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- Apr 2, 2009
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PCutter said:
Straight off, I will spare you the languid disputes over Marxism of the contemporary intelligentsia and limit myself to saying that his ideas were utopian and hence fundamentally unrealizable within human society. However between Marxist utopianism and the dystopian neoliberal capitalist regime that we actually have running in place, there would seem to me to be a happy (and sane) middle ground - liberal as an economic qualification as it is used in Europe at times (hence politically conservative), not to be confused with Liberal as a political and social marker indicating a person's orientation toward the left as it is always used in the US.
I'm interested in the history of ideas, and it seems to me that your entire argument hinges on your faith in "Western liberal values" and the market as being a sort of salvific panacea for all the planet's woes. Naturally I beg to differ. Especially because it has created other woes on an unprecedented scale.
In the first place, you're assertion that the true proletariate exists only in the emerging nations of the moment and that those complaining about higher education costs in Europe today, are merely the hypocritical sons of the bourgeois class that benefited from such economic growth, was positively Pasolinian in its caustic irony. Though, at the same time, to brand dismissively those that in any case fight for a a different value system than your own as an "insult to intelligence" only demonstrates the rather narrow ideological scope of your position. It also makes clear that you side unwaveringly with the political and business establishments, whose praxis of late (especially as regards their appalling incestuous relationship at Wall Street and the other financial markets, to the great detriment of today's and tomorrow's tax payers) is anything but edifying. When taxpayers money is being spent on everything but social causes, such as paying off the private crimes of the financalists or to sustain an ever more potent and at the same time useless military then, witingly or unwitingly, the protesters voices have a purpose and are encoded with meaning. If justice can never be made universal, at least the just causes are worth fighting for and can never be considered useless or irrelevant, because without such fighting cries democracy becomes ever more tenuous and impoverished.
I would also remind you that the so called better living standards for the peasants of the Third World, has come at the great price, in China for example, of their often being made into modern indentured servants (which means today's slaves) to the production demands of our corporate multi-nationals and industry. For this reason I find our application of the market to their world as having been done without scruples or any sense of shame and lacking totally in even a modicum of human rights and democratic values, which our politicians go around the world preaching to everyone constantly as being our divine and sovereign mission. Other than the hypocrisy of a few university students from middle class families. If their is any insult to human intelligence, therefore, it is to be found precisely here. The one at least trys to establish an ethical basis upon which their actions are based, the other breaks every ethical consideration in the book while never even questioning the real motives behind the "mission".
And wasn't it the same Adam Smith who said with prophetic vision that for one American to be rich, 500 of the world's people need to be poor (and even if my memory serves me incorrectly right now it was, in any case, said by someone of noteworthiness at the eve of America's rapid development and ascent within the international arena). Again your triumphalist rhetoric about the virtues of US capitalism and the opportunities it has bread, which are now spreading around the globe as an oil stain gets inexorably dispersed throughout a puddle, would be merely humorous if it hadn't conveniently neglected the fact that the access to wealth had been relegated to a privileged white, middle class social group and completely excluded blacks, the natives and a plethora of other minorities until the shameless hypocrisy could no longer be sustained before the eyes of the world.
Thus the crisis of capitalism never get resolved, but are simply moved around geographically. In other words when I can't get away with exploiting labor in my native land any longer, then I go to other regions where I can, until that no longer works, and so I seek new places. This is exactly what spawned neocolonialism at the end of the XIX and beginning of the XX centuries, which, in turn, begot the worst two military conflicts history has ever witnessed. And it explains largely why the global scene at the start of the twenty-first century is different from any that was commonly anticipated by the Western market triumphalists just thirty years ago. As the advance of globalization continues America, previously its driving force, has lost its central position. The US is in steep decline, its system of finance capitalism in a condition of collapse and its military machine effectively paid for by Chinese funding of its deficit. All mainstream parties of the democratic countries converged on a free-market model at the moment in history when that model definitively ceased to be viable. The bipolar world that globalization has produced of late (which means the spread of the Western market) has not been followed by one ruled by "the last superpower". Instead we have utter chaos in a world that nobody rules. Not that I'm against the absence of a superpower mind you.
A weakness for uplifting illusions, such as yours PCutter, has shaped opinion throughout the period. No doubt, though, intolerance of reality is innate in the human mind. Every age has its hallucinatory image of itself, which it persists until it gets dispelled by events. The humanist faith in progress of the secular thinkers has amounted to no more than taking refuge in a comforting fantasy. It's not as if because the Chinese or Indian worker is able to afford a cheap color TV today, and I'm sure even you realize this, we have made a better world, rather it only demonstrates that after the master has beaten and cowered his dog into total submission, he must at some point reward him with his biscuit if he is to return to the production lines willingly.
Historical inertia and the zeitgiest are really at the basis of the so called improvements the market has brought to the poor and underdeveloped world, not any virtuous praxis inherent to it, nor anything ennobling about its materialist philosophy. I mean we're not in the Middle Ages any longer. Thus relative to what could (should) have been achieved based upon Enlightenment principles, the new technologies and by the actual gargantuan wealth that was generated over the past century, we have fallen far short of the mark, PCutter. That's the truth. Your reasoning aspires to the lowest common denominator, whereas we can and should aspire to something more lofty.
