Trump

[Dilip Panjwani]

Re: What Libertarianism is, and what it isn't

Sorry, Mathieu, I should have clarified...it was not because people would not be able to appreciate it, it was because it included discussion about use of technology which is still evolving, and may take decades to become a reality...and I did not really want it to be viewed as 'science fiction' ;-)

[Tom O'Donnell]

Re: Trump

... Tom, I'd like to get your thoughts on the last recession in the U.S. from 2008 to 2012 roughly.... because that recession was such proof positive of the nefarious effect of unhindered corporation activity hurting -- in fact, almost killing -- the overall economy of the U.S. I'm referring, of course, to the unregulated buying and selling of mortgage-backed securities that brought too-big-to-fail enterprises such as AIG, JP Morgan, General Motors etc. to their knees. ...

I have no idea why you are talking about "unregulated". It seems to me that the crux of the problem was that the government ordered entities like Fannie Mae and Freddie Mac to make sub-prime loans to people who were bad risks and backstopped the loans. That distorted the market.

They also provided loan guarantees which made it relatively risk-free for other entities to make loans because the government guaranteed they would be paid back (much like CMHC in Canada). That distorted the market.

They then bailed out a bunch of companies who should have gone out of business because they were "too big to fail", which certainly implies that the government will not bail out smaller companies, which just underscores my point. And ya, that distorted the market. I remember Mozilo faced time but I can't recall too many others. I am sure it is probably just a coincidence that bankers are among the biggest contributors to political campaigns.

The government is like a drug dealer. They inject you with free money, you feel great for a while, then you crash. But hey here's another injection coming soon, so we're all good.

To summarize: government created a problem, then tried to fix it, and created another problem.

I suspect in my lifetime I will see at least one more example of the boom/bust cycle in US real estate because it seems to me that people learned the wrong lessons.

[Tom O'Donnell]

Re: Trump

Some more fake news. Courtesy of the CBC:

https://www.youtube.com/watch?v=kBHK4WWDdq4

http://www.huffingtonpost.ca/tim-moe..._14966070.html

[Paul Bonham]

Re: Trump

I have no idea why you are talking about "unregulated". It seems to me that the crux of the problem was that the government ordered entities like Fannie Mae and Freddie Mac to make sub-prime loans to people who were bad risks and backstopped the loans. That distorted the market.

...


To summarize: government created a problem, then tried to fix it, and created another problem. ....

Debunked, fake news. Statements of fact about the investigation of the crisis can be found on Wikipedia:

The Financial Crisis Inquiry Commission (FCIC) issued three concluding documents in January 2011: 1) The FCIC "conclusions" or report from the six Democratic Commissioners; 2) a "dissenting statement" from the three Republican Commissioners; and 3) a second "dissenting statement" from Commissioner Peter Wallison. Both the Democratic majority conclusions and Republican minority dissenting statement, representing the views of nine of the ten commissioners, concluded that government housing policies had little to do with the crisis.

The FCIC placed significant blame for the crisis on deregulation, reporting: "We conclude widespread failures in financial regulation and supervision proved devastating to the stability of the nation’s financial markets. ..."

Now Tom, before you start typing your bias-laced comments, realize that you and I are talking about 2 different things here. You are talking about actual mortgages. But mortgages weren't the root of the crisis. If they were, the government would have fulfilled their guarantees and the taxpayers would have footed the bill or the deficit would have gone up and that would have been that.

The root of the crisis was not mortgages but MORTGAGE-BACKED SECURITIES. That's why in the above wikipedia section I underlined the words "nation's financial markets". It was deregulation of financial institutions that allowed them to freely market mortgages in packages, known as MBS's, that were bought and sold around the world. The buying and selling got so frenzied (in the greedy pursuit of profit) that when mortgages started failing, NO ONE COULD DETERMINE WHO OWNED THEM. Thus fears started escalating that the biggest banks would eventually found to be on the hook for billions of these MBS instruments, and the LIBOR crisis happened just before Obama Barack took office in early 2009.

