A time of world wide crisis

[John Peterson]

Hey Gordon,

When I was growing up I heard a great number of stories about the great depression from my dad and many of his friends. Needless to say it always sounded as though it was a horrific time for many, many people. But I'm curious, do you think that America could be plunged into a full scale depression like the one of the 1930's. Or would it manifest itself in other ways?



---John Peterson

[JoeJustice]

Maybe a little off topic...

One thing is for sure, The Dust Bowl GREATLY contributed to the Depression. I don't see how we could have another depression without a very sustained natural* disasters such as that one.

-Joe

*The Dust Bowl was not actually a natural disaster, it was a man made weather event.

[MikeNY]

I suspect that the Bailout was to bail out Wall Street and also the Subprime Loan Holder's and not for the USA. The Republicans had a better Plan, the Workout, more like what the Europeans are doing. The Workout would have been US Insurance to the Financial Institutions and Government guarantees rather than a Bailout and much much cheaper. I doubt the Democratic & Bush Plan is best for the US but should work. The Democrats wanted Wall Streets silence since it was the Communitty Reinvestment Act that caused the Crediti Crisis.

[jaymo]

Hey Gordon,

When I was growing up I heard a great number of stories about the great depression from my dad and many of his friends. Needless to say it always sounded as though it was a horrific time for many, many people. But I'm curious, do you think that America could be plunged into a full scale depression like the one of the 1930's. Or would it manifest itself in other ways?



---John Peterson
[URL="http://www.vintagehealthandfitness.blogspot.com"]

Harry Dent, trusted demographic-based economic forecaster, says "YES"!

He has been quite accurate, long term.

[Andy62]

John, I don't know how this will compare to 1930,but it will be serious and last a long time in my opinion. Something like 2/3rds of the jobs created in the US in recent years were the result of employment growth in finance and construction. These are two areas that it is difficult to see coming back. Also while the US admittedly started the whole thing with our housing crisis the result, infact, is exposing weaknesses in Europe that had been convered up and most experts now seem to agree that Europe is in worse shape than the US, their financial instituations are less transparent, and they are way behind the US in coming to grips with the problem

[DJ]

Mike,

We had this discussion just the other day when you blamed the credit crisis on Obama and ACORN. As you are making similar (slightly different) remarks here I would like to give my two cent.

The credit crisis was not caused by the democrats, it was caused be lack of regulation. The lack of regulation on what you might ask, well the answer would be the creative securities called CDOs. CDO's first caused problems in the Enron crisis and are equally culpable for the credit crisis. I'll try to explain how the problem occurred but I suggest those interested read more in depth analysis then my very quick summary.

CDOs are that bundling of loans into funds that are sold. Now the problems with these CDOs are numerous. First they are an accounting nightmare as they allow creative accounting which can hide loss and inflate earnings. Second the are unregulated as they are fairly nebulous. There also is often a secondary packaging of these CDOs (please read up on this if interested).

Now so what? you might ask. Well financial industry is highly computerized and all information is assessed a degree of risk. Firms use a balance of risk based on computer models. The math always ensures the firms will be solvent by having a certain balance. What CDOs did was completely mess up the high/low risk balance due to their new, creative and misunderstood nature. When times were good CDOs paid out big when times got tough many institutions had exposed themselves to more risk then they understood and obviously many folded.

This is a very quick summary of what caused the credit crisis. It wasn't a particular candidate or a particular party. It was basically an unregulated derivative. As Greenspan (Sultan of Free Market Econ, disciple of Ayn Rand) himself said, it was not the loans that caused the problem, as they were actually a good thing in helping people get homes, but it was their bundling into funds that caused the problem. SEC Chaiman Cox testified that the problem was the bundling of loans into these unregulated CDOs. Once again, the financial sector is based on computer models that balance risk. Risk cannot be assessed correctly with these CDOs and accounting becomes a creative art.

If we don't understand what caused the crisis there is no way we can fix it and avoid another crisis in the future.