And your analysis of sustainability goes smack in the face of reality. The global business leadership can't afford having the peons of this world get a hold of too much economic purchase, for the simple reason that it goes against the very economic logic upon which their privileged world has been constructed. Capitalism's conflict of interests, and therefore those of the globalized free-market system, has allowed a few peons to increase their material standard, though it can never allow for everybody to prosper simultaneously. Perhaps no system can, but the imbalances between wealth and poverty relative to what was actually created is appalling in today's world and demonstrates just how much the system needs to be totally rethought. What's more, however, and this is the reality which your argument is completely blind to, it has caused incalculable damage to many local environments, created new forms of slavery, ever increasing religious fanaticisms (both in the advanced and undeveloped worlds) and has once again seemed to reaffirm only that humans are violent animals and how the peculiar flavor of modern mass murder has so often been committed with the aim of creating a new world. In the latest instance to "spread democracy and Western values" delivered on the backs of bombers and fighter planes. To say nothing of the bloody dictators and deplorable royal families our elected governments have tolerated, when not outright sustaining them, because it was good business practice to do so; and then they go around preaching human rights about those same barabarities to the uncritical public, which our industries and corporations have willingly supported! The hypocrisy knows no bounds.
The main point has to do with aspirations, what we aim for, and here, in light of capacity and historical moment, we truly do seem like the Orwellian farm animals who are incapable of anything more then base self-interest that gives over to unbridled greed.
I think, consequently, that we need entirely new and rational models, for which materialism is kept in check, privatization is not given the license by government to build something that's "simply to big to fail" because tyrannous, concepts like justice and virtue be truly considered through the lens of philosophy and how we can really make a better world, not the pseudo-better world we have arrived at under the present system. I don't have the answers, but there is a serious problem here, which will eventually need to be addressed.
- Nov 2, 2009
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PCutter said:
Forgive me if I seem a little slow. I have PTSD and this results in a diminished capacity to process information. I'm still working through your response.
PCutter said:
It seems a bit like "pass the parcel". Is it all reliant on a continual seeking out of desperately impoverished people who will work for peanuts? How does the planet sustain all the production involved with increasing demand for consumer items? I honestly cannot see how this is sustainable environmentally. Globally we need to reduce carbon emissions, not increase them, and we are expecting another 5 billion people or so to join us on the planet this century which will result in a significant rise in carbon emissions even assuming an average low level of consumerism. How does the theory envisage globalization and the transporting of goods including food from one continent to another when we are living in a post-peakoil world and the costs of freight begin to rise astronomically? Is the maintenance of the system dependent on the as yet unmade discovery of alternatives to oil-based aviation fuel (for instance)? Or is peak oil not assumed to be significant?
PCutter said:
Some people have made the transition you have described and a significant number of others seem to be in dire straits and becoming the new, urbanized, disenfranchized version of the peons in Asia. Is this ok as far as you are concerned because at least wealth is rising elsewhere? Won't the same pattern repeat itself elsewhere as well?
This is the use of neoliberalism I was referring to when I used the word "neoliberalist" (from Wikipedia):
"Neoliberalism describes a market-driven[1] approach to economic and social policy based on neoclassical theories of economics that stresses the efficiency of private enterprise, liberalized trade and relatively open markets, and therefore seeks to maximize the role of the corporate sector in determining the political and economic priorities of the state."
Sorry about all the questions. Just trying to understand your point of view.
- Apr 2, 2009
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And, PCutter, there is also problem with your flawed analysis about how for every 500$ saved on production abroad, 500$ are then able to be spent in America by consumers and that, on the other side, some South Asian peasant now has the money to improve his standard of living as a result. Namely that American workers (and Europe's too), who have not seen their wages significantly increased to meet inflation and higher costs if living since the 70's, means that the lower production costs have not met the increases in the other areas (no zero-sum game here) and so the American consumer has been offered all types of credit to compensate. By contrast, on the other end, most of the money, if we are to be intellectually honest, has gone to fattening a few oligarchs in the region more than revolutionizing the sub-human living standards of the Asian peasantry.
Even more insidious in this financial and business sham, is that private debt has made American consumers reliant upon the financial institutions who have lent the money to workers, like a parasite is to its host, in order to maintain their living standard. This means they have become increasingly enslaved to finance and their own debt. Meanwhile in most of the underdeveloped world that is exploited by the Western multi-nationals, abject poverty still prevails. This has led to the grotesque imbalance between wealth and poverty I previously mentioned, which makes a ghastly parody of democracy and what it is doing around the globe today. This appalling system, furthermore, of profiteering on workers loans to drive a non-optional and ever increasing consumption that the market logic demands, which is never affected by human reason because wouldn't be able to function otherwise, has resulted in a system in which everybody is lied to and everyone gets defrauded. And all this under the aegis of the governments.
It is one colossal financial scam played out on the international level, which creates huge earnings for the lenders on the interest collected from repayments that are then reinvested into other profiteering rackets in a multiplication of the loaves and fish performance always done on the backs of the working class. All because the political and financial establishment didn't want wage increases to meet higher living costs, since to have done otherwise would have meant that it wasn't afforded the opportunity to put their mendacious addiction plan to enslave workers into action. To put up a system, which, from the very start, was only to their great and exclusive adavantage and to the detriment of everybody else.
