Recent Policy Decisions and a Greater Depression

When Bank of America (BAC) decided to Buy Countrywide last year, I went on record. In my opinion, that was one of the worst mistakes in the history of our Financial Markets. Now, that opinion is starting to prove itself. Review the article here.

Given recent developments, I am going on record again. In my opinion, the decisions of our new administration will lead the US into a Greater Depression. This may be the worst mistake in the history of the United States. The Trillions of dollars spent to buy our way out of this mess will be wasted, and the by-product will stifle the economy for many years to come.

Although the purpose of the resolutions is well intended, the consequences will be more than the country can bear. After a sobering period of demand-side stability, the US Taxpayer will have to pay the price. In addition, the government will not be able to spend these monies every year to employ the 2 million jobs referenced by President Obama in recent days.

Instead, when the spending phase is exhausted those jobs will be lost. A perfect scenario suggests that the private sector would then pick up those laborers. However, a debt burden will linger over the country at the same time. Therein lays the problem. With Social Security and Medicare bringing up the rear, the taxes levied on the wealthiest Americans will skyrocket. This will create a circular trap which limits reinvestment into the economy, and which impedes growth as a result. Those laborers will not be rehired.

In addition, and more importantly, this will happen during the third major down period in US History. Normalized demand ratios decline for the next 16 years, according to my proprietary analysis. This called The Investment Rate, and it is the most accurate leading longer-term stock market and economic indicator ever developed.

Therefore, the result of today's decisions will compound as demand for new investments continues to decline. Accordingly, the United States will be faced with the worst financial crisis it has ever seen.

Here is the timeline:

1. Demand Side stability will surface in the next 6-12 months

2. The Economy will appear to be in a recovery process

3. The Target Rate will begin to increase

4. Taxes will go up

5. Economic recovery will stall

6. The declining demand ratios evidenced by the Investment Rate will prevail.

7. Social Security and Medicare will be front and center

8. The value of the Dollar will decline.

9. Foreign interest in US assets will wane.

10. A Greater Depression will result.

The Mortgage mess was just the beginning. BAC, C, GM, and Chrysler are all on the chopping block today. Over time, this list will grow. This is Contemporary Darwinism at its best. Only the strongest, most nimble companies will survive. We cannot stop this natural selection process. We cannot prop up weak companies. Moreover, we cannot buy our way out of this mess. The more the US spends, the more the taxpayers lose. Fiscal disciplines should be the focus, but that seems to be the last thing on anyone's mind. Didn't we learn that lesson already?

Comments

[VennData:]

The same people that roll out this sort of stuff were the same folks who tried to shout people down thoughtful disagreements with the former President "during a time of war."

Realize that Bush polices got us into this mess. The opposite policies will get us out. We have a surfeit of capacity and a paucity of demand. Do the math.

Feb 20 07:36 AM

[barn:]

Hmmm. Your analysis seems..........biased to say the least. So you admit that there WILL be recovery, but it won't last because the administration will have to raise taxes on the rich, which will slow growth. In the words of that genius, Bill O'Reillly, I just don't buy it.

What about investment in new technologies? Wind, solar, etc.? What about putting in regulations that keep the Bernie Madoff's of the world from robbing us blind?

You're right in that the McMansion, quick buck, house flipping of the 90's and early '00's isn't coming back. But good riddance. I DO agree that we shouldn't prop up failed company's. But the truth is that not doing anything will RELLY drag us into a depression. Besides, how is stopping the home forclosure mess and investing in infrastructure help the banks? Did you read some of what Obama said yesterday? The money going to the housing problem is coming from the TARP funds. In other words, it's going to the PEOPLE. It's NOT going to the banks.

I don't know. Your line of thinking just seems to be more of the "tax cuts saves the economy" nonsense. Hasn't this been debunked? Fight Obama if you really disagree with him. But come up with a new plan. Not the same ol' pyramid "free market" nonsense.

Feb 20 07:48 AM

[athena:]

Your article is well written but you forget how quickly markets anticipate and react. The greater tax theory is coming NOW by the states, and the rest fiasco to come will be written on the Dow in the next few days/weeks.
If it is true that the Swiss may collapse then next decade will be one of cleaning house. And maybe senate too...

Feb 20 07:52 AM

[Tomas04:]

I am gonna go on record and say that conservative fiscal policy sucks and there is plenty of proof to back that up so let me just say "It's time for a new direction so shut the hell up conservatives."

Feb 20 07:58 AM

[Steve in Gr...:]

Great article. Thanks.

Feb 20 07:59 AM

[Tim Miles:]

OK, genius. What is your solution? More tax cuts for the wealthy? Less government regulation? More dishonesty and greed? Duh. Didn't that get us into this mess in the first place? The latest numbers coming out on U.S. job losses may total more than 700,000. That's a great advertisement for the effectiveness of "Trickle Down" economics over the past eight years.

Feb 20 08:04 AM

[ironpants:]

Wow, you're oblivious to the fact the Countrywide is working out to have been a good move.
Refi's are up and you'll be eating your smug words soon.

Feb 20 08:05 AM

[303820:]

The republicans have had the White House 20 0f the last 28 years...they have helped wall street fat cats fatten their wallet at the expenses of the working stiff of this country...They have sold our jobs to the lowest bidder over seas and here in the states...our local governments are broke because they've destroyed our tax base by shipping our jobs over seas and lowering our wages!

Feb 20 08:19 AM

[James Wood:]

Thank for a most provocative article. A discussion of economics can not be labeled "conservative" ( or liberal) as one of the people did commenting on your article. You make a most interesting projection of where the economy will go based on Obama's economic policies.

My question for you is whether your are a student of Elliot Wave Theory? Your projections coincide exactly with what Elliot Wave Theory (particularity as represented by people like Bob Prechter). It is fascinating to see technical projections as those presented by Bob Prechter and fundamental economic analysis as presented by you which not only match in directionality and in timing for changes of direction of the market.

Feb 20 08:22 AM

[Ferdinand E...:]

Although I'm one of the best economics teachers in the world, I quit teaching macroeconomics because I lost my faith in it. I kept my macro books however. I think though that I will throw those books out into the snow, because if someone who knows the terminology comes to the conclusions of Mr Kee, then I don't want to be tempted to ever stand in front of a macro class again.,

Feb 20 08:25 AM

[Permacritical:]

Great assessment. You must be acquainted with Peter Schiff.

Feb 20 08:26 AM

[Greg Weiss:]

So many people are focusing on the noise in the system rather than the root cause of this crisis: the abandonment of reasonable mortgage underwriting standards.

