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 That subject line isn't a phrase I invented. It was a phrase used by Deutsche Bank's CEO, Josef Ackermann. He was referring to the coming downgrades of the major bond insurers, which he said was "comparable to subprime".

 Bond investors stand to lose $200 billion should MBIA Inc., Ambac Financial Group Inc. and Financial Guaranty Insurance Co. forfeit their AAA grades because of declines in mortgage-backed securities they insure, according to data compiled by Bloomberg.

 Since financial institutions have been choking on the $146 Billion of declared losses so far, another $200 Billion is a very big deal.

 Where will it all end? How much more is coming?
If you allow me a little latitude, I can tell you that the bond-insurer downgrades are merely the 3rd act of a 7 act play.
  And that's assuming that the financial infrastructure holds up under the pressure.

 Nearly a year ago I began writing diaries about how the subprime housing bust was going to be a catastrophe on Wall Street. It took another four months before Wall Street came to the same realization.
  Eight months ago I warned that the housing bust was going to go global. It took another two months before Europe realized it had a crisis.
 Three months ago I warned about the bond insurers, yet only in the last few weeks has Wall Street begun to worry about their fate.

  I'm not bragging. After all, all the information I get is written by someone else first. Some insiders on Wall Street have already positioned their investments to take advantage of the coming chaos before I am even aware of an approaching problem.
  I am just trying to establish my credentials that when something really big is on the way, I can see it coming.

First they came for the subprimes

 The first act of this play was the subprime residential mortgages.
Unless you've been living under a rock this past year you are already fully aware of this crises, so I will not go over this territory again.

 The second act was the direct result of the subprime implosion and the weakest link of the Wall Street chain - Structured Investment Vehicles (SIV) and their primary means of doing business - Commercial Paper (aka short-term commercial bonds).
  About 6 months ago the financial media was full of stories about how these markets were in a panic. Almost nothing has been written about them in months. Is that because the crises is over? Yes, in a way - almost all of the SIV's have gone bankrupt since then.
  When the SIV's went to financial heaven the worldwide commercial paper market stopped shrinking (it declined by nearly 40% in just 6 months), but it hasn't grown significantly since then.

 The third act is the current crisis over the monolines.

 If a bond insurer gets downgraded, in theory all the securities it has guaranteed have to be downgraded too.
  Credit-default swaps tied to MBIA's bonds soared 10 percentage points to 26 percent upfront and 5 percent a year, according to CMA Datavision in New York. That means it would cost $2.6 million initially and $500,000 a year to protect $10 million in MBIA bonds from default for five years.
 The price implies that traders are pricing in a 71 percent chance that MBIA will default in the next five years, according to a JPMorgan Chase & Co. valuation model.
 Contracts on Ambac, the second-biggest insurer, rose 12 percentage points to 27 percent upfront and 5 percent a year, prices from CMA Datavision in London show.
 Ambac's implied chance of default is 73 percent, according to the JPMorgan data.

 MBIA is issuing $750 million worth of new stock in order to re-captialize (and by default, screw their current investors by diluting existing equities). However, rating agencies are raising the minimum amount of capital needed by the monolines to maintain their AAA rating. Thus it is a wash.
 
  In fact, traders have already priced in dramatic rating downgrades for the monolines. The rating agencies of Moody's, Standard and Poor, and Fitch are way behind the curve as usual. Remember that these were the same guys that gave Enron an "investment grade" rating just four days before it collapsed. (The complete failure of the rating agencies is a topic that deserves its own diary.)
  For the past several weeks there has been much wasted ink concerning a bailout of the monolines. One day it will happen, the next day it won't. If you remember back four months ago the talk was very similar to an SIV bailout. It never happened for the SIV's and it is looking like it won't happen for the monolines either.

An Economic Katrina

  Just over a week ago I warned of another threat to the economy that is almost completely under the radar, and therefore is much closer than most people realize - the commercial real estate bust.

 "The market is locked up right now because there's a huge overhang of leveraged assets of every type, development deals that won't meet projections made last year when things were rosy," said David Tobin, a principal at New York-based Mission Capital Advisors LLC, which was involved in $5 billion of asset sales last year. "It will end just like the residential housing market."

 This impending collapse has been so silent that I have yet to see a single estimate of its size of the problem (the total commercial real estate market is $3.2 Trillion). Of course the original estimates of the subprime bust have already been exceeded four times over, so maybe estimates don't mean much.
  Like residential real estate, commercial sales have dropped off a cliff.

 US office property sales fell by the largest amount since the September 11 2001 terror attacks in the final three months of last year, raising fears that commercial real estate is heading for a meltdown.
...
U.S. commercial property prices probably will fall 10 percent in 2008 from last year's peak after rising 60 percent since 2002, said Dan Fasulo, director of market analysis at New York-based research firm Real Capital Analytics Inc.

Delinquencies of securitized commercial mortgages may quadruple in the next 18 months to almost 4 percent, said Kenneth Rosen, an economist at University of California, Berkeley, who runs a real estate hedge fund. About 70 percent of commercial mortgages are pooled into commercial mortgage-backed securities that are sold to investors, Rosen said.

 The fifth and sixth acts of this play could probably be combined into just one because they both concern subprime borrowers. One element is auto loans.

 Auto payment defaults doubled last year and are expected to get worse. It is another financial meltdown waiting to happen similar to the crisis in the home mortgage industry, according to one consumer group. A CBS 5 ConsumerWatch investigation has found consumers locked into cars they cannot afford.

According to Power Information Network, 1.85 of the 9.6 million customers in 2006 who leased or financed a new car were subprime borrowers or consumers with weak credit.

 The weak lending standards of real estate mortgages during the bubble spilled out into almost every other type of lending. Subprime consumers lied on their car loans just like they lied on their mortgage loans, and lenders encouraged it (or at last looked the other way). Now the chickens are coming home to roost.

 On the flip side of the coin is a more predictable problem - credit cards.

 the place that JPMorgan got hit was in credit products – items related to auto loans, home equity loans and credit cards. The bank said credit costs for the company were up 40% from a year ago, as credit card default rates rose.

 It isn't just JPMorgan. All the major credit card lenders are suddenly struggling.

 In October, credit-card giant Capital One Financial reported that the delinquency rate on credit cards for the third quarter of 2007 was 4.46 percent, up from 3.53 percent in the third quarter of 2006. "Given current loan growth and delinquency trends," Capital One reported, it "expects the U.S. Card charge-off rate to be around 5.25 percent in the fourth quarter."

 As housing prices have dropped, families that are already stretched can no longer tap into their home equity (if any still exists). Increasingly they use their credit cards and suffer the usury fees that come with it.

  This past summer's subprime meltdown involved about $900 billion in now-suspect securitized debt, reckless lending, and consumers who buckled under the weight of loans they couldn't afford. Now another link in the consumer debt chain - credit cards - is starting to show signs of strain. And the fear that the $915 billion in U.S. credit card debt (an uncannily similar figure) may blow up has major financial institutions like Citigroup, American Express, and Bank of America strapping on their Kevlar vests.
[...]
"We are in a heightened state of alert to monitor a potential domino effect," says Michael Mayo, Deutsche Bank's U.S. banking analyst.
  Dennis Moroney, an analyst at TowerGroup, expects credit card delinquencies will rise as consumers, who have until now used home-equity lines of credit to pay off their cards, start ratcheting up higher card debt.
 ...while missed payments are at a historical low, they show signs of an uptick: The quarterly delinquency rate for Capital One, Washington Mutual, Citigroup, J.P. Morgan Chase, and Bank of America rose an average of 13% in the third quarter, compared with a 2% drop in the previous quarter.

 Unlike mortgages, credit card debt bonds are unsecured. So a default on this kind of debt means a total loss for investors (as opposed to mortgage debt, where a home auction could at least partially reimburse the bond holder).

 The final act of this play is already playing out, but isn't getting reported probably because of laziness in the media or stereotypes.
  The problem is the prime sector, and it is starting to show up in the same areas as the economy slows down.

 For the past few years, banks that issue credit cards have aggressively wooed affluent customers with lavish perks and fat credit lines. Now, that high-end strategy is coming back to bite the banks: There are growing signs that some of those consumers are having a hard time paying their bills.

 While the subprime borrower often exaggerated their income to get into a home they couldn't afford, the prime borrower often took out a risky mortgage to get into a much larger home than they could afford. This is beginning to show up on balance sheets.

 Countrywide said 4.56 percent of its prime home-equity loans were delinquent at the end of the quarter, up from 1.77 percent in the year-ago period.
  The company said the delinquencies were not due to borrowers struggling with mortgage interest rate resets, as many had expected.  Instead, the delinquencies have been largely due to people losing their jobs or similar factors.
 "We are experiencing home price depreciation almost like never before, with the exception of the Great Depression."

 A common misconception is that every subprime loan was made to someone with sketchy credit. The fact is that many subprime type loans were made to people with good credit, but had overstretched themselves for various reasons.

 An analysis for The Wall Street Journal of more than $2.5 trillion in subprime loans made since 2000 shows that as the number of subprime loans mushroomed, an increasing proportion of them went to people with credit scores high enough to often qualify for conventional loans with far better terms.
  n 2005, the peak year of the subprime boom, the study says that borrowers with such credit scores got more than half -- 55% -- of all subprime mortgages that were ultimately packaged into securities for sale to investors, as most subprime loans are....
  "Every single day ... I saw prime borrowers coming through my desk with 660, 680 [and] 720 credit scores," says Thomas Rudden, a former senior account executive at Mercantile Mortgage Co., a now-defunct subprime lender. Some were taking out loans as speculators, he believes, while in other cases he thinks brokers put borrowers into these loans because they thought it was easier.

 It sort of makes sense in a way. It is well known that predatory lenders have targeted the poor for generations because they are often the most honest and responsible with their debt.
  While there are plenty of examples of very poor people getting into homes they can't afford, much of the current wave of foreclosures is occurring with homes bought by speculators. Speculators are much more likely to be from somewhere other than the lowest class. But to afford multiple mortgages they would have to take out subprime mortgages, such as interest-only and no-doc loans.
  Yet at the end of the day, the poor are the ones that the media blames for the current economic troubles.

Originally posted to gjohnsit on Sat Feb 09, 2008 at 08:08 AM PST.

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  •  Tip Jar (331+ / 0-)
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    Where is Estanislao when we need him?

    by gjohnsit on Sat Feb 09, 2008 at 08:07:59 AM PST

    •  Great work gjohnsit (16+ / 0-)

      As far as sub-prime lending goes, this particular downgrade is just a temporary hiccup.

      The dollar is crap, so international investors will continue to demand securities.  The homeownership rate is at almost 70%, meaning those who have steady incomes with few surprises are mostly already mortgaged.

      For millions of individuals and families our housing markets are fundamentally flawed.  Any interruption in employment or health can mean a decades long banishment into the financial maze of collections and bad credit.  These people still want and need stable homes and stable costs.

      The current situation represents a failure of public policy.  Lenders are prohibited by law from saying "no" to clients who want loans that are not in the client's own best interests.  There is no public provision for those who need a stable home at a stable price.

      Subprime lenders are easy to portray as demons and predators.  But they are at least trying to provide stable housing to those with low or unstable incomes.  And they are obligated by law to try to do it profitably.  Don't like it?  Change the laws.  What are our Congress and President doing?  Next to nothing.  And what will the next Congress and President do to help?  Probably not much more.

      "Subprime" lending won't go away unless the underlying failures of the housing markets and public policy are addressed.  It will just come back in a different form.

      •  subprinme was based upon a fallacious argument (32+ / 0-)

        it was "The subprime poor are risky, so we must balance the risk"
        we balance this risk by increasing the rates,

        When the answer should have been "We balance the risk by requiring equity".

        There would have been no subprime bubble if all mrotgages needed
        20% down.    

        George Bush i sLiving proof of the axiom "Never send a boy to do a man's job" E -2.25 S -4.10

        by nathguy on Sat Feb 09, 2008 at 08:37:35 AM PST

        [ Parent ]

        •  What a great solution! (9+ / 0-)

          How many of the working poor and unhealthy are relegated to permanent tenancy under your plan?  The demand doesn't go away.  The need for a stable home and stable cost of living doesn't go away.

          Subprime lending is an imperfect solution, but it is the only one around.

          The change that is needed is fundamental.

          •  The market will correct itself here (49+ / 0-)

            Lending money to people who can't pay it back was never a workable plan.
              The pain is unavoidable at this point. That's hard to swallow, but that's what you get for creating bubbles.

             The problem that should have been fixed was at the level of the Federal Reserve. They pushed real interest rates to negative levels (below inflation), and that's something a true free market would have never done.
              When money is cheaper than the inflation rate then banks have to lend it out in order to make profits. Then the frenzy developed, and lending standards went out the window.
              We are paying for it now.

            Where is Estanislao when we need him?

            by gjohnsit on Sat Feb 09, 2008 at 08:53:40 AM PST

            [ Parent ]

            •  total agreement (13+ / 0-)

              lending money to people who cannot pay it back sums it up. 20% down was a GOOD idea. also having standards that said you cannot spend more than about 35% of your gross income on a mortgage payment.

              does this put alot of people out of the housing market? uh yea , it does. you want them to own their own house? do something to encourage  building starter homes, change zoning laws to reflect that lower incomes  cannot buy 5000 sq ft houses at any price ( ie mandate much smaller homes in given areas) or raise wages, by unionizing.  other wise get used to it, the poor ARE locked in to tenant living for life.

              Welcome to the empire. life is not a dress rehearsal My record label: www.11mileswestofnowhere.com

              by johnfire on Sat Feb 09, 2008 at 09:46:01 AM PST

              [ Parent ]

              •  There are much worse things to be "locked in to." (3+ / 0-)
                Recommended by:
                spotDawa, Fischer, kyril
              •  20% down (3+ / 0-)
                Recommended by:
                myrealname, nathguy, Rick Winrod

                I have to say - my husband and I bought our house with much less than 20% down.  

                After a few years we refinanced to a 15 year mortgage. This past year we pulled a third of our equity to fix up the decrepit kitchen (and finished paying that back as of last month), and at this point we should have the house paid off in about nine years.  No problems making the monthly payments, ever.  On a single salary, just under 6 figures.

                The old rule of keeping your shelter costs to 1/3rd of income works just fine, as far as I can see.  Saving up the 20% while paying rent didn't make sense to us at that time.

                "Virginia Woolf's idea of a room of one's own has never been the place for middle- and working-class women. We work with interruptions." - Ananya Chatterjea

                by sarac on Sat Feb 09, 2008 at 11:47:39 AM PST

                [ Parent ]

                •  good for you (2+ / 0-)
                  Recommended by:
                  dewley notid, kyril

                  your front side DTI was 28% and the fact home prices didn't collapse
                  while you are paying it got you off luckily.

                  But, what had happened if housing prices in your area tanked, then
                  you would be looking at writing a check to move out.  Is that any fun?

                  Is that what you would want?

                  Or imagine if you had a family crisis and needed to sell,  a push sell requires
                  a price cut, a hard thing to do if you have no equity.

                  you didn't get bit,  a lot of people in your same situation did.

                  George Bush i sLiving proof of the axiom "Never send a boy to do a man's job" E -2.25 S -4.10

                  by nathguy on Sat Feb 09, 2008 at 02:27:08 PM PST

                  [ Parent ]

                  •  I live just outside a college town (1+ / 0-)
                    Recommended by:
                    nathguy

                    a kind of area where house prices typically don't waver up or down all that much.  

                    And we bid low (110K instead of 140K, due to a flaw we made them fix for 2K).  And we weren't at 33% of our larger salary on the payments even as it was.  

                    We never felt it was a risk, frankly, and I still don't think it was. We didn't tie up all our income in the house, we were in a position to save money. We could easily make the payments, and with one of us in a tenured job, no sudden changes were at all likely - I can't even think what family crisis could possibly  have forced us to sell in that time period.

                    "Virginia Woolf's idea of a room of one's own has never been the place for middle- and working-class women. We work with interruptions." - Ananya Chatterjea

                    by sarac on Sat Feb 09, 2008 at 06:01:05 PM PST

                    [ Parent ]

                    •  same here (0+ / 0-)

                      i bought in a college town, bid low, and it's a low DTI
                      but i also put down

                      so if wanted to get out i really could

                      George Bush i sLiving proof of the axiom "Never send a boy to do a man's job" E -2.25 S -4.10

                      by nathguy on Sat Feb 09, 2008 at 07:48:02 PM PST

                      [ Parent ]

              •  If lenders had universally required 20% down (11+ / 0-)

                It would have driven some people out of the housing market... temporarily.  In the longer term, it would have slowed down the inflation of home prices. This, in turn, would have strengthened the market by keeping homes from being flipped over and over and the prices from growing at an unreasonable rate.  In the end it would balance itself out.  (I'm not an economist, banker, or accountant, so my opinion may just be a bunch of crap)

                Bush repealed Godwin's Law with a Signing Statement.

                by Mad Kossack on Sat Feb 09, 2008 at 12:10:20 PM PST

                [ Parent ]

              •  tenant living (13+ / 0-)

                I hear people complain about how horrible it is to rent. Yet I've lived in the suburbs, and I can't think of a more horrible place to live than that.
                  I have savings, which I wouldn't have if I "owned" a house in the burbs.

                 Meanwhile, as I sit here in my rental apartment with a laptop on my lap and a cat sleeping next to me, my upstairs neighbors, who are excellent musicians, are practicing slow jazz on a piano and sax.
                  Renting doesn't seem all that bad right now.

                Where is Estanislao when we need him?

                by gjohnsit on Sat Feb 09, 2008 at 12:42:45 PM PST

                [ Parent ]

              •  This is TOTAL BULLSHIT (21+ / 0-)

                that overlooks the real problem - the class warfare waged on the middle class and especially the working class the past three decades. Working class family income is down over one tenth from the 1970s. That means less people can afford homes. The lax lending standards merely serve to cover up the decline in earnings, otherwise the fall in living standards would be out there for everyone to see.

                As economist Thomas Palley points out in an article yesterday, The Debt Delusion, since the shift to Friedman/Reagan/Thatcher "free market" economics (unfortunately called "neo-liberalism" by economists) the U.S. economy has become dependent on financial bubbles to maintain the appearance of normalcy. Prior to the 1980s, the U.S. economy was based on wage growth tied to productivity growth and full employment:

                But there is a deeper problem that has been overlooked: the US economy relies upon asset price inflation and rising indebtedness to fuel growth.
                Therein lies a profound contradiction. On one hand, policy must fuel asset bubbles to keep the economy growing. On the other hand, such bubbles inevitably create financial crises when they eventually implode.

                SNIP

                America's economic contradictions are part of a new business cycle that has emerged since 1980. The business cycles of presidents Ronald Reagan, George Bush Sr, Bill Clinton, and George Bush share strong similarities and are different from pre-1980 cycles. The similarities are large trade deficits, manufacturing job loss, asset price inflation, rising debt-to-income ratios, and detachment of wages from productivity growth.
                The new cycle rests on financial booms and cheap imports. Financial booms provide collateral that supports debt-financed spending. Borrowing is also supported by an easing of credit standards and new financial products that increase leverage and widen the range of assets that can be borrowed against. Cheap imports ameliorate the effects of wage stagnation.

                This structure contrasts with the pre-1980 business cycle, which rested on wage growth tied to productivity growth and full employment. Wage growth, rather than borrowing and financial booms, fuelled demand growth. That encouraged investment spending, which in turn drove productivity gains and output growth.

                You want a post-industrial economy? Fine, you got it. But you didn't read the fine print, did you?: comes with uncontrollable financial manipulation, bubbles, and recurring financial crises.