And what a horrendous culture of consumer addicts they have forged!
The disastrous consequences with the recent housing market collapse for one, demonstrates that this is so.
Even more insidious in this financial and business sham, is that private debt has made American consumers reliant upon the financial institutions who have lent the money to workers, like a parasite is to its host, in order to maintain their living standard. This means they have become increasingly enslaved to finance and their own debt. Meanwhile in most of the underdeveloped world that is exploited by the Western multi-nationals, abject poverty still prevails. This has led to the grotesque imbalance between wealth and poverty I previously mentioned, which makes a ghastly parody of democracy and what it is doing around the globe today. This appalling system, furthermore, of profiteering on workers loans to drive a non-optional and ever increasing consumption that the market logic demands, which is never affected by human reason because wouldn't be able to function otherwise, has resulted in a system in which everybody is lied to and everyone gets defrauded. And all this under the aegis of the governments.
It is one colossal financial scam played out on the international level, which creates huge earnings for the lenders on the interest collected from repayments that are then reinvested into other profiteering rackets in a multiplication of the loaves and fish performance always done on the backs of the working class. All because the political and financial establishment didn't want wage increases to meet higher living costs, since to have done otherwise would have meant that it wasn't afforded the opportunity to put their mendacious addiction plan to enslave workers into action. To put up a system, which, from the very start, was only to their great and exclusive adavantage and to the detriment of everybody else.
And what a horrendous culture of consumer addicts they have forged!
The disastrous consequences with the recent housing market collapse for one, demonstrates that this is so.
- May 13, 2009
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PCutter said:
PCutter, others have pointed out the flaws in your views already, so I'm probably just piling up:
1) Markets are never free and it is always in the interest of most players (in particular the bigger ones) for markets to be rigged. There's usually more money to be made by restricting flow of information, goods, capital, labor, by increasing startup investments for the competition etc. A free market economy is an entirely utopian idea to begin with.
2) Companies, beholden only to profit, will chose to operate under the most favorable conditions to them, i.e., where the markets are most rigged in their favor. This means, production in China, which for instance doesn't allow independent labor unions, and which keeps production cost low by undervaluing their currency. Then they sell their stuff in the US, where demand and prices are high because of the debt pushed onto the consumer and where the US$ is probably overvalued because it doubles as a safe haven for a lot of investors. Taxes on the whole operation are then paid in some Caribbean island state or wherever the corporate tax rate amounts to a minimum.
3) The game is therefore rigged in particular for large, global players and represents a race to the bottom. If a country wants to have large production facilities, it needs to depress wages (undervaluing their currency), suppress workers (not allowing them to organize) and have low or non-existent ecological standards. If a country wants to have happy consumers, it needs to be able to push debt onto the consumer (because wages aren't sufficient any more), basically by underwriting a bailout guarantee to the largest creditors in case the system goes belly up. If a country wants to host large companies and benefit through taxes from their profit, it basically needs a very low tax rate and space for thousands of post office boxes.
Can you not see that all of this will basically only benefit some oligarchs?
Yes, there will be instances where some elements in the chain (e.g. the Chinese factory worker) might be better off than previously. But it is not clear to me that this represents the optimal outcome of the global economic system when in fact a similar, higher wage, higher standard job (in terms of ecology, safety etc) has been eliminated elsewhere to basically squeeze out a larger surplus value to benefit some postbox headquarter on the Caiman Islands and their nameless shareholders. Maybe you can explain why everybody is better off in this scenario?
It is abundantly clear to me that globalization of rigged markets benefit mostly large global players. It will run out of steam when either everybody has reached the bottom or when natural resources run out. Neither of which is a desirable prospect. I think a much better way forward from here would be to set up sustainable, local markets which are well regulated for the good of the people.
I have a significant hangover today, so I will leave my reply to your loving responses till tomorrow. However, I will note, having worked on microfinance projects for the UN (admittedly, a deeply flawed organisation) in some of these Asian nations, I have seen this (the drive to wealth - yes, I get that Rhumbomra believes the pursuit of wealth is a bad thing) work at a local scale. And has been the most rewarding work I have done in my career. So all my posts today will solely relate to what a top guy Robbie McEwen is.
And I only like Billy Bragg's love songs.
The Milkman of Human Kindness,
PCutter
And I only like Billy Bragg's love songs.
The Milkman of Human Kindness,
PCutter
Cobblestones said:
Since there seems some sought of agreement around Cobblestones post I will summarize my response to all via it. He also conveniently numbered his points. Sorry for the length, but there's a lot of love out there, and a lot of points were made.
1. I thought I had made it pretty clear through my explanation that no system is perfect, and economies aren’t run in text books. But free markets in my view, remain the far better option to lift the wealth of impoverished nations than the alternative. And even Rhumbomra conceded that a Marxist utopia is an unrealistic standard for him to expect, so Im not sure why I should be expected the meet a utopian standard if no one else has to.