LIBOR is an acronym that stands for “London Interbank Offered Rate,” which is a benchmark interest rate that is derived from the rates that major banks charge each other for loans in the London interbank market. As the world’s most important benchmark interest rate, the LIBOR is used as a reference rate for hundreds of trillion dollars worth of commercial and consumer loans, derivatives, and other financial products across the globe.

The LIBOR rates shot up because of fear, and suddenly all the world's banks could not raise capital. Lending ground to an almost complete halt. This is why General Motors had to be bailed out: people were not able to buy cars even if they wanted to.

This is what brought down AIG, Bear Stearns, Lehman Bros. and others. They would have been fine if the only problem was foreclosures and if the originating lenders still owned the mortgages. But instead, these MBS instruments were created out of thin air, bought and sold, spread like a cancer, and none of this was regulated so that it all grew to enormous proportions as sheer greed prevailed over common sense. Think of it as like an unregulated stock market. How long do you think that house of cards would last?

So you can use your conservative talking points all you want, Tom, but it's fake news. The real problem was deregulation and excessive greed. Just as with all the other crisis I mentioned: BP oil spill, Fukushima, Volkswagon, Wells Fargo, lead, asbestos, formaldehyde.... I notice you had nothing to say about all that.

You are correct that overregulation, as the government engaged in with mortgages, is not good. But deregulation / lack of regulation is a disaster. It will always benefit the few and hurt the many. And it can even bring down all of human civilization.

[Neil Frarey]

Re: Trump

Debunked, fake news. Statements of fact about the investigation of the crisis can be found on Wikipedia:

[I]The Financial Crisis Inquiry Commission (FCIC)

All I read was ... Financial Chess Inquiry Commission ... and then couldn't continue to read the rest of your diatribe :p

[Tom O'Donnell]

Re: Trump

From https://en.wikipedia.org/wiki/Subprime_lending (about 2/3 down the page)

" ... The subprime mortgage crisis arose from 'bundling' American subprime and American regular mortgages into MBSs which were traditionally isolated from, and sold in a separate market from, prime loans.[4] These 'bundles' of mixed (prime and subprime) mortgages were based on asset-backed securities so the 'probable' rate of return looked superb (since subprime lenders pay higher premiums on loans secured against saleable real-estate, which was commonly assumed "could not fail"). Many mortgages had a low interest for the first year, and poorer buyers defaults were 'swapped' regularly at first, but finally such borrowers began to default in large numbers. The inflated house-price bubble burst, property valuations plummeted and the real rate of return on investment could not be estimated, and so confidence in these instruments collapsed, and all less than prime mortgages were considered to be almost worthless toxic assets, regardless of their actual composition or performance. Because of the "originate-to-distribute" model followed by many subprime mortgage originators, there was little monitoring of credit quality and little effort at remediation when these mortgages became troubled.[4]

To avoid high initial mortgage payments, many subprime borrowers took out adjustable-rate mortgages (or ARMs) that give them a lower initial interest rate. But with potential annual adjustments of 2% or more per year, these loans can end up costing much more. So a $500,000 loan at a 4% interest rate for 30 years equates to a payment of about $2,400 a month. But the same loan at 10% for 27 years (after the adjustable period ends) equates to a payment of $4,220. A 6-percentage-point increase (from 4% to 10%) in the rate caused slightly more than a 75% increase in the payment.[15] This is even more apparent when the lifetime cost of the loan is considered (though most people will want to refinance their loans periodically). The total cost of the above loan at 4% is $864,000, while the higher rate of 10% would incur a lifetime cost of $1,367,280. ..."

That a bunch of people in government don't blame government is not exactly surprising to me.

I question the idea that somehow people in business are greedy while people in government are (for some unknown reason) not. Particularly when these people seem to routinely move from one to the other (e.g. Goldman Sachs <----> Feds).