                A conservative is a scab for the oligarchy.

                by NBBooks on Sat Feb 09, 2008 at 01:09:11 PM PST

                [ Parent ]

                •  I found Thomas Palley's closing interesting... (6+ / 0-)

                  Given his closing remarks and conclusions, we don't have a choice over economic models, its is time to return to an industrial economy because there are no other options.

                  In short... the geniuses of the market place (as Tony Blair called them) have run out of smoke and mirrors!

                  Low interest rates eventually jump-started the expansion through a house price bubble that supported a debt-financed consumer-spending binge and triggered a construction boom. Meanwhile, prolonged low interest rates contributed to a "chase for yield" in the financial sector that resulted in disregard of credit risk.

                  In this way, the Fed contributed to creating the sub-prime crisis. However, in the Fed's defence, low interest rates were needed to maintain the expansion. In effect, the new cycle locks the Fed into an unstable stance whereby it must prevent asset price declines to avert recession, yet must also promote asset bubbles to sustain expansions.

                  So, even if the Fed and US treasury now manage to stave off recession, what will fuel future growth? With debt burdens elevated and housing prices significantly above levels warranted by their historical relation to income, the business cycle of the last two decades appears exhausted.

                  It is not enough to deal only with the crisis of the day. Policy must also chart a stable long-term course, which implies the need to reconsider the paradigm of the past 25 years. That means ending trade deficits that drain spending and jobs, and restoring the link between wages and productivity. That way, wage income, not debt and asset price inflation, can again provide the engine of demand growth.

                  •  We now have great pent up demand (9+ / 0-)

                    Just like after World War Two, we have pent-up demand, but this time it is for a green economy. Think of what needs to be built:

                    Every single car and truck in the United States needs to be replaced with hybrids or super fuel-efficient vehicles (see a picture of the Aptera further down-thread).

                    A replacement for the entire system of gasoline delivery and distribution.

                    Almost the entirety of the nation’s housing stock needs to be replaced or retrofitted with green technology.

                    Same with commercial buildings, especially skyscrapers built in the 1950s to 1990s, which is almost all the core downtowns. Tear ‘em down and start over again, make them user friendly and environmentally neutral.

                    Urban mass transit rail systems. New York City has the most dense network, and it is only half as dense as what you find in Tokyo, London. Paris, Moscow. Cities like Miami and Phoenix, which are now in the top ten urban areas in the U.S. don't have ANY mass transit rail, or have a single line with one or two dozen stations.

                    Passenger rail with its own rights of way. How many people know Amtrak has to run on rails owned and maintained by the freight railroads? In the northeast corridor, from Washington DC to Boston, we really should build this entirely underground. One long tunnel from DC to Boston.

                    Is the "free market" going to get all this done?

                    Where there is no vision, the people perish.

                    A conservative is a scab for the oligarchy.

                    by NBBooks on Sat Feb 09, 2008 at 03:39:49 PM PST

                    [ Parent ]

                    •  Governors demand candidates give infrastructure.. (1+ / 0-)
                      Recommended by:
                      NBBooks

                      I just saw the video of the press conference that they held for this to demand that the candidates of both parties give statements as to their plans for rebuilding the crumbling infrastructure of the United States.

                      The only candidate that did this to any great extent was John Edwards in his stimulus plan, which had not tax rebate but focused on targeted grants to the states which they could use rebuild their infrastructure and create jobs.

                      He also went into great detail about "Green collar" and "clean energy" job creation and gave nuclear energy that required hundreds of millions of Federal dollars to build one reactor... THE BIG THUMBS DOWN!

                      These jobs have had the lip service of both parties for the last thirty years and yet no significant progress has been made because the lobbyist kept them from becoming major priorities.

                      It is time to change... but let the candidates state what their priorities for change really are!

                      GOV. RENDELL JOINS GOV. SCHWARZENEGGER, MAYOR BLOOMBERG TO CREATE NON-PARTISAN COALITION FOR FEDERAL INFRASTRUCTURE INVESTMENT

                      ROCKEFELLER FOUNDATION COMMITS TO FUNDING COALITION EFFORTS TO MAKE INFRASTRUCTURE FUNDING A NATIONAL PRIORITY

                      LOS ANGELES, CALIF. – Governor Edward G. Rendell today joined with California Governor Arnold Schwarzenegger and New York Mayor Michael R. Bloomberg to announce that they are creating a non-partisan coalition for federal infrastructure investment.

                      The Building America’s Future Coalition will be comprised of state- and locally elected officials from around the nation and will become a repository of best practices on infrastructure funding issues.

                      In the short-term, the coalition will work with the presidential candidates and the platform committees of the national political parties to ensure that the next president understands the enormity of the infrastructure crisis and is committed to increasing federal funding.

                      "We can all look at recent headlines about levees in New Orleans, air traffic congestion in the Northeast or the bridge collapse in Minnesota to realize that our nation’s infrastructure is in need of serious attention," said Mayor Bloomberg.  "But those examples only scratch the surface of the problem.

                      The funding needs to maintain our existing infrastructure, and to improve and expand infrastructure as our nation continues to grow, just hasn’t been the priority it needs to be.  Today, I’m joining with Governor Rendell and Governor Schwarzenegger to create a coalition that will focus attention on our national infrastructure shortcomings in a non-partisan way and will work to ensure the federal government makes this a top priority."

                      "In the past 20 years, state and local governments have been forced to pay more and more of the cost for infrastructure repairs and expansion," said Governor Rendell. "Three-quarters of our nation’s infrastructure spending is by state and local governments. In the past five years Pennsylvania has increased state funding for bridge repairs by 300 percent, yet the number of structurally deficient bridges has increased. Our country can’t do it without federal leadership.

                      "America’s infrastructure crisis is far broader than bridges and roads," said Governor Rendell. "The infrastructure crisis includes the basic necessities communities and businesses need to survive: schools, waterlines, wastewater treatment systems, dams, flood mitigation, hospitals, energy, aviation, rail lines, and ports. This is an issue that crosses party lines and we need significant federal investments now to ensure the safety of our citizens and economic prosperity of our nation."

                      In the past five years, Governor Rendell has guided Pennsylvania to make significant investments in a range of infrastructure areas, including doubling funding for state programs that fund improvements to freight rail lines and doubling the size of the state’s aviation funding program. He also drove the effort to deepen the Delaware River shipping channel.

                      The national infrastructure needs are more than $1 trillion dollars.

                      "America needs $1.6 trillion worth of infrastructure over the next five years, yet federal investment has been cut in half as a percent of gross domestic product since 1987," said Governor Schwarzenegger. "This is disastrous because without adequate infrastructure to quickly and safely move goods and people our economy and our traffic will stop dead in its tracks. I could not be happier to join Governor Rendell and Mayor Bloomberg to shine an even brighter spotlight on this critical issue."

                      http://www.state.pa.us/...

                •  Excellent comment -- (4+ / 0-)
                  Recommended by:
                  splashy, greenearth, nathguy, kyril

                  The 'New Economy' has hollowed out America and put us in an Alice in Wonderland world where things of real value (e.g., industry, technology, real innovation) are cast away and replaced with Fed/Wall Street Ponzi schemes and what Kurt Vonnegut called "Casino Economics". Will it be any surprise that a sizable chunk of the 500+ trillion dollars in worldwide derivatives turns out to be a stinking pile of garbage?

            •  So is this the same as Margin Loans pre 1929? (7+ / 0-)

              They pushed real interest rates to negative levels (below inflation), and that's something a true free market would have never done.

              The Federal Reserve doing exactly the wrong thing? Gee why would they do that? To steal more of the middle class illusion of wealth? I am begining to understand now. Is it too late?
              When there are discussions of fixing the economy why is it that getting rid of the Federal Reserve is never an option?

            •  Now, they won't loan money (2+ / 0-)
              Recommended by:
              nathguy, kyril

              no matter how cheaply they get it (what the fed rate is).  Would you make a loan on collateral whose value is falling, like most homes?

              "We shall see." Gust Avrakotos channeling a Zen master in Charlie Wilson's War.

              by robokos on Sat Feb 09, 2008 at 12:35:11 PM PST

              [ Parent ]

          •  I agree with both of you (12+ / 0-)

            to a point.

            The need for stable homes and stable cost of living will never go away.

            The change that is needed here IS fundamental.

            Banks need to require equity. But 20% is beyond the pale for ALL mortgages.

            On re-fis? Absolutely. Equity loans? Hell yes.

            First time buyers? No. Base the rate on the ability to pay, and a buyer's credit. Period. Make the rate contingent on "down payment" and their overall credit rating. Period.

            There's a bubble due to greed on the part of a lot of lenders. The subprime problem did not create a shitty economy. A lot of defaults are based on job losses. You can't even forsee that on someone's CBR.

            I find humming is very useful - Elvis Costello

            by o the umanity on Sat Feb 09, 2008 at 09:05:09 AM PST

            [ Parent ]

          •  Europeans have been doing it (27+ / 0-)

            for decades.  30% down or more to purchase a house in Italy and France.  Home ownership rates are somewhat lower there - but bankruptcy rates are a FRACTION of ours.  And everyone has a pension.

            Here's another approach - when I was in Switzerland in 1972 or 1974 (I forget which time), mortgage rates were going up to rates that made it difficult for young people to get first homes.  So the government had the banks cut back on mortgages on second homes.  I forget whether the mechanism was rationing - or eliminating - those mortgages or applying a surcharge.

            The point is: subprime lending is not the only solution around.  There are many ways to help working people if that is your goal.  But our goal is first to help bankers and investors and only secondarily (at best) to help working people.

            •  How do they do it? (45+ / 0-)

              I should add that Europeans can save enough to make these down payments because
              a) they don't leave university burdened with debt
              b) their health care costs 30% - 40% less than ours
              c) they have vastly lower rates of credit card debt - so they're not being bled by the usurers
              d) because they have pensions and other social benefits, they tend not to purchase various forms of insurance popular here in the US

              •  Well, I think fundamentally they don't have to (13+ / 0-)

                carry a military that is gargantuan in its appetite and pays no dividends.  That is the thing that crushes the US economy.

                "I said, 'wait a minute, Chester, you know I'm a peaceful man.'" Robbie Robertson -8.13, -4.56

                by NearlyNormal on Sat Feb 09, 2008 at 11:21:50 AM PST

                [ Parent ]

                •  Military is a problem but not the largest (4+ / 0-)
                  Recommended by:
                  Cambridgemac, greenearth, nathguy, kyril

                  The U.S. military budget is, off the top of my head. about $800 billion. And that is the special appropriations for Iraq and the budget items not on the Defense Authorization, such as nuclear weapons by the Dept of Energy.

                  The U.S. economy is about $15 trillion now.

                  Wall Street and the futures pits in Chicago are trading about $1,200,000 billion a year. Yeah, that's right. $1,200 trillion. Or, if you wish, $1.2 quadrillion. That's, umm, 80 times the size of GDP.

                  If Wall Street and Chicago can skim just one fifth of one percent off that $1.2 quadrillion in fees, commissions, arbitrage, and so on, that is $2.4 trillion.

                  Yeah, imperial over-reach is a problem. But let's be real clear here: if you insist imperial over-reach is THE problem, then you are only doing the work of the Wall Street traders and bankers who would dearly love to keep the public ignorant of how big a problem we really have in them.

                  A conservative is a scab for the oligarchy.

                  by NBBooks on Sat Feb 09, 2008 at 12:55:34 PM PST

                  [ Parent ]

                  •  It's more than that... (6+ / 0-)

                    There's a lot of stuff that doesn't get listed. And you also have to throw in the CIA, who's budget is gargantuan. Know one really knows, but it is estimated to be more than $1 TRILLION a year.

                    Although figures are not available after 2000, the [Department of Defense's] Inspector General calculated the CIA has siphoned $1.7 trillion in 1998, $2.3 trillion in 1999 and $1.1 trillion in 2000. This entire CIA funding process, of course, has dubious constitutional authority, but is allowed by various Congressional enactments and secret approval given by the Executive branch and high-ranking congressional leaders.

                    "There's a kind of freedom in being completely screwed... because you know things can't get any worse. " -- Matthew Broderick, The Freshman

                    by friday durdikova on Sat Feb 09, 2008 at 02:57:13 PM PST

                    [ Parent ]

                    •  Right, they don't figure every cost in (0+ / 0-)

                      that they should.

                      I googled 'federal budget' and found many different ones.  One said that the government doesn't count the Veteran's administration as part of the war costs. Another said that 80% of the interest paid on the deficit should be put on the military, because we would have paid more of the deficit off, if it hadn't been for the war and then would have had less interest to pay. When year after year you add more interest to interest that is already owed, then that makes it more expensive.

                      One website showed the war taking 51% of the yearly budget.

                      Sometimes they use the percentage of the gdp, which made it sound like less than it is. The federal budget is 18% of the gdp.

                  •  Its like a junkie saying that Heroin is a (3+ / 0-)
                    Recommended by:
                    theran, relentless, kyril

                    problem, but not the biggest problem because he only spends a portion of the family income on it, never mind that the kids are not being fed, insurance doesn't get paid and there is no money being put away for retirement.  And the traders and the bankers make their best money off the corporations that are at the trough of the defense establishment, and that the defense establishment is the enforcer of last resort of these same people.

                    "I said, 'wait a minute, Chester, you know I'm a peaceful man.'" Robbie Robertson -8.13, -4.56

                    by NearlyNormal on Sat Feb 09, 2008 at 03:23:36 PM PST

                    [ Parent ]

                    •  OK, I wish you luck (1+ / 0-)
                      Recommended by:
                      Cambridgemac

                      trying to explain to a million aerospace workers that their jobs are less important than 50,000 speculators on Wall Street.

                      A conservative is a scab for the oligarchy.

                      by NBBooks on Sat Feb 09, 2008 at 03:45:57 PM PST

                      [ Parent ]

                      •  I'm not sure what your point is. (1+ / 0-)
                        Recommended by:
                        kyril

                        We could cut off the speculators on Wall Street-a very good thing I agree-but if we continue the wholly debilitating addiction to the military and we would not be better off.  What does the million aerospace workers have to do with anything?  Military procurement?  If so, put them to work making tractors or solar panels or something designed to advance the world rather than bust shit up.

                        "I said, 'wait a minute, Chester, you know I'm a peaceful man.'" Robbie Robertson -8.13, -4.56

                        by NearlyNormal on Sat Feb 09, 2008 at 03:59:05 PM PST

                        [ Parent ]

                        •  Exactly ! (4+ / 0-)
                          Recommended by:
                          Cambridgemac, NearlyNormal, nathguy, kyril

                          put them to work making tractors or solar panels or something designed to advance the world rather than bust shit up. Did you see my comment above? Just like after World War Two, we have pent-up demand, but this time it is for a green economy. Think of what needs to be built:
                          Every single car and truck in the United States needs to be replaced with hybrids or super fuel-efficient vehicles (see a picture of the Aptera further down-thread).
                          A replacement for the entire system of gasoline delivery and distribution.
                          Almost the entirety of the nation’s housing stock needs to be replaced or retrofitted with green technology.
                          Same with commercial buildings, especially skyscrapers built in the 1950s to 1990s, which is almost all the core downtowns. Tear ‘em down and start over again, make them user friendly and environmentally neutral.
                          Urban mass transit rail systems. New York City has the most dense network, and it is only half as dense as what you find in Tokyo, London. Paris, Moscow. Cities like Miami and Phoenix, which are now in the top ten urban areas in the U.S. don't have ANY mass transit rail, or have a single line with one or two dozen stations.
                          Passenger rail with its own rights of way. How many people know Amtrak has to run on rails owned and maintained by the freight railroads? In the northeast corridor, from Washington DC to Boston, we really should build this entirely underground. One long tunnel from DC to Boston.

                          A few years after we as a nation make the decision to deliberately steer the economy into a replacement of the fossil-fuel economy, we'll look back at these Reagan to Bush years and shake our heads in sad bemusement at our collective insanity.

                          A conservative is a scab for the oligarchy.

                          by NBBooks on Sat Feb 09, 2008 at 04:18:57 PM PST

                          [ Parent ]

                  •  Love your sig (0+ / 0-)

                    The real military budget is closer to 1 trillion when you include DOE nuclear energy programs, VA expenses, and the portion of the debt that is due to Empire (virtually all of it, since Social Security and Medicare have been running at a surplus for 20 years).  But that doesn't change the picture much.

                    The numbers you cite are mind-boggling.

              •  But as our "fearless decider" says: (1+ / 0-)
                Recommended by:
                kyril

                "They gotta soshalisht kinda economy 'n we gotta free economy."  Free for whom?  The top one percent.  

                •  That would be the Real Merkans (0+ / 0-)

                  Prior to the French Revolution and the rise of nationalism, the real people were the nobles.  In Poland, for example - which prided itself on being "free"  (until it was carved up by the Prussians, Austrians and Russians), to be Polish had nothing to do with speaking Polish.  Only the serfs spoke Polish.  The nobility spoke French.  And they were the Real Poles.

                  It was the same in every country.  And here in Merka, the Real People are the Top 1%.  The rest of us are a nuisance.

              •  Plus the Europeans actually get vacations! (2+ / 0-)
                Recommended by:
                Cambridgemac, nathguy

                It always pissed me off that our European divisions got six weeks of vacation after their first year of service and we yankee devils only got two!

                And our company was considered to have "modestly good benefits" by European standards!

                Grumble Grumble Grumble... Grubs again!

            •  Europe (9+ / 0-)

              Downpayments have trended down, but what has remained (at least in continental Europe, because the UK seems to have gone more towards the US route) is the requirement for debt service not to represent more than 33% of current available income.

              Banks have held on to such standards, thus ensuring that they had less 'toxic waste' on their books (also, it helps that they tend not to sell these assets, but keep them in their books).

          •  Lots of them. But. (11+ / 0-)

            Why should they? Most people actually can't afford a house. Trying to get clever about financing just results in, well, the subprime lending industry. Housing people is crucial, but we can't put every three-person family in a 2000-square-foot split-level.

            I think the long-term solution is going to be building a lot of townhouses, row houses, that sort of thing. Places that cost less per unit.

            •  correct (8+ / 0-)

              builders built the biggest houses they could becuase that is where the profit is. regulate the building industry and make them build 3 1500 sq ft homes for every 4500 sq ft home. simple as that.

              Welcome to the empire. life is not a dress rehearsal My record label: www.11mileswestofnowhere.com

              by johnfire on Sat Feb 09, 2008 at 09:47:52 AM PST

              [ Parent ]

            •  "Cost less per unit" ????? really? (27+ / 0-)

              seems like the current mess CAUSED prices to skyrocket.  

              CHEAPER credit made houses MORE EXPENSIVE.

              I bought after Gulf I - 8.5% or more was the norm, you needed 20% down and couldn't exceed 36-38% of your income with the resultant housing costs (mortgage, taxes, insurance).

              Those conditions got us a house at about $300,000 - the median price for a house that year.

              fast forward

              Sharply LOWER interest rates made you could afford HIGHER payments.....

              what happened?

              HOUSE PRICES went UP.  

              More competion for open land, higher material prices as more new houses got built....  That 'starter' $200,000 house became a not so affordable $500,000 one and even condos got absurdly expensive - though THAT market started falling apart a couple years back - though nobody was paying attention.

              Oh... and add to it all the fact that people wanted 'more' and builders were happy to oblige..... look at what's 'required' now - dishwasher, washer, dryer..... hell you'd get fined if you put out a clothesline in some communities.  But you NEED these labor saving devices cause everybody is out working to PAY FOR the house and all the 'stuff' in it.

              mjfgates has a point - not everyone can afford a stand-alone house but Americans have to get over thinking it's a 'right'.  It never was.   Truth is that houses were lucky to simply hold value over time and there were preiods where they LOST value - but that's changed.  And LOCATION is the key.