This is not a debate whether capitalism is better than socialism. Everyone with a basic understanding of economics understands why socialism is nonsensical: it directs resources away from efficient use of capital (which create jobs, wealth and prosperity) toward government which is clearly less efficient - and actually a drag - on economic activity. Simply stated - no government on earth has ever created wealth for its citizens.

So dont cheer for socialism - that over reaction and misunderstanding of the crisis is a bigger risk to the US long term than the current mess.

Abandonment of basic underwriting standards caused all if this crisis and collateral damage. We simply went wrong by listening to Barney Frank, the Democrats and George Bush as well in cheering the fact that you could have no money, no job and bad credit and still manage to buy a McMansion. Did anyone think that would end well?

What we simply needed to adhere to were mortgage underwriting standards that have worked for the past 300 years. No more than 1/3 of your gross toward a mortgage, 20% down so you wont walk away from the home. Oh - and you should definitely document your income and have a decent credit score. How 1990's...

Just because we got crazy underwriting does not mean that capitalism is does not work. It does not work when capital is free.

If Alan Greenspan and the Fed had stepped in and mandated that certain basic underwriting standards should be met for systemic security reasons - we would not have had the last half of the real estate bubble, credit crisis and economic catastrophy that we are now facing.

The efficient use of capital always works - but we do need some basic rules to the road to keep us out of trouble. We dont need massive legislation to fix this problem from happening again.

The way out is complicated - but the way into the storm was the simple abandonment of sensible underwriting.

Feb 20 08:32 AM

[BlueDevil-1989:]

Yes the republicans may have had control of the White House for the last 20 of 28 years but it was during the 8 years of Democrat control that the Community Redevelopment Act was passed (Clinton 1995). In fact this well intended, yet ill-conceived law began during another Democrat presidency (Carter 1977). The problem is when you tell banks they have to assume bad loans in the name of "fairness", create quasi-goverment mortgage companies willing to finance the crap, ask wall street to dress up these pigs with a 'AAA' ribbon and finally sell it to unwitting individuals/firms as a safe investment you give our financial system leukemia. All of this additional leveraging and liquidity forced home prices to far outpace the intrinsic value of the underlying assets and the wages required to pay for them.

Without these toxic assets in our financial system, we would NOT be going through the mess we are in today. Government interference caused this mess in the first place and it's continued government interference that will make this linger for years possibly decades to come.

And finally, the Bush administration tried to address this issue only to be shouted down by Barney Frank and Chris Dodd. These two scoundrels should be arrested and thrown in jail.

Feb 20 08:44 AM

[ALue167:]

I hardly ever see mentioned the elephant in the room. The $1.5 Trillion military agression budget mindset of our Imperial Empire AmeriKa with troops in 130 countries and 2 unnecessary wars. Our Empire days will come to an end either by public revolution when there is no medicare & social security or by throwing the entire government out in the next election, including closet rightwinger no change Obama. I voted for Nader

Feb 20 08:47 AM

[TheChallenge:]

To those who disagree with Mr. Kee's analysis:
1.why don't we have a $5 Trillion dollar stimulus, why not $10 Trillion. At some point his analysis is obviously correct(it is also in accord with CBO estimates).
2. Specifically where are the jobs going to be created and at what cost?
3. At what point does our National Debt impact our capacity to Grow?

Feb 20 08:49 AM

[NITRAM:]

Lets put the blame at the beginning. Clinton approved the beginning of the Housing problems.Clinton approved the Deriverters(not sure how to spell) on wall street. Clinton was to busy with Monica to see what was happening. "W' got us into a war that we had no right to be in. The cost of the war starting the down fall of our economic system. The lack of eversight by the "W" administration and the agencies like the S>E>C> and the I>R>S caused the crisis to grow. Then the ass holes in Congress gice Paulson unlimited use of $750,000,000,000 to help his friends on wall street. Now we have a president who will make Jimmy Carter look good. He has surounded himself with tax cheats and liers. By the way where did Emanuell live in Ill.? Now we have administartion cheats dealing with Congressional cheats. FRanks, Rangel, Daschell etal
The best of all we have a man in charge of the Treasury (IRS) who cheated the agency he now runs. Bottom line is each administration has contributed to the down fall. However, this racist socialistic administration will finish the job

Feb 20 08:55 AM

[Tim H.:]

I disagree with your analysis and here is why: A few years ago I had a discussion with my brother when the Iraq war was looking like as McCain said: "we will be there 100 years." Spending billions more on Iraq in process while this country's infrastructure decayed. Why were you not writing an article a few years ago stating the significant increase in cost of Iraq war was leading to a huge national debt and the Bush tax cuts of 2001 needed to be rescinded to help pay for the cost of war? My post is not an anti-war or anti-Bush rant. Merely my point is it seems to be okay to spend billions of US tax money to fund a war of choice. Yet when the government roles out stimulus bill which is more than just creating jobs but rebuilding the county's infrastucture. The people who were silent about the money spent in Iraq are now screaming bloody mary about the stimulus bill? Just seems kinda screwed up that this country spends billions on another country and that's okay. But if this country spends billions on itself. That's not right. Explain to me please why that is? I will use an example: There is $8 bil in bill to build high speed rail across country. This intent is to help decongestion our nation's roadways and air travel and promote conservation of energy. Being more energy efficient whether it's weather proofing, higher mileage in auto's or using power sources that use less energy (solar panels, energy efficient light bulbs) all lead USA to becoming more energy independent. So that stimulus bill is just not to create jobs but to upgrade this country's infrastructure. As for the foreclosure help... Fact is until the massive foreclosing's stop's this country's economy is never going to get revved back up. I understand the argument those people agreed to those terms but the foreclosing's need to be slowed down so people can stay in their homes. How does a foreclosed home that sits with no buying occupant help anyone? I find it really interesting that despite columns such as the one above and wall street's lack of excitement over what Obama is doing. His poll rating still remain high. Wall Street made alot of money in past few years and now the punch bowl has been taken away. Main street seems to approve. That bailout money is in loans so it is suppose to be repaid to tax payers years from now. As for the debt that is being created today. Under Reagan the national debt significantly increased yet I saw few columnist stating we were on our way to a great depression. Early in Reagan's term we were in a very bad recession too. No doubt down road the debt being created needs to be repaid and Obama has acknowledged this fact. Personally I think after economy recovers... A national gas tax is quickest way to repay that debt. This would force consumers to not go back to old driving habits, conserve energy and promote alternative energy travel. An author of a book about alternative energy said the technologies are there but to get the green energy infrastructure moving a base in the price of gas needs to be established. Bottom line is I disagree with this article but if the article is correct. Then Obama will have failed and as he told that audience in Florida: "We will have a new President." I hope Obama doesn't fail because it will be good for the country if he succeeds!

