t think it’s the same thing. Or, did you ever trying avoiding someone on 6th Avenue at noon? Impossible, my brother.

    But, yet, you survive, do you not, lil’ bro!

    Humans are self-organizing based on their mutual self-interest.

    Crashing down the sidewalk will get you bruised, and unsuccessful in your journey.

    Carefully respecting others, and working – instinctively, in avoiding crashing gets you to your destination with no bruises.

    You wish to bring force, coercion and violence into society – yet, on a sidewalk, it will destroy you. The same in society – humans will eventually rebel against coercion placed upon them by elitists.

    • GreaterGoodscs says:

      Brother, you have got to sell me what you’re smoking. I’m intrigued (by the drug–not the gibberish).

      Your paradigm (which you refuse to argue from–that of no gov’t) doesn’t exist because it can’t. That is a fallacy.

      You’re not aligned with the universe, big bro.

      Your 2+2 is equally 19.

      • Black Flag says:

        Since you discard reason, your only weapon is irrationality.

        Thus, your only answer is rooted in irrationality.

        You cannot reason your position.

        You can only coerce your position.

      • PeterB in Indianapolis says:

        Just because something does not exist does not mean it cannot exist. If you assert that it cannot exist simply because it currently does not, that is a fallacy.

  26. Hi Ya’ll! Gonna jump in here and say it the way I feel it!

    GG, Let me just say that I read everything on this site each day, many times, I don’t have much to say because my questions or responses have allready been answered. I’ve asked many questions of everyone, I don’t intentionally try to ask one person a generic question. I’ve been asked for answers and have provided them, by you and Ray and Mathius. They were good questions that I responded too, to the best of my ability. Yet, when I respond, I rarely get any feedback, which is the basis of debate. Not counting my answer to Ray today, as he may not have seen it, I will call you out on my responses to you. If you cannot recall, or did not see them I will provide them once again. Your call!

    G!

  27. v. Holland says:

    Here’s some more quotes-Not much of a contribution today-but hope you enjoy.

    One’s first step in wisdom is to question everything – and one’s last is to come to terms with everything.

    The only true wisdom is in knowing you know nothing.

    There are two ways to slide easily through life: to believe everything or to doubt everything; both ways save us from thinking.

    Truth is confirmed by inspection and delay; falsehood by haste and uncertainty.

    When money speaks the truth is silent.

    He who wants a rose must respect the thorn.

    When written in Chinese, the word crisis is composed of two characters. One represents danger and the other represents opportunity.

    After you’ve heard two eyewitness accounts of an auto accident, you begin to worry about history.~Author Unknown

    Depression is rage spread thin. ~George Santayana

    Depressed?Of course we’re all depressed. We’ve been so quickly, violently, and irreconcilably plucked from nature, from physical labor, from kinship and village mentality, from every natural and primordial anti-depressant. The further society “progresses,” the grander the scale of imbalance. Just as fluoride is put in water to prevent dental caries, we’ll soon find government mandating Prozac in our water to prevent mental caries. ~M. Robin D’Antan

    Do not be afraid of tomorrow; for God is already there. ~Author Unknown

    Nations grown corrupt
    Love bondage more than liberty;
    Bondage with ease than strenuous liberty.
    ~John Milton

    Order without liberty and liberty without order are equally destructive. ~Theodore Roosevelt

    What is the essence of America? Finding and maintaining that perfect, delicate balance between freedom “to” and freedom “from.” ~Marilyn vos Savant, in Parade

    Be kind, for everyone you meet is fighting a hard battle. ~Plato

    “Socialism: nothing more than the theory that the slave is always more virtuous than his master”

    “Elections should be held on April 16th- the day after we pay our income taxes. That is one of the few things that might discourage politicians from being big spenders.”

    The question isn’t who is going to let me; it’s who is going to stop me.” Ayn Rand quote

    As long as you are unable to access the power of the Now, every emotional pain that you experience leaves behind a residue of pain that lives on in you.

    The terrible thing about the quest for truth is that you find it.
    – Remy de Gourmont

    “So let us begin anew – remembering on both sides that civility is not a sign of weakness, and sincerity is always subject to proof”
     John Fitzgerald Kennedy quotes (American 35th US President (1961-63), 1917-1963)

    • Election day on April 16th – I like it. VDLG should adopt this.

    • Black Flag says:

      My friend (if, of course, I am privileged to call you that),

      If I cause such an introspection of one’s beliefs – I am envious of myself!

      Grasp hold of the wisdom of the ages, for they all lead to the same destination. That is why they have survived the ages.

      Cheers!

    • VH, Let’s add this: Be carefull of what you chase, if you know nothing of it and catch it, what next?
      G!