              Houses near urban centers - and jobs - are and always will be worth a premium.  Those built in the boonies on cheap land hours away from jobs will become unsustainable in an era of rising energy costs.  Stand-alone houses on large lots near mass transit are an unaffordable luxury.  They SHOULD be replaced with denser housing.

              Europe - and the rest of the world - is willing and happy to live in smaller spaces closer to work.  Americans have insisted on a stand-alone house even if it meant HOURS of commuting by car - a less and less viable option now.

              We will be seeing a seismic shift - it's already started.  Huge affordable rental housing complexes in NYC are getting bought out withthe intent of turning them into co-ops - EXPENSIVE co-ops.  Housing close to jobs will soar in value, housing far away from jobs will lose value....  continue the urbanization trend of the last century.  Small towns in the Dakotas are being abandoned..... but so are houses in suburban Detroit now.....  no jobs....no demand for houses.

              Look at where the housing collapse is worst - places NOT close to jobs.  Even here in NYC burbs, the market in Manhattan holds, close in burbs are still selling but farther out on the rail lines are dropping in price and sitting on the market......

              There IS and SHOULD be a relationship between housing and jobs.  You USED to WALK to work a century ago.  We're going to be getting back to a far simpler approach where INDIVIDUAL transportation will be priced out of existence except for the VERY wealthy.  Look at pricing plans for inner city access in London - and that proposed for NYC.  It DOES make sense - it's absurd to have people driving a car into Manhattan (and cops and firemen living 3 hours away from their jobs - some jobs SHOULD be held by local neighborhood residents for various pragmatic reasons).  I worked in downtown NYC and took the subway in from an apartment in the Bronx - a 45 minute commute.  Even moving to the burbs, I was two stops out of Grand Central and my commute went up to an hour.  But when my employer relocaed across the Hudson and I had to start driving....... hell, forget THAT.  Yet my boss downtown commuted in from past Middletown NY - 2 - 2/1/2 hours each way. A drive to NJ trains and then a long train ride, PATH and then subways. I thought he was NUTS.  But he had a house and property - which he rarely saw. Hell, if he'd settled for a row house in Queens where he grew up he'd have a 45 minute commute.

              I was in Greenwich a while back and dumbfounded. Greenwich CT, the home of corporate execs.  Along a street off the Merrit Pkey.  For years people had been happy with 3-4000sf houses on 1/2 - 1 acre.  Property, decent sized house.  NOW every damn house along one stretch was being remodeled nto some faux chateau - QUADRUPLED in size with a nice 6' high wall added around the perimeter..... Hmmm.... that sure makes a statement.  

              My point is that we used to be happy with far less..... and we're going to have to get USED to dealing with far less again in the future.  And that should apply to ALL Of us.  There should be a surcharge - a 'use' tax on absurdly large - and resource hogging

          •  You don't need to own (25+ / 0-)

            People the world over do great by renting their whole lives. Poor people in general should not own since doing so requires they put all their wealth into one asset. That's very poor financial practice. Look around right now. Renters are doing great. Many homeowners will be ruined.

            Also, people who are not certain they're going to stay in one place for a long time should not buy, regardless of wealth, due to transaction cost. Don't fall for the realtors' propaganda that there's magic pixie dust in ownership. Owning is a huge, huge financial commitment, tying you to one  place for an extended period of time and sticking you with extensive maintenance responsibilities. In return you get the privilege of remodeling and a possibility of appreciation. It's just a option, which should be evaluated with a level head and an appreciation for the big risks.

          •  We have fallen into this mindset (11+ / 0-)

            that being a renter is somehow a very bad thing.

            I would think that what's going on here should show that that is not necessarily true. Homeownership is simply not for everyone. And focusing on homeownership rather than focusing on housing has not only put us in the financial position we see now, but has contributed mightily to the explosion in the population of homeless Americans.

            Subprime lending is not the only solution.

            Civil marriage is a civil right.

            by stitchmd on Sat Feb 09, 2008 at 09:34:17 AM PST

            [ Parent ]

            •  In this country it is (8+ / 0-)

              Renters get very few of the benefits or the rights of home owners. While they will often get lower monthly payments than home owners, they build no equity, and can be evicted at the end of their lease regardless of their payment history. After living in apartments for 13 years, I figure I had spent about $100k in rent with nothing to show for it other than having a roof over my head.

              Do Pavlov's dogs chase Schroedinger's cat?

              by corwin on Sat Feb 09, 2008 at 09:46:06 AM PST

              [ Parent ]

              •  regulate like europe (12+ / 0-)

                prevent people from being thrown out with a decent payment history. set up laws protecting renters like germany.

                hey look we have what we got because we built the system we built. the economic crisis is a direct result of lazzez faire capitialism. same thing , boom and bust cycle , happened over and over again in the 1870s-1910. unless we start regulating commerce again, and enforcing the rules you are just getting more of t the same as time goes on.

                Welcome to the empire. life is not a dress rehearsal My record label: www.11mileswestofnowhere.com

                by johnfire on Sat Feb 09, 2008 at 09:50:34 AM PST

                [ Parent ]

              •  But what you have also had is (9+ / 0-)

                (assuming you are a traditional apartment renter) no obligation for maintenance and its associated costs, no obligation for insurance - it's not required for renters, as it is with a mortgage, although it's generally a good idea - and any of a number of other advantages.

                And in the current market, there's no guarantee that there is a 'return' on homeownership. Now, over 13 years, that's probably not true, granted.

                Others above, however, pointed out the potential problem of lower (and these days, even middle) income folk having essentially all their eggs in one basket: their single asset is their home. If you fall into a position where you can't maintain it, or had bought in an area that was declining, or any of a number of other scenarios, it doesn't necessarily pay off in the long run.

                Everyone has to look at their own situation.

                Civil marriage is a civil right.

                by stitchmd on Sat Feb 09, 2008 at 09:51:19 AM PST

                [ Parent ]

                •  Generally agree (5+ / 0-)

                  But ultimately, I did have to pay for maintenance, even if I wasn't paying directly for any repairs. Also, I had to put up with noisy neighbors that I couldn't do anything about. When you live directly underneath a family with 2 or 3 kids and a dog, the noise can be overwhelming at times.

                  As far as the return, I'm not really looking to cash out of my house. But if I keep it long enough, and manage to pay it off, at that point I have no more payments to make, just insurance and taxes, which would be substantially lower. And even if for some reason I had to sell now, I could still get quite a bit more than I paid for it 5 years ago.

                  Do Pavlov's dogs chase Schroedinger's cat?

                  by corwin on Sat Feb 09, 2008 at 10:07:41 AM PST

                  [ Parent ]

                  •  In my former house (7+ / 0-)

                    a rowhouse in Baltimore, we also had to put up with noisy, obnoxious neighbors, college students, actually. When we bought the house, most of the surrounding homes were owner occupied and well maintained. When we left 7 years later, 3 of the 5 on our block were rentals, 2 to students, not well maintained, and the 5th was vacant.

                    After 7 years, we sold it for what we paid for it, and had we not paid well ahead on the mortgage in the last 3 years (our financial situation changed significantly) we would have owed money at closing.

                    4 years later, same house sold for 2.4 times what we sold it for.

                    So, yeah, you could say, lousy timing. That's my luck.

                    Civil marriage is a civil right.

                    by stitchmd on Sat Feb 09, 2008 at 10:20:54 AM PST

                    [ Parent ]

                •  Partially true (2+ / 0-)
                  Recommended by:
                  stitchmd, nathguy

                  Renters are often required to have renter's insurance. In addition, one place I lived in required me to pay for a service agreement with the utilities so that if there were a problem with the heat, for example, the landlord didn't need to bother with it.

                  Today's mighty oak is just yesterday's nut that held its ground.

                  by MizC on Sat Feb 09, 2008 at 10:23:28 AM PST

                  [ Parent ]

              •  For everything there is a season (16+ / 0-)

                I'm a renter. I could have afforded a home several years ago, as my career has finally taken off.
                  But I chose to wait for the simple reason that I don't believe in buying overpriced products. Housing was overpriced.

                 In a couple years I will finally be a homeowner, but it will be at a price of probably 50 cents on the dollar compared to today's prices.

                Where is Estanislao when we need him?

                by gjohnsit on Sat Feb 09, 2008 at 09:53:18 AM PST

                [ Parent ]

              •  Exactly (4+ / 0-)
                Recommended by:
                corwin, greenearth, nathguy, SuperCameron

                Also, in areas where rents are high, renters end up paying a lot more per square foot than homeowners. A few years ago, my brother was paying about 20% more than me to buy a house that was 2-3 times the size of my apartment.

                Today's mighty oak is just yesterday's nut that held its ground.

                by MizC on Sat Feb 09, 2008 at 10:17:29 AM PST

                [ Parent ]

                •  That goes up and down (4+ / 0-)
                  Recommended by:
                  greenearth, nathguy, kyril, MizC

                  My parents have owned a house that they have rented out in a very desirable area (NYC suburbs) for more than 35 years, and as the market has fluctuated the ratio of rent to mortgage has flipped several times.

                  In the last few years, they went for long periods of time without tenants even though the rent was lower than many mortgage payments, because people wanted to buy. There have also been times when their rent was higher than mortgage payments in the area and they've had no trouble finding tenants.

                  It's part of the market.

                  Civil marriage is a civil right.

                  by stitchmd on Sat Feb 09, 2008 at 10:24:53 AM PST

                  [ Parent ]

              •  Homeowners are renters also. I pay more in (3+ / 0-)
                Recommended by:
                greenearth, nathguy, kyril

                property taxes per month than I ever did renting. You can be evicted even more easily from a home than from an apartment.

                "I count him braver who overcomes his desires than him who conquers his enemies; for the hardest victory is over self." --Aristotle

                by java4every1 on Sat Feb 09, 2008 at 11:44:07 AM PST

                [ Parent ]

              •  And then renters are hit with EIT (2+ / 0-)
                Recommended by:
                greenearth, nathguy

                tax on income by municipal and school district bodies that used to/should rely just on property taxes.

                Stupid Quaternary Period!

                by obatanga night on Sat Feb 09, 2008 at 02:32:27 PM PST

                [ Parent ]

          •  Probably More Fundamental Than You're Thinking (5+ / 0-)
            Recommended by:
            greenearth, nathguy, kyril, MizC, lgcap

            Renting is normal throughout history and across the developed world as commenters are saying.

            This is not my expertise but if you are thinking universal home ownership you're probably talking much more fundmental changes to our entire system than universal health or even the New Deal.

            Personally I'm open to hearing about such dramatic change but I doubt the top of the economy we've worked so long and hard to empower is.

            We are called to speak for the weak, for the voiceless, for victims of our nation and for those it calls enemy.... --ML King "Beyond Vietnam"

            by Gooserock on Sat Feb 09, 2008 at 09:56:12 AM PST

            [ Parent ]

          •  Some people cannot afford to (2+ / 0-)
            Recommended by:
            greenearth, kyril

            "own" a home. The cost of "ownership" far exceeds the mortgage payment, particularly in a less expensive home. Maintenance is another 3-5% per year, without the expenditure at the end of a thirty year period all that is left is a lot with a pile of debris that must be removed.

            Mortgages are slavery for many.

            •  a number of people own condos (5+ / 0-)
              Recommended by:
              bablhous, greenearth, nathguy, kyril, lgcap

              and have been hit with unforeseeable assessments, for all kinds of things in addition to just repair and maintenance.... and that has whacked them!

              to me, it seems all no win.

              I am a renter now, by dint of circumstance and now choice, and am trying to get my financials in good enough condition to buy at the bottom, if there is such a thing.  May or may not be able to do it, depending on how much of a drain the COL is during the coming recession balanced with how my business does.  F*cking utilities are astronomical...anyone else finding that?  and I heard on the news that they are projected to go up 12-17%

              Though, come to think of it, not being tied down to an owned home, could have advantages.  I also heard that local taxes are going to go up bec. states don't get from the govt as they used to.

              With all that and the inevitable increase in gas, we are s-c-r-e-w-e-d.

              A depression era mentality of thrift makes a whole lot of sense now.  what is it? Saving, reusing, no credit...

              Demand a "voter verified paper trail" in every election, in every state. Sign Rush Holt's Petition for HR. 811.

              by SeaTurtle on Sat Feb 09, 2008 at 01:05:21 PM PST

              [ Parent ]

          •  Stop trolling for Wall Street (2+ / 0-)
            Recommended by:
            greenearth, NBBooks

            stop trolling

            Look TrollBoy,  In the 1960's and 1930's we created things like
            the FHA and FHmA which allowed low equity loans for the working
            poor but these were capped at fairly small loan sizes.

            This allowed the working poor to buy wiht 3% down and at better rates
            for houses less then $200K.

            once the banks figured out a way to inflate real estate prices, what they
            did was figure out a way to systematically rob the working poor
            of their equity.

            That's all.

            Now have some pie

            George Bush i sLiving proof of the axiom "Never send a boy to do a man's job" E -2.25 S -4.10

            by nathguy on Sat Feb 09, 2008 at 02:21:46 PM PST

            [ Parent ]

        •  Exactly (9+ / 0-)

          Lenders could still help out higher risk borrowers without sticking them with loans they can't afford.

          They could steer them into lower priced properties, tell them to save some more $$$ and come back, etc etc.

          It makes no sense to me to require higher interest rates for those least able to handle them.

          Sure it's nice to be able to get everything you want immediately on credit, but that economic model of buy now pay later is simply not sustainable over the long term.

          "I'd rec you if I could." - cometman

          by cometman on Sat Feb 09, 2008 at 08:45:21 AM PST

          [ Parent ]

          •  The lender can reccomend all day long. (2+ / 1-)
            Recommended by:
            jxg, DreadWolf
            Hidden by:
            nathguy

            Under the fair credit and housing act, they have no right to say no to the loan the borrower wants.

            •  Not totally true (11+ / 0-)

              The lender has the right to demand a very large down payment that many could never afford.
                The current problem isn't from there being too much government regulation. The current problem is from too much Federal Reserve manipulation of the markets.

              Where is Estanislao when we need him?

              by gjohnsit on Sat Feb 09, 2008 at 08:56:26 AM PST

              [ Parent ]

              •  That just trades one lender for another. (2+ / 0-)
                Recommended by:
                jakbeau, MizC

                The one who won't loan for the one who will.  What difference does that really make?

                The change needs to come from Congress.  It has to address the needs of the lenders, the securitizors, the investors, the borrowers, and most importantly the poor.  Everything else is a punt.

            •  Not exactly. (10+ / 0-)

              For example, I can't walk in and demand a million dollar loan even though I only make $45k a year.

              Lenders can't set up different requirements for different demographics or geographic areas, but there's nothing in the law that prevents them from setting up defensible financial criteria for their potential borrowers.

              If borrowers could get whatever they asked for, there'd be no need for the pile of paperwork required to qualify for a mortgage.

            •  You know, (3+ / 0-)
              Recommended by:
              mattman, kyril, MizC

              back in 1993 when we bought our first house, we made an offer and the seller accepted it, but the lender refused to give us a loan that would support that price.

              Now, it was based on the value of the house and not the loan (remember, the early 90s in parts of the country also saw a decline in housing prices; how soon we forget) but had we tried to get a loan above what we could afford, we most likely would have been turned down.

              The simple answer would be to return to the kinds of restrictions in place not all that long ago.

              Civil marriage is a civil right.

              by stitchmd on Sat Feb 09, 2008 at 09:39:11 AM PST

              [ Parent ]

            •  Cite statutory language and precident (5+ / 0-)
              Recommended by:
              Detlef, fiddler crabby, nathguy, kyril, BYw

              No lender is required to give a loan. The only requirement under that act is to apply standards equally to all persons, based on objective criteria of what they can afford, rather than by subjective preferences for people of a certain color or class. If you think that any bank is required to give any borrower any loan, why don't you just borrow a few million dollars and move to South America? Seriously, you should do that and go. Except you can't. Because that's not the way lending works.

        •  Subprime was a damn Ponzi scheme (9+ / 0-)

          The "smart money" got out a while back.

          'But they'll burn ya out' The unsteady eyes dropped to the ground. "I know. They done it before" - Steinbeck

          by SecondComing on Sat Feb 09, 2008 at 09:28:01 AM PST

          [ Parent ]

          •  The Mother of all Ponzi Schemes... (27+ / 0-)

            Gjohnsit...

            An excellent diary and well researched... scary... but excellent none the less!

            Last month I posted on several economic diaries about the commercial real estate aspect of the sub-prime debacle because I was worried about its effects on business.

            I started talking to friends of mine who are CEOs about this and found one aspect of the Sub-prime debacle created by these hedge funds that seems to have been ignored.

            I spoke with a friend of mine who is a CEO of a small electronics manufacturer in Pennsylvania. I wanted to know how his company was being effected by the financial institutions reluctance to make loans and the Feds new rate cut.

            He told me that the worst hasn't yet really come to light because right now it is only housing prices and their roll in the Hedge fund bundling that has come out, but there is a corporate aspect that hasn't come to light.

            He told me that he sold the building that houses his company a year and a half ago and it was purchased by a hedge fund and that he found out that it had been "repackaged" five times since his original sale.

            His greatest fear is that as the recession deepens and businesses down-size or close retail outlets or go under, that another whole side to the Hedge Fund created debacle is going to emerge and no stimulus package or Fed rate cut will be able stop the cascade of financial institution failures.

            He said that the hedge funds were selling his former property with guarantees that the property would be rented and that they couldn't realistically make that assertion. His estimate was that for every real dollar in the funds package that there were 300 bogus bucks that they sold on the market.

            He's not concerned about his company's location but he is terrified about what the possible impact to his customers capitalization budgets are going to be.

            This may be why Bush was so insistent on the business tax cuts in the stimulus package.

            As further validation about how deep this is going, I snagged these articles last month that really started to raise the hairs on the back of my neck...

            When AT&T takes a major stock hit because people can't pay their phone bill... there is big time trouble in river city as the saying goes!

            The Amex credit card defaults is equally troubling because as the article notes, "AmEx's warning was particularly worrisome as its high-end clients were considered more resistant to a consumer slowdown."
            This indicates that it isn't just the poor or working class who are getting hit, but all economic strata (except the .01% who have enough reserves that it really won't effect them... except they might throw both drinks across the lawn as they watch their portfolios devalue).

            AT&T shares slip after CEO Randall Stephenson says co. sees some slowdown on consumer side
            updated 4:05 p.m. ET, Tues., Jan. 8, 2008

            NEW YORK - AT&T Inc.'s shares tumbled Tuesday afternoon after Chairman and Chief Executive Randall Stephenson said the telecom carrier is experiencing some slowdown in its consumer business segments.

            Speaking at Citi's Entertainment, Media and Telecom Conference, Stephenson said the bulk of the weakness is coming from service disconnections due to nonpayment of its access lines and home broadband services.

            http://news.edgar-online.com/...

            Wall Street drops sharply on AmEx earnings
            Consumer-facing stocks were sold off on Friday after American Expresssaid it would take a $440m fourth-quarter charge to cover rising delinquencies
            and gave a cautious outlook for this year. American Express's warning came after Capital One Financial (NYSE:COF), the card issuer, cut its full-year profit guidance by more than 20 per cent. The shares fell 10.5 per cent to $44 and 7.4 per cent to $42.59, respectively.

            Economists have long feared mortgage-related losses would spread into the broader economy as consumers unable to make home payments default on loans. AmEx's warning was particularly worrisome as its high-end clients were considered more resistant to a consumer slowdown.

            http://www.ft.com/...