If you feel unhappy with how the “rules” are, you can exercise your democratic right to vote for someone who’s views are more aligned with yours, and they can regulate away the riggness. And if you can make a compelling enough argument, you should be able to bring enough voters along with you.
2. “Debt pushed onto the consumer”? Please, did some bank hold a gun to your head and say you must buy a new car? Your don’t appear happy to outsource labour, but more than happy to outsource responsibility.
The Renminbi is pegged to the USD, and it is the devaluation (not overvaluation) of the USD as America seeks to inflate its way out of debt which has resulted in the majority of the undervaluation currently in the Chinese currency. Fox News isn’t the best place to get economic commentary.
As for your Caribbean (or Luxumbourg Schleckies) taxation argument, that is one of domestic taxation policy, not an argument for or against free markets. There are any number of taxation triggers which can be pulled to work around the setting up of offshore tax havens – consumption taxes as one example. As to my view on the idea of tax minimization, I take that of the late Kerry Packer:
“Anybody in this country doesn't minimize their tax they want their heads read because as a government I can tell you you're not spending it that well that we should be donating extra”
3. The “race to the bottom” argument was populist nonsense when it was perpetuated in the ‘70’s in response the rise of post war industrial Japan and it is populist nonsense now. If you don’t want to compete for customers on the back of lower wages, you had better find another way to compete. Might I suggest innovation? This is why I drive a German car and watch a German television, as I’ve bought into the (real or perceived) benefits of the country’s higher levels of engineering and build quality when I could have bought a comparably size car (or TV) for considerably less money, manufactured in China or Korea. I was happy to pay more, and support the higher wages of German manufacturing plants, as I perceived a benefit beyond the lowest level of wages possible. Last time I checked (and Im not expert on the German economy) salaries in Germany were relatively high, as are social and environmental standards, though, courtesy of the PIGS the Euro is slightly undervalued.
As for the oligarchs/bad men in the closet taking all the money argument, the industrial revolution occurred in the west in the 18th and 19th centuries, so we’ve had 100 years or more for the wealth to spread, but you seem to expect China to achieve it all in 10 years. The west had oligarchs too, its just that Standard Oil was broken up long ago.
As for the environments stuffed, no more resources arguments, while these arguments are somewhat away from my original contention that if the price the west has to pay for the worlds poorest to feed and shelter themselves is a few trinkets of social welfare than so be it, I believe (no surprise here) that the market will deliver the answer! As a microcosm for an example, I do believe in the peak oil story, which in turn leads to market responses, ie. more efficient vehicles to cope with the higher oil prices. A very basic example, but I obviously have more faith in the human race’s ability to innovate than you.
As for more regulation, the crisis, at its heart, was caused by governments trying to bend the free market through social regulation. Clinton introduced a change in lending standards to force Freddie Mac and Fannie Mae to lower lending standards to minorities as a way to imbed wealth into these historically disadvantaged groups. So while the free market suggested these people couldn’t afford home loans, the government regulated that they could. And we all know how that turned out. I’m not sure regulation is the answer.
Reports of capitalisms death have been greatly exaggerated.
- Apr 2, 2009
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PCutter said:
No it isn't about wealth per se, but about the current imbalance around the globe between the haves and the have nots. And this, as I and others have made resoundingly clear, has all to do with the current predatory means with which the actual economic system we have is designed and set up to work.
Thus from its very ideological underpinnings and mechanical processes, it is an economic model that is destined to promote an ever widening gap in this regard, for which the masses of the developed world become increasingly more enslaved to finance by their debt, while those of the Third World see no real improvements in their state of abject poverty.
All this despite the gargantuan sums of profit that finance and industry have actually generated over the recent past, thus becomes an intolerable situation because so completely unjust. And the very praxis of the current model can never allow for things to wind up otherwise. This is what I have been denouncing. The many vaunted reasons to celebrate wealth according to the conservative establishement, therefore, are invisible to me.
The other poblem, though, as I see it, is how can wealth behave otherwise? When in the entire history of the world has it behaved otherwise? It hasn't among thsoe who have unwaiveringly saught it, because greed and megalomania proceed from themselves hand in hand. What's lacking in this equation is any sense of decent measure and proportion and a total concept of purpose purpose, which isn't something other than the hoarding or indivdual profit for profit sake alone among protagonists of the economy.
Look, the colossally huge sums of money that have been generated by this ecconomy means that poverty and starvation could have long since been wiped out from civilization. But this hasn't happened. To the contrary, in certain parts of the world like Africa for example, despite all the efforts of the humanitarian organizations, it has actually increased along with population growth. Medicines, which the pharmaceutical companies should be made to disperse free of charge to the sick and dying of the impoverished world by the governments, are not (or at least not in nearly sufficient quantities) being forced to do so by law, because this is anti-economic (which means anti-profit).
Too much wealth accompanied by too much poverty and suffering, therefore, unquestionably demonstrates that the pressent economic system we have not only is not functioning optimally, in the sense of what it could achieve, but is falling disgracefully short of the mark. And, as I see it, could never do othewise, because founded upon the most flawed and uncivil of human natures: namely, egoism and greed. There is no room for concepts like solidarity or caritas.