      • v. Holland says:

        You don’t have to worry about me if I see something that I don’t know what it is-I will be going the other way.

  28. Good Evening All.

    Since I didn’t contribute to the conversation today, I thought I would make this my contribution.

    Enjoy

    _______________________________________________________________
    “Sometimes when I reflect back on all the wine I drink I feel
    shame.
    Then I look into the glass and think about the workers in the
    vineyards
    and all of their hopes and dreams If I didn’t drink this wine, they
    might be out
    of work, and their dreams would be shattered.
    Then I say to myself, “It is better that I drink this wine
    and let their dreams come true, than be selfish and worry about my
    liver.”
    ~ Jack Handy

    WARNING: The consumption of alcohol may leave you wondering what
    the hell happened to your bra and panties.
    ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

    “I feel sorry for people who don’t drink. When they
    wake up in the morning, that’s as good as they’re
    going to feel all day. ”
    ~Frank Sinatra

    WARNING: The consumption of alcohol may create the illusion that you
    are
    tougher, smarter, faster and better looking than most people.

    ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
    “When I read about the evils of drinking, I gave up reading.”
    ~ Henny Youngman

    WARNING: The consumption of alcohol may lead you to think
    people are laughing WITH you.
    ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

    “24 hours in a day, 24 beers in a case. Coincidence? I think not.. ”

    ~ Stephen Wright

    WARNING: The consumption of alcohol may cause you to think you can
    sing.
    ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
    .
    “Beer is proof that God loves us and wants us to be happy.”
    ~ Benjamin Franklin

    WARNING: The consumption of alcohol is a major factor in dancing
    like a retard.
    ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
    “Without question, the greatest invention in the history of mankind
    is beer.
    Oh, I grant you that the wheel was also a fine invention,
    but the wheel does not go nearly as well with pizza.”
    ~ Dave Barry

    WARNING: The consumption of alcohol may cause you to tell your
    friends over
    and over again that you love them.
    ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
    To some it’s a six-pack, to me it’s a Support Group.
    Salvation in a can!
    ~Dave Howell

    WARNING: The consumption of alcohol may make you think you can
    logically
    converse with members of the opposite sex without spitting.

    ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
    And saving the best for last, as explained by Cliff Clavin of
    Cheers.

    One afternoon at Cheers, Cliff Clavin was explaining the BUFFALO
    THEORY
    to his buddy Norm Here’s how it went:

    “Well ya see, Norm, it’s like this… A herd of buffalo can only
    move as fast as the slowest buffalo. And when the herd is hunted, it is the
    slowest and weakest ones at the back that are killed first This natural
    selection is good for the herd as a whole, because the general speed and
    health of the whole group keeps improving by the regular killing of the
    weakest members. In much the same way,
    the human brain can only operate as fast as the slowest brain cells.
    Excessive intake of alcohol, as we know, kills brain cells. But
    naturally, it attacks the slowest and weakest brain cells first. In this
    way, regular consumption of beer eliminates the weaker brain cells, making
    the brain a faster and more efficient machine That’s why you always feel
    smarter after a few beers.”

    WARNING: The consumption of alcohol may make you think
    you are whispering when you are not.

    • Hi Judy, Thank God I don’t dance, sing, yell, or try to pick up women in bars! LOL, Good funny tonight, gettin close to my sleep time. Bye the way (joking of course), I’m not an alcoholic, know why, cuz I don’t go to the meetings. Just thought I’d throw that out there.

      On a better subject, have to butcher 6 chickens and a young turkey this weekend, for the freezer of course. Who ever says we as people aren’t generous is nuts. This from a neighbor in PA!

      Peace my friend!

      G!

    • v. Holland says:

      Great way to end a day, with laughter, now I am heading to bed-Good Night!

  29. Black Flag says:

    Judy,

    LOL

    I forwarded it to my wife — at least now I can give good reasons for my “beer quest”…

    🙂

    • Let the beer drinkers unite! LOL.

      Have to have alittle fun, don’t we?

      Cheers!

      G!

      • Black Flag says:

        G-man,

        You are a very well centered person – you remind me of President Truman’s best qualities – a simple man with more wisdom of the world in your little finger than most men have in their entire body.

        We will toast at USwep’s “blog party” one day.

        • That sounds like fun.

          • Black Flag says:

            Yeah, but can he handled 3,000 people at his house??

            🙂

            • I would certainly be willing to give it a shot! I love the idea that someday many of us will be able to get together and have a beer and talk about how we created a system that will work better than the one we have today.

        • I will look forward to that moment. A good salute with good people is always a must, and the miles traveled well worth it!

          G!