            Also... Amex reported that the defaults were heaviest in California and Florida, the two states hit the hardest by the sub-Prime debacle.

            Personal Bankruptcy Filings Rise 40%

            Personal bankruptcy filings in the United States jumped 40 percent in 2007 because of rising mortgage payments, job losses and other financial pressures.
            The increase followed a sharp decline from a year earlier, when a new law made it more difficult for consumers to seek bankruptcy-court protection from creditors.

            http://www.washingtonpost.com/...

            A New Final Act? Pension Funds...

            Perhaps one of the most disturbing parts of the coming Tsunami Acts that I didn’t see in your diary is the impact on Pension Funds. This may constitute a 8th act to this fiasco and make Enron, Global Crossings, and Tyco look like petty theft when the full extent becomes public...

            Banks Sell 'Toxic Waste' CDOs to Calpers, Texas Teachers Fund

            June 1 (Bloomberg) -- Bear Stearns Cos., the fifth-largest U.S. securities firm, is hawking the riskiest portions of collateralized debt obligations to public pension funds.

            At a sales presentation of the bank's CDOs to 50 public pension fund managers in a Las Vegas hotel ballroom, Jean Fleischhacker, Bear Stearns senior managing director, tells fund managers they can get a 20 percent annual return from the bottom level of a CDO.

            ``It has a very high cash yield to it,'' Fleischhacker says at the March convention. ``I think a lot of people are confused about what this product is and how it works.''

            Worldwide sales of CDOs -- which are packages of securities backed by bonds, mortgages and other loans -- have soared since 2003, reaching $503 billion last year, a fivefold increase in three years. Bankers call the bottom sections of a CDO, the ones most vulnerable to losses from bad debt, the equity tranches.

            They also refer to them as toxic waste because as more borrowers default on loans, these investments would be the first to take losses. The investments could be wiped out.

            http://www.bloomberg.com/...

        •  When we bought our first home (6+ / 0-)

          Hubby and I borrowed $1,000 to pay down on a house which had the full purchase price of $10,000.  My husband only made $75 a week before taxes. We paid the $1000 back at $50 a month and the house payment inlcuding insurance was $75.  

          It was really hard to make those payments and sometims we borrowed from Peter to pay Paul. We would get a new loan and add bills we were behind on to it, just to stay even.

          Eventually a raise made it easier.  It was a small 3 bedroom down the hall house in a good neighborhood.  We sold that 5 years later and moved to the country.  Had we known that same house would rent for $800 a month today, we would have kept it.  

          20% down would be impossible today for many, we only paid 10% down and it was hard to pay.  Even 1% is enough, because that would be a lot of money and hard to save.  

          If a couple is renting a house and saving to buy a house, usually going ahead and buying the house is the best way to do it, because you can pay most of your house payment with what you are paying as rent. Then you would only have to pay a little more for the principal and insurance.  Then, you get the tax deduction.

          I had a friend that was saving to buy a home. She lived in a shacky place with low rent.  House prices kept going up for the next three years while she was saving, so she finally plucked what she had down on a house.

          The lenders  need to have a regulation that they can't lend to those who will owe over a certain amount of their income.  Our banker always checked our salary at work and our debt payments to make sure we were good pay.  They also hired an appraiser to make sure it was worth what they were financing it for.  That is common sense.

          We didn't mind, because we wouldn't want to lend to someone who didn't pay their bills and we would want to know the house was worth the loan if the roles were reversed.

          I see a problem, if houses keep going down, then couples may walk out, if their home is worth a lot less than what they owe on it.

        •  Needless to mention (2+ / 0-)
          Recommended by:
          greenearth, kyril

          the use of ARMS, which disguise and then explode the risk contributes greatly to the phenomenon.

          People like the shiny low initial rates, don't fully appreciate what will happen in 5 years.

          "We shall see." Gust Avrakotos channeling a Zen master in Charlie Wilson's War.

          by robokos on Sat Feb 09, 2008 at 12:33:16 PM PST

          [ Parent ]

        •  Printing Money For 28 Years (7+ / 0-)

          The $8 trillion in debt taken on since Reagan took office is 100% non-earned and tossed into circulation.  Real estate values exploded, feeding speculators and driving prices up for those on fixed budgets making it virtually impossible to come up with 20% down.  A house was no longer a place to live and someday own, but a short term investment with a completely unrealistic expected rate of return.  Is there anyone delusional enough to expect their property value to double every 5 years in perpetuity?

          There is (was?) nowhere within 50 miles of Boston where one can buy a house for under $300,000.  Paying $1200 a month rent while saving up $60,000 for 20% down payment is hopeless for the median wage earner.  What could anyone do but try via whatever loan scheme possible?

        •  IT WAS PURELY A SCAM NOT A MISTAKE (4+ / 0-)
          Recommended by:
          Clzwld, YucatanMan, KenBee, kyril

          The Media portray this all as a "mistake"  total BS!!!!!!

          The SAME boys behing the old S&L scandal ...

          "Lets create a whole NEW class of "loans" - that NEVER before would have qualified as EITHER loans OR Assets - sell them as assets, sell them short and make a few 100 Billion" THAT's what they said to each other.... the side-benefit is it kills the Middle class economically - which of course constitutes the ONLY Opposition to these Creeps.

          Of course they wouldn't have asked for Equity for those loans. THE WHOLE POINT of this was to create massive Loans = "Debt" that they could repackage as a leveraged "Asset" Asset backed Securities -

          These are now known in the industry as "Ass-paper" - that's what they were worth to begin with!

          Now - The Fed creates more Huge Inflation - to prop the whole house of cards up JUST long enough till the next Administration takes over, then WHAM!!! Yardstick? Gold's up over 40% in the last year vs. the Dollar.look at Wheat, Corn, etc prices!!!... & Corporate Media will blame it on the Dems......

          Don't settle for media BS about this!

          Blind loyalty to self-defeating strategies is equally destructive as working for your enemy.

          by Hiroprotag on Sat Feb 09, 2008 at 01:30:30 PM PST

          [ Parent ]

      •  Thank goodness, one of our better Diarist, (5+ / 0-)
        Recommended by:
        linnen, KenBee, SuperCameron, kyril, CanyonWren

        gets the rec list.

    •  Great Diary (6+ / 0-)

      Regarding your poll:

      Which market?

      RE? Stocks? Bonds? Commercial RE?

      I went with 2010 and I'm thinking about the housing market. However, it won't be much of a bottom as the market will just stay down at the bottom level for a number of years.

      The credit cards and auto loans really are scary. Did you see that GMAC took a huge hit from RE the other day? I'm thinking that GM must be really glad they sold that off! And they made a nice amount from the deal.

      •  In this business and diary's a GREAT summary! n/t (2+ / 0-)
        Recommended by:
        greenearth, kyril

        "I always thought if you worked hard enough and tried hard enough, things would work out. I was wrong." --Katharine Graham

        by bobswern on Sat Feb 09, 2008 at 10:06:49 AM PST

        [ Parent ]

      •  I voted for 2012 because it took five years (2+ / 0-)
        Recommended by:
        greenearth, kyril

        from the stock market crash of 1929 to the bottom of the Depression. And even with all the maneuvers by FDR, the Depression didn't end until WW II guaranteed full employment and profits for corporations.

        As gjohnsit suggests, we ain't seen nothin' yet. Just wait until all those funny alphabet-soup "assets" sitting on the balance sheets of investment banks, pension funds of corporations, unions, and local governments, mutual funds, hedge funds, commercial banks, have to be priced at true market value. It could result in a 'loss' equal to one quarter of annual US GDP. That's the figure that keeps showing up in what I read ($3.5 trillion).


        -7.25/-6.41 If you don't like what you hear on the news, go out and make some of your own. -Scoop Nisker

        by sravaka on Sat Feb 09, 2008 at 01:20:43 PM PST

        [ Parent ]

    •  Interest Rates (1+ / 0-)
      Recommended by:
      kyril

      The Fed Funds futures show that the Fed Funds rate will bottom out around 2% in the middle of the year and then start back up by the end of the year. Look for that to help some of these insurance companies and lenders.

      •  thing is, the problem isn't the interest rates (6+ / 0-)

        the problem is that there aren't enough assets out there to back the debt out there. Reducing the Fed rate even further will only make things worse in the long run, not better.

        And that's why these stimulus checks are going to be a fiasco in the long run. Only thing they'll do will be to overall increase debt. No one is telling people to use them to pay down their debt, after all.

        Civil marriage is a civil right.

        by stitchmd on Sat Feb 09, 2008 at 09:42:01 AM PST

        [ Parent ]

        •  I'm socking my stimulus check away (10+ / 0-)

          I'm trying as hard as I can to put a few months of salary away in the event of joblessness.

          "They" always advise that.  It's hard as hell for most people to accomplish.  I make a good wage -- more than most -- and it's taken me a year to sock away 3 months of savings.

          I worry terribly about people who cannot do that at all and are living paycheck to paycheck.  There are a lot of people in that situation.  They might be my neighbors or anyone's here.

          But I won't discuss my credit card debt level right now.  It's astronomical.  After I get this last bit saved I'm shifting to pay it off as best as I can.

          Again, tho.  Bad choices, desperate choices, uninformed choices or not, I worry about those people and those families who are overextended on their credit cards, too.

          Recessions always seem to be numbers in news coverage.  But for many they are about electricity, bread, transportation, shelter.  That's when recessions get VERY personal.

          Question authoritarianism.

          by m00nchild on Sat Feb 09, 2008 at 11:08:19 AM PST

          [ Parent ]

          •  we're going to Mexico for a week with ours (2+ / 0-)
            Recommended by:
            java4every1, kyril

            Stimulate this, Bush!
            You're plan is smarter though.
            And I agree, it's going to be very sad for a LOT of people. Already is.
            I think our whole economy needs to be restructured. Rich people need to realize that "taxes are the price we pay for a civilized society" (Oliver Wendell Holmes) or things could get REALLY ugly.

            "If being an elitist just means not the dumbest motherfucker in the room, then yeah, I'm an elitist." - Get Yer War On

            by sadair on Sat Feb 09, 2008 at 11:29:49 AM PST

            [ Parent ]

    •  hard to tip (7+ / 0-)

      such lousy news.

      But tipped and rec'd.

      Civil marriage is a civil right.

      by stitchmd on Sat Feb 09, 2008 at 09:30:29 AM PST

      [ Parent ]

      •  Denial doesn't help anyone (8+ / 0-)

        For instance, back in 2003, right after the fall of Baghdad, the media pundits were telling us how great things were going to get in Iraq. And that would mean that oil would flow out of Iraq like the Tigris river.

         I didn't believe it for a second. So I invested half of my life savings in energy stocks.
          The world would have been better off if I had lost a bunch of money on that investment, but reality doesn't care what the world wants. So instead of losing money, I tripled my investment.

        Where is Estanislao when we need him?

        by gjohnsit on Sat Feb 09, 2008 at 09:59:00 AM PST

        [ Parent ]

        •  I read (4+ / 0-)
          Recommended by:
          greenearth, phonegery, kyril, CanyonWren

          recently that the next big speculative bubble will be in the area of 'alternative energy,' and you can already see the denial and problems going on about that, with the reports on the carbon costs of corn-based ethanol.

          I'm sure that will be spun in endless ways so as to protect the venture capitalists who've already sunk a tidy sum in.

          Civil marriage is a civil right.

          by stitchmd on Sat Feb 09, 2008 at 11:10:05 AM PST

          [ Parent ]

    •  I don't know how they've managed to delay (6+ / 0-)

      the bad news as long as they did.  We SHOULD have had a well-planned recession in '99, but no -- Y2K and the Asian Currency Crisis, then 9/11, and so forth.  The housing bubble was a bubble and everyone knew it.  Each time we replace a bubble with a larger one, but it isn't clear there are any larger ones than real estate to tap.

      No, we're going to get a hard recession, if we're lucky.  If we're not lucky we could get a host of other nasty things.  Welcome to 1972 or possibly 1929.

      Happy little moron, Lucky little man.
      I wish I was a moron, MY GOD, Perhaps I am!
      -Spike Milligan

      by polecat on Sat Feb 09, 2008 at 09:44:10 AM PST

      [ Parent ]

      •  Welcome to 1973 (7+ / 0-)

        That's how I see it.
          The back end of an expensive losing war. Guns and butter. Energy prices going up 4 or 5 fold.

         It certainly looks a lot more like mid-1970's than anything else.

        Where is Estanislao when we need him?

        by gjohnsit on Sat Feb 09, 2008 at 10:01:20 AM PST

        [ Parent ]

        •  Deflation (1+ / 0-)
          Recommended by:
          kyril

          Do you believe that the current inflationary market might transition to a more serious deflationary cycle.   I've read off and on that economists and planners have been far more worried that speculative bubble economies will actually result in deflation.

          I'm not suggesting that you're wrong.  I'd just like more elaboration on why we only go down the road to stagflation like in the 1970s.

          The 1930s were all about a collapse of credit, speculative bubble (not just stocks) sell offs, and a massive real estate downturn.

          For example, I went to a financial planner several years ago and we were talking about history (my favorite subject) and he showed me a long term chart (and a very detailed one) of home price valuation fluctuation in the Bay Area (where I live).  It's true, the Bay Area has this magic ability to weather downturns.  Most of the years in the chart were colored in a nice comfortable black -- signifying increase in value.

          The chart went back to 1910 or 1920.  But I'll tall you this, there was a MASSIVE swath of red numbers -- some double digits through the 1930s.

          It was frightening to look at.

          Can you elaborate? I'd love to read your take on this.  (And bonddad's too if he's still commenting)

          Great diary.

          Question authoritarianism.

          by m00nchild on Sat Feb 09, 2008 at 11:14:56 AM PST

          [ Parent ]

          •  Inflation vs. Deflation (2+ / 0-)
            Recommended by:
            polecat, kyril

             This is the #1 point of contention on some economic boards that I frequent.
              Both sides have good points, but I side with the inflationists.

             If I was to make a guess, I would say that we are looking at an Argentina-type scenario.
              In 2001-2002 Argentina had actual deflation, by the classic definition where their monetary supply declined (i.e. less money).
              However, their currency dropped even faster, much faster, so that prices skyrocketed. In other words, hyperinflationary stagflation.

             Sounds pretty scary, huh? A generation suddenly thrown into poverty.
             OTOH, look at Argentina now. Their society didn't crumble. It never looked like Road Warrior or Mad Max. And since their economic crisis, they've had one of the strongest economic growth rates in the world.

            Where is Estanislao when we need him?

            by gjohnsit on Sat Feb 09, 2008 at 11:29:34 AM PST

            [ Parent ]

            •  Hyperinflation (3+ / 0-)
              Recommended by:
              polecat, Clzwld, kyril

              My academic background is German Studies (I have an MA).  I focused primarily on Weimar and Nazi history and culture.

              I know alot about hyperinflation.  The German hyperinflation experience in the early 1920s was a catastrophe.  For other readers here's a basic primer.

              Germany's example was extreme.  But it's a cautionary tale.  Some historians say that it wasn't the WW1 loss that made Germans shift over time to Nazism.  It was the economic instability and the hyperinflation panic that destabilized people's confidence in institutions and authority.  So that, Hitler was able to consolidate enough popular support in the midst of another economic downturn (the 1929 Depression) to seize power altogether.

              Question authoritarianism.

              by m00nchild on Sat Feb 09, 2008 at 11:41:06 AM PST

              [ Parent ]

      •  Combine this news with political developments . . (2+ / 0-)
        Recommended by:
        polecat, kyril

        and you have scary stuff indeed.  I am timid in adding such speculation to this wonderful, factual thread, but yesterday's diary about shoot-to-kill corporations in combination with this bleak economic outlook makes for a nasty witch's brew.  As you say,  

        If we're not lucky we could get a host of other nasty things.

        The only frame change that matters: the corporate media = propaganda machine. Americans must find their news elsewhere.

        by geomoo on Sat Feb 09, 2008 at 11:38:48 AM PST

        [ Parent ]

    •  America’s inflated asset prices must fall ! (7+ / 0-)

      Stephen Roach, Managing Director and Chief Economist of Morgan Stanley, has been saying for some time.

      The main reason is purposely low interest rates for past 8 yrs and make plenty of loans to keep assets bubble persistence allowing Wall St. to keep the ruse and going and screw more unaware Americans.

      The US has been the main culprit behind the destabilizing global imbalances of recent years and its massive current account deficit absorbs about 75 per cent of the world’s surplus saving.

      A sharp decline in asset prices ( first and foremost with homes ) is necessary to rebalance the US economy.

      Combine this with Americans have been living better than they should - which is by definition the case when a nation’s total consumption is greater than its total production - and you have the perfect storm for a sickening US economy that will invariably fall into deeper recession.

      I think we won't see bottom until 2010.

      BTW, nice diary!

      •  good points (2+ / 0-)
        Recommended by:
        greenearth, kyril

        i picked 2010 too, not one of these 6 month recessions we've had in the recent past.
        as painful as it will be, recessions are a necessary evil, especially
        when lots of bad loans get made and housing prices, which have historically barely beaten inflation, rise 70% in 10 years, and we borrow far more than we make. that can't go on forever.
        the bill has come due.
        maybe we'll realize we can't go on consuming and start making things people want again.
        since we're the largest consumers of energy, alternative energy technology would be a good start.

        "If being an elitist just means not the dumbest motherfucker in the room, then yeah, I'm an elitist." - Get Yer War On

        by sadair on Sat Feb 09, 2008 at 11:36:30 AM PST

        [ Parent ]

    •  Scary (3+ / 0-)
      Recommended by:
      theran, greenearth, kyril

      I never thought I'd have some degree of gratitude for spending a few recent years as a poor grad student and not having any money to spend buying an overpriced DC condo like peer pressure encourages one to do around here.. and that my brother didn't make the jump either.  This is scary stuff though - so many people did around here and lots with the intention of flipping them - not gonna happen.

      Competent leadership, for a change! | Hillary '08

      by daria g on Sat Feb 09, 2008 at 10:41:00 AM PST

      [ Parent ]

      •  I Commend You for Not Buying in or Near DC (2+ / 0-)
        Recommended by:
        greenearth, kyril

        I bought my condo in Montgomery Village (about 25 miles north of DC in MD for you nonlocals) in 1990 and paid $1000 down on an FHA loan.

        I was a freelancer, so the lender demanded proof of future income. My clients  happily lied for me, saying they'd pay me a certain amount the next year. Fraud? Nope. Faith. We all had it back then.

        Instead, my income dropped like a stone the following year, but my mortgage payments were low and I made it through, then until now. I'm still happily housed in the same condo.

        It seems so old-fashioned it's almost quaint. I wish fervently that people could buy a home that way now, a little nail-biting but a good chance of getting by and even thriving.

        For a sardonic laugh, go here: Sic Semper Tyrannus.

        by JG in MD on Sat Feb 09, 2008 at 02:23:19 PM PST

        [ Parent ]

    •  CNN Business Channel bobbleheads... (5+ / 0-)

      disagree with any bad news.  Economy is strong, don't leave the Market, etc. etc.  Whistling past the graveyard.  Much appreciated diary Gjohnsit.

    •  FINALLY gjohnsit in the Rec'd Tomb (6+ / 0-)

      I can now die happy knowing a few Kossacks are paying attention to something that is far, far more important than the election of some poor slop who can't do a goddam thing about what's about to befall America.

      Except to be a one-term fall guy like Carter, of course.