Feb 20 09:00 AM

[pacman1947:]

Provocative article with some truth amid much speculation. The Great Depression was caused in some part to overleveraging of assets, too much concentration of wealth in the hands of too few, and poor regulation. There were mistakes made by both Hoover and FDR that resulted in a prolonged downturn. We have much to learn from the mistakes of the past. Perhaps you might examine them before pronouncing doom upon the world.

I agree that too much money is being wasted on bailing out the few that caused the most harm. I agree that taxes must rise on the wealthiest in order to pay the bills. By the time JFK came to office, the income tax rate for millionaires was over 90%. It's odd that the economy was on fire then. Counterintuitive that the economy should grow while the rich are being pounded?

Economics and monetary policy are counterintuitive subjects. Neither is a science nor even a sustainable theory. No one can predict the interactions of people and their imaginations when money and security are challenged. The only thing that will help now is hope, and trust and integrity won't hurt, either.

We need a large dose of reality check. Most of the bloggers here get it. We will recover, with or without the government. The sun will rise tomorrow morning and the day after. The Earth will be under our feet. Your friends will say hello when you greet them. The world is not ending.

Do not fear the future. Learn from the past. We will rise again stronger than ever.

Feb 20 09:16 AM

[a. palmer jr.:]

I'm not a Republican or Democrat, I usually vote for the person, not the party. I think our basic problem right now is that we don't want to hold anyone responsible for their own actions. We have people who bought houses that know they couldn't afford them, sold by realtors who knew that and bankers who also knew. On top of this we are now seeing criminals involved in our financial system, who when discovered get a stiff sentence such as having to stay in a penthouse suite in New York.
Businesses who an elementary school student would know have no way of turning a profit turn to the taxpayers for billions and they get them! Hey, it's the taxpayers who wouldn't buy GM and Chrysler cars in the first place whom are having to come up with money for them to survive.
I'm all for helping people when they're down but when something is proven over and over again not to work, let it die already!
As for the "white collar" criminals, they should all be in a cell in the general population with the gang bangers and rapists, for they are no better.

Feb 20 09:29 AM

[wosorrell:]

I absolutely agree with barn. It is easy to be the arm chair quarter back critiquing the plays as they unfold and although my initial inclination, dating back to early '08 was to let the investment banks and company go the way of the do do, I thought...hmmm, do I want to live in a world where an axis shift in financial control and innovation veers away from Europe and the US to China and the Arab emirates.


On Feb 20 07:48 AM barn wrote:

> Hmmm. Your analysis seems..........biased to say the least. So
> you admit that there WILL be recovery, but it won't last because
> the administration will have to raise taxes on the rich, which will
> slow growth. In the words of that genius, Bill O'Reillly, I just
> don't buy it.
>
> What about investment in new technologies? Wind, solar, etc.? What
> about putting in regulations that keep the Bernie Madoff's of the
> world from robbing us blind?
>
> You're right in that the McMansion, quick buck, house flipping of
> the 90's and early '00's isn't coming back. But good riddance.
> I DO agree that we shouldn't prop up failed company's. But the truth
> is that not doing anything will RELLY drag us into a depression.
> Besides, how is stopping the home forclosure mess and investing in
> infrastructure help the banks? Did you read some of what Obama said
> yesterday? The money going to the housing problem is coming from
> the TARP funds. In other words, it's going to the PEOPLE. It's
> NOT going to the banks.
>
> I don't know. Your line of thinking just seems to be more of the
> "tax cuts saves the economy" nonsense. Hasn't this been debunked?
> Fight Obama if you really disagree with him. But come up with a
> new plan. Not the same ol' pyramid "free market" nonsense.

Feb 20 09:33 AM

[Thadeus Tho...:]

One thing is for sure. This economic crisis is on it's way to provide a so called "level playing field" for everyone. Back in 1999 to 2000 when all the rich Big Boys raided the pockets of plain folks who pumped up the stock market with their 401K plan contributions, the Big Boys walked away with billions collectively and now got burned by their own greed in real estate speculation and "creative financial products".
No worries for them though. You can bet there are plenty of Big Boys out there creating "contracting" companies to get their hands on President Obama's stimulus money. That's a big reason why things look bad. Little or no checks or balances to fence off unscrupulous opportunists who claim to be making lemon aid out of lemons; but are really out to line their pockets with public money and provide little , if anything, for it. Don't believe it? Look at Haliburton and how they cashed in on "support" infrastructure for the wars in Afghanistan and Iraq. $100 to do a soldiers laundry. $1,000 a day per diem charges to Uncle Sam for "contract agents".
Well, maybe we've learned by now. Then again . . .

Feb 20 10:04 AM

[Larrysyr:]

The Community Reinvestment Act seems to be a popular whipping-post during this down-turn.

My experience with an inner-city credit union doing just such work contradicts the notion that CRA brought down the economy. We have higher delinquencies than ordinary credit unions, but, somehow, much lower charge-offs. The members do get behind on their payments, but most catch up, given a chance. The credit union is willing to go out of its way to work with people, but it is very unforgiving to those who simply try to duck their respondsibilities.

The work of lending to lower income folks is more labor-intensive, but the results are stronger neighborhoods in place of outright ghettos and real prospects for upward mobility for the many people who are willing to work at improving their lives. (These people then also end up being consumers who keep the economy humming along in better times.)

The CRA grew out of the unwillingness of larger banks to do this kind of labor-intensive work in inner cities, thus abandoning whole populations to high-priced check-cashing, payday lending, and rent-to-own services.

The CRA does NOT force good people to make bad loans. It DOES require banks to recycle some of their money into neglected areas, whether on their own or by helping to finance community development institutions such as local credit unions.

The problem is neither the CRA nor subprime loans in general. The problem is lax lending standards that pay no attention to real credit-worthiness indicators. Can the borrower repay? Is the borrower willing to honor commitments? Is the lender sufficiently protected by collateral?


On Feb 20 08:44 AM SocialismSux wrote:

> Yes the republicans may have had control of the White House for the
> last 20 of 28 years but it was during the 8 years of Democrat control
> that the Community Redevelopment Act was passed (Clinton 1995).
> In fact this well intended, yet ill-conceived law began during another
> Democrat presidency (Carter 1977). The problem is when you tell
> banks they have to assume bad loans in the name of "fairness", create
> quasi-goverment mortgage companies willing to finance the crap, ask
> wall street to dress up these pigs with a 'AAA' ribbon and finally
> sell it to unwitting individuals/firms as a safe investment you give
> our financial system leukemia. All of this additional leveraging
> and liquidity forced home prices to far outpace the intrinsic value
> of the underlying assets and the wages required to pay for them.