          • Oh! That would be so much fun. I would really love to meet all of you in person, and see if maybe you all look like I imagine, or sound what I think you might sound like.

            Seriously though, we should try and plan something for the future, and get together at some hotel conference room or something and have a big ol party.

            Doesn’t that sound like fun?

    • Well, I figured, since I stayed out of the loop today, I felt compelled to put something worth while on here.

      G— Thanks for sharing what you’re going to be doing this weekend, and you never know about if you can sing, dance, or pick up women. Noticed, I left out bars. Have you tried singing and dancing?

      BF— Didn’t know you are a big beer fan. Glad I was able to help you there. Think your wife will more understanding now when you have quench you quest?

      • BF– I meant to say have to quench your quest. Sorry.

      • Black Flag says:

        Ah, we are allowed one or two vices, aren’t we??

        Fine Red wine and beer – what can I say – my weakness and joy!

        (As my wife frowns as I consume “just one more beer”….)

        • OH Heck, why not. Every once in awhile, I’ll have a couple shots of tequila. Don’t drink that often, except when we go to dinner maybe, and then I’ll have a couple margaritas, with double shots. Hey, if you’re going to have margaritas, why not twice the amount of tequila.

          I also like a good wine. Not red, gives me a headache, but I like Rose’ and a good white wine. Wine makes me really relax, and, gets my thoughts going.

      • Judy, Every other weekend is a new journey this year, we can veggies, prepare for deer harvesting, and now Dad’s got me butchering chickens, LOL.

        I laugh quite alot about this, but at least I can do it. Hope you are heading in the same direction, might need it soon!

        G!

        • Sorry G, can’t do any of it, especially chopping heads off of animals. I Guess I’m doomed. I never learned how to can stuff. My mom never did any of that, but my grandmother, my dad’s mom, oh, how she could do anything. I guess she had to in order to survive back in the 20’s and be able to bring some money in for the family.

          • It’s alot of work, prepare the dirt, plant, maintain, harvest and get it on the shelf. But it tastes so good, it’s well worth the effort. And it’s not hard to do, just damn time consuming.

            I can help if you want to give it a go!

            G!

            • Well, and I say that reluctantly too, I really can’t get into the gardening thing. I have all I can do to remember to water the front yard. BUT, I really appreciate your offer G.

              My son, Christopher wants to do that in the backyard, but the thing with him is time as well. Plus we’d have to rope a section off to keep the dog out, he loves to rip things up.

        • v. Holland says:

          Do you chop or swing and snap? This is a not so pleasant memory from my childhood-but my grandmother swung and snapped, but they sure tasted good. 🙂

          Now I really have to go to bed.

          • Well VH, Sounds like dance steps to me, LOL. I’m laughing hard here, cuz never heard of those terms. I just make them fit in the jar, if that helps!

            G!

          • Oh geez, now I’m really laughing. I reread your question and realized it was about the chickens, sorry! I’m a snapper, with tears in my eyes laughing about this.

            Thanks for the helping me laugh at myself!

            G!

  30. Okay folks, I’m out for the night, Had a really busy, busy day today at work, and I’m quite tired.

    Have a great night and catch you all tomorrow, maybe.

    Take Care and Good Night.

    Judy

  31. OT, but I’m just stirring the pot now…hehe

    http://www.rense.com/general87/dict.htm

  32. BF,

    I received this in a Human Events newsletter. What are your thoughts please?

    We are Now in the Eye of the Hurricane!
    Mainstream Media is now reporting ..
    “The Recession is Over…Stocks and Housing are Now…Good Buys”
    They were NOT right about the Melt Down… How could they possibly be Right about the Recovery?
    Many prominent figures like: Jim Rogers, Gerald Celente and Peter Schiff are forecasting that.. By Mid to Late October… It will Not feel like a Recession but rather a Depression!
    Here are the reasons why…
    #1. We’re about to see the Largest Bulk, of the “option arm-risky Loans” written by the banks, Re-adjust from a Fixed– “Teaser-rate” to a Variable rate.
    Home owners will go from a 4.25-4.5% interest rate, to 8-10% (Libor rates). People will No longer afford their mortgage payment! Foreclosures Will Skyrocket!..
    Banks will Not have equity (payments) coming in…They’re going to Fail!
    #2. Banking system is Under water; according to the FDIC website, we have already seen more than Three times as many banks Fail this year, than the last 10 years put together… Banking Holiday??
    #3. Unemployment is rising; many prominent economist believe Real unemployment is closer to 15%… At the height of the 1930s Depression, unemployment hit 18%…we’re almost there!
    #4. Housing is being artificially kept from crashing by Banks, whom are holding onto foreclosed properties, Only releasing a small amount of inventory.. They don’t want to Flood the regional market with excess inventory.. Hence; Crashing Prices even further!
    Nevertheless, foreclosures are rising …They will have to release inventory at one point!
    #5. The FEDS continue to bailout the banks by Buying “Toxic” Mortgage Backed Security, for both residential & commercial loans. Plus, the auto industry by their creative “Cash for Clunkers” program. Not to mention, the FEDS are Now Buying their own Bonds, at the T-Bill Auctions… China doesn’t want our Debt/Bonds anymore…Who can blame them?
    Ladies and Gentlemen, the writing is on the wall..
    It’s about to get Really Bad, Really Quick!