So it is not wealth, but the relationship between wealth and poverty caused inherently by this business ideology, that I find deplorable and could never, as you seem to do, see anything of real ethical and philosophical merit in it. And this doesn't even deal with the broader issue of what wealth is in the first place.
What is wealth really? The current system, which is where the ideology is to be found in it, would seem to suggest that wealth is excluisively material in nature, and can only be measured as such, because congenial to its modus operandi. But I don't see it that way. And what this has meant for a host of environmental issues, to say nothing of the base cultural standards the system promotes and aspires to, is deplorable and another reason why I simply catagorically beg to differ.
For me, consequently, the minds and hearts of people and society need to be reprogramed and rebooted. But, here again, the current neoliberal capitalist regime will do everything within the realm of its possibility to block all efforts at offering other models (perhaps more cultural even before economic) that contest its global hegemony.
PS. Democracy, like the markets, is also fixed, because people behave like a flock of sheep and will give their votes to whomever offers, or seems to offer, them the biggest carrot. And the voting public has been bombarded with a type of mass propaganda by the finanance and business establishments, which owns the goverments and the political classes of which they are composed, such that it is completely unprepared at having any shot of collectively thinking beyond that which they have been told by those with special interests. Whereas those that may have the preparation are in such an overwhelming minority as to reamin socially (even before politically) insignificant. Democracy is about the numbers, little else, and often the majority preferences are not the best even for the majority's interests for this reason. Propaganda is more powerful than society's collective reason, and here the marriage between wealth and power amount to true coercive and anti-social forces. I have little hope, consequently, in finding enough people in today's world willing to think enough outside the box to have any illusions of a prospect for real change. We live in a world where nearly everybody is towing the party line in a manner of speaking. As I see it more votes are not needed, but better leaders. Yet I know this truly makes me the laughing stock of the nation!
Lastly I do not share your optimism that the free-markets will actually self-correct the problems they inherently generate, nor do I have such low aspirations about what financial wealth could be doing to better the living conditions of the empoverished masses of the world. Frankly, on this matter, your self-rightious complacensy is particularly off-putting, though not surprising in light of the materialist culture upon which your entire world view seems to be based. German cars and all.
- Apr 2, 2009
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PCutter said:
1. What I actually said, go reread it if you like, is that between marxist utopianism and the dystopian economic system we actually have, there should be a sane and healthy third way. The problem with folks like yourself is that even this, just look at how the republican party responds to any progressive form of financial and social reforms, is considered anathema. So who is the more radical? Ideological?
2. Since many of history's most noted luminaries, not even the Christ, have failed in their (futile, in hindsight) attempts to change the hearts of men and convincing them of their autodestructive follies, I doubt anyone among us here would have a shot at doing otherwise.
PCutter said:
Too much flawed reasoning to reply to in full..
Jimmy Carter not Clinton pushed for minority lending..Freddie and Fannie were not forced to do anything. The greenspan/bush fed used freddie and fannie to infuse liquidity into the stock market when there was little demand in business in general. Bush the stupider's only boast on the economy for his entire tenure was increased home ownership among the lower working class. This was only accomplished by the new stockbrokers who now called themselves investment bankers(Gramm Leech Biley) creating stocks out of thin air that they could insure as bonds and collect all their money in short order IF these new home owners failed. MBS were neither backed by actual property nor money that didn't have to be waited on for 30 years. What you describe is almost off the chart being NOT what happened or why.
PCutter said:
This is 100% completely ignorant of the actual problem. Only around 10% (the most generous of studies) of the loans in the non-conforming market were CRA loans. You had to be a deposit bearing institution to be bound by CRA. (Hint: only a tiny minority of non-conforming loans were done by CRA bound institutions) Just because Rush Limbaugh and Sean Hannity say it was CRA does not make it so. I hear that ignorant proposition thrown around still. Only someone who knows absolutely nothing about what happened says stupid crap like that. So, lets put it to bed, shall we?
Here, educate yourself: http://www.jchs.harvard.edu/publications/governmentprograms/n08-2_park.pdf
The real failure in the mortgage industry (Fannie and Freddie loans are not the real problem, again, only someone who doesn't know what they are talking about still believes that) was almost entirely because of greed and corruption in the market. I was in the industry on the wholesale side, and worked for a company doing almost a $1 billion per month (and we were one of the small ones in the non-conforming industry) in loans. Our underwriting guidelines were set by the investors who were purchasing our loans. Those entities were PRIVATE. We never originated a single loan that was purchased by any government or quasi-governmental entity. The private market had an insatiable apatite for non-conforming loans. After the tech bubble burst, people were looking for a place to get a 13% return on investment because they had shot the heroin of ridiculous return on investment so long that they just couldn't get off the junk. So they looked around and found that they could loan money to minorities, the self employed, and people with challenged credit on what they thought was a safe basis because property value always rises, so the risk you have in loaning such people was offset by the probability that you could still make a profit if they defaulted. Not to mention that you could hit them with a 9% first mortgage, and a 15% second and take that yield until they defaulted.
So that was a pretty good looking monkey to buy, so investors flocked to the market just like good heroin junkies always do. They could buy into large pools of loans that had been securitized. (BTW, also note that the interest rate for non-conforming loans were set by the investor and had NOTHING to do with the interest rate set by the Fed. It was a market existing outside of that) And buy they did. By the trillions.
