Off Topic · OT: Some worrisome trends in the economy (page 2)

Hank wrote:

arkrud wrote:

Hank wrote:

meloshouldgo wrote:

Hank wrote:I do believe there is too much easy credit in the United States. Real estate, education, cars won't be so expensive if there is more restrictions on borrowing money. Doesn't make sense to take 100,000-plus loan to bachelor's degree that most likely lead to minimum wage or unemployment. Same goes for buying more expensive homes and cars than you can afford. Over-borrowing is a common problem and pattern every decade, and will continue on until United States can no longer borrow money. This may may or may not happen in our lifetime, don't have any historical points for reference. It did take Roman Empire and China a few hundred years to collapse/rebuild. It took Greece a couple of decades to ask for a bail-out.

Borrowing money is the norm, and will continue to be the norm until U.S. can't borrow money from other countries, as in other countries are in recessions. Apparently, we are not close to our limit on borrowing money, but a recession might be coming if the default rates on loans keep going up. US economy can endure a lot of stress before imploding into a recession (could be mild or strong one).

Interesting. do you have data on people with $100K degrees earning minimum wage? I would like to see that.

Borrowing money IS the norm, but has little to do with other countries. It became the norm because it is the central mechanism that drives the financial engine of this country. Our economy runs on debt. If people start paying the debt off ata massive rate, the whole economy will collapse. Borrowing is a problem because the people running teh economy want the population to be permanently saddled with debt. It's how they make money.

Being in debt is part of the US economy, but I wouldn't say businesses want Americans to be saddled in debt. It's more like a vicious cycle, consumers want to keep buying things they can't afford, and banks want to give these loans since it's profitable. No one is really paying attention to future consequences, which leads to a financial bubble and recession. I don' think regulation is going to help much, I think people/businesses will have to learn the hard way, which is to take the huge loss.

We just had a huge bubble burst and recession in 2008.
Where are this all losers hiding? Looks like whoever was OK before is OK after.
And many are more that OK.
Who cares how wealth is accumulated in US as soon as it is accumulated.
We get more, World get less. And we have nuks and mighty military to protect it.
World of Man is not fair. And will never be.
So lets just enjoy what we have. Life is short.

Yes, people will adapt, move on, and will be fine. I am enjoying my life.

Yes, "Who cares" is agood way to phrase it. It just about sums up the problem I am trying to illustrate.

meloshouldgo wrote:

Hank wrote:

arkrud wrote:

Hank wrote:

meloshouldgo wrote:

Hank wrote:I do believe there is too much easy credit in the United States. Real estate, education, cars won't be so expensive if there is more restrictions on borrowing money. Doesn't make sense to take 100,000-plus loan to bachelor's degree that most likely lead to minimum wage or unemployment. Same goes for buying more expensive homes and cars than you can afford. Over-borrowing is a common problem and pattern every decade, and will continue on until United States can no longer borrow money. This may may or may not happen in our lifetime, don't have any historical points for reference. It did take Roman Empire and China a few hundred years to collapse/rebuild. It took Greece a couple of decades to ask for a bail-out.

Borrowing money is the norm, and will continue to be the norm until U.S. can't borrow money from other countries, as in other countries are in recessions. Apparently, we are not close to our limit on borrowing money, but a recession might be coming if the default rates on loans keep going up. US economy can endure a lot of stress before imploding into a recession (could be mild or strong one).

Interesting. do you have data on people with $100K degrees earning minimum wage? I would like to see that.

Borrowing money IS the norm, but has little to do with other countries. It became the norm because it is the central mechanism that drives the financial engine of this country. Our economy runs on debt. If people start paying the debt off ata massive rate, the whole economy will collapse. Borrowing is a problem because the people running teh economy want the population to be permanently saddled with debt. It's how they make money.

Being in debt is part of the US economy, but I wouldn't say businesses want Americans to be saddled in debt. It's more like a vicious cycle, consumers want to keep buying things they can't afford, and banks want to give these loans since it's profitable. No one is really paying attention to future consequences, which leads to a financial bubble and recession. I don' think regulation is going to help much, I think people/businesses will have to learn the hard way, which is to take the huge loss.

