The Era of Living Dangerously

[slapout9]

What happened was this.

"Ike" was spending 12.5% of GDP(Gross Domestic Product) a year on Infrastructure and Taxing Rich People up to 90% of their income. Population about 165 million people.

As of 2009 (or about then) we were barley spending 2.5% of our GDP on Infrastructure and rich people are only paying a 17% Capitol gains tax. Population about 310 million.


Infrastructure back during "Ike" was not just roads and bridges, but electrical grid, water systems,sewer systems,phone company(we used to have one)schools,hospitals,libraries,court houses, and medical clinics. Yes "Ike" was going to provide actual Health Care to people not some phony health insurance company scam(Insurance is a racket). It was gone by about 1965 or so. Oh Yea Cats and Dogs were living together in the same house.

[Fuchs]

Our current woes were caused, more than any one thing, by the bundling of mortgages and governmental entities Fannie and Freddy were in the midst of that --

The root causes were macroeconomic and easily visible even in macroeconomic abstracts of monthly BEA reports for more than a decade.

Any single institution was merely a cog wheel in the whole.


edit: Blame your media. There are 24/7 "business" channels that didn't devote a single hour in a full decade to these obvious macroeconomic disaster-in-waiting.
Even today they don't appear to explain that the root causes still exist and the whole attention is focused at petty symptoms.


You simply cannot run a nation with -1% GDP net capital investment, +1% population growth, a trade balance deficit equalling a quarter of your goods production and expect it to run 'great'.

[motorfirebox]

I think that the problem was not stripping of government oversight in the deregulation sense but lack of effective government oversight in still regulated industries and sectors at the behest of Congroids who wanted favors for donors and forced Regulators to back off by threatenting their budgets (or adding to same as a carrot...).

Our current woes were caused, more than any one thing, by the bundling of mortgages and governmental entities Fannie and Freddy were in the midst of that -- and Congress resisted calls from three Presidents from both parties to clean up that mess. They also protected the SEC in the face of whistleblowers (plural) that tried to warn them of the impending crunch.

I don't see how the first doesn't lead to the second. It seems strikingly probable to me, for instance, that not passing the Gramm-Leach-Bliley Act would have either prevented the housing crisis entirely or strictly limited its impact. Fannie and Freddie were the method by which a financial crunch occurred; their involvement dictated that it would be a housing crunch rather than a student loan crunch or a commercial real estate crunch. Lack of effective oversight was certainly a big problem, but to give financial entities carte blanche to completely make up as much wealth as they want is going to have political ramifications. It is hard to have effective financial regulation when you allow the creation of entities which have enough purchasing power to buy the SEC as a conversation piece to mount in the living room. The only solution to that is to limit the amount of wealth financial entities are allowed to spin out of thin air.

[Ken White]

I don't see how the first doesn't lead to the second. It seems strikingly probable to me, for instance, that not passing the Gramm-Leach-Bliley Act would have either prevented the housing crisis entirely or strictly limited its impact.

Why did it pass? Politicians doing things that didn't need to be done because they are impelled to do 'something.' Too often, 'something' that is designed to slip through and cater to a particular constituency that supports one party or the other. The larger the governmental milieu, the easier to hide things.

Fannie and Freddie were the method by which a financial crunch occurred; their involvement dictated that it would be a housing crunch rather than a student loan crunch or a commercial real estate crunch. Lack of effective oversight was certainly a big problem

That's perhaps an understatement. I'd go much further. Protection -- protection, not lack of oversight -- protection of Fanny and Freddie for political / ideological and not practical purposes were not only the method but principal cause.

but to give financial entities carte blanche to completely make up as much wealth as they want is going to have political ramifications.

Of course it is and I certainly am not advocating that -- regulation is needed, no question. What is NOT needed is the political skewing of what gets regulated on ideological grounds as opposed to logical, balanced and minimal curbs on excess.

It is hard to have effective financial regulation when you allow the creation of entities which have enough purchasing power to buy the SEC as a conversation piece to mount in the living room. The only solution to that is to limit the amount of wealth financial entities are allowed to spin out of thin air.

I think you just said there should be no Fannie, no Freddie. I agree. That also means there should be no Bank of America, Citi or J.P. Morgan et.al. in their current forms -- I agree.

Bottom line on all that is big government per se is neutral on these particular economic issues (though not necessarily on different economic and on many other issues...) but that excessive government fiddling, allowed by a government that is too big to restrict its focus to the basics and is thus encouraged to engage in politically oriented tinkering in order to obtain funds or votes and to expand a party's or the government's reach, is indeed the culprit...