Then the default rate started to alarm people. See, the default rate for Fannie and Freddie loans did rise. But that is peanuts to the default rate for non-conforming loans. (they are called non-conforming because fannie and freddie were "conforming" meaning you met the underwriting guidelines set by them which were influenced by governmental programs. But the default rate, as has already been stated, was far less than the PRIVATE market for non-conforming) The investors started looking around and those triple A rated investments were starting to look kind of dangerous. (Note: NONE of those loans were fannie or freddie loans. Fannie and Freddie were the investors for their loans. The loans that caused the problems were those in the PRIVATE market for non-conforming.) The started backing out, which changed the underwriting guidelines, but it was too late. They had already shot up too much investment heroin, and the system came crashing down.
We didn't even get into the Credit Default Swaps, which were an unregulated insurance you could purchase against your non-conforming investments, but then again, the point here is that the government was not the problem (and if you don't understand the term "unregulated," then let me know and I will explain to you how the government was not the problem there either...unless you consider that they should have been regulating and weren't. That was a problem.)
Now, all of the above shows that ACTUALLY, the failure in the mortgage market was NOT because of governmental anything. It was a failure in a PRIVATE MARKET. So, your whole "government is always the problem" bull**** just goes down the drain on this one, sorry.
However, do me a favor: Don't do the whole cognitive dissonance thing and believe that just because you don't know what the **** you are talking about you have to be right. Just quit spreading that particular stupidity and fess up to your capitalist friends that you screwed the pooch on that problem. It was ALMOST EXCLUSIVELY a problem in the market caused by greed and corruption. Blaming it on the government only shows that you don't actually understand what happened.
Cheers!
- Jul 4, 2009
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Thoughtforfood said:
...match point and game!...you smoked em...
...and if I may add another point that I believe is important...as a society we operate on credit, and no, we are not forced to take loans, but if we are to play the game and enjoy things like owning our own homes, we take out loans...now for a long time easy credit allowed Western economies to expand but this system was based on the expectation that a healthy economy would sustain employment so that the credit could be paid back...to suddenly move production to low wage areas is tantamount to pulling the rug from under a large number of people who were playing the credit fueled economic game that is Western Society in good faith...and it is the betrayal of that good faith that is so galling, and what is even more galling is the finger pointing that we see from people like Mr PCutter...especially given the circumstances behind that betrayal...
...and again, thank you Mr Thought for putting the swill that Mr PCutter trots out as fact and supposedly accepted common sense into perspective...
Cheers
blutto
blutto said:
Yea, it is as if credit is merely available, not promoted aggressively. That is the fallacy they base their "personal responsibility" rants upon.
Never is there a recognition that "supply side" economics started a reduction in the amount of wealth for every income level except for the top 5%. The "trickle down" theory was actually a method of concentrating a greater percentage of wealth in the hands of only the upper 5% of the population, and the only thing that got "trickled" back were 19% revolving credit loans. In that same period, we experienced a rise in productivity. In their model, there would be a corresponding rise in wealth for those actually being productive. Instead, the wealth of 95% of the population decreased. It was all part of the great pyramid scheme that is capitalism.
Also, ask one of them to produce an actual study that shows that lower taxes lead to job creation.
They also will never admit that poverty is a necessary part of their system. They will say that poverty is a motivator, but the reality is that poverty is necessary to create greater wealth for the upper 5%. "Everyone has the same opportunity in capitalism" is a lie. No, they don't. Most people in lower levels will never be provided a real opportunity to advance, and that is by design. Yea, they will point to the exception and pretend that is proof of their model, but the reality is that they are an exception not because the system is looking for exceptions, but because there are exceptions for anything. Poor people are their by design.
Again, there is a place to meet in the middle. Pure socialism is not any better than pure capitalism. However, people like PCutter worship money, and guard it as fiercely a fundamentalists defend their gods. You will never convince him that there is any merit to anything but "free" markets. The problem is that there is no such thing as a "free" market. There are only corrupt markets manipulated by people who finance them and political elections.
Contrary to the assertion that Capitalism alive and well, it is a dying system incapable of producing the results it swears will exist. They will only be able to deflect the blame to government for so long. Stupid people sometimes take generations to recognizing that they are being pi$$ed on, but sooner or later, they will. History is full of examples.
Thoughtforfood said:
Actually, far from ignorance, I do have a pretty good understanding of what happens in this market, its how I make my living. Its how I made it before the crisis, its how I made it during the crisis, its how I make it now. I don't live my life in a text book, especially ill informed academic texts written by people who've never bought or sold a bond in their life but rather sit around Boston convinced in their own smugness. But hey, thats the amazing thing about economists, I've never met a profession better at predicting what happened last year. And the premise of RMBS is tranching, and the CRA loans were such, in volume and overall crapness, that their sustained losses where such as to go beyond the losses of their tranche causing pain for the overall securitised investment market beyond what was the historical average. But hold on, on Freddie and Fannie held their loans you cry, gee, I guess the CDO, CDO squared and CDO cubed makets must not have existed in your world then? But gee, you worked for a crappy mortgage originator, so you know how market trading decisions are made
As for CDS, market forces have/will fix the default swap market, they remain an essential part to risk allocation in markets, so leave it us, we'll sort it out, not some ill conceived government regulation. If you think anyone in the markets fears government regulation, you're kidding yourself, governments are cr@p and so are their regulations as they are beholden to the populous wind, so they will regulate for the last problem, not the next problem. The MARKET does the heavy lifting in regulation.