>
>
> Without these toxic assets in our financial system, we would NOT
> be going through the mess we are in today. Government interference
> caused this mess in the first place and it's continued government
> interference that will make this linger for years possibly decades
> to come.
>
> And finally, the Bush administration tried to address this issue
> only to be shouted down by Barney Frank and Chris Dodd. These two
> scoundrels should be arrested and thrown in jail.

Feb 20 10:16 AM

[shootpar2001:]

Wrong Again!!!
This not the result of one admin.
It has been building for over twenty years.
Too much debt, then releveraged and so on.
The blame is everywhere; I suggest you look in the mirror.
Unless you are completely debt free (I'll give a mortgage), you have no room to talk. You show your ignorance when you bring in politics.
Shut up!!! Go to work.



On Feb 20 07:36 AM VennData wrote:

> The same people that roll out this sort of stuff were the same folks
> who tried to shout people down thoughtful disagreements with the
> former President "during a time of war."
>
> Realize that Bush polices got us into this mess. The opposite policies
> will get us out. We have a surfeit of capacity and a paucity of demand.
> Do the math.

Feb 20 10:54 AM

[shootpar2001:]

Again!!!! Stupid politics.
It is not conservative v. liberal.
Part (I say part!!) Is their policies.
Too much supply side from one admin., then too much demand from the next. All in the context that they know better.... they don't!!!!!!
Supply/Demand is suppose to reach an equilibrium.
The politicians distort it!!!!!


On Feb 20 07:58 AM Tomas04 wrote:

> I am gonna go on record and say that conservative fiscal policy sucks
> and there is plenty of proof to back that up so let me just say "It's
> time for a new direction so shut the hell up conservatives."

Feb 20 10:59 AM

[bosun.j:]

Its always "you're an idiot for bringing in politics" with these guys except of course when those politics happen to be working for them.

Feb 20 11:00 AM

[Mad Hedge F...:]

Here is another thought about Obama’s mortgage bailout plan. It is so small, and helps so few people, it isn’t really a bail out at all. It doesn’t help those with mortgages over $625,000, a second home, investment properties, and those who have no mortgages (20% of the US total). Those who do qualify will have to run a gauntlet of qualifications and paperwork. No wonder the market for mortgage backed securities completely shut down! The plan does enable Obama to satisfy the left wing of the Democratic Party crying out for some government relief of their constituents, like Nancy Pelosi. It also makes a nice headline.

Feb 20 11:03 AM

[bosun.j:]

Someone imagines himself to be a rat f*<k cop today! Yep, ol' W was right they do hate us for our freedoms........


On Feb 20 11:01 AM shootpar2001 wrote:

> Wrong again!!!!!!!
> If you do not have a clue about economics and/or capitalism....

>
> GET OFF THIS BLOG!!!!!!
>
>
>
>
> On Feb 20 08:04 AM Tim Miles wrote:

Feb 20 11:05 AM

[shootpar2001:]

I voted: a good comment.
Glad you are leaving 'teaching'.
Less talkers and more doers will help get us out of this!!!!!!



On Feb 20 08:25 AM Ferdinand E. Banks wrote:

> Although I'm one of the best economics teachers in the world, I quit
> teaching macroeconomics because I lost my faith in it. I kept my
> macro books however. I think though that I will throw those books
> out into the snow, because if someone who knows the terminology comes
> to the conclusions of Mr Kee, then I don't want to be tempted to
> ever stand in front of a macro class again.,

Feb 20 11:05 AM

[Mister Jimmy:]

"This may be the worst mistake in the history of the United States." Bigger than the invasion of Iraq?

Feb 20 11:07 AM

[User 158164:]

I disagree with the assumption that the mortgage crisis started this mess. Manufacturing has gone from 20% to 10% of our economy over the last decade. What do you think happens to the housing market when 10,000 auto workers lose their jobs?

We need to make US manufacturing compedetive with the rest of the world, then people will have the wealth to buy homes.

No, instead we'll do a rant about the UAW and corporate jets and ignore the fundamental problems with the economy.

Pay no attention tot he man behind the curtain!

Feb 20 11:17 AM

[shootpar2001:]

Partially correct here....
Most of these bad loans were initiated by brokers; not bankers.
CRA was generally a fair idea that was misused.
It was misused by politicians, then by the greedy.
However, this was the 'last straw'.... not the beginning of our troubles.
Excessive debt had been building for over twenty years, let us all pay our debts off and move forward. Yes, it will take time in this instant world,
but this four letter word (TIME), will prove the best medicine.



On Feb 20 10:16 AM Larrysyr wrote:

> The Community Reinvestment Act seems to be a popular whipping-post
> during this down-turn.
>
> My experience with an inner-city credit union doing just such work
> contradicts the notion that CRA brought down the economy. We have
> higher delinquencies than ordinary credit unions, but, somehow, much
> lower charge-offs. The members do get behind on their payments, but
> most catch up, given a chance. The credit union is willing to go
> out of its way to work with people, but it is very unforgiving to
> those who simply try to duck their respondsibilities.
>
> The work of lending to lower income folks is more labor-intensive,
> but the results are stronger neighborhoods in place of outright ghettos
> and real prospects for upward mobility for the many people who are
> willing to work at improving their lives. (These people then also
> end up being consumers who keep the economy humming along in better
> times.)
>
> The CRA grew out of the unwillingness of larger banks to do this
> kind of labor-intensive work in inner cities, thus abandoning whole
> populations to high-priced check-cashing, payday lending, and rent-to-own
> services.
>
> The CRA does NOT force good people to make bad loans. It DOES require
> banks to recycle some of their money into neglected areas, whether
> on their own or by helping to finance community development institutions
> such as local credit unions.
>
> The problem is neither the CRA nor subprime loans in general. The
> problem is lax lending standards that pay no attention to real credit-worthiness
> indicators. Can the borrower repay? Is the borrower willing to honor
> commitments? Is the lender sufficiently protected by collateral?
>

Feb 20 11:18 AM

[know nothing:]

It appears that the subject is greed and human nature.Most Everyone is long on blame and short on solutions to fix the problem, talk is cheap, but it take money to buy whisky. Our whole system is broken now, until the people are ready to take a stand and hold all the crooks responsible for their greed and decite, we will only experience more of the same. We the people are electing politicains into office that have no integrity or morals, my parents and grand parents would roll over in their grave if they witnessed the lack of values our politicians and buisness leaders are displaying.