[ganulv]

The root causes were macroeconomic and easily visible even in macroeconomic abstracts of monthly BEA reports for more than a decade. […] edit: Blame your media. There are 24/7 "business" channels that didn't devote a single hour in a full decade to these obvious macroeconomic disaster-in-waiting.

Keep in mind that the U.S. is a society in which many parents are resistant to childhood vaccinations—maybe the greatest achievement in human history, as far as I am concerned—because they are convinced they cause autism, and evolution and climate change are also widely portrayed as political opinions. Most Americans seem to understand that alternative hypotheses are part of science, but far fewer seem to understand that strongly held opinions do not count as support for them.

[Ken White]

"Ike" was spending 12.5% of GDP(Gross Domestic Product) a year on Infrastructure and Taxing Rich People up to 90% of their income. Population about 165 million people.

That tax rate was sustained only by the need to pay off the WW II debt, no way it could have or should have lasted much longer; that it produced excess is shown by that 12.5% spending on infrastructure. Not saying that expenditure was bad, just that it was large.

To put that in perspective the 1954 GDP was $2,582.1B (roughly 19.4 Trillion today), 12.5% of that was $322.7B (roughly 2.4 Trillion today)

As of 2009 (or about then) we were barley spending 2.5% of our GDP on Infrastructure...

The GDP in 2009 was only $12.8 Trillion (not 19.4 Trillion), thus 2.5% on Infrastructure was about $320 B, roughly the same amount but from a relatively lower if actually larger GDP (so one could say we're spending more...) -- and we are not building an interstate system, not supporting as heavily an inefficient rail passenger system or, unfortunately, not paying off a massive debt. We have instead opted to spend far more of our money on Social programs to the detriment of things the Federal Government should be doing -- highways, incidentally and as you know, are a State responsibility.

I'm assuming your figure are accurate and just working off them. My experience is that it is really quite difficult to pin down the actual numbers though you can get a broad approximation -- which is good enough for internet discussion purposes. To provide a bit more contrast, if you check this LINKand got to the Outlays by Super function, you'll see that total Federal Outlay in 1954 was $76.1B, Social program spending was 18.5% of the total (including massive Veterans benefits and services, the largest single item as a result of WW II). In 2009, outlays were $3.5 Trillion and Social program spending was 61.3% of that. Different world Slap -- those Ike days are gone and they won't ever come back.

Not to mention that much of the then infrastructure spending was on things now far more in the private sector -- like the grid. Not arguing who should pay, just that comparing the two pots of spending is a bit of apple and orange.

Same thing holds true on your tax rate and population numbers -- then and now have a lot of different parameters.

...not some phony health insurance company scam(Insurance is a racket).

True. You mention that to your Congress critter?

It was gone by about 1965 or so.

Wasn't that when Lyndon introduced the Great Society -- and Medicare???

Fuchs

Blame your media. There are 24/7 "business" channels that didn't devote a single hour in a full decade to these obvious macroeconomic disaster-in-waiting. Even today they don't appear to explain that the root causes still exist and the whole attention is focused at petty symptoms.

True, our pathetic media is almost as responsible for the shape we're in as is excessive government, wrongly focused...

You simply cannot run a nation with -1% GDP net capital investment, +1% population growth, a trade balance deficit equalling a quarter of your goods production and expect it to run 'great'.

Yes. you'd think that would be obvious...

I think it is obvious -- to everyone except our Politicians, both parties, both ends of Pennsylvania Avenue...

[Fuchs]

My experience is that it is really quite difficult to pin down the actual numbers (...)

These things take five minutes for me...

lines 22, 23, 26:
http://www.bea.gov/scb/pdf/2011/08%2...A_Section5.pdf

page 6 (table 3), first line:
http://www.bea.gov/newsreleases/nati...dp2q11_2nd.pdf


Minor revisions are to be expected for the more recent values, the maximum error for 2010 and earlier values should be +/- 2% in worst case, more likely far below +/-1%. (This means per cent for actual aggregated values, per cent points for change values.)


Correction of my previous post: The trade balance deficit is close to a FIFTH of domestic goods production. I got my fractions mixed up (one fifth missing = one fourth more would be needed to close the gap).

[ganulv]

The trade balance deficit is close to a FIFTH of domestic goods production.

Yeah, but my country owns the printing presses for the world’s reserve currency. Though not for much longer if the current crew of elected officials in D.C. keep up their recent behavior.