DJ

[MikeNY]

From reading I'd say that Obama and ACORN have been involved in the credit crisis and forced the issue. ACORN forced Banks to give subprime loans without documentation nor much supervision. http://article.nationalreview.com/?q=ZjRjYzE0YmQxNzU4MDJjYWE5MjIzMTMxMmNhZWQ1MTA=&w=MA==

The CRA was passed under President carter, then modified under President Clinton and changes made. Obama and ACORN lead the charge and forced Fannie and Freedie to package subprime loans, Wall Street became part of the Democratic problem. here is something by an Obama supporter disputing that http://articles.moneycentral.msn.com/Banking/HomeFinancing/did-poor-minorities-cause-the-crisis.aspx Here is a video tying the Obama/ACORN crowd in http://tizona.wordpress.com/2008/10/11/devastating-obama-tied-to-acorn-obamas-tactics-to-credit-crisis/ and Obama/ACORN at work http://www.nypost.com/seven/09292008/postopinion/opedcolumnists/os_dangerous_pals_131216.htm

The News might not want to admit it but the Crisis leads to Obama and Friends.

[MikeNY]

Untill the CRA is made fair and all the problems it caused will continute to fester. That Law has not been addressed in the bailout! It is just bad practice to allow a no documenation 110% of all costs, nothing down loan and not even know who the barrower is, no Identification needed either.

I think the Obama/ACORN Axis has already stolen the Election. http://www.nypost.com/seven/10082008/postopinion/opedcolumnists/the_pro_barack_vote_fraud_drive_132618.htm?page=0

[DJ]

Mike,

I have no problem with your wanting the CRA to be modified. The issue I have is your blame of Obama and ACORN for the credit crisis. I disagree with your reasoning which is, as I understand it, the following:

1. There is a credit crisis
2. Some high risk loans were involved in the crisis
3. CRA lead to some risky loans
4. ACORN believed in providing loans
5 Obama had some association with ACORN

Therefore

Obama is responsible for the credit crisis.

It has the appearance of logic but the conclusion is is anything but logical. I tried to explain the reason for the credit crisis in my earlier post. It is admittedly a simple (due to trying to explain it in a paragragh or two) explanation of the causes but I encourage you to read about it in depth. Greenspan himelf (as you know he was a Reagan appointee) said the crisis was brought on by the packaging of the mortgages and the subsequent inability to assess the risk correctly. He continued on to say that the loans themselves were good things.

Finally, the CRA is involved in less then 20% of mortgages (If memory serves me). Now the default rate on these is under 10%(I'm estimating on the high side for both of these to show worst case scenerio). If we do the math we see that that is under 2% off all loans, That is absolutely nothing for the size of our economy to absorb. Now ACORN is even lower on the totem pole and involved in a fraction of the less then 2%.

Now to be very clear. I believe both candidates to be good men but I disagree with anyone who attempts to
drag either one of them through the mud and make false assertions.

DJ

[MikeNY]

"I have no problem with your wanting the CRA to be modified. The issue I have is your blame of Obama and ACORN for the credit crisis. I disagree with your reasoning which is, as I understand it, the following:

1. There is a credit crisis
2. Some high risk loans were involved in the crisis
3. CRA lead to some risky loans
4. ACORN believed in providing loans
5 Obama had some association with ACORN

Therefore

Obama is responsible for the credit crisis.

It has the appearance of logic but the conclusion is is anything but logical. I tried to explain the reason for the credit crisis in my earlier post. It is admittedly a simple (due to trying to explain it in a paragragh or two) explanation of the causes but I encourage you to read about it in depth. Greenspan himelf (as you know he was a Reagan appointee) said the crisis was brought on by the packaging of the mortgages and the subsequent inability to assess the risk correctly. He continued on to say that the loans themselves were good things.

Finally, the CRA is involved in less then 20% of mortgages (If memory serves me). Now the default rate on these is under 10%(I'm estimating on the high side for both of these to show worst case scenerio). If we do the math we see that that is under 2% off all loans, That is absolutely nothing for the size of our economy to absorb. Now ACORN is even lower on the totem pole and involved in a fraction of the less then 2%.