And you can jam your false arrogance as to assume that because someone believes that free markets ARE THE BEST WAY TO CREATE WEALTH IN POOR COUNTRIES they are automatically a Bush supporter.
Maybe you should follow cobblestones idea and shut yourself off from the free market and only trade with yourself. Sounds great. Return to an agrarian society. Im sure the 18th century farm serfs had a pretty good retirement policy. All those highly paid innovators like Steve Jobs can now work in a farm to help feed the 200m US mouths, as the fly over states aren't really efficient enough to feed the country without trade. And all those well paid engineers designing google will be working in the mill making cotton, because I'll be damned if Im going to allow an Indian to steal that job while working for a bowl of rice a day! I hope you enjoy potatos.
Meanwhile I will continue to short European sovereigns as they arrogantly continue to resist austerity measures.
PCutter said:Actually, far from ignorance, I do have a pretty good understanding of what happens in this market, its how I make my living. Its how I made it before the crisis, its how I made it during the crisis, its how I make it now. I don't live my life in a text book, especially ill informed academic texts written by people who've never bought or sold a bond in their life but rather sit around Boston convinced in their own smugness. But hey, thats the amazing thing about economists, I've never met a profession better at predicting what happened last year. And the premise of RMBS is tranching, and the CRA loans were such, in volume and overall crapness, that their sustained losses where such as to go beyond the losses of their tranche causing pain for the overall securitised investment market beyond what was the historical average. But hold on, on Freddie and Fannie held their loans you cry, gee, I guess the CDO, CDO squared and CDO cubed makets must not have existed in your world then? But gee, you worked for a crappy mortgage originator, so you know how market trading decisions are made
Hey dumba$$, the market for CDO's and Fannie and Freddie's losses have nothing to do with each other. The losses because of CDO's were AGIAN due to private mortgages. You also realize that fannie and freddie buy their own MBS's right? Plus, I never said they held their loans. They are the original investor for loans underwritten by their guidelines. That is all I said. You have a hard time reading too I see. I mean, for someone who claims to know how the system works, you just proved you know f**k all about it. That is literally the dumbest thing I have read today, and that is saying a lot because I read a piece on Sarah Palin. You don't actually understand how that market worked at all, do you?
The non-conforming market was by far a private market dipsh!t. You just proved 2 things:
1. You can claim to be anything on the internet.
2. You need to do some reading.
Read: It might do you some good http://seekingalpha.com/article/84584-fannie-freddie-myth-vs-reality
That line in there that says "it is clear that most commentators and observers discussing these institutions have very little understanding of the actual businesses." HINT: That's you.
Oh, and I wasn't an "originator" toodled!ck. I wholesaled money to originators and was well informed regarding the market we sold our loans on. That is why I am able to make you look so inept. One of us knows what they are talking about and one doesn't. You are swinging and missing a lot today. If you are responsible for anyone's investments but your own, you should be arrested.
PCutter said:
You mean like not backing those CDS's with any capital. You mean work it out like that?
PCutter said:
Where did I call you a Bush supporter?
PCutter said:
See, money worshipers are so predictable. No, that is not what I am advocating, but your head is so far up your a$$ that you couldn't possibly begin to see there is another way.
PCutter said:
I would short your intelligence if I were the investor.
Thoughtforfood said:
Wow, name calling, what a surprise. Gee, how do you invest in Freddie and Fannie loans in a CDO? Its called a CLN - credit linked note. There were heaps of them, and they were included in CDO's. So, if you're going to get all worked up maybe you should go beyond the basic structure.
As for the Bush comment, correct, that was someone else, but there was a Rush Linbaugh reference, so you were in the same ball park.
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PCutter said:
Arrogance in taking from people their social gaurantees, which they expected they had contributed for by paying their taxes? Arrogance in not allowing for that which belongs to the public to be privitized because caving into the ideologues of Western financial capitalism!
What a ghastly and uncivilized world the financialists are creating! These killers and obliterators of society, whose baseness knows no bounds when it comes to their killing and obliterating ways. Soon all their killing and obliterating works will drive society to the brink of total extinction, and once they have actually suceeded in extinguishing everything and everyone, all will come to a dramtic end. The world will cease to exist as we know it as a result of the completely unmitigated ruthlessness, and zeal, with which they persued their murderous ways.
PCutter said:
The problem was NOT with any MBS or CLN or CDO that had anything to do with Fannie and Freddie. Take a gander at the default rates of them compared to the default rates for TRUE non-conforming loans.
And you still have not addressed your complete incompetence in understanding the market, so I will have to defer to someone a bit better informed. The losses in the CDO market had little to NOTHING to do with Fannie and Freddie. That was all PRIVATE capital buying PRIVATE mortgages.