[Fuchs]

I looked at the M2 (a measure for the amount of cash) of the USD recently and estimated that the value would drop by about 60% if the government debt would be paid for with 'printed' money. Now that was government debt.

National debt is something very different.

A trade balance deficit means net capital import. This means among other things that foreigners buy business shares in the U.S. or set up businesses in the U.S.. You can't do #### against this with a printing press. This part of the accumulated debt is not some bond or IOU, but a claim for a share of the domestic business profits.

A permanent printing press action for paying for imports year after year won't work; the foreign suppliers wouldn't accept such deals. More importantly, the exchange rate of the USD would drop so badly that the much-changed terms of trade would balance the trade balance anyway.



Btw, the accumulation of debt by trade balance deficits is one of the areas where BEA has a poor reputation (the other is iirc unemployment stats). Its data is inconsistent. That's the 'nice' description.

---------------------------------------------

Btw, the trade balance deficit is almost back to pre-crash heights: (-) 53 billion USD in June 2011 (http://www.bea.gov/newsreleases/inte...f/trad0611.pdf page 4). The lowest was about (-) 25.5 bn and the record shortly before the bust was about (-) 67 bn.
Yay. I told u; the real root problems are in a great shape, while the media and politics steer the attention onto symptoms.
The share of manufacturing in GDP is still only close to 20%; Germany is close to 30%. About 25% would be healthy (and necessary for the U.S.).


You cannot get there without much capital investment (several more % GDP p.a., but that would require much more savings (to lend from foreign sources instead would drive up the trade balance deficit even more and might hasten a bust). How to raise savings without decreasing consumption? In short term it's possible to improve the degree of capacity utilisation, but that's not going to suffice, for it will at best lead back to a bit lower than immediate pre-bust levels. The answer is that consumption has to drop.
Now that won't happen voluntarily in a country that still believes that consumption (and really almost only consumption) drives the economy.

The tragedy is that this consumption thing is even correct for combating the short-term problems (low capacity utilisation), a.k.a. the symptoms. It's 180° wrong for combating the long-term problems (insufficient manufacturing for the level of demand).
A great success in defeating the symptoms will further fortify the belief in the importance of consumption .. .and thus grow the root problem, hasten the travel to the next, greater, bust.

In the end, it doesn't matter how the bust looks. Housing bubble or not - the key is that the whole is unsustainable in many ways and the internal dynamics are even reinforcing this.

--------------------------------------


Meanwhile, many people (for whose courage and rationality I have little respect) jump mentally overboard because of fantasy "threats" and want to allocate major amounts of resources against these "threats"...

[Ken White]

These things take five minutes for me...

Thanks for the links. They'll come in handy for beating up on Slap...

Problem I've noted is that statistics of most types are fairly easily located but often, variations in collection and presentation in different periods of time make simple (underline that word -- for us non econometric / math deprived folks) comparisons speculative in many cases.

In short term it's possible to improve the degree of capacity utilisation, but that's not going to suffice...Now that won't happen voluntarily in a country that still believes that consumption (and really almost only consumption) drives the economy...A great success in defeating the symptoms will further fortify the belief in the importance of consumption ...

Witness the Fed's unbelievable position on rates...

and thus grow the root problem, hasten the travel to the next, greater, bust.

Yes. I don't think that result is inevitable -- but it is, sadly, the most likely...

[motorfirebox]

That's perhaps an understatement. I'd go much further. Protection -- protection, not lack of oversight -- protection of Fanny and Freddie for political / ideological and not practical purposes were not only the method but principal cause.

I don't see it that way. Fannie and Freddie certainly provided the opportunity, but the opportunity couldn't have been taken advantage of to this disastrous extent without a) the massive capital available to the megabanks that emerged in the wake of the repeal of Glass/Steagal, and b) the criminal complicity of private ratings agencies such as Standard & Poor's. Without those two factors, the actions of Fannie and Freddie would have been harmless or even beneficial.

Of course it is and I certainly am not advocating that -- regulation is needed, no question. What is NOT needed is the political skewing of what gets regulated on ideological grounds as opposed to logical, balanced and minimal curbs on excess.I think you just said there should be no Fannie, no Freddie. I agree. That also means there should be no Bank of America, Citi or J.P. Morgan et.al. in their current forms -- I agree.

The concept behind Fannie and Freddie is a good one--striving to keep the bottom end of the economy from dragging too far behind the top end, as I mentioned earlier. I'm not going to try very hard to defend them in the form they'd taken circa 2007, but I think we do need entities who fill the function Fannie and Freddie were intended to fill.