Now to be very clear. I believe both candidates to be good men but I disagree with anyone who attempts to
drag either one of them through the mud and make false assertions. "

DJ if only 2% of Mortgages are toxic then there is no credit crisis! I do not think that Obama and ACORN planned the Credit Crisis but Democrats were steering the ship and lead the way. Obama has gotten a free pass from the Press and was never vetted.

Lou Dobbs [http://www.care2.com/news/member/176597074/909187 could be wrong; and ACORN just a civic minded group http://beltwayblips.com/video/obama_s_ties_to_acorn/

But Obama's fingerprints and ACORN's Loan Division aided this crisis. If 2% of bad Loans are at fault then something is very wrong. Wall Street was involved and I think still is backing Obama with cash.

I saw Obama get a free pass with Hillary and think the Democrats engineered the Primaries and used Caucus States to steal the election from Hillary. I remember the demand that whoever got more of the popular vote be the Democratic nominee until Obama lost the popular vote!

So DJ your saying that CNN Business News Lied about Obama and ACORN and other sources also lied and your secret sources are true? here is an article on the topic http://mises.org/story/2963 and here is a newspaper article on the topic http://www.nypost.com/seven/02052008/postopinion/opedcolumnists/the_real_scandal_243911.htm

[MikeNY]

Here is an article to help the why and how of the CRA causing Toxic Subprime Loans http://cafehayek.typepad.com/hayek/2008/09/the-role-of-the.html

They were flipping mortgages and I quote from the article "Accordingly, in mid-1999, 8.2 percent of the mortgages NACA had arranged with the Fleet Bank were delinquent, compared with the national average of 1.9 percent. ". I have read that 49% of private homes are owned by minorities in the USA, so your 2% toxic mortage figure does not look like it could cause the Credit Crisis Meltdown, can you provide facts please to back your claims.

Simply put bad loans were flipped over and refianced now with the bubble burst bad loans have stacked up for 30 years. I heard from one source they thought that possibly 30% of homes would default due to the crisis and that was why they did the Bailout. Now Wall Street did play the game the Democrats ordered. So if we are lucky 10% of homes will default not the 2% you quote. I think 1/3 of home loans are now under water, homes now worth less than was paid for the home.

McCain tried to stop this process, as did Bush several times. Obama. ACORN and the Democrats lead the charge to derail McCain's efforts at regulation and enforcement 2 years ago.

[imike24]

Now the most important thing to to solve the problem before it gets worst. It is not point blaming anyone right now. It is best to fixed it once and for all.

[MikeNY]

imike24 you can not change nor correct a problem when you pretend it is not there. Plus in the upcoming Election Americans are owed the truth, and the truth is never wrong. The Obama Propoganda Machine is benefiting from the Media conducting a Cover-up for him. If the American people knew his role in leading the Credit Crisis problems they'd have informed consent. As of now Obama and his Political Machine blame Bush and McCain for the credit crisis with impunity, and have avoided Obama's own guilt. Freedom means knowing the truth and the Media is acting as part of the Obama Campaign. That is a dire warning for the future and reminds me of the Fascist leaders of the past. those that forget history are forced to relive it.

[DJ]

Mike,

I have explained myself quite succinctly (I think) in regards to your Obama -ACCORN causing the credit crisis claim. I have explained what most non-partisan professional economists believed to be the reason for the credit crisis. I have also addressed what I consider to be a fault in your chain of logic. I have no illusions of changing your mind as your agenda is of a partisan nature. My reason in discussing this with you is so that any non-partisan individual reading this thread will see another view point and take some time to really understand the reason for this crisis. If they do, I have no doubt they will agree with what I've written.

I will not post on this thread again as I've explained myself. I have no hard feeling towards you Mike and hope to discuss physical culture issues on John's forum with you. I have enjoyed many of your posts on that forum and look forward to more in the future.

DJ

[MikeNY]

DJ I think your economic reasoning is faulty, in 1999 8.2% of the problem loans were CRA., ACORN also provides Loans and profits from that as do other Affilitaed Groups and profited by thier actions. Since 1999 more bad loans were extended and others refinanced. In the end the piper is always paid, just it was delayed.