Feb 20 11:19 AM

[Wood1024:]

It is interesting to observe the left/right debate among the various commenters. Mr.Kee has a fairly good track record so what I'm taking away from his analysis is that we might should be worried about our present administration's attempt to heal us. He is in eseence saying "The medicine may be worse than the disease." The government can redistribute wealth or borrow and temporarily create an economic recovery. But the fiscal soundness of the government will be comprimised and our net worth and standard of living is in jeopardy. No one can create equity permanently out of thin air, even the government. The sooner we citizens and financial instituions realize that the equity we thought we had was emphermeral, the sooner we are to the road to recovery. But more reflation and more debt may be more bad medicine.

Feb 20 11:21 AM

[shootpar2001:]

The U.S. still manufactures more than any other country...period.
Even the Associated Press decided to acknowledge this in the last week.
We manufacture the big expensive stuff (planes, combines, big equipment, etc.) the stuff that gets put off in slow times.
Education is the answer, more of the big stuff is made by complicated machines (computers, etc.).
Toys can be made by any Chinese citizen.
Industry leading 'green' may be part of the answer.... not all.



On Feb 20 11:17 AM User 158164 wrote:

> I disagree with the assumption that the mortgage crisis started this
> mess. Manufacturing has gone from 20% to 10% of our economy over
> the last decade. What do you think happens to the housing market
> when 10,000 auto workers lose their jobs?
>
> We need to make US manufacturing compedetive with the rest of the
> world, then people will have the wealth to buy homes.
>
> No, instead we'll do a rant about the UAW and corporate jets and
> ignore the fundamental problems with the economy.
>
> Pay no attention tot he man behind the curtain!

Feb 20 11:26 AM

[ManFromMars:]

Economic growth (and viable jobs) requires efficiency enhancing long term investment, not ill-conceived politically motivated payoffs for to favored groups. Unfortunately, your math is faulty, and when the rest of the world stops paying (buying treasury securities) calamity will follow, as government promises will then have to be paid for by printing money, causing hyper-inflation. There will not be enough rich people to tax - many will have moved to Australia etc.

Please note that the last major country to experience hyper-inflation was Germany in 1920s-30s. That did not end well, but it did lead to the end of the last US depression. Chaos,misery then death.


On Feb 20 07:36 AM VennData wrote:

> The same people that roll out this sort of stuff were the same folks
> who tried to shout people down thoughtful disagreements with the
> former President "during a time of war."
>
> Realize that Bush polices got us into this mess. The opposite policies
> will get us out. We have a surfeit of capacity and a paucity of
> demand. Do the math.

Feb 20 12:21 PM

[Thomas Kee:]

Everyone wants solutions, and unfortunately the best answer is NOT what anyne wants to hear. The impending doom is coming. My advice is to become proactive. That is the best case for individuals. Because we are small, we are also nimble and capable. We will be able to outperform the brackish discipline of buy and hold money managers and mutual funds whose main objective is to collect fees, and we should prevail accordingly.

If you are of the mindset that everything must always go up, your mindset needs to change.

My advice to the government is to reign in spending and balance the budget. Then start paying off debt. Let failing companies fail. Let our capitalistic structure and darwinistic economy work itself out. Protect people along the way, as best as possible. But prepare for the worst.

No one wants to hear it, everyone wants an answer, but it is really too late already. The proper steps to avoid these problems had to be taken 5-10 years ago. Those proper steps were deficit reduction. We cannot live off of debt, and our government has not yet got the point.

We are at the mercy of a dauting economic cycle.

My advice: You better be nimble, or you will lose.

Keep it simple....that way no one can hurt you....

Cash is king. Opportunities will surface if you are patient.

THK.

Feb 20 12:32 PM

[ManFromMars:]

Analysis such as yours is scary. The whole problem we now face is the result of too much spending by government and individuals. More spending can not fix the problem. Good intentions (the Community Reinvestment Act), when implemented foolishly, only unleash greed and and stupidity throughout the body politic.

One of your heroes (I guess) Barney Frank, was quoted about how wonderful Freddie and Fanny were and how there was no problem. If one is going to introduce great risk into the system, one should also pay attention to the evolving results. We are all going to pay for the arrogance of Congress and bankers, and the greed of consumers for a long-long time.


On Feb 20 08:04 AM Tim Miles wrote:

> OK, genius. What is your solution? More tax cuts for the wealthy?
> Less government regulation? More dishonesty and greed? Duh. Didn't
> that get us into this mess in the first place? The latest numbers
> coming out on U.S. job losses may total more than 700,000. That's
> a great advertisement for the effectiveness of "Trickle Down" economics
> over the past eight years.

Feb 20 12:41 PM

[Spartacuss:]

This forum is intended for constructive and thoughtful comment that may help people to understand the underlying structures that brought about this horrible mess. Politicizing and conjecturing detracts, it doesn't add.

The failure of effective regulation of the investment banks lies with congress and the SEC. Senetor Dodd for one is either completely stupid or complicit in this failure of all failures.

Getting out of this mess may not be doable by any standard and wishing and hoping are not remedies to the situation. Right now politicians are shooting from the hip when they should be burning the midnight oil to find productive and effective methods to bring order back first instead of injecting a trillion dollars of malplaced capital which will create more problems than are solved.


On Feb 20 10:59 AM shootpar2001 wrote:

> Again!!!! Stupid politics.
> It is not conservative v. liberal.
> Part (I say part!!) Is their policies.
> Too much supply side from one admin., then too much demand from the
> next. All in the context that they know better.... they don't!!!!!!
>
> Supply/Demand is suppose to reach an equilibrium.
> The politicians distort it!!!!!

Feb 20 01:16 PM

[Berninvestor:]

Mr. Kee. One sentence in your reply leads me to believe you don't know what you're talking about. "The brackish discipline of buy and hold money managers and mutual funds whose main objective is to collect fees". There are no fees with a buy and hold strategy that invests in solid companies, compared to jumping in and out of your investments due to the analysis of people like yourself. It is so much easier to report and predict the doom and gloom than offer any real concrete solutions to problems.

Feb 20 01:25 PM

[TXDESERTFOX:]

Professional Politicians Have Destroyed The American Way of Life

Advocates for one world government, including the Clinton and both Bush administrations, have exported our jobs under the guise of global free trade. A natural consequence of this globalization is an equalization of living standards. That is, the living standard of Americans is being permanently reduced while living standards in China and India soar. Most jobs, once exported, will never return to the United States.