We just had a huge bubble burst and recession in 2008.
Where are this all losers hiding? Looks like whoever was OK before is OK after.
And many are more that OK.
Who cares how wealth is accumulated in US as soon as it is accumulated.
We get more, World get less. And we have nuks and mighty military to protect it.
World of Man is not fair. And will never be.
So lets just enjoy what we have. Life is short.

Yes, people will adapt, move on, and will be fine. I am enjoying my life.

Yes, "Who cares" is agood way to phrase it. It just about sums up the problem I am trying to illustrate.

My point is that Human Race does not have enough wealth for everyone from 7 billions people to leave live even the homeless person in US has.
Not talking about average US citizen.
In the history of mankind the Civilizations which existed at the same time never had equal development.
And many were dead-end cultures which vanished without a trace.
Our time is not an exception.
The difference is there are too many people and they have no place to run.
So the death and suffering multiplied and until the population of the Earth will go down at leas in a half this will not change.
So we will see more war, terror, pandemics, and we have to be ready to survive in this chaos.
Isolationism is not an idea fix of some group of conservative politicians but clear necessity.
The great migration from wastelands of Africa and Middle East is just beginning.
And we will need to deal with it. Europeans already get the first feel of it. More to come.
So tighten your seat belts...

arkrud wrote:

meloshouldgo wrote:

Hank wrote:

arkrud wrote:

Hank wrote:

meloshouldgo wrote:

Hank wrote:I do believe there is too much easy credit in the United States. Real estate, education, cars won't be so expensive if there is more restrictions on borrowing money. Doesn't make sense to take 100,000-plus loan to bachelor's degree that most likely lead to minimum wage or unemployment. Same goes for buying more expensive homes and cars than you can afford. Over-borrowing is a common problem and pattern every decade, and will continue on until United States can no longer borrow money. This may may or may not happen in our lifetime, don't have any historical points for reference. It did take Roman Empire and China a few hundred years to collapse/rebuild. It took Greece a couple of decades to ask for a bail-out.

Borrowing money is the norm, and will continue to be the norm until U.S. can't borrow money from other countries, as in other countries are in recessions. Apparently, we are not close to our limit on borrowing money, but a recession might be coming if the default rates on loans keep going up. US economy can endure a lot of stress before imploding into a recession (could be mild or strong one).

Interesting. do you have data on people with $100K degrees earning minimum wage? I would like to see that.

Borrowing money IS the norm, but has little to do with other countries. It became the norm because it is the central mechanism that drives the financial engine of this country. Our economy runs on debt. If people start paying the debt off ata massive rate, the whole economy will collapse. Borrowing is a problem because the people running teh economy want the population to be permanently saddled with debt. It's how they make money.

Being in debt is part of the US economy, but I wouldn't say businesses want Americans to be saddled in debt. It's more like a vicious cycle, consumers want to keep buying things they can't afford, and banks want to give these loans since it's profitable. No one is really paying attention to future consequences, which leads to a financial bubble and recession. I don' think regulation is going to help much, I think people/businesses will have to learn the hard way, which is to take the huge loss.

We just had a huge bubble burst and recession in 2008.
Where are this all losers hiding? Looks like whoever was OK before is OK after.
And many are more that OK.
Who cares how wealth is accumulated in US as soon as it is accumulated.
We get more, World get less. And we have nuks and mighty military to protect it.
World of Man is not fair. And will never be.
So lets just enjoy what we have. Life is short.

Yes, people will adapt, move on, and will be fine. I am enjoying my life.

Yes, "Who cares" is agood way to phrase it. It just about sums up the problem I am trying to illustrate.