    • The author failed to mention that the forclosures on “commercial real estate” are just starting to increase. The dollar value of the impact will be greater than the first wave of ARM and private home forclosures.

      Also, the volume and value of ARM’s about to reset is greater than the amount that hit when the crash began.

      And, the unemployment rate during the depression hit a high of around 25% before dropping back down to settle around 18%. That 7% drop is still used by the Progressives as justification for their massive government spending to save jobs theory.

  33. I READ SOMEWHERE THAT BUSH TRIED TO PUT MORE REGULATIONS ON FANNIE AND FREDDIE, BUT THE DEMOS.BLOCKED. I SAW BARNEY FRANK ON TV WHO SAID THOSE TWO WERE DURING GREAT, AND THEN BANG, DOWN THEY GO. AFTER ACORN THREATENING BANKS TO LOAN LOW INCOME PEOPLE WITH NO JOBS, HOUSING MONEY, I JUST WONDER WHERE IT STARTED. ACORN BEEN IN BUSINESS FOR MANY YEARS AND WHEN I WANT TO HELP I TRIED TO GIVE A TITHE TO CHURCH I KNOW IS LEGAL AND NOT LIKE THE ONES THAT USED THEIR MONEY IN A BAD WAY. PEOPLE DO NEED HELP, AND MOST CHURCHES DO HELP LEGALLY, SOME ARE JUST PLAIN CROOKED AS ARE POLITICS. I MUST QUOTE BIBLE HERE, IF YOU DON’T WORK, YOU DON’T EAT, I FIRMLY BELIEVE THAT, AM VERY DISABLED SO CAN’T DO PHYSICAL WORK,BUT DO KNIT NEWBORN BABY HATS AND GIVE, NO MONEY, TO LOCAL HOSPITAL. NOT MUCH WORK, BUT I TRY IN MY OLD DISABLED WAY TO ADD A BIT. BUSH OK IN SOME WAYS, BUT I MUST ADMIT UNDER BUSH (WHO MY SON DISLIKES A LOT) WE DID NOT HAVE THE LOSS OF JOBS WE HAVE UNDER THE ALLEGED PERSON IN WHITE HOUSE, BUT I DO BLAME BUSH FOR NOT WORKING HARDER ON BORDER PROBLEMS. WHEN I GOT MY LITTLE HOUSE, WAS ASKED ABOUT LOAN, FIXED, OR ARM, I LAUGHED AND SAID I HATE SURPRISES, THE SAME PAYMENT EACH MONTH, NO ADJUSTABLE ANYTHING FOR ME. SO THIS HAPPENED, ALSO WHEN I REFINANCED THE SAME DEAL. THE TITLE COMPANY EVEN HAD A PAPER WITH NOTHING BUT ADJUSTABLE INFORMATION, I SAID AM I SUPPOSE TO SIGN THIS, THEY SAID NO SIGN THE ONE YOU WANT, SO, FIXED RATE. DON’T AGREE WITH ALL POST, AS I DON’T THINK THE ECONOMY IS COMING BACK, NOT MANY JOBS RETURNING AND NOT SURE IF THEY WILL EVER COME BACK. SMALL BUSINESSES ARE NOT BEING BAILED OUT, THEY ARE GREAT TO HELP START NEW JOBS, WHY NOBODY HELPING THEM, JUST THE FOOL ADDING MORE TAXES AND PROBLEMS TO THEM. I DON’T THINK AMERICA I LIVED IN FOR 85 YEARS, VETERAN OF U.S. MARINE CORPS. AND RESIDENT WHO VOTED AND REALIZE WE ARE IN BIG, BIG TROUBLE. GOD BLESS AMERICAN SHE REALLY NEEDS BLESSINGS. goldie

  34. Hi Goldie,

    Where did you serve during WWII? Where you in the Pacific Theater, by chance? If so, where?

  35. Of course, what a great site and informative financial articles, I will add backlink – bookmark this site? Regards, Reader.

  36. bridging loan says:

    No deposit = no mortgage – no more credit crunch.

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