The Federal Reserve has allowed our currency to depreciate by more than 95% in its futile attempt to maintain full employment instead of preserving the purchasing value of the U.S. Dollar. The U.S. is now bankrupt with no possible way to repay our debts. These same professional politicians are now destroying what is left of American Citizen’s lifetime savings in a futile attempt to inflate away the debts of the fiscally imprudent. After they decimate what is left of our fiat currency, decades of depression will follow if they do not reverse course now.

Any bankrupt, including the United States, should terminate all unnecessary spending, reduce necessary spending to an absolute minimum and do everything possible to increase income. Our entrenched professional politicians are doing the opposite via their standard approach of throwing an ever depreciating currency at the problem. After almost eight trillion dollars, they continue their futility. Since they have bankrupted the nation, they now take money from fiscally prudent that can still provide jobs and income and give it to the fiscally imprudent that cannot provide jobs and income.

Unless our Federal Government immediately recognizes the fallacy of its present course of action and adopts the above steps to emerge from bankruptcy, America is doomed. Why are so many economists, financial experts, news reporters etc. not recognizing this is what the advocates of one world government want, being a bankrupt and demoralized citizenry.

Feb 20 01:39 PM

[Amitabha Mu...:]

To jack up the economy it is the only way to increase government spending as well as spending by consumers. Because of the multiplier effect each billion dollar investment will transform into ten billion dollars worth of jobs, goods and services and so even if it means increase of debt in the long run it will not matter. The size of the economy is the important factor. When it will cross say 20 trillion dollars all these hyper tensions about increasing debt will appear foolish.

Feb 20 02:01 PM

[PROXIMO:]

Actually, ManFromMars, Barney Frank is one of my heroes. He and Chris Dodd, Paulson, Franklin Raines, San Fran Nan, and the rest of the on-the-take crowd from the DC corridors. And Bernie Madoff of course. They would make a perfect task force to resolve all the nation's economic woes. With the help of my neighbor's pet gerbil.


On Feb 20 12:41 PM ManFromMars wrote:

> Analysis such as yours is scary. The whole problem we now face is
> the result of too much spending by government and individuals. More
> spending can not fix the problem. Good intentions (the Community
> Reinvestment Act), when implemented foolishly, only unleash greed
> and and stupidity throughout the body politic.
>
> One of your heroes (I guess) Barney Frank, was quoted about how wonderful
> Freddie and Fanny were and how there was no problem. If one is going
> to introduce great risk into the system, one should also pay attention
> to the evolving results. We are all going to pay for the arrogance
> of Congress and bankers, and the greed of consumers for a long-long
> time.

Feb 20 02:18 PM

[misolarman:]

It was congress and their pie in the sky dreams of 'every American deserves a home of their own' that started this mess. This was compounded by Barney Frank and Chris Dodd (head of the Senate and House banking committees) that stuck their head in the sand as dollars were filling their pockets from the banking industry. This is indisputable, look at where their campaign contributions came from! It was Bush who tried twelve times to get these committees off their butts and do something. Barney Frank less than a year ago was blasting the republican stating, "Fannie Mae and Freddie Mac are financially sound." Youtube it and see for your self! The situation we are in was very forseeable. I had read several books on it three years ago. Just like the coming hyperinflationary storm that is coming is forseeable. No country in the history of man, has ever been able to spend their way into prosperity. Every one has eventually had to devalue their currency after hyperinflation.
People like me will do very well in the coming times, because we know what is happening. What is going to be very interesting is seeing how the democrates will convince the American 'Sheeple' that it is Bush's fault, like they have everything else that has been their fault.


On Feb 20 07:36 AM VennData wrote:

> The same people that roll out this sort of stuff were the same folks
> who tried to shout people down thoughtful disagreements with the
> former President "during a time of war."
>
> Realize that Bush polices got us into this mess. The opposite policies
> will get us out. We have a surfeit of capacity and a paucity of demand.
> Do the math.

Feb 20 03:07 PM

[Fred Voetsch:]

"OK, genius. What is your solution? More tax cuts for the wealthy? Less government regulation? More dishonesty and greed? Duh. Didn't that get us into this mess in the first place? The latest numbers coming out on U.S. job losses may total more than 700,000. That's a great advertisement for the effectiveness of "Trickle Down" economics over the past eight years."

Good article.

As for comments like those above it is sad to see how blind some people become to truth and facts just so that they can blame someone...anyone, for how terrible their lives are.

What we are facing was brought about by greed and a generational "foregetting" about what happens when greed runs amuck. Good people, whether they are conservative or liberal, understand that.

The answer to our problems is time. We need to restablish the regulation that once worked and take the time to fix our broken economy. That means paying off our debts and investing in things that really matter such as a civil, caring society where we do not blame all of our trouble on "the other side".

Feb 20 03:50 PM

[Larrysyr:]

Let's see...

The House was under Republican control from 1995 until 2007. The Senate was under Republican control during that time, also, except for a year and a half in 2001 and 2002. And George W. Bush was President from 2001 until a month ago.

Last time I checked, congressional committees were chaired by members of the majority party. You may not like Barney Frank, and you may think he says some stupid things, and you may even think he should have done some things differently, but he didn't chair the Banking and Finance Committee until 2007.

Mr. Frank probably deserves some blame for the meltdown, but there were a whole lot of other people with a whole lot more real power throughout the bubble period.


On Feb 20 03:07 PM misolarman wrote:

> It was congress and their pie in the sky dreams of 'every American
> deserves a home of their own' that started this mess. This was compounded
> by Barney Frank and Chris Dodd (head of the Senate and House banking
> committees) that stuck their head in the sand as dollars were filling
> their pockets from the banking industry. This is indisputable, look
> at where their campaign contributions came from! It was Bush who
> tried twelve times to get these committees off their butts and do
> something. Barney Frank less than a year ago was blasting the republican
> stating, "Fannie Mae and Freddie Mac are financially sound." Youtube
> it and see for your self! The situation we are in was very forseeable.
> I had read several books on it three years ago. Just like the coming
> hyperinflationary storm that is coming is forseeable. No country
> in the history of man, has ever been able to spend their way into
> prosperity. Every one has eventually had to devalue their currency
> after hyperinflation.
> People like me will do very well in the coming times, because we
> know what is happening. What is going to be very interesting is
> seeing how the democrates will convince the American 'Sheeple' that
> it is Bush's fault, like they have everything else that has been
> their fault.
>
>
> On Feb 20 07:36 AM VennData wrote:

Feb 20 04:43 PM

[viewfromnyc:]

The economic policies of the Bush administration did not lead the economy into recession. Recessions are a normal part of the business cycle. The excerbation of the negative portion of the cycle is a direct reflection of the excessive non-productive investing in housing which drove the positive phase to extreme. Housing is not a productive asset. The long term government subsidies (mortgage interest deduction, artifically low interest rates) for owner occuppied housing have distorted the capital allocation decision of consumers. Our economy can only achieve optimal levels of growth if capital is allocated away from consumption to productive assets.