My point is that Human Race does not have enough wealth for everyone from 7 billions people to leave live even the homeless person in US has.
Not talking about average US citizen.
In the history of mankind the Civilizations which existed at the same time never had equal development.
And many were dead-end cultures which vanished without a trace.
Our time is not an exception.
The difference is there are too many people and they have no place to run.
So the death and suffering multiplied and until the population of the Earth will go down at leas in a half this will not change.
So we will see more war, terror, pandemics, and we have to be ready to survive in this chaos.
Isolationism is not an idea fix of some group of conservative politicians but clear necessity.
The great migration from wastelands of Africa and Middle East is just beginning.
And we will need to deal with it. Europeans already get the first feel of it. More to come.
So tighten your seat belts...

People who advocate for isolationism should go live in a cave and they should take their friends with them. You can't live in a society and not care about the people around you - because that is what is supposed to make you human. Given your responses I still think you maybe somebody's sick joke of a bot in a machine learning experiment gone rogue. You don't lack street smarts, but your responses "seem" to indicate a lack of basic decency and humanity.

One reason for the 2008 recession, and there are many reasons, is the US government pushing banks to find ways to increase the homeownership rate in US. Being a home-owner is the American Dream, and that is an agenda pushed by Americans, politicians, real estate developers, and banks. For more details, read the study below on the causes of the housing bubble in 2008. Not saying banks don't prey on consumers, but just pointing a recession is contributed by many players, including the government.

https://www.aei.org/wp-content/uploads/2014/10/pinto-bailout-america-timeline-government-mortgage-complex_1305029805.pdf

"Over the next 16 years underwriting standards across the nation were progressively loosened.
At the same time Fannie Mae and Freddie Mac’s charters withstood all efforts to be reined in.
During boom periods low delinquency rates reduce losses and tend to promote a progressive
weakening of lending standards. The governments push for weaker standards was akin to
dynamiting the housing finance system. Financial and economic collapse ensued turning the
American dream into the American nightmare. "

Hank wrote:One reason for the 2008 recession, and there are many reasons, is the US government pushing banks to find ways to increase the homeownership rate in US. Being a home-owner is the American Dream, and that is an agenda pushed by Americans, politicians, real estate developers, and banks. For more details, read the study below on the causes of the housing bubble in 2008. Not saying banks don't prey on consumers, but just pointing a recession is contributed by many players, including the government.

https://www.aei.org/wp-content/uploads/2014/10/pinto-bailout-america-timeline-government-mortgage-complex_1305029805.pdf

"Over the next 16 years underwriting standards across the nation were progressively loosened.
At the same time Fannie Mae and Freddie Mac’s charters withstood all efforts to be reined in.
During boom periods low delinquency rates reduce losses and tend to promote a progressive
weakening of lending standards. The governments push for weaker standards was akin to
dynamiting the housing finance system. Financial and economic collapse ensued turning the
American dream into the American nightmare. "

This is a right wing sanitized version of reality. And reality is not hard to find. The deregulation was well underway based on actions of teh Fed(specifically Greensapn) and not the government. The banks and the Fed played a pretty cute game to usher in deregulation and then promoted this myth that the government push for fair housing was responsible for it. And I am not for a second giving the government a pass. Clinton and his Republican congress definitely did everything they could to drive the final nails into the coffin of regulation that had withstood the test of time.

By BARRY EICHENGREEN January 16, 2015
Many have bemoaned the U.S. government’s failure to do more to strengthen the financial system following the 2008-2009 crisis. In particular, Congress has not considered anything resembling a revival of the Glass-Steagall Act, which separated the humdrum deposit-taking function of commercial banks from the kind of dubious investment and trading activities that set up financial institutions for a fall.

In fact, Congress recently weakened The Volcker Rule, which aimed to prohibit some forms of risky trading by banks. And now the Republican-controlled House and Senate vow to further roll back the Volcker Rule and other provisions of the Dodd-Frank financial reform.