You still believe this was a government problem. What a freaking laugh. Maybe spending some time in a textbook would do you some good.
PCutter said:
Lets focus on this one here too.
So, please do tell me how it is that the market for CDS's was regulating itself prior to 2008. Because, I would suggest that selling insurance not backed by any money is pretty freaking stupid. Outright dumb actually. Your little theory breaks down before it even began. They didn't seem to be regulating themselves for that "next problem" there, did they Skippy?
Also note one other GLARING reality:
1. The market for loans that involve Fannie and Freddie is still alive.
2. The market for non-conforming loans is dead. By "dead" I mean that there is no longer a supply, and there is no longer a demand. Its dead. Hundreds of companies went tits up that did those loans.
Now, based on that AND the default rate among the differing loans, you explain to me how this was primarily a government problem again. Because to suggest that really is ridiculous. Not only is it ridiculous, it is an outright lie.
1. The market for loans that involve Fannie and Freddie is still alive.
2. The market for non-conforming loans is dead. By "dead" I mean that there is no longer a supply, and there is no longer a demand. Its dead. Hundreds of companies went tits up that did those loans.
Now, based on that AND the default rate among the differing loans, you explain to me how this was primarily a government problem again. Because to suggest that really is ridiculous. Not only is it ridiculous, it is an outright lie.
PCutter
You know what, I apologize for the insults. I read the "crappy mortgage originator" line and decided to ratchet it up, but you did include a smiley, so I was being a d!ck. I will move forward without the ad hominem.
You know what, I apologize for the insults. I read the "crappy mortgage originator" line and decided to ratchet it up, but you did include a smiley, so I was being a d!ck. I will move forward without the ad hominem.
Thoughtforfood said:
Frannie and Freddie should be dead. They are not because the government stepped in, not because they have this great pool of quality loans. Whether this were a good or bad thing, its hard to say as we'll never know how bad it would have been if the gov't hadn't stepped in. The demand of Freddie/Fannie loans is underpinned by the US gov't ownership and thus its guarantee and therefore the gov't's AAA status. Other non-conforming loans do not have the same benefit, so there is no demand in the market for non-govt guaranteed RMBS when you can go down the street to Fannie and get gov't guaranteed RMBS. Demand for Freddie/Fannie loans is not a function of the quality of the assets, but the quality of the ownership. And that is the glaring reality. I would debate the quality of that ownership though (ie US's AAA status - but a downgrade of that really would be a global disaster).
As for how CDS will be fixed by the market. The market bit the pooch (or kicked the pooch, or whatever the saying is, its not one I use regularly) massively on the CDS market. And it died. And now it is slowly being reborn, and market participants are being far more careful about the counterparty holding the CDS with which they are investing. This is how the market has fixed it - as those who took a bath on CDS, had their investors withdraw their funds, and their confidence, and place it with people who demanded higher standards. In the meantime Governments are still debating exactly what to do about CDS and will no doubt come out with a regulation addressing what happened 2 yrs ago, but the market will have moved on from that model already.
meanwhile
"The Fed also owns credit-default swaps — basically, insurance policies that pay off if a borrower defaults on a loan. It holds swaps on the debt of Florida schools, and on debt owed by California and Nevada. So the Fed would profit if one of those states defaulted on its debt.""
No ‘there’ there: Dinallo said that credit default swaps — essentially private insurance contracts that paid off if the underlying investment went bad — were totally unregulated, meaning that the banks and investment houses that sold them didn’t have to set aside any money to cover potential losses. “As the market began to seize up and as the market for the underlying obligations began to perform poorly, everybody wanted to get paid, had a right to get paid on those credit default swaps,” he said. “And there was no ‘there’ there. There was no money behind the commitments.”
It was legalized gambling: 100 years ago it was illegal gambling, explained Dinallo. And then Congress made it legal gambling with the Commodity Futures Modernization Act of 2000, which removed derivatives and credit default swaps from federal oversight and preempted the states from enforcing existing gambling and bucket shop laws against Wall Street.
worth another picture of a world class crook--Ms Commodity Futures Modernization Act of 2000 herself
"The Fed also owns credit-default swaps — basically, insurance policies that pay off if a borrower defaults on a loan. It holds swaps on the debt of Florida schools, and on debt owed by California and Nevada. So the Fed would profit if one of those states defaulted on its debt.""
No ‘there’ there: Dinallo said that credit default swaps — essentially private insurance contracts that paid off if the underlying investment went bad — were totally unregulated, meaning that the banks and investment houses that sold them didn’t have to set aside any money to cover potential losses. “As the market began to seize up and as the market for the underlying obligations began to perform poorly, everybody wanted to get paid, had a right to get paid on those credit default swaps,” he said. “And there was no ‘there’ there. There was no money behind the commitments.”
It was legalized gambling: 100 years ago it was illegal gambling, explained Dinallo. And then Congress made it legal gambling with the Commodity Futures Modernization Act of 2000, which removed derivatives and credit default swaps from federal oversight and preempted the states from enforcing existing gambling and bucket shop laws against Wall Street.
worth another picture of a world class crook--Ms Commodity Futures Modernization Act of 2000 herself
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