Feb 20 05:11 PM

[MichaelJ007:]

Great article. There are some real dopes are on here commenting who obviously don't understand the fundamentals of economics, free markets and government. To put it simply for all you guys out there- the current economic cycle was caused by our government's massive failure to enforce the rules of our free market. The GOV now insist that it has a "Plan" that will get us back on track, but it won't. They are taking our money and allocating it to the less efficient means of production (Ford, GM, Chrysler, etc) and are picking financial favorites by choosing winners and losers (BofA, AIG, Lehman, etc) while hoping to reinflate the most recent asset bubble in an attempt to prop up prices and generate enough tax revenue to stay current on our massive debt burdens. This attempt WILL fail as you CANNOT de-leverage with more debt, you cannot create wealth by borrowing and you cannot survive in a free market with a costly and inefficient business model. I'm no advocate for a financial doomsday, but our current actions are setting us up for financial failure.

Feb 20 05:18 PM

[Tedspick:]

There is a book on my bedstand called "Bankruptcy 1995" by Harry Figgie. The only thing he got wrong was the timing. Blame can be issued to all kinds of politicians-of-the-mom... but decades and decades of exercising our culture of consumption and debt has finally cracked the system just as ole Figgie said it would. What to do? Figgie says that 1. The government must begin telling the truth 2. Create a "deficit war cabinet" (we are at war with ourselves) 3. Don't allow gov agencies to issue debt (ha!) 4. Don't monetize the debt 5. Pay down the debt but 6. Don't raise taxes.

GOOD LUCK!

Feb 20 06:11 PM

[EEB:]

I thought that the author's response was much more reasonable and restrained than the original article. I had a problem with the original article that no one commented upon, and it has to do with
Social Security. Social Security is a much smaller problem than Medicare, and financially the solution is fairly simply. 1) Raise the retirement age. 2) Increase the cap on taxable wages. 3) Introduce means testing for benefits. These changes are relatively minor, although politically unpopular, but they woud go a long way to solving a long-term problem. I wish that analysts would stop trying to scare us about Social Security.

The Medicare problem is a much tougher problem, and it is a problem on the immediate horizon.

Feb 20 10:14 PM

[zanardm:]

The more debt the gov runs up, the higher yields rise, and hence interest rates. Therefore this further shuts down the housing market. Why not get debt down, yields down, and hence interest rates down for houses, cars, and consumers in general? Thus the quickest way for the economic tide to rise for all of us? But a lot of time will be required. Is this too simple a plan to advance and execute? Forgot about the big banks; most of the banking system (8000+) is stable.

Feb 20 11:34 PM

[max12345:]

I too am pessimistic, but not for the reasons or the reasoning Mr. Kee outlines. Within 5 to 10 years maximum things economic and financial will find their equilibrium once again; and yes the U.S. dollar will be worth 25% less because of all the dilution it has been subjected to. (so anyone holding dollars, and probably most other paper currencies too -except perhaps for the Australian dollar and the Canadian dollar which are backed by real resources in the ground- will be "worth" 25% less) But that is the least of the problems or worries we all face.

We are already past "peak oil" and close to or past "peak commodities" for several key commodities. And guess what....all those other alternative energies being contemplated all also require commodities that we are fast running out of. In 1950 the only economy with a very high GDP per capita was the United States. Now there are many others and even more with even greater numbers are "catching up".

"Normal" 3% per year "economic growth forever" is simply not going to work. We either should have one billion people living with a high GDP and resource consumption per capita or 10 billion living with one that is 1/10th as large.

We are heading for an absolute disaster which is not only economic but involves the carrying capacity of our planet and the environmental destruction the human species (6.3 billion greedy, narcisisstic, self-indulgent, and complacent turkeys...i.e. humans) is wreaking across the board.

Feb 21 03:49 AM

[max12345:]

I too am pessimistic, but not for the reasons or the reasoning Mr. Kee outlines. Within 5 to 10 years maximum things economic and financial will find their equilibrium once again; and yes the U.S. dollar will be worth 25% less because of all the dilution it has been subjected to. (so anyone holding dollars, and probably most other paper currencies too -except perhaps for the Australian dollar and the Canadian dollar which are backed by real resources in the ground- will be "worth" 25% less) But that is the least of the problems or worries we all face.

We are already past "peak oil" and close to or past "peak commodities" for several key commodities. And guess what....all those other alternative energies being contemplated all also require commodities that we are fast running out of. In 1950 the only economy with a very high GDP per capita was the United States. Now there are many others and even more with even greater numbers are "catching up".

"Normal" 3% per year "economic growth forever" is simply not going to work. We either should have one billion people living with a high GDP and resource consumption per capita or 10 billion living with one that is 1/10th as large.

We are heading for an absolute disaster which is not only economic but involves the carrying capacity of our planet and the environmental destruction the human species (6.3 billion greedy, narcisisstic, self-indulgent, and complacent turkeys...i.e. humans) is wreaking across the board.

Feb 21 03:50 AM

[Al-USA:]

Excellent article Mr. Kee, and completely sensible, to me.

Based on your analysis the USA is headed for about 16 years of this Greater Depression.

However, we are human beings, we don't have to descend into 16 years of barbarism, civilization does not have to end...

But that is precisely how it will feel to the 25% or 50% unemployed if, this Greater Depression comes about and stays for 16 years. Can an advanced civilization exist with 25% or 50% living under barbaric conditions? It hasn't happened yet, as history clearly shows in the period leading up to the two world wars of the last century.

So, if the choice is 16 years of barbarism for a large part of society or maintaining civilization, then the people will do what has to be done. If that means supplanting capitalism with an economic model that will allow continued civilization, then that is how it will be. I know most of us are trying our best under the capitalist system, but really, in the choice between barbarism or civilization, there is nothing "sacred" about capitalism.

Feb 21 04:49 AM

[Kinja Rules:]

Great Comment! Some see this but many do not. The Media is not doing any service to this thought, which is wrong. People who pay NO TAXES are all up in arms about how Their Tax Money is being spent w/ no clue about where it is going or why. Teletubby's, What the Tube Says is How It Is. Ouch!