      __________________
      Fascism ought to more properly be called Corporatism since it is the merger of state and corporate power. - Mussolini

      by Pluto on Sat Feb 09, 2008 at 02:26:46 PM PST

      [ Parent ]

    •  A Credit Card You Want to Toss - BoA (5+ / 0-)

      Bank of America abruptly notified cardholders in good standing their rates would skyrocket if they didn't opt out fast. Is BofA greedy or needy?

      by Robert Berner
      Business Week
      February 7, 2008, 12:01AM EST

      Credit-card issuers have drawn fire for jacking up interest rates on cardholders who aren't behind on payments, but whose credit score has fallen for another reason. Now, some consumers complain, Bank of America (BAC) is hiking rates based on no apparent deterioration in their credit scores at all.

      The major credit-card lender in mid-January sent letters notifying some responsible cardholders that it would more than double their rates to as high as 28%, without giving an explanation for the increase, according to copies of five letters obtained by BusinessWeek. Fine print at the end of the letter—headed "Important Amendment to Your Credit Card Agreement"—advised calling an 800-number for the reason, but consumers who called say they were unable to get a clear answer. "No one could give me an explanation," says Eric Fresch, a Huron (Ohio) engineer who is on time with his Bank of America card payments and knows of no decline in the status of his overall credit.

      Bank of America spokeswoman Betty Riess confirms some bank cardholders could be receiving rate increases for reasons other than declines in credit scores, such as running higher balances with their Bank of America cards or with other creditors. She says the increases are part of a "periodic review" that assesses customers' credit risk. She declined to say if the Charlotte (N.C.) bank had changed its credit standards thereby bumping some consumers' rates or how many cardholders were being affected by the review. Bank of America has 40 million U.S. credit-card accounts.

      and down toward the end of the article:

      Bank of America is trying to get ahead of Amanda Pennington, 29, of Euless, Texas. She says the bank raised her credit limit three months ago from $5,000 to $8,000 because of her strong payment history. Then she got the letter from the bank in mid-January notifying that her rate would rise from 15.74% to 25.99%. When she called, she says, the bank told her it was raising her rate because her balance was now too high, though it was still under the higher new limit the bank had previously granted. After paying tuition for a community college course, transferring another balance, and paying for daily expenses, Pennington's Bank of America debt now stands at $7,500. Bank of America declined to comment on individual customers.

      Adam Levin, CEO of Credit.com and former head of New Jersey's Division of Consumer Affairs, says he is surprised Bank of America would risk bad public relations with its rate increases, given the congressional hearings in December. The bank risks alienating new customers and existing ones by being so brazen, he says, adding, "Either Bank of America has more financial troubles than it is willing to admit or it has a level of institutional arrogance that is unacceptable."

      As Warren Buffet said the other day - There's a certain amount of poetic justice in this...

      If you dance with the devil, then you haven't got a clue; 'Cause you think you'll change the devil, but the devil changes you. - illyia

      by illyia on Sat Feb 09, 2008 at 03:16:48 PM PST

      [ Parent ]

  •  Thanks for putting this all together. (16+ / 0-)

    Like you indicate, it has been no mystery, and for the last 2-3 years all you had to do was read the official statements of Central Bankers to know the booming economy itself was an illusion conjured by debt.

    Funny how all our "pundits" missed this all along.

    Until we break the corporate virtual monopoly on what we hear and see, we keep losing, don't matter what we do.

    by Jim P on Sat Feb 09, 2008 at 08:12:32 AM PST

    •  like any bubble (14+ / 0-)

      we are all emotionally invested in keeping it going. Until we start to see it's "the wind trade"

      Now what do sober, careful people who didn't get involved in all this but who now potentially are vulnerable to the various systemwide crashes do to protect themselves? What's the best position to take? Thoughts, ideas?

      "Get informed, and let it change you."--wonderingmind42's chemistry professor

      by DemocracyLover in NYC on Sat Feb 09, 2008 at 08:15:08 AM PST

      [ Parent ]

      •  First of all, don't listen to pundits (14+ / 0-)

         If this was a normal bubble then the safest thing to do is to buy treasuries, sit tight, and ride it out.

         However, this isn't a normal bubble. Both the government and the Fed are inflating like mad to keep the bubble going, and that's inflationary.
          So the best bet is to invest like it was the 1970's all over again. Buy energy, precious metals, and commodities in general.
          That's what I've been doing, and it has paid off for me so far.

        Where is Estanislao when we need him?

        by gjohnsit on Sat Feb 09, 2008 at 08:21:03 AM PST

        [ Parent ]

        •  Me too. (2+ / 0-)
          Recommended by:
          side pocket, kyril

          Good to own stuff, not paper.

          Still having a nice wad of cash doesn't hurt either for the short term. Although you may take a bit of a hit from inflation it is also likely that you will get some super good deals coming along in a year or two that will more than makeup for the loss to inflation.

          I am slowly exiting some of my precious metals positions (got to take some profits) and holding more cash. The bargains will start arriving soon.

          I can live with doubt and uncertainty and not knowing. I think it is much more interesting to live not knowing than to have answers that might be wrong- Feynman

          by taonow on Sat Feb 09, 2008 at 08:25:27 AM PST

          [ Parent ]

        •  False Value (10+ / 0-)

          the thing that's most striking about this is that it's almost word for word a match for Jerome's description of the Anglo Disease.  

          In the 70s, the Economist coined the label "Dutch Disease" to describe the economic travails of the Netherlands as the country's export-oriented industrial sector struggled with the increased exchange rates caused by the rapid growth in gas exports followed the discovery and development of the massive Groningen field. The extractive sector was so profitable that it captured a large share of new investment, and its export volume was large enough to alter the trade balance and boost the currency, further rendering other activities less attractive.

          Today, we can observe a similar phenomenon on a large scale around the financial industry, whose high profitability for many years has also caused weakness for other sectors of the economy. As this has developed around the money centers in New York and, in an even more concentrated way, London, I would propose to label this the "Anglo Disease."

          The creation of false value, and the crodwing out of investment in those sections of the economy that generate societal returns.  It's theft by private interests on a scale not seen since the enclosure of the Commons.

          P.S. Someone needs to explain to Jerome that in the US "Anglo" is often used as a not so subtle racial slur.  The "English Disease" might be better, seeing as Jerome points out while Wall Street has been at work on this, the City of London is where it is most pronounced.  And it's an interesting counterpart to the French Disease.

        •  Warning Re Bank America Credits Cards (12+ / 0-)

          They are suddenly raising rates on good cardholders who are never late and even those with GOOD credit ratings generally.  They are not giving any explanations to those who call in demanding to know why.  And the jump is steep - as high as 28% APR.

          Of course the real reason is obvious,  BofA is wallowing. It always was a crappy bank , now much worse as they appear to be willing to antagonize and put off new cardholders.

          At this point, the only recourse you have if they jump your rates is write them and tell them you will not use the card again and you may be able to pay it off at prior rates.

          Watch those cards carefullly and decide if you are willing to pay new rates.  If not,  you only have a short time to WRITE them and tell them you won't use the card again.

          You can't always tell the truth because you don't always know the truth - but you can ALWAYS be honest.

          by mattman on Sat Feb 09, 2008 at 09:30:13 AM PST

          [ Parent ]

          •  They just bought Countrywide (10+ / 0-)

            Is it a coincidence that they are raising rates after buying a very expensive company that is losing money hand over fist?
             I don't think so.

            Where is Estanislao when we need him?

            by gjohnsit on Sat Feb 09, 2008 at 10:02:48 AM PST

            [ Parent ]

          •  Capital One (9+ / 0-)

            Strange,  I just got a letter from Capital One offering to "upgrade" my card.  They are offering "No Hassle Rewards," a lower APR or any other "way they can improve my card."

            I haven't figured out what they are up to.  I'm one of those people credit card companies refer to as "dead beats."  I pay my card on time, and in full every month.  I don't think I've ever had a balance over $1000.

            I can't help but think, that someone how they think this "upgrade" will benefit them, but I'm not sure how it will, unless I change my spending habits - which I have no intention of doing.

            The only "upgrade" I'd be interested in is getting a custom picture on the card.  Somehow, I don't think that's what they have in mind :-)

            Established 1995 --> www.cyber-kat.com

            by Cyber Kat on Sat Feb 09, 2008 at 10:10:59 AM PST

            [ Parent ]

          •  In the UK, one company just cancelled 160,000 (3+ / 0-)
            Recommended by:
            mattman, greenearth, kyril

            Egg, a popular bank that offers Visa cards (and which is owned by Prudential, a major insurance company) told 160,000 customers last week that they were closing their accounts.
            Right after Prudential announced that Egg was being sold to...Citigroup.

            "America is the only country that went from barbarism to decadence without civilization in between." -- Oscar Wilde

            by expatyank on Sat Feb 09, 2008 at 11:45:41 AM PST

            [ Parent ]

          •  Or else just pay off the balance each month (3+ / 0-)
            Recommended by:
            mattman, greenearth, kyril

            They can't hurt me with interest rates because I never carry a balance over. Not everyone is in a position to do that, of course.

            What hurts me is their other new fees, and the chance that they'll shorten the "grace period" or eliminate the current rule that as long as you don't carry a balance over, there is no interest charge on new purchases that month. If they change that one, I'm out of here & will just use the debit card.

  •  Tip jar? (5+ / 0-)
    Recommended by:
    nyceve, sam07, kyril, lgcap, woodtick

    Good post. How does one use the tip jar?

  •  Walk away houses (18+ / 0-)

    There was an interesting article in the Wall Street Journal titled "The Rise of the Mortgage 'Walkers'".

    "The apparent willingness of borrowers to 'walk away' from mortgage debt," the analysts noted, "has contributed to extraordinary high levels of early default" on loans issued during the 18 months before the mortgage bubble burst. It expects losses to reach 21% of initial loan balances for subprime mortgages issued in 2006 and 26% for those issued in early 2007.

    Such behavior, where not precipitated by willful fraud, shows that American homebuyers supposedly duped by their lenders aren't so dumb. They're perfectly capable of acting rationally without political interference.

    Basically mortgage brokers sold homebuyers an option on a house, but failed to price it right. Here's how.

    You buy a house for $400,000 with 0 down, interest only. If the price goes up, you make money. If it goes down, you walk a way leaving the mortgage lender with the bill. Cool. Well..okay it does impact your credit rating...but..still

    If hundreds of thousands of people with decent work histories are going to have less-than-stellar credit because of foreclosures this year and next, they won't suffer so much as in the past. Many walkers are going to want to buy houses again some day; and when they do, lenders are going to want to make money lending them money to do so (hopefully requiring a good down payment). Investors searching for yield likely won't bypass what could be a large pool of borrowers.

    I can live with doubt and uncertainty and not knowing. I think it is much more interesting to live not knowing than to have answers that might be wrong- Feynman

    by taonow on Sat Feb 09, 2008 at 08:22:43 AM PST

  •  The Bush Depression (50+ / 0-)

    will hit the country hard.  Republicans will try to blame it on Clinton or Obama.

    America will continue to financially self-destruct every so often as long as supply-side economics comes back in to fashion every 50 years or so.  That old adage about history repeating itself is apropos.

    We MUST start teaching Civics in public schools again.  This has to include basic economic instruction.  After a few generations, people might not be duped so easily to drink the Milton Friedman Kool-Aid.

    YMMV

    -- I've got your Stimulus Package right here buddy.

    by dickinabox on Sat Feb 09, 2008 at 08:29:46 AM PST

  •  Good job. Hope this makes the rec list (25+ / 0-)

    I've got a good companion diary to this one I'm putting together now about the collapse in middle class savings.

    The period we are entering will be unlike anything any of us have seen before in our lifetimes.  You know how you were never supposed to count out the American consumer.  Well, you can now.

    However the global economy reaches a new equilibrium, it will not be renewed spending by the American consumer that gets it there.

    Cheers.

    "When the going gets tough, the tough get 'too big to fail'."

    by New Deal democrat on Sat Feb 09, 2008 at 08:33:18 AM PST

  •  I think you are right (7+ / 0-)

    about the credit card defaults.  I was reading the Economist a couple weeks ago, and while discussing the mortgage crisis they offhandedly mentioned the mounting threat of credit card defaults and then went on to say it was probably nothing to worry about in the same sentence.

    The fact that the Economist brought it up at all leads me to believe that it is something to worry about.  

    "I'd rec you if I could." - cometman

    by cometman on Sat Feb 09, 2008 at 08:39:13 AM PST

  •  Not going to disagree here (13+ / 0-)

    I work in debt capital markets on Wall Street and the markets for leveraged loans and high yield debt are in an awful shape.  The general consensus is that the economy may or may not (more likely "may") be in a recession right now but the debt markets are in a depression.  Each week is literally worse than the last week.  When debt markets are in such terrible shape, it typically doesn't take too long for the equity capital markets to follow suit.

    Also the same CIBC/Oppenheimer analyst that warned several months ago that Citibank may have to cut its dividend (she took a lot of heat but was later found to be right) is now projecting monoline losses of $40 - $70 billion.  I can easily see this spilling into the other areas you mention.

    Up until a year ago, I have always been a confident investor and would have all my assets in stocks.  Now I have 50% of my assets in cash, money market funds and treasuries.  I am thinking about upping that percentage.  A lot of colleagues are doing the same.

  •  Great Arcticles... (6+ / 0-)

    ....one of the reasons I still read Daily Kos

    Always forgive your enemies; nothing annoys them so much. Oscar Wilde

    by RationalMan on Sat Feb 09, 2008 at 09:09:55 AM PST

  •  I Have an MBA, So... (10+ / 0-)

    I am not an idiot on this stuff, but I am also not an expert.

    And yet, I am quite aware of the enormous impact of these various economic events "quietly" occuring in the last year.

    I say "quietly" because the average American is not aware of the magnitude of the impending crisis. They just know things don't feel good.

    I hate to be melodramatic, in part because I'd rather pretend all will be OK in the end, but my fear is growing we are headed toward a HUGE economic collapse at least equal to the Great Depression.

    For us Democrats, that could destroy our party as the full force of this economic downturn will happen during the next presidency, presumeably a Democratic presidency. No one will care this started during the Bush presidency.

    •  Oh, they'll know (4+ / 0-)
      Recommended by:
      opinionated, 3goldens, kyril, MizC

      we'll be sure to tell them. Repeatedly (semi-snark).

      IMO, this would destroy the Other Party too. Among other things...

      I find humming is very useful - Elvis Costello

      by o the umanity on Sat Feb 09, 2008 at 09:13:08 AM PST

      [ Parent ]

    •  People will remember Bush (5+ / 0-)
      Recommended by:
      HippyWitch, 3goldens, debedb, kyril, MizC

      As those in Michigan remember Engler. The next prez will not take the fall.

    •  Even in 1929, almost half of the population (9+ / 0-)

      lived below the poverty line.

      In the great depression, the average household wealth declined 25%.

      An equivalent event now would obviously be awful, but the average (median) family income and wealth are 2-3x the poverty line.

      So I am personally not concerned about another 1929-32, but I am concerned about a dramatic and long term decline in the "affluence" of the average middle class American family.  (but that's a diary or two away....)

      Cheers.

      "When the going gets tough, the tough get 'too big to fail'."

      by New Deal democrat on Sat Feb 09, 2008 at 09:17:47 AM PST

      [ Parent ]

      •  You should be worried (7+ / 0-)

        Unlike the Great Depression, new circumstances are here that change the equation drastically.  It may not be a coincidence that many of the financial things are occurring during skyrocketing energy costs.  Oil most likely has hit "Peak Oil" in the last year or two (or perhaps even in 2005) and will continue to become more and more expensive in the next few years.  It may cause recovery from this situation nearly impossible.

      •  Another major difference between the time of the (14+ / 0-)

        great depression and now is the food supply. Many families in the '20s were able to produce at least some of their own food. In addition to kitchen gardens, many areas of the country  had plentiful fish and game. Growing up with my grandparents in the '50s and '60s in northern California, my grandfather still regularly brought home abalone, lobster, salmon, trout, quail, pheasant, duck, etc. that he shot or caught himself. He could barely force himself to eat abalone in his later years...he said there were weeks in the '20s when abalone was almost all they had to eat.

        We won't have that buffer this time around.

      •  1929-1932? (2+ / 0-)
        Recommended by:
        OLinda, greenearth

        That was just the Depressions first wave.  It got much worse in the mid 1930s up until FDR ramped up the war economy.

        The statistic I remember most about the Great Depression was a 25% unemployment rate.  That's 1 in every 4 workers.  I.e. On a block 20 houses, 5 houses had no income!  The reality of the is sobering.

        My grandmother went through the Depression.  We still talk about it together.  And how the war changed everything.

        Question authoritarianism.

        by m00nchild on Sat Feb 09, 2008 at 11:32:50 AM PST

        [ Parent ]

        •  Not true (5+ / 0-)

          The Great Depression bottomed out in 1932-33.  There was great GDP growth during Roosevelt's first and part of his second term, until the 1938 bust (thought to be brought about by enforced saving for the new Social Security program), but it never got nearly as bad as the bottom.

          Here's the graph:

          QED.  Cheers.

          "When the going gets tough, the tough get 'too big to fail'."

          by New Deal democrat on Sat Feb 09, 2008 at 11:55:32 AM PST

          [ Parent ]

          •  That doesn't tell the whole story (2+ / 0-)
            Recommended by:
            greenearth, kyril

            But it isn't that far off. If you look at the unemployment numbers the 1937 crash took unemployment rates almost back up to their 1933 peaks.

             There is also the issue of duration of hard times, which makes the latter Depression worse than the earlier Depression (when people may have not exhausted their savings).

             But I agree that the absolute bottom for the economy was in early 1933.

            Where is Estanislao when we need him?

            by gjohnsit on Sat Feb 09, 2008 at 12:28:02 PM PST

            [ Parent ]

            •  I've been wondering about this question (2+ / 0-)
              Recommended by:
              greenearth, kyril

              because the actual number of unemployed never really changed very much until 1941. Which leads me to hypothesize that it pulling the 8 million or so men into the armed forces that finally ended the unemployment problem. Then, the question becomes: what happened after the war? I think there were two factors: first, the G.I. Bill, so millions of veterans go to college instead of being dumped directly back into the labor force and unemployment; and second, the post-war military never shrank to the minuscule levels of before the war, where the Army, I believe was only a few tens of thousands. I think after the war we never went much below 1.5 million or so. (Someone needs to look up the numbers, because I'm not sure how accurate these numbers are).

              Also, after the war, you have the social safety net in place that was created during the New Deal. So you never get the sudden collapse in aggregate demand generation like you did in 1929 (although I suspect we have gotten very, very close the past three months). So, the recession of the late 1970s never became a Depression, even though we have lost probably about half of our manufacturing capacity.

              A conservative is a scab for the oligarchy.

              by NBBooks on Sat Feb 09, 2008 at 01:32:25 PM PST

              [ Parent ]

            •  unemployment rates for the great depression: (3+ / 0-)
              Recommended by:
              greenearth, sravaka, bigchin

              The Depression's unemployment rates (& sequel) were
              1929:3.2%,
              1930:8.7,
              1931:15.9,
              1932:23.6,

              1. 24.9%,

              1934:21.7,
              1935:20.1,
              1936:16.9,
              1937:14.3

              1. 19.0%,

              1939:17.2,
              1940:14.6,
              1941:9.9,
              1942:4.7, 1943:1.9
              (from Ross Robertson's History of American Economy, 3rd Ed., p.682)

              I think you make a good point about eventual exhaustion of savings.  Of course, that goes back to my original point that even under an awful scenario like the 30s (or less so, the 70s), the American middle class in terms of median net worth is starting off from a much better position than before.

              Cheers.