I think the USA needs Nationalized Health Care, which neither candidate is offering. I honestly think Obama has been involved with, lead, trained and been a partisan in the Credit crisis. Possibly our educational backgounds lead me to a differnt conclusion since my degree was in in the field of discussion and it appears you did not read the evidance I posted to contrast your opinions.

I am not arguing with you and think most Americans get thier News from TV Evening News that does appear to be part of the Obama Propoganda Machine and that is a distorted picture. PS I'm not a republican nor a democrat, was a Union Offical/Steward and a Democtratic Party loyalist and leader until I saw the handwritting on the wall. All the best to you.

[Andy62]

There are changes in world dynamics that make this situation different from other economic challenges faced during the lifetimes of any one alive today. This is the first time that the whole world has been effected to this extent. The last 20 years have been built on pumping the world economies higher and higher with borrowed money at all levels from individuals to Governments. The mature economies of Western Europe are credit based while world power has shifted to the low cost producing and energy rich countries of Asia and the Persian Gulf together with Russia which tend in many instances not to be democracies and are not friendly with or want to control other countries. Frankly this economic Crisis is as much geopolitial as economic and we didn't have the terrorists active in the past. I am an optimist,but things are going to be different and westen life styles are going to decline.

[Andy62]

RUBBERBUS, I agree with many things that you say,but my concerns are with the larger picture. The countries that have benefitted from these changes are not democracies or at least democracies as we in the west have known them. The capital is concentrated in the Persian Gulf Countries, Asia [primarily China] and Russia. China and Russia are capitalist,but practice a brand of totalitarian capitalism. Putin has again become aggressive as is witnessed by his invasion of Georgia and he has stated that "the biggest mistake of the post Soviet Era was the breaking up The Societ Union" it self. Putin has been using oil, his nuclear technology, and Russia's extensive cash reserves to form long term alliances with non democratic countries - Iran, Venezuela and China. Russia just today announced an alliance with China where Russia will provide them with oil over a extended period in exchange for a $25 billion loan and this is in addition to their recent joint military training exercises. In addition you have the terrorists who have to be licking their chops over the reduced strength of the mature economies of Western Europe and North America as their ultimate collapse is the long term goal of the terrorists. There is no way that I can view these changes a beneficial to the overall health of democracries inspite of some in city changes that encourage more physical activity.

[Andy62]

rubberbus, I am not talking about wealth and commercial success. Actually I have a great deal of respect for the Chinese People, I earned a minor in Eastern civilization in college and the department head and my instructor was a very respected Chinese scholar who had formerly been ranked very high in the Chinese Diplomatic Corps. My concern is with their totalitarian, communist, government that stretches international laws and is heavily militaristic. We all hope that they become a good and respected member of the international community,but so far they have not shown an interest in doing so. By any standard in their current stance they have to be on the watch list of all western intelligence organizations as I know they are.

[MikeNY]

China is a Nation of great people and traditions ruled by a Communist Government that has the potential to be a powder keg, rural poverty, repession of human rights and of subject peoples as well as a growing Muslim Rebellion. The Communist Rulers seem aimed at bring Capitalism back to China as well enriching thier children called "The Young Princes" by the Chinese People. The Young Princes head up Corporations and Businesses and in a land of poverty is a slap in the face of the People.

China's aggressive policies in aiding Islamic Terrorist Groups looks like it will in the end backfire on China and bring problems as well as China's other uses of Power Politics like spreading nuclear technology through N. Korea a surrogate and Client State.

The US is changing and soon the bill is coming, Trillions have been spent in the War on Poverty and soon the baby Boomer's will be retiring and there is a 89 Trillion dollar deficit facing the USA. The money that should have been invested was spent on the Poverty War and contribute to the Credit Crisis. I foresee the US having to cut back on Social spending, Education and cut it's role as the World's Policeman.