On Feb 20 09:00 AM Tim H. wrote:

> I disagree with your analysis and here is why: A few years ago I
> had a discussion with my brother when the Iraq war was looking like
> as McCain said: "we will be there 100 years." Spending billions more
> on Iraq in process while this country's infrastructure decayed. Why
> were you not writing an article a few years ago stating the significant
> increase in cost of Iraq war was leading to a huge national debt
> and the Bush tax cuts of 2001 needed to be rescinded to help pay
> for the cost of war? My post is not an anti-war or anti-Bush rant.
> Merely my point is it seems to be okay to spend billions of US tax
> money to fund a war of choice. Yet when the government roles out
> stimulus bill which is more than just creating jobs but rebuilding
> the county's infrastucture. The people who were silent about the
> money spent in Iraq are now screaming bloody mary about the stimulus
> bill? Just seems kinda screwed up that this country spends billions
> on another country and that's okay. But if this country spends billions
> on itself. That's not right. Explain to me please why that is? I
> will use an example: There is $8 bil in bill to build high speed
> rail across country. This intent is to help decongestion our nation's
> roadways and air travel and promote conservation of energy. Being
> more energy efficient whether it's weather proofing, higher mileage
> in auto's or using power sources that use less energy (solar panels,
> energy efficient light bulbs) all lead USA to becoming more energy
> independent. So that stimulus bill is just not to create jobs but
> to upgrade this country's infrastructure. As for the foreclosure
> help... Fact is until the massive foreclosing's stop's this country's
> economy is never going to get revved back up. I understand the argument
> those people agreed to those terms but the foreclosing's need to
> be slowed down so people can stay in their homes. How does a foreclosed
> home that sits with no buying occupant help anyone? I find it really
> interesting that despite columns such as the one above and wall street's
> lack of excitement over what Obama is doing. His poll rating still
> remain high. Wall Street made alot of money in past few years and
> now the punch bowl has been taken away. Main street seems to approve.
> That bailout money is in loans so it is suppose to be repaid to tax
> payers years from now. As for the debt that is being created today.
> Under Reagan the national debt significantly increased yet I saw
> few columnist stating we were on our way to a great depression. Early
> in Reagan's term we were in a very bad recession too. No doubt down
> road the debt being created needs to be repaid and Obama has acknowledged
> this fact. Personally I think after economy recovers... A national
> gas tax is quickest way to repay that debt. This would force consumers
> to not go back to old driving habits, conserve energy and promote
> alternative energy travel. An author of a book about alternative
> energy said the technologies are there but to get the green energy
> infrastructure moving a base in the price of gas needs to be established.
> Bottom line is I disagree with this article but if the article is
> correct. Then Obama will have failed and as he told that audience
> in Florida: "We will have a new President." I hope Obama doesn't
> fail because it will be good for the country if he succeeds!

Feb 21 05:25 AM

[T.Stamps:]

obama is to worried about himself. He's selfish. He's trying to talk the
economy down to much. A leader has to have some positive outlook.
He's making things worse and that's his objective.

Feb 21 11:30 AM

[brianoh:]

The problem as I see it is one of fundamental direction. It is rather like the question in 2001 – should I buy the Dow or is it way-overpriced? It was overpriced. If one gets the overall strategy wrong, then the medium and long-term results are going to be wrong. Needless to say that with the Dow, many traders still made money during the 2001-2008 period even though the Dow was overpriced. These people were not the long-term holders however.

The analogy is similar with the economy. The overall strategy is wrong (Keynesian), however some of the results may still be favorable on a short-term basis. Quite simply, we have the wrong people running the economy – Cheap-Credit Academics.

Greenspan is a perfect example of this. In his recent speech to the NY Economics Club he was basically saying (in part) that we need high stock prices so that we can get credit creation. This I presume explains his moves to prop-up the Dow bubble in 2001 and created the problem that brought us here. Even I can see that it is ludicrous to pump-up the Dow in order to provide the mechanism for credit. The Dow has to earn the level that it has, not be pushed there by Greenspan. We now have a Greenspan protégé as Treasury Secretary.

There are many negative consequences from this “Keynesianism God Mad”. One of the main problems is an imbalance in the economy that was caused by fictitious wealth. There are many, many businesses that need to down-size, and this will not happen overnight.

While the US has the wrong people charting the course, the long-term results will be negative. To generalize the problem – the problems caused by cheap credit cannot be solved by more of the same. The economy requires restructuring and that will not happen until the NORMAL supply-demand dynamics are allowed to play-out. Prop-ups, bailouts, mailouts, rate drops, stimulant measures, and deficit spending all create a wrong-sized economy that is unsustainable long term. In addition, the losses in the financial system that resulted from the misguided policies need to be written off, not propped-up.

It is extremely difficult to make economic decisions knowing that the policymakers are manipulating the free market at unprecedented levels. Time to let the chips lie where they fall and let industries survive or fail as a result of their own decisions.

Feb 21 08:14 PM

[bosun.j:]

Bingo!


On Feb 21 04:49 AM User 270430 wrote:

> but really, in the choice between barbarism or civilization,
> there is nothing "sacred" about capitalism.

Feb 22 03:15 AM

[a fat panda:]

It had nothing to do with Allan Greenspan and the lowering of interest rates. It had nothing to do with the removal of Glass-Stegal. It had nothing to do with CDSs, which were insurance products without regulation. It had nothing to do with profits at the ratings agencies, which rated all of the CDOs. It had nothing to do with people who refinanced their homes so that they could take the expensive trips that they could otherwise not afford. It was just the war - that's a thought that hadn't occurred to me.

On Feb 20 07:36 AM VennData wrote:

> The same people that roll out this sort of stuff were the same folks
> who tried to shout people down thoughtful disagreements with the
> former President "during a time of war."
>
> Realize that Bush polices got us into this mess. The opposite policies
> will get us out. We have a surfeit of capacity and a paucity of demand.
> Do the math.

Feb 22 07:51 AM

[Kunst:]

Seems like all you ever do is talk about how great you are. Boring!


On Feb 20 08:25 AM Ferdinand E. Banks wrote:

> Although I'm one of the best economics teachers in the world, I quit
> teaching macroeconomics because I lost my faith in it. I kept my
> macro books however. I think though that I will throw those books
> out into the snow, because if someone who knows the terminology comes
> to the conclusions of Mr Kee, then I don't want to be tempted to
> ever stand in front of a macro class again.,

Feb 26 01:38 AM