Bottom line on all that is big government per se is neutral on these particular economic issues (though not necessarily on different economic and on many other issues...) but that excessive government fiddling, allowed by a government that is too big to restrict its focus to the basics and is thus encouraged to engage in politically oriented tinkering in order to obtain funds or votes and to expand a party's or the government's reach, is indeed the culprit...

That's a valid perspective, but I'm not convinced it's the one most suited to fixing our current problems and/or ensuring another 50ish years of relatively uninterrupted prosperity. I generally take the position that there's not enough government fiddling, where "fiddling" is defined as "dragging S&P and Goldman Sachs into the street and clubbing them like baby seals".

[slapout9]

But you got my point anyway

Different world Slap -- those Ike days are gone and they won't ever come back.

I will try again. We have rising and unsatble energy, debt and population costs....we are going to have to look at something new or differant.

This is a little boring but look at the Chinese/Marxian view of banking, they do not use the same methods we do and these guys really have a hard time understanding it because they are trying to view bank debt from a western viewpoint.

http://www.nakedcapitalism.com/2011/...ent-banks.html

[slapout9]

I don't see it that way. Fannie and Freddie certainly provided the opportunity, but the opportunity couldn't have been taken advantage of to this disastrous extent without a) the massive capital available to the megabanks that emerged in the wake of the repeal of Glass/Steagal, and b) the criminal complicity of private ratings agencies such as Standard & Poor's. Without those two factors, the actions of Fannie and Freddie would have been harmless or even beneficial.

Good job!, also nobody has mentioned that Fannie and Freddie had no problems until 1968 I think??? when Nixon privatized them.

[Ken White]

I don't see it that way. Fannie and Freddie certainly provided the opportunity, but the opportunity couldn't have been taken advantage of to this disastrous extent without a) the massive capital available to the megabanks that emerged in the wake of the repeal of Glass/Steagal...

I'll match your Glass/Stegall repeal fiddle with the passage of Title VIII fiddle and raise you an ECOA fiddle.

...and b) the criminal complicity of private ratings agencies such as Standard & Poor's.

Agree totally on that. I also think there's more to S&P in several aspects than has yet come out. I look forward to some actual prosecutions though I suspect the main culprit will skate. Moles are hard to kill...

Without those two factors, the actions of Fannie and Freddie would have been harmless or even beneficial.

We can disagree on that. Fannie and Freddie are both 'remedies' to the fact that the market works but it is admittedly slow and uneven in its effects -- that is anathema to big guvmint types who want absolute equality NOW. Well that's a little hyperbolic on my part -- but Fannie etc. are in fact efforts to speed the market and apply a uniform standard nationwide (Not accounting for the fact that this nation is too large geographically and too diverse demographically for any one size solution to really work well...).

The Fannie / Freddie approach is pandering vote buying disguised as social engineering disguised as economic policy and it is a corrupt idea with corrupt efforts and corrupt protectors in the congress. It is still asking for tax dollars.

The concept behind Fannie and Freddie is a good one--striving to keep the bottom end of the economy from dragging too far behind the top end, as I mentioned earlier. I'm not going to try very hard to defend them in the form they'd taken circa 2007, but I think we do need entities who fill the function Fannie and Freddie were intended to fill.

We're unlikely to find agreement on that. IMO, such entities skew the market and for all the acknowledged good they do, they end in always causing more harm. It is also noteworthy that there are other, better ways to keep that top from getting too far ahead or the bottom from falling too far behind but they require Politicians with testicular fortitude -- those are rara avis.

The real role of Fannie and Freddie (as well as Social Security and Medicare et. al.) is to buy complacency and votes in that order. The social engineering aid to the downtrodden that is the nominal reason for them does exist but it is secondary to wooing the complaisant contributing voter. It is effective because it is hard to counter as concepts and talking points -- who can argue with taking care of the disadvantaged -- but there are two very practical, not propagandistic, things that will mean the death or dismemberment of all those programs. First, they were and are absolutely unaffordable as structured over the last 50 years or so (and most who passed them into law knew that but didn't care because they'd be gone...). Secondly, The insidious harm of dependency and over reliance on a government that absolutely cannot -- not now, not ever -- do all it alleges it can and will do for its citizens is becoming apparent and the natives are becoming very aware -- and quite restless. Both Parties are venal, corrupt and place garnering votes and their interests ahead of those of the Nation and voters are beginning to wake up to that fact. I look forward to the 2012 Election; my guess is there will be blood (figuratively speaking) and the decimation of incumbents, long overdue, will continue. Hopefully, it'll make the 2010 election look like a quiet picnic in the park.