[Andy62]

The father of history, Thucydides said that all major historical events result from a "cause and an event." In my lifetime I have never seen more causes than there are worldwde now. He also also emphasized the golden rule "those who have the gold make the rules." Major-major changes are coming. Just remain strong and develop your nerve force.

[Andy62]

I would like top see us do that too,but unfortunately if I were a terrorist I would pick this as a perfect time to attack.

[MikeNY]

The future seems to hold a deminsihed US role in World Politics. That does not mean a more stable world, it means more problems and conflict on the world stage. A US with less resources also means a reduceded standard of living. Right now about 33% of the US Population has never worked or has no show jobs, that will have to end and those that get a free ride will demand it continue. So look forward to social conflict within the USA.

Less assets mean rather than US style Prisons we will see Jails more like Third World Hell Holes and that might lead to reduced crime and much harsher punishments. Conflict between baby boomers and the poor, the boomers having paid for thier retirements over a life time of work and many of the poor having come from families that have not worked in generations and feeling entitled, and riding the Government Entitlement wave. ossibly real efforts to end Third World Immirgration and stopping llegal Aliens from using US Social benifits that they currently get. That will led to more racial conflict between the haves and have-nots.

Possibly the future is a Blade Runner a crude, dirty future in a Third World USA. Lets hope the US has the will to make a better future.

[MikeNY]

The next shoe is already dropping in the Credit Crisis, Credit Card Debit http://articles.moneycentral.msn.com/Banking/CreditCardSmarts/the-next-meltdown-credit-cards.aspx?page=1
and that will be followed by auto loan defaluts. The Cycle will not be finished until all three the Housing Market, Credit Card Debit and Auto Loan defaults are complete.

[MikeNY]

PAUL B. FARRELL: Wall Street's 'Disaster Capitalism for Dummies' 14 reasons Main Street loses big while Wall Street sabotages democracy. Article in Market Watch Wall Street Journal Digital Network.

http://www.marketwatch.com/News/Story/Story.aspx?guid=f63ec448d9c14138ac1897bf0fe68ee3&siteid=nwhpf&sguid=5m3c4mdvxkCOK7cz-GXrYA

[gruntbrain]

Without taking sides, I really like to know if anyone is addressing the issue of a short supply of healthcare providers that would result from increased coverage.Anyone for free, self healing?

[Free]

That supply is likely to get shorter, once medicine becomes socialized, so pack a suitcase next time you go to see a doctor.

Along with the rest of Obama's Marxist plans, expect a long recession, or more likely a depression from his redistribution plans.

[MikeNY]

I suspect we are entering a time of National Social Conflict (like so many other places int eh World before and now) and less money for social policies. Get ready, everyone should have a Shotgun, Carbine, Revolver or Auto and a knife. If you get lemons make lemonaide. Obama will mean a stockmarket beaten down along with massive capital flight, daconian taxes further impovershing the nation and making it a buyers market for stocks, being a value investor means Obama will be good for me. McCain will bring stability, financial responsiblity and a stock market trending upward, also good for me.

[Andy62]

Two factors to consider:
1. Let's see how the terrorists play this
2. The debt loads are going to play an inmportant role in what whoever is elected does.

[MikeNY]

Gordon the debt load will change the USA. Some think that the $89 Trillion Social Security projected defiect by the Government might be an understatement. Both parties have spent the huge Social Security windfall through the years, they should have privatized 20 to 25 years ago. I see nothing but trouble ahead over this issue in the future. The Baby Boomers have paid in for thier entire lives and will want thier pensions. Under the current system we have people (including peeople & children without a documented medical condition) collecting SSI, SSD and Social Security Retirement that never worked nor had a spouse work and many illegal aliens also collect. Social Security has become a corrupt system and should be reformed.

The problem is Washington has spent like a drunken sailor the Social Security trustfund and there is nothing but IOU's. Now some folks will make fortunes and someone always does well. Being rich in a poor nation is not hard.

Since my family came from Italy they have retained the concept, every man should have a Shotgun, a revolver or pistol and a large bladed Bowie knife (13 1/2" blade and up) just in case. God casts down the mighty and rises up the lowly is the saying.