              "When the going gets tough, the tough get 'too big to fail'."

              by New Deal democrat on Sat Feb 09, 2008 at 01:34:09 PM PST

              [ Parent ]

          •  Maybe (1+ / 0-)
            Recommended by:
            kyril

            The reason my grandmother speaks of the second wave as being so bad is because the fatigue of such a protracted cycle of unemployment and struggle was widespread?

            She definitely has spoken specifically that FDRs programs did a lot of good things (though her father HATED FDR).  But that it really was the war that changed the country for good.

            Thanks for the statistics.  Helps correct impressions I've picked up elsewhere.

            Question authoritarianism.

            by m00nchild on Sat Feb 09, 2008 at 05:06:56 PM PST

            [ Parent ]

      •  The Poverty Line is Artificially Low (2+ / 0-)
        Recommended by:
        greenearth, kyril

        Don't count on 2x or 3x poverty to keep anyone afloat. It won't.

        For a sardonic laugh, go here: Sic Semper Tyrannus.

        by JG in MD on Sat Feb 09, 2008 at 02:34:03 PM PST

        [ Parent ]

      •  Poverty line (0+ / 0-)

        doesn't mean now what it meant then.

        During times of universal deceit, telling the truth becomes a revolutionary act. - George Orwell

        by kyril on Sat Feb 09, 2008 at 05:09:50 PM PST

        [ Parent ]

    •  Maybe, maybe not (10+ / 0-)

       Bush wasn't able to run out the clock. The recession started in either December or January. By next January, if things haven't improved any, then the full blame won't be falling on the next president.

       However, the next president will have unprecedented challenges. He or she will have their hands full just to make things not get worse.

      Where is Estanislao when we need him?

      by gjohnsit on Sat Feb 09, 2008 at 09:18:21 AM PST

      [ Parent ]

    •  Two Huge Reasons This Will Be Much Worse: (10+ / 0-)

      FDR had freedom to do as much as he did because there existed

      1. no corporate realtime mass media and
      1. no military-industrial complex.

      Radio was our first mass medium and was just becoming popular in electrified urban areas in the early 30's.

      Neither today's corporate media nor the military empire is going to tolerate very much tampering with their power just because some voters are out of work and hungry.

      We are called to speak for the weak, for the voiceless, for victims of our nation and for those it calls enemy.... --ML King "Beyond Vietnam"

      by Gooserock on Sat Feb 09, 2008 at 10:00:24 AM PST

      [ Parent ]

      •  "Mass media" in the 1930s were newspapers, (10+ / 0-)

        and 90% of them were against FDR.  

        The big difference I see is that the Progressive, populist, and union movements had existed for decades before 1932, and had widespread support, and had some prior successes in Teddy Roosevelt and Sen. LaFollette of Wisconsin.

        I don't see the existing political infrastructure yet to launch a new, New Deal.  That's why I've disagreed with DHinMI's diaries claiming 2008 is like 1932.  I see 2008 as more like 1968.  It's the beginning of the turn.

        Cheers.

        "When the going gets tough, the tough get 'too big to fail'."

        by New Deal democrat on Sat Feb 09, 2008 at 10:04:16 AM PST

        [ Parent ]

        •  Newspapers are a superior media (6+ / 0-)

          It requires something more than passive entertainment. You actually have to think a little.
            It is also a media that contains a lot more information.

           On the flip side, anything that requires you to use your gray matter makes it harder to float political BS.

          Where is Estanislao when we need him?

          by gjohnsit on Sat Feb 09, 2008 at 10:28:20 AM PST

          [ Parent ]

          •  most newspapers in the 30s were pretty bad (5+ / 0-)

            The newspapers read by Joe Average were really not that different from today's tabloids--lots of scandal, movie stars and sports. The NYT was a hell of a lot better in terms of writing quality level, but generally didn't question the status quo. There were still some good radical and progressive papers hanging on in places like Kansas, but most of those were gone before 1921, thanks to the Palmer Raids.
            Remember, great investigative reporters like George Seldes and Upton Sinclair had to find alternative ways to get their stories out (Seldes wrote books and started his own magazine, Sinclair wrote books, often "issues-based" fiction).
            The real mass media was the radio, and there was not a lot of hard-hitting journalism there. Serials (soaps), music, comedy, plus preachers and other rubbish.
            And of course there were the movies, and they pumped out a Busby Berkeley version of the world on one hand, and cops & gangsters on the other. My dad and grandma used to go every week--sometimes twice--during the Great Depression.
            (BTW, I used to teach journalism history).

            "America is the only country that went from barbarism to decadence without civilization in between." -- Oscar Wilde

            by expatyank on Sat Feb 09, 2008 at 12:09:39 PM PST

            [ Parent ]

      •  adding your #1 and #2 (2+ / 0-)
        Recommended by:
        bluebrain, greenearth

        Someone on Thom Hartmann's show awhile back seemed to coin the term military-industrial-media complex. I thought it very right and it should catch on.

      •  So, let's try and keep the military on our side (3+ / 0-)
        Recommended by:
        greenearth, kyril, JG in MD

        because

        1. the military industrial complex retains one of the few areas of manuifacturing excellence left in the U.S. economy, and we will need to draw on it if we go about this the correct way and get out by rebuilding the industrial and transportation base of the country (i.e. all vehicles must be replaced by hybrids or super fuel efficient, such as the 240 mpg Aptera, shown below, within the next five to ten years.)
        1. Like LBJ said of J. Edgar Hoover, I'd rather have them inside our tent pissing out, than outside our tent pissing in. I mean, they've got the weapons, not us. I have half jokingly posted before that the best use of American military power would be to drop the 82nd Airborne on the Cayman Islands, seize all the records for those big bank accounts, and let a few hundred eager young prosecutors get to work. As the economic and financial crises unfold, that half joke will fall to a third of a joke, then a quarter of a joke, then a fifth of a joke . . . you get the idea.

        <CENTER>Aptera340mpg
        Let's replace the whole national fleet of vehicles with these things, and rebuild American industry doing it!

        A conservative is a scab for the oligarchy.

        by NBBooks on Sat Feb 09, 2008 at 01:40:31 PM PST

        [ Parent ]

    •  Let's hope it destroys both parties (1+ / 0-)
      Recommended by:
      kyril

      This moribund nation needs a rebirth and the seeds of such are not in Washington now.

      Stupid Quaternary Period!

      by obatanga night on Sat Feb 09, 2008 at 02:49:19 PM PST

      [ Parent ]

  •  It all leads to an oncoming Depression (10+ / 0-)

    not a recession. Cars will be repossessed. Jobs losses will keep tumbling. More Credit Card Defaults. Have you ever tried to file bankruptcy lately. Many of you probably not. But it is virtually impossible. If you have a job, you are in debt to your credit cards forever.  People will wake up and start realizing this soon. You can't even rent an apartment without stellar credit so where are you to live when you lose your home?

    Its only going to get worse. They are afraid of the "R" word for god sakes how about the "D" word...

  •  Even if you (7+ / 0-)

    were bragging - Being able to see the writing on the wall and actually read it better than the so-called "experts" is a rare talent.

    I'm glad that you didn't coin the "tsunami" reference. In my humble opinion - the recent  disaster is just a bit too raw to be tossing the word around like so much fluff.

    'But they'll burn ya out' The unsteady eyes dropped to the ground. "I know. They done it before" - Steinbeck

    by SecondComing on Sat Feb 09, 2008 at 09:15:23 AM PST

    •  Literal Tsunami Killed a Quarter Million People (7+ / 0-)

      Recognizing that we already kill half that many of ourselves every 12-18 months from medical mistakes alone, a Great Depression II could be drifting into tsunami order of magnitude of devastation.

      Add up all the injuries and deaths from all the degraded services and safety nets, crumbling infrastructure, increased crime, and compare it all to the conditions of the 2010 imaginary America that had elected President Al Gore.

      I'm comfortable with 'tsunami.'

      We are called to speak for the weak, for the voiceless, for victims of our nation and for those it calls enemy.... --ML King "Beyond Vietnam"

      by Gooserock on Sat Feb 09, 2008 at 10:06:04 AM PST

      [ Parent ]

  •  Bank of America is raising card rates... (12+ / 0-)

    From Yahoo Personal Finance:

    Credit-card issuers have drawn fire for jacking up interest rates on cardholders who aren't behind on payments, but whose credit score has fallen for another reason. Now, some consumers complain, Bank of America is hiking rates based on no apparent deterioration in their credit scores at all.

    The major credit-card lender in mid-January sent letters notifying some responsible cardholders that it would more than double their rates to as high as 28%, without giving an explanation for the increase, according to copies of five letters obtained by BusinessWeek. Fine print at the end of the letter -- headed "Important Amendment to Your Credit Card Agreement" -- advised calling an 800-number for the reason, but consumers who called say they were unable to get a clear answer. "No one could give me an explanation," says Eric Fresch, a Huron (Ohio) engineer who is on time with his Bank of America card payments and knows of no decline in the status of his overall credit.

    One would surmise that Bank of America is desperate for some sort of cash inflow, but is pissing off your good, reliable customers a sound business strategy?  I was appalled to read this article.  

    Great diary, by the way.  This is one of the best for us financial laypeople out there.  

    •  It's just raising the price on a commodity (2+ / 0-)
      Recommended by:
      theran, forgore

      with inflexible demand.  To the bank, it's no different from raising the price on a gallon of gas.  Don't like it?  Quit buying gas.

      •  Opting out (7+ / 0-)

        The article says customers need to send in a letter to the bank stating they no longer wish to use the card can pay off the remaining balance at the original interest rate, but I suspect that it's not something they're letting customers know in a big bright font.  You KNOW someone is going to be caught off guard by the rate change and devastated by the new charges.

        It's one thing to dismiss it with a comment like "quit using it", but the reality is people are going to get hit hard by the new interest rate.  Is it impossible for us to say they're being greedy motherfuckers who have been putting their hands into our wallets to get every last goddamned penny and now want more?  Screw "it's just business".  That's what is going to be the downfall of the United States...as a society, we've allowed such unbelievably greedy, shortsighted pigs to control the wealth and ultimately leading to the current dire situation.

  •  I'll make this short: (6+ / 0-)
    Recommended by:
    Dave925, 3goldens, MadMs, bigchin, kyril, MizC

    Yikes!

    "I am my brother's keeper. I am a Democrat." -- That's your slogan, Democrats.

    by Bensdad on Sat Feb 09, 2008 at 09:25:56 AM PST

  •  President McCain (10+ / 0-)

    Might want to learn something about economics.

    Fact is, these ominous signals should be trumpeted far and wide as an indicator that re-electing Herbert Hoover is a bad idea.  A Dem president will need to unleash a federal recovery program unseen since the aforementioned great depression and steamroller over all the 'small government" types.  Otherwise our financial meltdown will happen faster than our polar one.

  •  I'm a great believer in greek tragedy (13+ / 0-)

    We need catharsis. The econodeity must be appeased before balance can be restored.

  •  On the up side (7+ / 0-)

    Collection agencies are reporting a boom year, and new jobs are opening up in the repo sector.

    "YOPP!" --Horton Hears a Who

    by Reepicheep on Sat Feb 09, 2008 at 09:51:58 AM PST

  •  Auto catastrophe (5+ / 0-)

    If a huge block of auto loans goes into default, it will have two consequences:

    1. Those driving those cars will be in serious trouble
    1. Lenders will be less willing to finance more car loans. This means that:

    2a) Fewer people will be buying new cars.
    2b) Auto production will slow down.
    2c) Steel and galss production will slow down.
    2d) Employment in three of the US's basic industry will collapse.
    We're lucky if this is a recession; it well might be a depression.

    The US has spent twice the amount in real dollars rebuilding Iraq than we spent rebuilding Japan after WWII. -- Vanity Fair

    by Frank Palmer on Sat Feb 09, 2008 at 09:53:03 AM PST

  •  Until we change the massive shift (11+ / 0-)

    in concentration of wealth in the economy, the downward will continue.

    The answer is to reestablish a fair distribution of wealth within the economy, and to put back in controls over taking advantage of misery.

    What we are seeing now is a direct result of the wealthy simply having no one else left to rape to enrich themselves off of.

    It's time to put all of this to a screeching halt.

    "If you want to go quickly, go alone.
    If you want to go far, go together.
    We have to go far, quickly."

    by shpilk on Sat Feb 09, 2008 at 10:24:38 AM PST

  •  No way monolines won't be bailed out (11+ / 0-)

    in some way.  They are far too important to the overall economy as a whole and the debt market in particular.  It's not a matter of if but of degree.

    "You think you can intimidate me? Screw you. Choose your Weapon." Eliot Spitzer

    by bonddad on Sat Feb 09, 2008 at 10:25:08 AM PST

  •  Bottom? Or fall off a cliff? (8+ / 0-)

    The market will fall off a cliff this year, but it wont be the bottom.

    When Rome was sacked by Alaric the economy collapsed; but the "bottom" was 5 centuries later.

    •  Ha (4+ / 0-)
      Recommended by:
      bablhous, greenearth, kyril, MizC

      I just posted something similar a few comments down thread.  At least I don't feel like a solitary Cassandra.

      Question authoritarianism.

      by m00nchild on Sat Feb 09, 2008 at 11:02:03 AM PST

      [ Parent ]

    •  Generational shift (5+ / 0-)
      Recommended by:
      greenearth, sravaka, xaxado, kyril, JG in MD

      Most people have failed to realize how the retirement of the baby boomers will effect the markets.
        Think about it:

      tens of millions of relatively wealthy people are about to retire on their savings. That savings is in stocks, bonds and real estate.
        In order to extract that wealth they must sell it.

       Now, here's the $64 question: what do you think will happen to the stock, bond, and real estate market when tens of millions of people all want to sell around the same time?

      Where is Estanislao when we need him?

      by gjohnsit on Sat Feb 09, 2008 at 11:18:20 AM PST

      [ Parent ]

      •  Selling Off All At Once (2+ / 0-)
        Recommended by:
        greenearth, kyril

        I'm two years ahead of the baby boom. All I had to do was look over my shoulder and heat up a few little gray cells. "Wait a minute, they're going to restructure their finances and then sell, some in a lump sum, some slowly... but everybody!"

        Predictable, predictable.

        For a sardonic laugh, go here: Sic Semper Tyrannus.

        by JG in MD on Sat Feb 09, 2008 at 02:43:05 PM PST

        [ Parent ]

      •  That is the killer to the "recovery" politicians (3+ / 0-)
        Recommended by:
        bablhous, greenearth, kyril

        are trying to get.  If you couple early retirements with the wave of regular retirements, and the flood of  securities, houses etc coming on market,it looks bad.

         But there is a two edged sword. The foreigners who have cash will be the ones buying.  Holding up prices.  

         Some of them will not be easy landlords or nice benevolent owners of factories. They will want their return, so the squeeze will continue.  The attacks on the economic stability and independence of the USA will continue, it will be a slow motion wreck over several years.

         If there is no large scale serious investment in resource extraction, transportation, power upgrade
        generation, manufacturing HERE inside the country employing our own people mainly....where is the recovery going to come from?

        Overseas investments?  Service economy for a shrinking domestic source of economic activity? No to those two. There may be a case where young people emigrate to Asia, China ,maybe Europe to fill  needs
        there and send money back home to support their families. Unthinkable? It has been done for many years by the Irish, Chinese, Italians, Filipinos, Turks, Poles...yeah all those "second tier" and third world countries.

         Welcome to the new "conservative" success story USA. We will have a military rampaging around and being a protective service for the biggest global multinationals in difficult places, or we civilians will go overseas to have "a job". That is what it will look like 5 to 10 years from now. Only much more so than this outline hints at.

        You looking for some respect from me? What have you done to make life around here for others a little better and earn your privileges?

        by Pete Rock on Sat Feb 09, 2008 at 03:13:33 PM PST

        [ Parent ]

  •  Muni bonds have been considered a haven. (5+ / 0-)

    The scary part of this is that a bulk of MBIA and AMBAC insured bonds are muni bonds which were considered a safe place. But if their rating goes down, so does their value, muni mutual funds go down, and holders of single bonds can't sell unless they take the loss.

    The only 'vulture-ish' upside that is that some people will be able to get a lot of otherwise great muni bonds  for cheaper.

  •  It's all about jobs. (10+ / 0-)

    The reasons mortgages, credit cards and auto loans are all defaulting is because people are broke because their wages are stagnant, or they're under-employed, working at Wal-Mart instead of real industry.

    What we need to do is cancel NAFTA and CAFTA and China trade deals and get trade tarrifs in place on all white collar outsourcing such as IT and engineering.

    Companies don't hire Americans anymore, they hire in China and India.  And as long as companies can hire overseas for 10 cents on the dollar, the middle class will continue to fall into poverty.

    We don't need to bail out the investment firms or anyone else.  We need to bring back the factories, the industry and tech jobs that built the middle class in the first place.

    And part of that does mean being more business friendly, tax friendly, focusing the taxes to encourage American investment instead of foreign investment.

    That new Cali Bay-Area carbon tax is only going to shove more jobs to China and sink more of the middle class into poverty.

  •  question (2+ / 0-)
    Recommended by:
    greenearth, kyril

    since this looks shitty

    and

    everything George W. Bush touches turns to shit....

    then

    How did GW contribute to this mess?


    Gentlemen, you can't fight in here! This is the War Room! - President Merkin Muffley

    by AlyoshaKaramazov on Sat Feb 09, 2008 at 10:52:29 AM PST

    •  seriously (2+ / 0-)
      Recommended by:
      greenearth, kyril

      did he life regulations on these lenders, or what?


      Gentlemen, you can't fight in here! This is the War Room! - President Merkin Muffley

      by AlyoshaKaramazov on Sat Feb 09, 2008 at 10:54:37 AM PST

      [ Parent ]

    •  Bush is merely the latest iteration (3+ / 0-)
      Recommended by:
      YucatanMan, greenearth, kyril

      The problem is not just the past seven years of Bush, but the "free market" fundamentalism of the past four decades. Bush is merely the logical culmination of an already established policy trend that was not fundamentally altered by Bill Clinton and Robert Rubin. From The debt delusion, by economist Thomas Palley yesterday:

      America's economic contradictions are part of a new business cycle that has emerged since 1980. The business cycles of presidents Ronald Reagan, George Bush Sr, Bill Clinton, and George Bush share strong similarities and are different from pre-1980 cycles. The similarities are large trade deficits, manufacturing job loss, asset price inflation, rising debt-to-income ratios, and detachment of wages from productivity growth.

      The new cycle rests on financial booms and cheap imports. Financial booms provide collateral that supports debt-financed spending. Borrowing is also supported by an easing of credit standards and new financial products that increase leverage and widen the range of assets that can be borrowed against. Cheap imports ameliorate the effects of wage stagnation.

      This structure contrasts with the pre-1980 business cycle, which rested on wage growth tied to productivity growth and full employment. Wage growth, rather than borrowing and financial booms, fuelled demand growth. That encouraged investment spending, which in turn drove productivity gains and output growth.

      A conservative is a scab for the oligarchy.

      by NBBooks on Sat Feb 09, 2008 at 01:57:42 PM PST

      [ Parent ]

  •  The Poll is trickier than most repondents (6+ / 0-)
    Recommended by:
    bablhous, 3goldens, greenearth, leema, kyril, MizC

    may have realized.  The diarist asked about the market bottoming.  Not starting.  We've begun to slide precipitously into a major recession -- maybe the most significant economic downturn since the Great Depression.  Tho things will have to play themselves out to see how bad it gets.

    Bottom.

    With credit driven crises it's all about mounting defaults and cascading processes.  Because loans and credit lines have payback terms and for sum, adjusting rates (ARM mortgages, credit cards, etc.), the pain gets felt as things CHANGE.

    They're just starting to change.