Consider that the directed equality approach as I mentioned elsewhere, does raise boats -- it also lowers some which can have adverse impacts of second and third orders. Raising some is merely attacking the symptoms, lowering too many high flyers will merely create harsher symptoms and can do long term damage. It also enforces mediocrity. Do we really want to do that?

Companies today are sitting on piles of cash but they won't spend due to the chaotic regulatory environment. Not harsh, not overly restrictive (if anything, most are too lenient) but excessive in volume and reach. IOW there is not too much regulation, there are simply too man regulations, a different thing. Instead of regulatory effectiveness we have regulation aggrandizement and proliferation inducing bureaucratic sclerosis. The US government doe not need to prescribe the lighting and sleeping requirements for the quarters provided Goat Herders -- but it proposes to do so...

That's the kind of thing I mean when I said the government does a lousy job of things it is supposed to do (foreign intelligence, diplomacy, defense, policing Wall Street...) because it is too busy raiding Gibson Guitars on the off chance they may have a piece of ebony, finding ways to for the EPA penalize Texas for daring to defy DC, 'No Child Left Behind' (Republican foolishness), fixing No Child Left Behind (Democratic counter foolishness) and magnanimously allowing kerosene lantern to be used for Shepherds and Herders...[quote]That's a valid perspective, but I'm not convinced it's the one most suited to fixing our current problems and/or ensuring another 50ish years of relatively uninterrupted prosperity.[/quote[Hmm. Having looked futilely for work during the recession in the mid 50s, participated to an extent in those of the 70s and 80s I would agree that the "uninterrupted prosperity" is indeed relative...

I generally take the position that there's not enough government fiddling, where "fiddling" is defined as "dragging S&P and Goldman Sachs into the street and clubbing them like baby seals".

Is that fiddling? Not to me, that's merely enforcing the law -- as opposed to deliberately not doing so as a political gesture. Such political gestures and turning a blind eye are fiddling. Fannie and Freddie are fiddling. Repeal of Glass/Stegall and passing of Title VIII are fiddling.

Where's Yo Ma Ma -- er, Yo Yo Ma -- we need a little lite classic on the Cello to offset all the fiddling...

And what, ask many, does Yo Yo Ma have to do with eras of living dangerously. Little to nothing -- but the fiddles of the US Congress, both parties, over the years but particularly in the last 40-45 have contributed to the perception that we live in dangerous times because, simply, it is to their advantage to do so. Fear, real, imagined or manufactured is used by politicians to sow anxiety and suggest that only they can be trusted to bring us through these 'perils.' They try to fix things that aren't broken. H.L. Mencken as quoted in Dayuhan's sig line has it right:

“The whole aim of practical politics is to keep the populace alarmed (and hence clamorous to be led to safety) by menacing it with an endless series of hobgoblins, all of them imaginary”

[Ken White]

Good job!, also nobody has mentioned that Fannie and Freddie had no problems until 1968 I think??? when Nixon privatized them.

Uh, not quite...

Fannie was fairly cool -- if unnecessary -- from its inception in 1938 until its transition began in 1954 -- under; wait for it, Ike -- when it became a mixed ownership corporation (part Fed, part investor owned). It still puttered along okay.

Federal interest was removed and it was totally privatized in '68 but it was a Johnson, not a Nixon, initiative to get the Fannie debt off the Federal Budget -- same time as he began raiding Social Security to provide guns and butter...

Nixon did father Freddie Mac in 1970 but both of those corporations really screwed the pooch when they created mortgage passthroughs in 1971 at selective Congressional urging. Been downhill ever since.

G.H.W. Bush and his directive to "facilitate the financing of affordable housing" in '91 was not helpful. The Clinton initiative of '99 to push Fannie and Freddie into heavy support of the Community Reinvestment Act of 1977 (Carter's contribution) was the straw that broke their backs. G.W. Bush tried several times to rein them in but was stymied by Congress. Barney Frank and Chris Dodd among others protected them to the bitter end. Those two BTW were big pushers of Clinton to 'energize' Fannie and Freddie...

The rest, as they say is history...

Government fiddling. In things they do not understand. In things that are in many respects none of the Federal governments business...

Slap, I agree we're going to have to look at something different, the old stuff won't work -- I believe the old Congroids will not work. Kick 'em all out...

[slapout9]

Federal interest was removed and it was totally privatized in '68 but it was a Johnson, not a Nixon, initiative to get the Fannie debt off the Federal Budget -- same time as he began raiding Social Security to provide guns and butter...