All this makes it important to get the history, and specifically the history of Glass-Steagall, right. First put in place in response to the financial crises of the Great Depression, the Glass-Steagall Act was allowed to lapse in 1999. Many critics of that move argue that it enabled the orgy of financial risk-taking that followed. Others counter that the increased risk-taking was not coming from commercial banks freed up by the elimination of Glass Steagall but by the shadow banking system of investment firms, hedge funds, and commercial paper dealers that were never restricted by Glass Steagall in the first place.

In fact, the financial crisis of the late 2000s was not brought on by the lack of Glass-Steagall per se but instead by a whole set of measures that loosened regulation. The end of Glass-Steagall was simply emblematic of that process.

It all started in 1980 with the abolition of Regulation Q ceilings on deposit interest rates, which allowed commercial banks to compete more aggressively for deposits. That led to a cascade of unintended consequences. It intensified the pressure on Savings & Loans, which previously had been permitted to offer higher deposit rates than other financial institutions. To limit the damage, the Garn-St. Germain Act of 1982 allowed S&Ls to engage in a range of commercial banking activities, those related to consumer lending for example.

Garn-St. Germain helped set the stage for the S&L crisis because it allowed thrifts to take on additional risk but didn’t do anything to restrain them. Meanwhile, as the thrifts began to offer more financial services to customers, traditional banks began to feel competitive pressure. Commercial banks had long been frustrated by their inability to underwrite corporate and municipal bonds. So, in response to a petition from J.P. Morgan(JPM, -1.12%), Bankers Trust, and Citicorp, the Federal Reserve creatively reinterpreted Glass-Steagall in December 1986 to allow commercial banks to derive up to 5% of their income from investment banking activities, including underwriting municipal bonds, commercial paper, and, fatefully, mortgage-backed securities.

In 1987, over the opposition of Fed Chair Paul Volcker, the Federal Reserve Board authorized several large banks to further expand their underwriting businesses. Under Volcker’s successor, Alan Greenspan, the Fed then allowed bank holding companies to derive as much as 25% of their revenues from investment banking operations.

The pressure to loosen regulation intensified as a merger wave swept through the world of investment banking and brokerage firms in the 1990s. Investment banks had first been allowed to expand when, in 1970, the ban on publicly listing their shares was lifted. The response took time to gather steam, but they now expanded with a vengeance.

In 1997, Morgan Stanley (MS, -0.68%), an investment bank, merged with Dean, Witter, Discover & Co., a brokerage and credit card company. That same year, the trust company and derivatives house Bankers Trust acquired Alex. Brown & Sons, an investment and brokerage firm. The consolidation of investment houses, brokers, and insurance companies threatened to put banks at an even bigger disadvantage. So, the banks responded by lobbying even more intensely for the removal of the remaining restrictions on their operations.

By the 1990s, then, the Glass-Steagall Act was already significantly weakened. The fatal blow was struck in 1998 when Citicorp moved to purchase Travelers Insurance Group, notwithstanding Glass-Steagall’s requirement that it sell off Travelers’ insurance business within two years. The merger allowed Travelers to market insurance and its in-house money funds to Citicorp’s retail banking customers. And it gave Citicorp access to an expanded clientele of investors and insurance policyholders. Its main shortcoming? It was not compatible with Glass-Steagall.

The chairmen and co-CEOs of the merged company, John Reed and Sandy Weill, mounted a furious campaign to remove Glass-Steagall’s nettlesome restrictions before the two-year window closed. Their arguments received a sympathetic hearing from Alan Greenspan’s Fed, the Clinton White House, and the Treasury Department, especially when Lawrence Summers succeeded Robert Rubin as secretary in mid-1999. And the executives were warmly received in the halls of Congress, where bank lobbyists freely roamed.

Glass-Steagall was finally euthanized by the Gramm-Leach-Bliley Act, which repealed residual restrictions on combining commercial banking, investment banking, and insurance underwriting businesses in November 1999.

It would be all too easy to claim that Glass-Steagall’s death was a singular event that caused the financial crisis. In fact, its demise was the culmination of a decades-long process of financial deregulation in which both commercial banks and shadow banks were permitted to engage in a wider range of activities, while supervision and oversight lagged behind. Competition between commercial banks, investment banks, and shadow banks squeezed the profits of all involved. Many of the affected institutions responded by using more borrowed money and assuming more risk. The consequences, we now know, were disastrous.