    Out here in California the majority of risky ARM mortgages are just starting to adjust.  It's going to take THREE years for that drama to play itself out.

    In other words, you ain't seen nothing yet.

    I would expect other parts of the economic tragedy in 7 acts would like operate over an extended period.

    I voted 2011 -- at least three years out before the market bottoms.

    Recessions don't have to just last a year. Really really bad economic down turns like the Great Depression (that took three years from 1929-1932 to cycle in) or the Panic of 1872 can last 1-2 decades depending on how economic historians have looked at them

    1-2 decades.

    Fasten your seatbelts.

    Question authoritarianism.

    by m00nchild on Sat Feb 09, 2008 at 11:00:32 AM PST

  •  Population growth (8+ / 0-)

    Somehow, I always want to see unsustainable population growth as part of these discussions, and it seldom is.  This seems to me an underlying aspect of most of our economic, political, social, and environmental problems.  Frustrating how little attention it receives.

    To be more specific, it makes me crazy that permanent economic growth is accepted as a part of most models.  Simple mathematics proves the concept absurd.

    Perform this thought experiment.  Assume a population of fruit flies with the same intelligence as humans.  There are four jars of "territory" for them and they currently fill half of one jar.  The population doubles every hour.  The question is, at what point will they understand that they have a population problem?  In one hour they will double to fill one jar, but have a wide open wilderness of 3 jars left.  In another hour they will have filled two jars, but still be looking at as much open space as they are occupying.  Will they understand at that point that they only have an hour left before they have filled their living space, or will those remaining two jars give them a false sense of security?

    Geometric progression is simple, but it's not intuitive.

    The only frame change that matters: the corporate media = propaganda machine. Americans must find their news elsewhere.

    by geomoo on Sat Feb 09, 2008 at 11:49:03 AM PST

    •  Did you know that (4+ / 0-)
      Recommended by:
      bablhous, greenearth, kyril, JG in MD

      Thomas Malthus was an instructor Hailybury, the training school for the British East India company?

      Overpopulation has always been an excuse for the ill effects of what is essentially the economic policies and practices of British colonialism. In the 1800s, American economists, especially Henry Carey, were very explicit about this. Starvation in Wales, Scotland, Ireland, India and elsewhere was always ascribed to overpopulation, when in fact it was the effects of British colonial policies and practices.

      I don't think it is any different today. Afterall, what is the real wealth of a nation? Not its gold, not is mineral deposits, not its amassing of foreign reserves, or trading of stocks and bonds. No, the real wealth of a nation is the knowledge and skill of its people. How can too many people ever be a problem if you view an economy for what it really is: the arrangements a society makes for supporting and maintaining human life.

      But, since everyone in America today seems to think that the stock market is the economy, I can easily understand that we're just not as smart as we were right after kicking England in the ass.

      A conservative is a scab for the oligarchy.

      by NBBooks on Sat Feb 09, 2008 at 02:06:10 PM PST

      [ Parent ]

      •  I appreciate the historical truth in what you say (1+ / 0-)
        Recommended by:
        kyril

        but, I don't understand how so many people can think this way:

        How can too many people ever be a problem

         When there is no longer enough land to grow food for everyone, over-population has become a problem.  When there is no longer enough water, even for people to drink, overpopulation has become a problem.  Our ecosphere is finite with finite resources.  Unless you are dreamy about space travel (energy needs are often ignored in such scenarios), it is obvious the human population cannot double itself ad infinitum.  Just to make the point, take it to its extreme.  When there are, say, ten humans per square meter of earth and ocean area, then I hope you will agree that too many people would be a problem.  The equation is simple.  I am baffled that it is so difficult for people to grasp.

        Since we've gone this far, I'll gemeralize my argument to say that I think the capitalist mind set of constantly growing goes with a mind set of having more money.  I contend that all our lives would improve greatly if we could change to a mind set of knowing when enough is enough and focusing on using what we have to better our lives rather than being constantly driven to get ahead.  Calmer, more realistic thinking can also lead to clear planning with respect to infinite population growth.

        I appreciate your arguments that it has been used as an excuse in the past.  I know little about that.  But as a math teacher, it is clear to me that too many paople can and probably will be a problem.  In fact, I think it already is one of the roots of many of our problems.

        The only frame change that matters: the corporate media = propaganda machine. Americans must find their news elsewhere.

        by geomoo on Sat Feb 09, 2008 at 04:50:39 PM PST

        [ Parent ]

        •  Tyrannical depopulation vs re-regulating the fina (0+ / 0-)

          The 1972 Club of Rome book, Limits to Growth, modeling the consequences of a rapidly growing world population and finite resource supplies, has been shown to be scientifically inaccurate, to put it mildly. Basically, the Limits to Growth model fails to account for the development of new technologies. New technologies which allow for more efficient use of resources, the viable extraction of resources that were not economically viable before; and the substitution of new resources for old ones.

          For example, we have the technology in hand to build vehicles powered by internal combustion engines that get 240 miles to the gallon. This means that the full deployment of this technology increases the expected life of petroleum reserves ten times. I submit that the problem is the lack of purchasing power to get more expensive, lead technologies into use faster. There is also the political problem of bad decisions: as Stirling Newberry pointed out about two years ago, the amount of money wasted on waging war in Iraq in less than one year would have more than covered the cost of increasing U.S. CAFE standards.  

          The Club of Rome model calculated the carrying capacity of the planet at 7.7 billion people – which we will soon reach. Westing in 1981 calculated carrying capacity at 3.9 billion people, based on total land area, cultivated land area, forest land area, cereals (grain) and wood assuming technology and politics of 1975. These low estimates are invalid, having been surpassed by reality without the massive social disaster these and similar studies predicted. On the other hand, Helig in 1993 calculated carrying capacity at 14.0 billion people, based on biophysical capacity, and accounting for increased technology.
          http://www.ilea.org/...

          From 1845 to the present, the amount of energy required to produce the same amount of gross national product has steadily decreased at the rate of about 1 percent per year. This is not quite as spectacular as Moore's Law of integrated circuits, but it has been tested over a longer period of time. One percent per year yields a factor of 2.7 when compounded over 100 years. It took 56 BTUs (59,000 joules) of energy consumption to produce one (1992) dollar of GDP in 1845. By 1998, the same dollar required only 12.5 BTUs (13,200 joules)
          http://en.wikipedia.org/...

          In the June 14, 2002 MIT Technology Review, 1982 MacArthur Fellow, and  UC-Berkeley Physics Department professor Richard A. Muller noted

          The United Nations now estimates that the population of the world will peak, sometime in this century, at about ten billion. That sounds bad—it is much higher than the current level—but it is a peak. After that, the population will decrease slowly. The predictions are now believed to be quite robust, as a paper in Nature last August documented (Vol. 412, pp 543-545, 2001). Malthus’s population bomb is fizzling. The year 2026 will pass without a singularity.

          What is happening? Where was Malthus wrong? At a United Nations conference last March, demographers discussed many possible explanations. The most appealing one was that the declining growth is a consequence of the expanding worldwide rights of women. Others attribute it to poverty reduction. Wealthy people have fewer children, for reasons we don’t fully understand. Western TV is also cited: people see happy families with small numbers of children. I get the sense that scientists are groping, putting forth plausible explanations for an observed fact that they didn’t predict. Fertility is declining far faster than expected in many regions, even in nations with no government family planning efforts (e.g., Brazil).

          The happy news comes when we combine limited population with conservation growth. The conservation bomb wins. Rosenfeld points out that at 2 percent growth—the 2 percent solution—conservation outruns population by a large factor. Two percent compounded over 100 years reduces energy use by a factor of 7.2. By 2100, with a world population of 10 billion people, everyone can be living at the current European standard of living and yet expending half the energy we are using today.

          In fact, energy through-put through the earth’s eco-system is basically infinite, the only limiting factors being the output of the Sun and atmosphere absorption and diffusion, and our level of technology employed in capturing and utilizing the Sun’s energy. The first two we can do nothing about; the third factor we can do a great deal about. L. Merrick Lockwood, for example, developed a 5-HP Stirling Cycle engine in Bangladesh that burns rice husks, the detritus of raising and processing a basic food staple in Asia.
          http://www.stirlingengine.com/...

          Lockwood’s major problem was a lack of financing. That is, in fact, the major problem for technology-driven solutions to the problems of population growth and resource use – unless you are willing to forcibly prevent people from reproducing. Everybody is quick to write and say that people need to use less, and have less babies, but nobody is willing to face the ugliness that solution entails – true tyranny and the end of many basic human freedoms. As Prof. Muller went on to note, a technology-driven solution is much better:

          The solution may lie in making the developing world wealthy. What a delightful vision! Economics—the glorious science. Wealth reduces population growth; conservation wins; the environment is cleaner; the world is happier.

          Now, it so happens that the world is awash in financing. According to the latest Quarterly Report from the Bank for International Settlements, dated this month, March 2007:
          http://www.bis.org/...
          Trading on the international derivatives exchanges slowed in the fourth quarter of 2006. Combined turnover of interest rate, currency and stock index derivatives fell by 7% to $431 trillion between October and December 2006.
          (see page 24)
          So, derivatives trading – mostly futures contracts on interest rates, foreign currencies, Treasury bonds, etc -- is now $1,200 trillion in a year. That’s $1.2 quadrillion a year.  

          By comparison, U.S. GDP last year $12.456 trillion.
          ( Table B-1 of the 2007 Economic Report of the President,
          http://www.gpoaccess.gov/...
          .
          So the entire U.S. economy of goods and services produced is traded once every two days. Assume speculators are able to capture as profit one fifth of one percent of that $1,200 trillion a year in derivatives turnover, and that is $2.4 trillion a year.

          What if that $2.4 trillion a year were devoted to developing new technologies such as Lockwood’s 5-HP Stirling Cycle engine?

          Yet when I half jokingly wrote a week or so ago that an "accidental" cruise missile attack on Zurich or the Cayman Islands would help force the financiers and bankers to accept a new regime of finance aimed at actual national development, rather than speculation, a few people here had the temerity to denounce the idea as tyrannical.

          So we have a choice of who to impose tyranny on: most of the world’s population of 7 billion or so souls, or a few tens of thousands of financiers and bankers and "free market" ideologues.

          So again I proffer the quote from Henry Carey in 1851:

          Over-population is the ready excuse for all the evils of a vicious system, and so will it continue to be until that system shall see its end...

          A conservative is a scab for the oligarchy.

          by NBBooks on Sat Feb 09, 2008 at 05:15:59 PM PST

          [ Parent ]

          •  Neither so clear-cut nor mutually exclusive (0+ / 0-)

            Thanks for the fascinating information.  I appreciate the effort.  I apologize in advance that I'm responding here without having read all that you put out as thoroughly as I will read it later.  For now, please excuse me for this quick response to just a couple of your points.

            I'm usually at a loss as to the best response to what strikes me as dreamy thinking wrapped in data and logic.  While I appreciate the grounded approach, and I find the studies immensely useful, there is a overly certain tone and at some point a loss of connection with simple reality.  That's my impression of highly analytical thinking in general, but I certainly don't advocate throwing out the baby with the bathwater.

            1.  Just because specters of overpopulation have been raised in the past on the basis of faulty analysis and treated as scapegoats for faulty politics, that does nothing toward automatically discounting any such claims today.  Certainly we must learn, and I appreciate the teaching here, from the past tendencies of societies to sidestep responsibility.  Still, we are not freed from looking with fresh eyes today.  In short, the world has changed a lot since those words were written in 1851.  I appreciate their sentiment and their clarity.  They do not reassure me for today.
            1.  I feel you are in part putting your hands on your hips to say, "Well, the rich and powerful hold most of the responsibility for this problem, so I refuse to even discuss the population side of the equation."  What is wrong with engaging on every possible front?
            1. "Tyrannical depopulation" may have been a problem at some time in the past, but it seems to me that the extreme right is posing an opposite obstacle:  strong resistance to birth control and sex education in Africa, India, and elsewhere.  The predictions of a leveling off of population may be quite strong, but I find the context of the argument to be strange.  You seem here to be acknowledging that in fact, a limit on population is desirable.  And you seem content with a prediction that it will happen and with informal speculation as to the forces at play.  If such an outcome is desirable, then does it not behoove us to study the forces that will increase its likelihood and do what we can to implement effective policy to that end?  Always, of course, with a view toward opposing tyrannical and irresponsible behavior of governments in the name of limiting population.  In the end, here I think we find that our disagreement is in some way false, in that you are simply saying that population will not grow infinitely and will be limited.  You seem to be acknowledging indirectly that, yes, too many people would be a problem.  Just you don't think it will happen
            1.  I am very uncomfortable with infinities, as in "basically infinite" energy.  Do you think the American continent looked endlessly bountiful in 1700?  1800?  This is back to my original argument:  a lot is not the same as infinite and never will be, especially so in the face of geometric growth, which itself approaches infinity.  I would be much more at ease with your position if you simply argued that the sun will provide "enough" energy.  That could be true.
            1.  Where the hell is our 240 mpg car?  I know you speak of political will and humane policy, and I very much appreciate that position.  But we also must be realistic and do what we can as we can.

            You clearly are much more knowledgeable on these issues than I.  I look forward to studying your densely packed comment more fully.  I don't think we are in strong disagreement, and you have opened my eyes to some issues.  Still, I see the world running out of water, I don't trust technology or "infinite energy" to fix that problem (as an example), and I think humane, voluntary limits to population growth is a nearly essential part of the solution.

            Finally, may I offer that population limitation, like diet, is difficult for humans to approach objectively.

            The only frame change that matters: the corporate media = propaganda machine. Americans must find their news elsewhere.

            by geomoo on Sat Feb 09, 2008 at 07:37:24 PM PST

            [ Parent ]

            •  Picture of an Aptera 240 mpg car and links (0+ / 0-)

              A conservative is a scab for the oligarchy.

              by NBBooks on Sat Feb 09, 2008 at 08:02:05 PM PST

              [ Parent ]

              •  That's quite cool (0+ / 0-)

                Of course, people put down a few hundred for the Tesla over a year ago and they're still waiting.  It was supposed to be here by now, but failed its crash test and it's back to the drawing board.  What I'm saying is, I'll believe it when I actually see it but still, that's pretty cool.  It looks like it may have some crash test issues of its own.  In general, US standards being different (not better, just perversely different) from European and Asian standards is a huge hindrance to our having access even to what is available in Europe right now, much less even more exotic possible designs.  What is possible and what will come to pass are heartbreakingly distant at the moment.

                I researched alternative vehicles fairly thoroughly last year, and now I own the Vectrix, an electric motorcycle which has a range of about 60 miles and will go 62 mph.  It also charges more rapidly than most.  It was easily the closest thing to a real vehicle of anything on the market now, as least so far as I could tell.  When my solar panels are installed, my local travel will be free of fossil fuels except for what was used to build the vehicle, the solar panels and servicing.  I love my Vectrix motorcycle.  It is here right now and it works.  I can't imagine 10 billion of them on the planet, but still, it's a marvel of technology.

                The only frame change that matters: the corporate media = propaganda machine. Americans must find their news elsewhere.

                by geomoo on Sat Feb 09, 2008 at 09:51:16 PM PST

                [ Parent ]

  •  Subprimes invite foreclosure/cause it. (11+ / 0-)

    Nothing gets written about this. NOthing. I am told my situation isn't common. I am told they can't do what they are doing. I am told over and over that no one wants to straighten it out. My lawyers just seem to think "They can't get a way with this, it will catch up with them." They have violated many federal laws. It takes a long time to file the complaint, and then have an investigation. By the time this happens many people have lost their house, OR have gone into bankruptcy. The remedy remains in the air. At some point it will be revealed that these servicers did many truly illegal things which contributed to foreclosures and bankruptcy.

    1. would not return calls and faxes. I have kept a long, with times and dates and I have turned them into the attorney general and FDIC twice. The investigation continues.
    1. they misapply my payments. When I began my chapter 13 bankrupcty I owed 8900k, they report I owe 12k after 2 1/2 years and not a single missed payment through the bankruptcy court and my account. They report that I am behind, despite being able to show otherwise, they put fees on my loan for being late despite the fact that I am not.
    1. escrow account. Naive people tell me "Oh it's easy to prove it and catch them if they mess with that...that's illegal." Sorry, it's been very difficult being able to prove how they have. They are very good at rationalizing extra charges on the escrow account for late payments fees. These fees are not regulated. They are supposed to apply to equity first, but it's very hard to prove how they applied the payments.
    1. they do not answer my lawyers repeated requests for my payment history. He's documented two attempts so far.
    1. they would not work with me before I fell behind at all. My credit had been good, my ex took me to court for custody which cost 10k to defend my teen boys right to live with me as they preferred. My ex quit paying his childsupport after 10 years of consistent faithful payment. He quit his 150k a year job and moved to the next state. It took almost two years to get him paying again. In the meantime they would not work with me but to add fees that increased my payment substantially.
    1. I was able to get back to the regular payment within 3 months but I could not afford to pay an extra 500 a month. They sent my payments back and refused all monies.

    They contribute to the problem by their practices. The first consequence of this is that it makes the mortgage holder look bad. Everyone blamed me and assumed that since I missed two payments, I was irresponsible and just not dealing with them effectively. I had a hard time getting around this misconception. The only solution given me was chapter 13. Which would have been unnecessary if they had followed banking laws and had their been some regulation on fees.

    Why is this never discussed?

    Google and you will find many of us, reporting the same illegal behaviors. It's not just a few of us, but many. Where will this fit into the crises. From my point of view it makes the economic picture even more bleak, because at some point it will be clear that MANY people lost their homes to servicers who violated federal banking laws.

    The greatest gift you can contribute to the goal of world peace is to heal.

    by wavpeac on Sat Feb 09, 2008 at 11:49:14 AM PST

    •  My sympathies (3+ / 0-)
      Recommended by:
      greenearth, kyril, JG in MD

      That sounds like hell.

      I was completely unaware of that situation.  Thanks for the details.

      The only frame change that matters: the corporate media = propaganda machine. Americans must find their news elsewhere.

      by geomoo on Sat Feb 09, 2008 at 12:21:07 PM PST

      [ Parent ]

    •  Wow! (3+ / 0-)
      Recommended by:
      greenearth, kyril, JG in MD

      I know there is plenty of fraud out there, especially in manias, but our society (or at least our media anyway) is based around blaming the victim.

        Remember Reagan's "welfare queens" in the 80's? Remember Papa Bush saying that the homeless are homeless because they want to be? Remember how the people in New Orleans were treated after Katrina?

       Well, people being foreclosed on today want to be foreclosed on. Don't believe me? Then listen to the news media.

       I sympathize with your situation. Unfortunately, the system was never designed to deal with a crisis of this magnitude.

      Where is Estanislao when we need him?

      by gjohnsit on Sat Feb 09, 2008 at 12:21:31 PM PST

      [ Parent ]

  •  maybe the sky is not falling (3+ / 0-)

    I don't have the economic education or experience of bonddad or gjohn. But according to the numbers 95% of people are paying their credit cards, equity loans , mortgages and car loans on time . This is still a very lucrative business for financial institutes. The problem I see is that these financial institutes tried to take solid profits and turn them into obscene profits with financial vapor ware. These financial gadgets are now collapsing and many people are going to get hurt. But this could be an interesting financial crisis where most of the pain is felt at the top. bond speculators, stock speculators, real estate speculators and commodity speculators are all going to be hurt. Also the 5% of those that used credit unwisely are going to learn a painful lesson. But, this is the kind of thing most people recover from eventually. These financial problems will affect all of us in some way, but, maybe it won't be as catastrophic as some think. credit will be tighter , but maybe people are utilizing credit too much anyway. anecdotally my brother was a mortgage broker and he claims that the only people that took out the risky low interest mortgages were people that were flipping houses. During the California real estate collapse of the nineties, there where at least a half dozen foreclosures  in my neighborhood and 1 in 3 houses in nearby Moreno Valley was a foreclosure.
    Currently, there is only one vacant home that will probably end up in foreclosure. These people paid too much for a house that was on the market for six months in the hottest real estate market in history. they then took out equity loans and proceeded to over improve this house. Then the husband gets transfered less than a year after they buy it. At least 95% of the people in this neighborhood pay their bills on time and despite recent price drops, most still have a lot of equity. There will be economic pain, but I don't think the "sky is falling". The best thing that will happen is that people will realize the fallacy of so called "free markets", where a corrupt privileged few use the laws and lack of oversight to siphon money from the rest of us .