Nixon did father Freddie Mac in 1970 but both of those corporations really screwed the pooch when they created mortgage passthroughs in 1971 at selective Congressional urging. Been downhill ever since.

I was close

[slapout9]

Really,really,really good article on the history of what is debt. Also links the debt crises to wars/rebellions/revolutions/etc. through history. The man calls himself a Economic Anthropologist....never met one of them.


http://www.nakedcapitalism.com/2011/...d-graeber.html

Historic answer is,in order to keep the peace governments used to Cancel the Debt and start over. Also traces the very definition of the word FREEDOM to a meaning of no debt!

[motorfirebox]

I'll match your Glass/Stegall repeal fiddle with the passage of Title VIII fiddle and raise you an ECOA fiddle.

You mean FHIP and USC §1691(2)(a-b)? I still don't see it. That's still only providing the opportunity, not the means to exploit it to the immense detriment of the rest of the country. The worst result of those two elements alone would be the failure of banks that aren't large enough to sink the economy.

Fannie and Freddie are both 'remedies' to the fact that the market works but it is admittedly slow and uneven in its effects -- that is anathema to big guvmint types who want absolute equality NOW. Well that's a little hyperbolic on my part -- but Fannie etc. are in fact efforts to speed the market and apply a uniform standard nationwide (Not accounting for the fact that this nation is too large geographically and too diverse demographically for any one size solution to really work well...).

They're efforts to speed the market, but that's not a bad thing unless you keep the pedal to the floor all the way and let go of the steering wheel. Housing assistance is a great way to bootstrap the lower class. You just can't base the entire frickin' economy on it.

We don't need absolute equality now. We don't need absolute equality at all, and I don't think Fannie and Freddie were ever intended to provide that. And the "now" question is moot--we don't need it now, but I think more than a century, for certain sectors (well, a certain sector) is a long enough wait. Aside from that, it's not a "now" concern, it's a continuing concern. Capitalism is, to use the scientific term, awesome. But over time it engenders a class system consisting of those whose ancestors succeeded versus those whose ancestors did not. Housing assistance is one way to help a person whose ancestors did not succeed become an ancestor who succeeded.

The Fannie / Freddie approach is pandering vote buying disguised as social engineering disguised as economic policy and it is a corrupt idea with corrupt efforts and corrupt protectors in the congress. It is still asking for tax dollars. We're unlikely to find agreement on that. IMO, such entities skew the market and for all the acknowledged good they do, they end in always causing more harm. It is also noteworthy that there are other, better ways to keep that top from getting too far ahead or the bottom from falling too far behind but they require Politicians with testicular fortitude -- those are rara avis.

Well, what's "the end", here? Because they seemed to work pretty well for about, what, seventy years? Forty of which were after changes which arguably set them on the path to failure? That just doesn't meet my criteria for "bad idea". Actually, it comes pretty close to my criteria for "good idea".

The real role of Fannie and Freddie (as well as Social Security and Medicare et. al.) is to buy complacency and votes in that order. The social engineering aid to the downtrodden that is the nominal reason for them does exist but it is secondary to wooing the complaisant contributing voter. It is effective because it is hard to counter as concepts and talking points -- who can argue with taking care of the disadvantaged -- but there are two very practical, not propagandistic, things that will mean the death or dismemberment of all those programs. First, they were and are absolutely unaffordable as structured over the last 50 years or so (and most who passed them into law knew that but didn't care because they'd be gone...). Secondly, The insidious harm of dependency and over reliance on a government that absolutely cannot -- not now, not ever -- do all it alleges it can and will do for its citizens is becoming apparent and the natives are becoming very aware -- and quite restless.

Man, you want to talk about planning for failure, go ahead and roll with that "to heck with the poor" paradigm. That would be a really excellent way to foment actual, no-kidding revolution. The money to pay for these programs--and it should be noted that "affordability", in terms of nations with fiat currency, is a really slippery concept--is there; we're just not taking it and, yes, we're also spending what we have unwisely. To me, that's a reason to try to fix things, not to just throw up our hands and say everything since Ike has been a bad idea.

Both Parties are venal, corrupt and place garnering votes and their interests ahead of those of the Nation and voters are beginning to wake up to that fact. I look forward to the 2012 Election; my guess is there will be blood (figuratively speaking) and the decimation of incumbents, long overdue, will continue. Hopefully, it'll make the 2010 election look like a quiet picnic in the park.

No argument there.