[Paul Bonham]

Re: Trump

From https://en.wikipedia.org/wiki/Subprime_lending (about 2/3 down the page)

" ... The subprime mortgage crisis arose from 'bundling' American subprime and American regular mortgages into MBSs which were traditionally isolated from, and sold in a separate market from, prime loans.[4] These 'bundles' of mixed (prime and subprime) mortgages were based on asset-backed securities so the 'probable' rate of return looked superb (since subprime lenders pay higher premiums on loans secured against saleable real-estate, which was commonly assumed "could not fail"). Many mortgages had a low interest for the first year, and poorer buyers defaults were 'swapped' regularly at first, but finally such borrowers began to default in large numbers. The inflated house-price bubble burst, property valuations plummeted and the real rate of return on investment could not be estimated, and so confidence in these instruments collapsed, and all less than prime mortgages were considered to be almost worthless toxic assets, regardless of their actual composition or performance. Because of the "originate-to-distribute" model followed by many subprime mortgage originators, there was little monitoring of credit quality and little effort at remediation when these mortgages became troubled.[4]

To avoid high initial mortgage payments, many subprime borrowers took out adjustable-rate mortgages (or ARMs) that give them a lower initial interest rate. But with potential annual adjustments of 2% or more per year, these loans can end up costing much more. So a $500,000 loan at a 4% interest rate for 30 years equates to a payment of about $2,400 a month. But the same loan at 10% for 27 years (after the adjustable period ends) equates to a payment of $4,220. A 6-percentage-point increase (from 4% to 10%) in the rate caused slightly more than a 75% increase in the payment.[15] This is even more apparent when the lifetime cost of the loan is considered (though most people will want to refinance their loans periodically). The total cost of the above loan at 4% is $864,000, while the higher rate of 10% would incur a lifetime cost of $1,367,280. ..."

That a bunch of people in government don't blame government is not exactly surprising to me.

I question the idea that somehow people in business are greedy while people in government are (for some unknown reason) not. Particularly when these people seem to routinely move from one to the other (e.g. Goldman Sachs <----> Feds).

Ok, so your wikipedia section says basically what I was saying.... mortgages were bundled into MBS's and when mortgages started failing, there was not only the foreclosure and perhaps short selling of the properties to be dealt with, but also this new thing that deregulated financial institutions were selling on unregulated markets and THAT was the cause of the crisis ("the real rate of return on investment could not be estimated, and so confidence in these instruments collapsed", right from your own quoted section with my emphasis added.)

Again, if bank regulations had remained in place and banks weren't allowed to package, buy and sell these MBS's there would not have been this additional side-effect collapse to worry about. The government would have upheld their mortgage guarantees and only the deficit (and taxes) would have increased and the economy could absorb that without crisis. Yes, the government made a mistake and over-regulated mortgages. No, that alone would not collapse the entire economy. It was the deregulation of banks and their greedy response to that deregulation that caused a minor but containable crisis to explode into a major crisis that could have brought down civilized society worldwide except for emergency actions, aka bailouts.

As far as corporate greed versus government greed, one thing must be remembered: corporations are only in one business, and that is making their shareholders happy. Their share value is critical to their survival. Every decision they make is based on return on investment. They do not care one smidgeon about the larger economy, about macroeconomics. If laying off 10,000 employees will boost their share price in a downturn, they do it. No concern whatsoever for whether those 10,000 layoffs might shut down a whole town.

The government is far more broad-based in their decision making. Governments live and die on macroeconomic numbers (among other things pertaining to the state / province / nation as a whole). This is really economics 101 and politics 101. I would be quite surprised you don't fathom these differences, but then that's what bias and closed-mindedness can do.

You are your own man, Tom, you can continue to be one-dimensional if that is what you want to be, but I can tell you the view is so much better when you climb the mountain of open-mindedness.

Or as Deepak Chopkra might have said (ha ha),
"The valleys where your thoughts are chained never see the sun."

[Tom O'Donnell]

Re: Trump

Ok, so your wikipedia section says basically what I was saying.... mortgages were bundled into MBS's and when mortgages started failing, there was not only the foreclosure and perhaps short selling of the properties to be dealt with, but also this new thing that deregulated financial institutions were selling on unregulated markets and THAT was the cause of the crisis ("the real rate of return on investment could not be estimated, and so confidence in these instruments collapsed", right from your own quoted section with my emphasis added.)