    Patriotism consists not in waving the flag, but in striving that our country shall be righteous as well as strong. ~James Bryce

    by california keefer on Sat Feb 09, 2008 at 12:03:41 PM PST

  •  What WAS in your wallet? (3+ / 0-)
    Recommended by:
    greenearth, Rick Winrod, kyril

    Things are looking pretty grim. Time to take stock in the financial situation and make some adjustments radical or not.  I have a prime mortgage at 5.625% but house prices have been falling.  The current status quo is obviously not sustainable.  

    The forbidden subject of population growth is bound to factor in here somewhere.  It is even more taboo than the idea of reducing consumption and being more self reliant.  Stocking up on survival gear and getting that garden in shape may sound paranoid but it's a Good kind of paranoia.  

    "If you want a picture of the future, imagine a boot stomping on a human face -- forever." G.Orwell

    by FuddGate on Sat Feb 09, 2008 at 12:23:01 PM PST

  •  NYC stores are now advertising (8+ / 0-)

    that they accept EUROs. It's official we are Mexico

    To sin by silence when they should protest makes cowards of men~~ Abraham Lincoln

    by Tanya on Sat Feb 09, 2008 at 12:25:55 PM PST

  •  the beginning of the end (6+ / 0-)

    of manufactured need.

    sign the petition at http://www.impeachbush.org

    by DrKate on Sat Feb 09, 2008 at 12:27:40 PM PST

  •  Highly recommendeded (2+ / 0-)
    Recommended by:
    greenearth, kyril

    Thanks for posting this. I've always felt real estate would just be the harbinger. I think commercial real estate is the next wing of real estate to cave, and that will happen this year. We're already seeing these default rates on credit cards and auto loans. That is destined to worse, especially in a recessionary environment. 2008 will be a year to remember (already is.) As will 2009, 2010, 2011....

    "To be a poor man is hard, but to be a poor race in a land of dollars is the very bottom of hardships." ~W.E.B. DuBois [-7.12, -5.95] as of 09/2007

    by rovertheoctopus on Sat Feb 09, 2008 at 12:39:54 PM PST

  •  Wait till the Bulk of the Boomers Retire (2+ / 0-)
    Recommended by:
    greenearth, kyril

    Game over, folks.

    I advise positioning yourself to be able to grow your own food.

    This is CLASS WAR, and the other side is winning.

    by Mr X on Sat Feb 09, 2008 at 12:40:09 PM PST

    •  Retire? I don't think so. (5+ / 0-)

      As a boomer (just turned 58) watching my retirement savings (I'm one of the lucky ones) dropping in value 5% per week, I'm thinking that "retire" is one of those quaint words that didn't apply before 1935 and won't apply after 2010.

      I'm tempted to just sell all my investments and pay off the mortgage. It's an urban condo but there's a bit of a back yard and I can walk everywhere.

  •  Great Diary as always (3+ / 0-)
    Recommended by:
    greenearth, Bronx59, kyril

    What was W's recommendation after 911, anyone?anyone?

    How could we forget ... go shopping! Thats right the solution to just being attacked was to go into debt and keep the economy going. Now that a financial huuricane is looming on the horizon what is W's solution (with the help of our UP FOR REELCTION Congress) A stupid rebate check ... or put another way ... go shopping.

    NEWSFLASH ... you cannot continue to do the same thing and think you are going to get a different result.

    Wonder why a couple summers ago you would see young people cruising down the road in a $50K SUV towing a boat? All this is coming back in a big way and I am affraid that there will be a number of people asking themselves what the f just happened?

    The diarist referenced the MSM ignoring a certain aspect of housing that is not even on the radar prime borrowers walking. http://online.wsj.com/...

    Now the bloom is off the residential mortgage-backed securities (RMBS) rose. And some borrowers, even those who can theoretically afford to keep their homes, realize they owe much more than what comparable houses in the neighborhood are selling for -- and think that prices won't rebound anytime soon. So they're walking away, according to anecdotal reports as well as recent statements by top executives of both Wachovia and Bank of America.

    Even people with supposed good credit were enjoying their new found wealth provided by W. Borrowed on their equity and now find the house the used as an ATM card has just dryed up. Now they are upside down and are willing to foreclose rather than paying on a depreciating asset.

    We are in for one hell of a ride down to third world status. Prepare yourself.

    "We dont neeed, no mor troubles" - Bob Marley

    by joeshwingding on Sat Feb 09, 2008 at 12:43:01 PM PST

  •  A question re recession, gdp (4+ / 0-)
    Recommended by:
    Detlef, gjohnsit, greenearth, kyril

    I am no economist, far from it actually.  But I do have a bs in math, for what it is worth.  I went over to wikipedia to start.

    The given is the simple GDP equation:

    GDP = C + I + G + (X-M)

    X-M is a huge negative (exports v imports), and getting worse all the time.

    C = the purchase of currently produced goods and services out of income, savings, or from borrowed funds.  This number is obviously larger mainly because of the borrowed funds piece of it.  It looks like the sub-prime and it's backlash will drastically reduce this.

    I = non-residential investment (such as factories) and residential investment (new houses). Net investment deducts depreciation from gross investment. It is the value of the net increase in the capital stock per year.  Obviously the factory piece has been shrinking for a long time, but the residential investment will take a huge hit.

    Now we get to G.

    Government purchases of goods and services for current use are classed as government consumption. Government purchases of goods and services intended to create future benefits, such as infrastructure investment or research spending, are classed as government investment. Government expenditures that are not purchases of goods and services, and instead just represent transfers of money, such as social security payments, are called transfer payments. Government spending can be financed by seigniorage, taxes, or government borrowing.

    The first two types of government spending, namely government consumption and government investment, together constitute one of the major components of gross domestic product.

    We are not doing infrastructure investment and any purchases of goods and services is done on deficit spending.  But the US government is "spending on goods and services" on obscene military spending.  This is the only piece that is, and will increase.

    This is the way it has been for awhile, so the only why to keep GDP rising is for the government to spend, but it is not spending it on its people, it is throwing it to military spending.

    My question is have we been artificially increasing growth numbers by increasing G above, and not to help citizens, but increase the size of the military?

    Just looking at the components of GDP, I say we are way beyond fucked.  Even though the recession has not been officially declared, it is already happening but for government spending.  

    Do I have this correct?  In a Keynesian model, a response to a bad economy is for the government to spend, but we are spending it on Iraq/Afghanistan.

    I keep telling my kids that after recent trends of parents leaving things in better shape than they had, we are going to leave our kids with a disaster, and thats why they need to stay in school.

    Of course the only way I can pay for their college is to take out loans.

    we, and more importantly our kids, are screwed.

    ¨An inglorious peace is better than a dishonorable war.¨ - Mark Twain

    by Indiana Bob on Sat Feb 09, 2008 at 12:55:43 PM PST

    •  X-M Number is Positive Now (0+ / 0-)

      I'm pretty sure that the economists would consider the X-M number to be a positive now, not a negative.  If we were sending more goods overseas than we're receiving, that would be considered a negative.  I believe this results from the concept that a positive element produced by GDP factors is shipped out of the economy.  The financial deficit might be a negative, but that is just an accounting detail.  No factors of production (at least of any real value) were used to make the entry on the ledger.

      Look at it this way.  At some point in the future we'll need to make more widgets to send to Country X (let's call it Xanadu) to earn enough to repay that accounting entry.  We'll have used factors of production to make the widgets, but will have lost the use of the widgets by having exported them.  Hence, a surplus current account shows up as a minus in GDP accounting.  It does mean our standard of living will be lower because we're shipping useful widgets to someone else.

      "Love the Truth, defend the Truth, speak the Truth, and hear the Truth" - Jan Hus, d.1415 CE

      by PrahaPartizan on Sat Feb 09, 2008 at 01:09:42 PM PST

      [ Parent ]

  •  Bond downgrades will suck $2 Trillion out of.... (3+ / 0-)
    Recommended by:
    greenearth, xaxado, kyril

    ....the economy.

    Pardon me, while I pimp an on-topic diary I wrote three months ago:

    New $2 Trillion Crisis Looming on the Horizon.

    -5.75 -4.72 3.14159 2.71828

    by xynz on Sat Feb 09, 2008 at 01:08:46 PM PST

  •  This is a diary itself (7+ / 0-)

    It is well known that predatory lenders have targeted the poor for generations because they are often the most honest and responsible with their debt.
     
    While there are plenty of examples of very poor people getting into homes they can't afford, much of the current wave of foreclosures is occurring with homes bought by speculators. Speculators are much more likely to be from somewhere other than the lowest class. But to afford multiple mortgages they would have to take out subprime mortgages, such as interest-only and no-doc loans.
     
    Yet at the end of the day, the poor are the ones that the media blames for the current economic troubles.

    This is far too important a point to tuck into another diary. This needs to be fully developed by someone more qualified than I.

  •  Three years to bottom out with dot.com bust..... (1+ / 0-)
    Recommended by:
    greenearth

    .....at least that long with this one.

    -5.75 -4.72 3.14159 2.71828

    by xynz on Sat Feb 09, 2008 at 01:28:05 PM PST

  •  This dairy and posted Comments comprise (2+ / 0-)

    a graduate course in Economics. I wish that just once MSM would discuss the issues and facts discussed herein. If they did, I suggest there would be a whole lot more wringing of hands out there.  

  •  Just the tip of the iceberg (6+ / 0-)

    I am no economist so I may be talking out my a$$-

    But my take on this is that our economy has been hollowing out for a long time.  We have been using consumer spending as the engine for our economy.  

    We no longer make stuff, most of manufacturing is outsourced.  Our agriculture was long a tentpole to our economy but I believe that the emerging economies of the world has taken a bite out of our grain exports.

    For years we had the housing market that drove a lot of   our economy.  As real estate values rose, a lot of American's kept refinancing their mortgages or taking out home equity loans to pay for purchases, banking on rising housing prices to keep their assets growing.

    But the mortgage crisis has led to banking liquidity problems, suddenly the money spigot has been turned off.

    Americans suddenly feel very poor, since their wages haven't risen in a decade and they have been living beyond their means with the assurance of their homes being their savings account.  Now how do they keep their standard of living?

    I know I personally have stopped spending money at all, except for groceries.  And I am watching my savigs diminish.  Also my retirement investments.

    But if we stop spending, we cause a change of reactions that increase the recession, since so much of our economy is based on consumer spending.

  •  The current powers that be (5+ / 0-)

    will keep it from bottoming until a Democratic President is in office. After the new President is sworn in the bottom is going to drop out. At that time this tsunami will hit a larger swath than is being caught up right now.
    It is my opinion that running McCain is not an accident. He is an unelectable idiot. The Democrat's win and when the entire economy collapses a year from now it will be the Democrat's fault
    Perfect set up for Republican fascism to sweep in and take over for good.
    Desperate and broke people who have lost everything won't be listing their Constitutional rights as a first priority.

    "Our lives begin to end the day we become silent about things that matter." Martin Luther King Jr."

    by Oke on Sat Feb 09, 2008 at 02:05:44 PM PST

  •  Credit card users...watch your statements closely (9+ / 0-)

    Three people I know have told me their CC companies had 'dinged' them for 'late payment charges'.

    And all of them have NEVER been late on even ONE payment. One said it was nonsense-since she made her payment by telephone and paid with her debit card. She has the bank statement to PROVE she paid 17 days BEFORE the due date.

    Another said she has always mailed her payment due on the same day (for 3 yrs) and it is 14 days before the due date-yet it still wasn't posted to her CC account until after the due date. They would not reverse the late charges. She was so angry-she is going to close the account.

    Another said almost the same thing-only that her check HAD cleared her bank 5 days BEFORE the CC company credited the payment.

    So-are these CC companies so hard up for dollars that they will resort to dirty tricks to raise money through penalties? What the hell-If they ding just 10% of their card holders and only 8% manage to get the charges reversed-those 2% who paid - well that is a LOT of money.

    1/20/09: End of an Error.

    by Esjaydee on Sat Feb 09, 2008 at 02:12:42 PM PST

    •  One day (3+ / 0-)
      Recommended by:
      greenearth, xaxado, CanyonWren

      people will pay with cash again. Just like me.

      Where is Estanislao when we need him?

      by gjohnsit on Sat Feb 09, 2008 at 02:20:27 PM PST

      [ Parent ]

      •  Like a lot of things technology has brought us (1+ / 0-)
        Recommended by:
        greenearth

        … there's little chance of going back unless the means to use that technology are removed. Thus, i don't think cash is going to make a comeback unless we have a civilisational collapse (ie. even worse than this) that forces us to go back to using leaves, rocks, and goats.

        "People who say I'm dystopian are middle class pussies!" – William Gibson

        by subtropolis on Sat Feb 09, 2008 at 03:03:08 PM PST

        [ Parent ]

        •  Wow (2+ / 0-)
          Recommended by:
          Marie, greenearth

          The fact that you equate using cash with the collapse of civilization really says something about America today.
            And its not good.

          Where is Estanislao when we need him?

          by gjohnsit on Sat Feb 09, 2008 at 03:14:17 PM PST

          [ Parent ]

          •  do YOU really believe it will replace credit? (0+ / 0-)

            Did you even consider my point about technology? (think djinn <- bottle)

            Also, take note that my statement was not in defense of plastic, nor was it a complaint about cash in hand. Some things just are the way they are.

            "People who say I'm dystopian are middle class pussies!" – William Gibson

            by subtropolis on Sat Feb 09, 2008 at 10:02:57 PM PST

            [ Parent ]

            •  What is credit? (0+ / 0-)

              Credit is debt. What happens when debt goes bad? No one wants it.

               One of the causes of the Great Depression was excess debt. Afterwards the generation that followed wanted nothing to do with debt.

               Things run in cycles. We are on the downside of excess debt. A lot of it is going to go bad.
               Afterwards credit will get expensive and hard to get. People are going to get weaned off of credit whether they like it or not.

              Where is Estanislao when we need him?

              by gjohnsit on Sun Feb 10, 2008 at 12:07:50 AM PST

              [ Parent ]

              •  ok, no news there (0+ / 0-)

                I was responding to—what seemed to me—your assertion that buying on credit (ie. cash-only) would one day be a thing of the past. If i've misinterpreted, then please let's just drop this.

                If, however, you really do believe that, one day, people will no longer use plastic, then i'm afraid i have to disagree, however unfortunate such a situation would be.

                "People who say I'm dystopian are middle class pussies!" – William Gibson

                by subtropolis on Sun Feb 10, 2008 at 08:59:43 AM PST

                [ Parent ]

      •  "Cash? ID Please" (3+ / 0-)
        Recommended by:
        debedb, greenearth, CanyonWren

        It's coming.  Cash deprives the databases of key info and will be discouraged.

        The Shock Doctrine by Naomi Klein -- best book ever, I nominate for a Nobel Prize!

        by xaxado on Sat Feb 09, 2008 at 03:30:12 PM PST

        [ Parent ]

    •  Nothing could be worse for the credit economy (1+ / 0-)
      Recommended by:
      greenearth

      Than this sort of practice.

      If people no longer trust the terms of the cards they will (a) close out the accounts if they can and (b) simply default the debt and walk away from the credit economy for keeps if they cannot.

      Freedom is more than throwing an occasional treat to the people. Even tyrants do that much.

      by cskendrick on Sat Feb 09, 2008 at 03:44:56 PM PST

      [ Parent ]

    •  Credit The Day Received - A Law Suit Waiting? (0+ / 0-)

      I believe I read somewhere that it is the law that the credit card companies have to credit the account the day they receive the payment (check).  That is why Citi or Chase may have their credit card payment address at the smallest post office in America, somewhere in the middle of the country or far west, I believe.  So they can get the float allowed by the slow mail delivery.

      If the check cleared, and they didn't credit the consumer's account until 5 days later, that may not just be reversible, it may be the basis for a massive consumer lawsuit.  Someone might want to check into that.

      Some credit card violations have a $1,000 fine per violation, per customer for the issuer of the credit card.  Plus, there could be tripple damages sometimes for that kind of fraudulent practice.  Some lawyer out there should look into it.

  •   We walk at the Mall of America.... (2+ / 0-)
    Recommended by:
    jfdunphy, greenearth

    You wouldn't believe the number of closed spaces there.  2, 3 times what we've typically seen in the past.

    There's still lots of open businesses, but the number of closed is way up.

  •  Serious "adjustments" will have to be made. (2+ / 0-)
    Recommended by:
    greenearth, Bronx59

    It's more expensive for multinationals to build infrastructure(highways, railways, shipping infrastructure etc.) in third-worlds countries than it is for them to lobby our government to make our labor market more "globally competitive".  Policies like FASTTRACK, which wire around Article 1, Section 8 of the US constitution requiring Congress to negotiate trade laws, has worked effectively to lower the standard of living of US workers. Trade policies negotiated by FASTTRACK, such as NAFTA, GATT, CAFTA etc. have led to the exportation of millions of good-paying US jobs, depleting US consumer purchasing-power and eventually contributing to this economic free-fall we're all going to see.
    Serious "adjustments" will have to be made. It's not cost-effective for $10 an hour auto-workers to live in a $200,000 homes, regardless of the deals they get on their loans.

  •  Is there a typo? In the graf (1+ / 0-)
    Recommended by:
    greenearth

    in blockquotes, should the word millions in defaults actually read billions, with a b?

  •  If the useless DEMs in DC (1+ / 0-)
    Recommended by:
    greenearth

    want to do something constructive, they could rescue the portfolios of public agency bond guarantees issued by MBIA, etc.  If done right, this wouldn't cost the taxpayers anything and it would restore the health of this important financial service.  And next time keep the freakin MBA greedy idiots out of this specialty line of business.  

    What FDR giveth; GWB taketh away.

    by Marie on Sat Feb 09, 2008 at 03:41:52 PM PST

  •  MBS Fallout from Restructured Mortgages? (0+ / 0-)

    I've been talking about restructuring mortgages to relieve pressure from the subprime collapse. Letting people borrow from their IRAs to pay their mortgages. Forcing fraudulent lenders to accept only principal payments, and downgrading their "creditor rating" that increases the rates at which they borrow money wholesale from the Fed and elsewhere. While setting variable rates to the median fixed rate in their neighborhood when they got their loan, and interest paid to a fund that remedies other defects from the collapse.

    I think those changes would stabilize the mortgage and housing markets with minimum damage and injustice. What do you think those changes would do the MBS markets and industry?

    "When the going gets weird, the weird turn pro." - HST

    by DocGonzo on Sat Feb 09, 2008 at 04:45:34 PM PST

  •  After the dot-com bust in silicon valley (0+ / 0-)

    vacancy rates for corporate properties in the valley itself were upwards of 40%. There was a stretch of North San Jose I drove through at the time that was a big shiny ghost town. Surreal.

  •  "suffer the usury fees" (0+ / 0-)
    and that is what they are. Wasn't usury against the law? It is certainly a sin.
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