Companies today are sitting on piles of cash but they won't spend due to the chaotic regulatory environment. Not harsh, not overly restrictive (if anything, most are too lenient) but excessive in volume and reach. IOW there is not too much regulation, there are simply too man regulations, a different thing. Instead of regulatory effectiveness we have regulation aggrandizement and proliferation inducing bureaucratic sclerosis. The US government doe not need to prescribe the lighting and sleeping requirements for the quarters provided Goat Herders -- but it proposes to do so...

Er, my impression is that most companies sitting on piles of cash are doing so because the housing bubble isn't done popping. The major lenders are sitting on their money because they're also sitting on massive collections of properties whose actual worth isn't worth the paper their deeds are printed on (assuming the deeds can be located!). Everyone else is following suit because credit is so tight. Where does regulation come in?

Hmm. Having looked futilely for work during the recession in the mid 50s, participated to an extent in those of the 70s and 80s I would agree that the "uninterrupted prosperity" is indeed relative...

It's absolutely relative. Even at our current low point, we're really well off. Consumer spending just jumped because many Americans have exhausted their savings and have switched to living off credit cards. That sucks, and it's certainly a portent of impending doom, but the fact that it's even possible--and that it's taken four years after the crash to reach this point--speaks volumes to our prosperity.

[ganulv]

Really,really,really good article on the history of what is debt. Also links the debt crises to wars/rebellions/revolutions/etc. through history. The man calls himself a Economic Anthropologist....never met one of them.

http://www.nakedcapitalism.com/2011/...d-graeber.html

Well I’ll be, a link to something by David Graeber at the SWC! Sidney Mintz and Eric Wolf might also be of interest. Mintz’s Sweetness and power is one of my personal favorites.

Regarding Fannie Mae, there was a very good interview on Fresh Air a few months ago.

[Ken White]

You mean FHIP and USC §1691(2)(a-b)? The worst result of those two elements alone would be the failure of banks that aren't large enough to sink the economy.

The point I was trying to make, apparently poorly, was not based on the effect but on manipulation -- both sides do it, both fiddle with the economy in accordance with their nominal ideologies -- or their voters interests. That's politics and thus understandable. It's not governance or leadership. So IMO, while understandable it is wrong and enlightened voters wouldn't tolerate it. The fact that most voters are not all that enlightened is a by product of elevating politics over governance -- the complaisant voters bit...

You just can't base the entire frickin' economy on it.

You, I and many others know that -- why does Congress not???

Capitalism is, to use the scientific term, awesome. But over time it engenders a class system consisting of those whose ancestors succeeded versus those whose ancestors did not. Housing assistance is one way to help a person whose ancestors did not succeed become an ancestor who succeeded.

This is the source of a basic philosophical difference between us. I understand what you write and there is much truth in it -- but I'm also pretty well convinced that you could redistribute all the money in the world today and within a year, most of it would migrate back to the same people without a great number of exceptions. Class, as used here, is as natural as breathing and it is not going to be eliminated no matter how hard some wish and some try.

Well, what's "the end", here? Because they seemed to work pretty well for about, what, seventy years? Forty of which were after changes which arguably set them on the path to failure? That just doesn't meet my criteria for "bad idea". Actually, it comes pretty close to my criteria for "good idea".

Most programs start as good ideas -- the problems accrue as they are modified by politics to cater to certain events, persons or efforts. That is a natural evolution and will only be changed by changing the players or actors on the political scene very regularly. Those actors know that and thus try to skew things to insure their continuity or continuing incumbency. Programs must be modified to adapt to changing circumstances and doing that with politicians as opposed to referendums is more efficient and effective.

In the US that tension tilts to stasis and if funds are involved, to under the table manipulation. Those two factors also are countered by a regular change of politicians. The Pols do not like that thought. Your next comment is the interesting corollary to all that verbiage:

Man, you want to talk about planning for failure, go ahead and roll with that "to heck with the poor" paradigm...

That's the progressive mantra. Unfortunately, it's not at all what I wrote, not even close. I wrote "they were and are absolutely unaffordable as structured over the last 50 years or so (emphasis added / kw) and "Secondly, The insidious harm of dependency and over reliance on a government that absolutely cannot -- not now, not ever -- do all it alleges it can and will do for its citizens..." That in no way attacks the poor -- it attacks the Politicians who took advantage of programs to assist those poor and award unneeded 'assistance' in the form of funding and other support to persons who were and are not poor in an effort to obtain votes for themselves and their parties.