Again, if bank regulations had remained in place and banks weren't allowed to package, buy and sell these MBS's there would not have been this additional side-effect collapse to worry about. The government would have upheld their mortgage guarantees and only the deficit (and taxes) would have increased and the economy could absorb that without crisis. Yes, the government made a mistake and over-regulated mortgages. No, that alone would not collapse the entire economy. It was the deregulation of banks and their greedy response to that deregulation that caused a minor but containable crisis to explode into a major crisis that could have brought down civilized society worldwide except for emergency actions, aka bailouts.

As far as corporate greed versus government greed, one thing must be remembered: corporations are only in one business, and that is making their shareholders happy. Their share value is critical to their survival. Every decision they make is based on return on investment. They do not care one smidgeon about the larger economy, about macroeconomics. If laying off 10,000 employees will boost their share price in a downturn, they do it. No concern whatsoever for whether those 10,000 layoffs might shut down a whole town.

The government is far more broad-based in their decision making. Governments live and die on macroeconomic numbers (among other things pertaining to the state / province / nation as a whole). This is really economics 101 and politics 101. I would be quite surprised you don't fathom these differences, but then that's what bias and closed-mindedness can do.

You are your own man, Tom, you can continue to be one-dimensional if that is what you want to be, but I can tell you the view is so much better when you climb the mountain of open-mindedness.

Or as Deepak Chopkra might have said (ha ha),
"The valleys where your thoughts are chained never see the sun."

To summarize my position:

1) If there were no subprime loans backed by government there would have been no problems with CDOs. I don't believe that the government should back the purchase of any home by any person.

2) If I don't like what the mom and pop shop down the street is doing I can choose not to do business with them. If I don't like what the CBC is doing (in Canada) or what Goldman Sachs is doing (in the US) the government will prop them up with taxpayer money. Whether a particular taxpayer wants them to or not.

3) That government is operated by people. The same sorts of people who operate companies. I don't want a central plan by a few bureaucrats but organic plans by millions of citizens.

[Kevin Pacey]

Re: Trump

Fwiw, it is often said government cannot run any sort of business as well as the private sector. I've found private companies can screw things up pretty good too, at least from time to time. A tiny but symbolic example, perhaps... my local pharmacy had until recently provided a small bell at the cashier's desk, so that a customer could ring it to get the attention of a staff member who might be busy in an aisle doing other things. Recently, at another branch in the city, customers complained that that particular pharmacy had used a loud cowbell for this purpose. So, the company banned the use of all bells, both great and small, in every pharmacy in the city.

[Paul Bonham]

Re: Trump

Fwiw, it is often said government cannot run any sort of business as well as the private sector. I've found private companies can screw things up pretty good too, at least from time to time. A tiny but symbolic example, perhaps... my local pharmacy had until recently provided a small bell at the cashier's desk, so that a customer could ring it to get the attention of a staff member who might be busy in an aisle doing other things. Recently, at another branch in the city, customers complained that that particular pharmacy had used a loud cowbell for this purpose. So, the company banned the use of all bells, both great and small, in every pharmacy in the city.

When the post-mortem is done on the Trump administration (assuming any of us are around for there to be a post-mortem), what will become obvious is that trying to run a government like a corporation is utter foolishness.

Trump's mission statement is "America First". That is what he says will be going into all his decisions. And on the surface, if you're American and not doing so well in the current economy, America First sounds great. But what Trump and his supporters are not realizing is the full down-the-road consequences of America First. The greatest and most effecting consequence will be inflation. When your only source of goods and services becomes America, your cost goes way up. When companies are told they must do their manufacturing in America, their cost goes way up, and someone has to pay for that.

With high inflation will come a much larger cost of debt service for everyone, including the federal government itself. And that could ignite a process of spontaneous combustion, in which each tick up in the interest rate adds fuel to the fire. The end result is debt servicing taking up more than 50% of total government expenditures. Meanwhile, inflation will cause an implosion in the consumerism that America depends on to keep its economy going. The result of that is stagflation.