The fact that much of the risky business that led to the 2008-2009 crisis was performed by shadow banks that had always operated outside the Glass-Steagall ring-fence does not excuse the ongoing relaxation of financial oversight and regulation. But simply putting Glass-Steagall back in place will not protect us from future crises. Re-regulating only part of the financial system will not be enough.

We need comprehensive financial reform to cope with 21st century financial markets. From this point of view, eviscerating the Dodd-Frank Wall Street Reform and Consumer Protection Act, as some in the recently inaugurated Congress propose, would be a step in precisely the wrong direction.

Barry Eichengreen is the George C. Pardee and Helen N. Pardee Professor of Economics and Political Science at the University of California, Berkeley and the author of the recently published Hall of Mirrors: The Great Depression, The Great Recession, and the Uses-and Misuses-of History.

Deregulation happened because the banks weren't happy being lenders anymore and they wanted to be able to make ridiculous bets often against the loans on their own books to profit from what basically amounts to reckless and unhinged gambling. And the Watchdog rating agencies were in on the take. To fall for this narrative that government was responsible for deregulation falls somewhere between sheer naivete and wilfull suspension of reality. The article here makes Glass-Stegall look like some weak ass rule, but it wasn't. Every thing ittalks about in the bolded area were actually violations of Glass- Stegall that were allowed to happen.

Systematic racism against people of color trying to be homeowners was pervasive, well documented and easy for anyone excpet the most inherently biased people to see. The effort by the government to allow people of color to be homeowners by lowering credit requirements has been subsequently lampooned by the GOP establishment as the reason for the crisis. For banks that were betting billions of tax payers savings to profit from derivatives trading, a marginal lowering of credit qualifications for mortgageges suddenly became the one thing that "forced" them to take risks. Convenient- isn't it? Plus there's plenty of data that even at the peak of the crisis the subprime mortgages still accounetd for a small percentage of the losses the banks were faced with. The biggest chunks of those came from Prime mortgage loan defaults made out to "responsible white homeowners" and from derivatives trading.

The government did play a role in lowering the lending standards for mortgages, how big of a role is up to debate. Freddie Mac And Fannie Mae are semi-government agencies that bought a lot of these mortgage backed securities (MBS) that were bundle with sub-prime mortgages. Since MBS are bundle with prime mortgages, enough default in subprime mortgages can impact the prime mortgages in MBS.

Fannie Mae and Freddie Mac bought these securities in an effort to help raise homeowner rate in U.S., and it was also considered safe and profitable by credit agencies. A lot of players contributed to the 2008 recession, and many of them had good intention. It's really hard to argue against a public agenda of increasing home ownership in this country, including people with low credit scores.

You know before 2008 recession, there was no national real estate crisis, only regional ones. Pretty much of all the big financial institutions made enormous bets that real estate on the national level would never fall, and kept acquiring more subprime mortgages and bundle them with prime mortgages. And to make more profits, they took on more risk and created other novelty derivatives off on MBS. So even though subprime mortgages were small % of the real estate market, it was the size on the bets that these institutions took on that made it very devastating when a national real estate crisis emerged. And it had a snowball effect, since even prime owners lost their home during the crisis.

Also, keep in mind, I agree that financial institution played a huge role in the financial crisis, but the government had played a role (big or small) in the crisis as well. The government has the interest of the public, which is to find ways to increase home ownership rate and to create affordable housing.

You are conflating the trigger for the collapse with the reason for the bubble. Subprime defaults may have triggered the collapse, and if they hadn't something else would have.

Government had zero to do with MBS and CDOs.(Android phone not letting me put the URL tags)
Take a read on this article

http://fortune.com/2015/06/17/subprime-mortgage-recession/

https://www.msn.com/en-us/news/politics/...

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