There is no logical reason to not means test Medicare and Social Security -- yet that idea is strongly resisted by many politicians not due to their oft stated 'slippery slope' argument but because in reality it would mean lessened 'loyalty' bought from voters, lessened control by those who wish to impose their vision of 'governance' (scare quotes obligatory because that is scary...) on a docile populace. I don't buy it

My comments also attack the "what's the government going to do about this" outlook of a great many Americans of all classes and wealth levels today. Sixty or so years ago, one rarely heard or read that, people would pitch in an fix things themselves. There was, for example no FEMA. Are we better off now with FEMA? Unquestionably. Does the existence of FEMA adversely impact self sufficiency and foster reliance on the government? Also unquestionable. Whether this is a good or bad thing is viewpoint dependent. In my view it is not totally beneficial. For example, FEMA says that, post hurricane, you must be prepared to survive on your own for a week or so without their assistance (the States are far faster, Counties and cities faster yet...) but they downplay that excellent advice, tout their good works -- and provide oversized checks to people not always in need in an effort to buy loyalty and keep the local Congroids happy with FEMA 'performance.' Good program -- manipulated and misused -- needs adjustment (Not by any Congress person whose district or State benefited from FEMA's excessive largesse... ).

There are those who contend one should not confront miscreants; let the Police do it. Unfortuantely, it's proven that there's never a cop around when you need one...

Government absolutely cannot do everything for everyone, regardless of income level, and it is IMO criminal for politicians and academics to imply that it can. It is also probably unwise for folks to believe they can rely on the government to make bad things go away...

That would be a really excellent way to foment actual, no-kidding revolution. The money to pay for these programs--and it should be noted that "affordability", in terms of nations with fiat currency, is a really slippery concept--is there;

That's sorta specious, isn't it? Regardless of fiat-ability, one can only get so much blood even from a turnip. It becomes an issue of priorities. I gather your priority would be toward social spending with a view toward 'equalizing'. Mine would provide adequate social spending to care for those with needs but would means test such funding; 'equality' would not be a goal but equal opportunity (which we do not now emphasize -- been to Court lately?) would be a major goal.

...we're just not taking it and, yes, we're also spending what we have unwisely. To me, that's a reason to try to fix things, not to just throw up our hands and say everything since Ike has been a bad idea.

That again is something I did not suggest or write. What I have written is that most social programs have merit but have been prostituted and transmuted into vote buying schemes by venal Congressional fiddles and that fiddling should be eliminated.

Er, my impression is that most companies sitting on piles of cash are doing so because the housing bubble isn't done popping. The major lenders are sitting on their money because they're also sitting on massive collections of properties whose actual worth isn't worth the paper their deeds are printed on (assuming the deeds can be located!). Everyone else is following suit because credit is so tight. Where does regulation come in?

Your comment addresses part of it, no question but the excessive emphasis by the Federal Government on the regulation of every facet of business is burdensome and expensive. A Doctor I know could operate his Office with himself and two others. He has seven and is hiring another because the new computerized medical record requirement will add another to his two billing and insurance clerks who are needed not to answer the insurance company requirements but to insure compliance with federal regulations. The burden is not due to this Administration (in fact, they've vowed to try to reduce the problem (LINK) the Regulatory overkill has been building for years and both parties as well as our governmental system are at fault. Congress can effect change but it is not in their interest to do so -- unless the voters start wholesale firings of them to send a message. As I said above, the issue is not the burden of any particular regulation and few of them are very onerous, it is the cumulative effect of a massive government that is trying to do things to justify its existence -- or, more correctly, of the various departments and agencies of a massive government who must justify the existence by doing something...

A significant part of the that regulatory problem is that those diktats from one Agency often contradict those from another and adjudication is required, the bureaucracy grinds very slowly and to most businesses, time is money.

It's absolutely relative...speaks volumes to our prosperity.

I agree with that. We probably agree on goals -- we just disagree on how to get there...

Proving yet again that this era is not really very dangerous...

I probably should disclose that my views on all this are indeed involved with dangerous eras. This one is not but they do occur. In order to be prepared for the unexpected onset of such an era, that Congressional / Political malfeasance concerns me because in funding efforts and in the societal changes induced it adversely affects the Armed Forces of the US. The societal bit affects serving persons, our risk aversion problem is largely societally induced.

On the funding, I'm not speaking of the net defense budget -- IMO it's over large, needs reduction and fosters much fraud, waste and abuse -- but of the misplaced spending priorities (that complaisant bit isn't restricted to civilians...). The Congressional emphasis on jobs in the district and pushing major equipment purchases for that purpose as opposed to fostering a well trained and competent force to do the Nation's bidding is dangerous...