Already there are graphs and reports showing that China, Japan and many other nations are divesting themselves of U.S. Treasuries like never before. So far, Treasury auctions have not suffered because domestic buyers are stepping in. But the yield is going up, and the process is only getting started. When it's all over, America and possibly the entire world economy will be decimated. Over at the FED, Janet Yellen seems to think this can all be managed. But she's been quite wrong on her assessments in the past.

Trump did say during the election campaign that he would consider defaulting on foreign debt. Hello Argentina!

[Mathieu Cloutier]

Re: Trump

Fwiw, it is often said government cannot run any sort of business as well as the private sector. I've found private companies can screw things up pretty good too, at least from time to time. A tiny but symbolic example, perhaps... my local pharmacy had until recently provided a small bell at the cashier's desk, so that a customer could ring it to get the attention of a staff member who might be busy in an aisle doing other things. Recently, at another branch in the city, customers complained that that particular pharmacy had used a loud cowbell for this purpose. So, the company banned the use of all bells, both great and small, in every pharmacy in the city.

Plenty of things cannot be run efficiently as 100% private enterprise in a capitalist environment. Think about the fire department in a city. It would be a huge mess if the service wasn't public (and payment mandatory through your municipal taxes).

[Kevin Pacey]

Re: Trump

Plenty of things cannot be run efficiently as 100% private enterprise in a capitalist environment. Think about the fire department in a city. It would be a huge mess if the service wasn't public (and payment mandatory through your municipal taxes).

Fwiw, there have been privately owned Fire Departments, besides volunteer ones. I haven't tried to check if any serve cities anywhere, though:

https://en.wikipedia.org/wiki/Fire_department

[Duncan Smith]

Re: Trump

I have no idea why you are talking about "unregulated". It seems to me that the crux of the problem was that the government ordered entities like Fannie Mae and Freddie Mac to make sub-prime loans to people who were bad risks and backstopped the loans. That distorted the market.

They also provided loan guarantees which made it relatively risk-free for other entities to make loans because the government guaranteed they would be paid back (much like CMHC in Canada). That distorted the market.

They then bailed out a bunch of companies who should have gone out of business because they were "too big to fail", which certainly implies that the government will not bail out smaller companies, which just underscores my point. And ya, that distorted the market. I remember Mozilo faced time but I can't recall too many others. I am sure it is probably just a coincidence that bankers are among the biggest contributors to political campaigns.

The government is like a drug dealer. They inject you with free money, you feel great for a while, then you crash. But hey here's another injection coming soon, so we're all good.

To summarize: government created a problem, then tried to fix it, and created another problem.

I suspect in my lifetime I will see at least one more example of the boom/bust cycle in US real estate because it seems to me that people learned the wrong lessons.

You are a painting a good example how people on the internet can claim knowledge about something confidently and take conclusions from their false narrative and run with it. You don't understand what you are talking about. The sub prime crisis was a direct result of private corporations running wild under a lack of proper regulations to control their behavior. They basically took on risky options which pay a regular stream on income without understanding ( or in some cases caring ) about the implied risk of their investments. This snowballed over time to an inescapable situation.

Ironically, it was a LACK of government oversight that created the problem. Yet here you are claiming the opposite.

[Kevin Pacey]

Re: Trump

Fwiw, here's wikipedia's main entry on the causes of the 2007 financial crisis:

https://en.wikipedia.org/wiki/Financ...%932008#Causes

[Mathieu Cloutier]

Re: Trump

Fwiw, there have been privately owned Fire Departments, besides volunteer ones. I haven't tried to check if any serve cities anywhere, though:

https://en.wikipedia.org/wiki/Fire_department

Maybe my comment was not completely clear. I agree that the service can be private. But if it's private and payment for the service is mandatory, it's not real capitalism.

What I'm saying is that a 100% free market for things like fire departments is bound to fail. Some people will decide not to pay for coverage, the fire brigade might run out of funds. And competition leads to some strange incentives, like the firemen actually wanting to see more fires etc.

Just look at the wiki article you cited. It was indeed a real mess back in the days when free market was the norm.