Marc Faber: 'It Will All End in Disaster' 81 comments
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Dr. Doom takes steps to counter his recently growing reputation as a stock market bull. Marc Faber, publisher of the Gloom, Boom and Doom Report, talks with Erik Schatzker about the prospects for equity markets and recent actions by the Fed and Treasury Department.
Click to play in a new windowI do not think so. On the contrary, I think what the government is doing and its economic "dream team" under Mr. Bernanke and Mr. Geithner and Mr. Summers are going to be, from a longer term point of view, rather negative. I think he's doing the right thing from a very short term perpective. If you have cracks in your walls and just put paint on it, it will hide them and then you sell your house. But it won't solve the problems of the cracks - it's the next owner and these are the children of the current taxpayer who will pay for it. 00:00 Stock rally "may have some more legs."
On whether Ben Bernanke has redeemed himself and what that means for stocks:
On the new bad assets purchase plan:
But, you understand, we can all sit here and say it will all end in disaster. That I'm sure. But, in the meantime, we can have big moves in markets.
Here's the summary from Bloomberg:
01:26 Potential for S&P 500 at 880; volatility
02:21 Treasuries; U.S. response to crisis
04:10 Treasury's bank-rescue efforts
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This article has 81 comments:
The point being: the predictions sound scarier than the reality is when you get there - even if the predictions do come true. You get used to the situation as you go.
You're right. Human beings adapt, so there's nothing to worry about. Just like frogs in a slowly heated pot, we adapt. But the results are the same: we get boiled and cooked because we stayed too long in the pot because instead of getting out, we tried to cope with slowly increasing heat.
It's not a question of IF we can adapt. It's about how we ought to adapt if we care about our future and our future generations.
On Mar 25 11:22 AM kelm wrote:
> There is always some perspective required. If someone had described
> where we are today three years ago we would have regarded that description
> as economic hell yet we are all sitting commenting on SA and probably
> not sleeping too badly either. Yes, things are bad but you get used
> to it over time. That is the adaptability of human beings. Now if
> we say that the US dollar will be replaced by a new reserve currency
> and the US will see 20 - 30% inflation for a time and lose much of
> its international standing we think that is alarmist and yet another
> form of hell. But, if and when it happens, America will still be
> here and there will still be a bunch of middle age guys commenting
> on SA.
>
> The point being: the predictions sound scarier than the reality is
> when you get there - even if the predictions do come true. You get
> used to the situation as you go.
We don't need Pollyannish attitudes at a time like this. Americans must wake up and throw ALL incumbent politicians out of office unless they voted consistently against the bailouts. That leaves 2 or 3...
If I predict that it will rain in Chicago, and it eventually rains, I made a great call.
This is especially true in finance, where the comparisons are relative, since I can always move the yardstick to fit my results.
Yeah!
The Hoover administration practiced Austrian economics ("laissez faire approach to the economy").
That was fabuously successful! Why it led to something called "The Great Depression".
The Great Depression was loads of fun for Americans and Europeans, too!
25% of young American boys were too malnourshed to be accepted by the military in WWII. What a stroke of genius these Austrian economists are, huh?
And who ended the Depression? Austrian economists?
Yeah, it's not like the massive Keynesian spending on military equipment that the US did in it's buildup to WWII pulled us out of the Depression?
What? It did?
But this guy says that Keynesian spending don't work!
Its complaining to complain. Wait until some of these people actually get out from in front of their computers and go rally somewhere. They'll talk about it like its the Revolutionary War or something. In the PAST PEOPLE ACTED. Today they write a few comments about how they are 100% correct, throw out a few economists or bloggers that promote their agenda, wipe their hands and go along with their lives.
Problem is many of the people complaining live comfortably, don't really know what its like to be poor or really struggling. Maybe its their wish to know it.
For the person who says Austrian Economists have been proven correct, care to add any proof of that? I can come out with a plan that to win baseball games a team should bunt every at bat of the game...does that mean then that if a team bunts one time and wins the game that that proves my theory correct? You yourself say it isn't practiced, so how then is it proven to work?
On Mar 25 01:38 PM CaptainJJack wrote:
> What is operating in the doomsday predictions is that eventually
> they will be right.
>
> If I predict that it will rain in Chicago, and it eventually rains,
> I made a great call.
>
> This is especially true in finance, where the comparisons are relative,
> since I can always move the yardstick to fit my results.
How could that end in disaster?
The Bull Market, he talks about, refers to the future after the Market Bumps along the Bottom for a while.
It is Not an All Clear and away we go buy signal.
Commodities, emerging markets. Greatest weights given to China and Brazil.
That's right, good old fashioned VHS tape. My VCR has none of the Modifications built in to prevent the taping of whatever I choose, I have two replacements.
Unfortunately, nobody is that good at any money or at any price.
Yes, few years ago, some people accurately predicted that the USA economy was/is very ill and was ready to go down at any time. However, very few if any could accurately predict accurately S&P 500 or DOW as it closed today.
However, the overall trend is quite clear regardless of short-term (up to 1-2 months) financial markets actions and/or specific US government actions and/or interventions.
The US financial and economic trend reminds me a runaway train about to crush. "Dr. Doom" is too optimistic telling us that "our children" will pay for it. No, we will pay for it in just 2-3 years. And, it will be very ugly.
On the way up the financial industry was able to lobby and get the rules which would have prevented this mess removed. Then when they system became unstable, as always happens in credit bubbles, the rules are getting altered again to help the same people. Additionally tax payer funds are being used to help the people who made the most when the first set of rules were removed.
What is happening is a crime against the American people pure and simple. I used to have some faith about Obama, but after Bush I look at actions not words and this guy speaks with a forked tongue as well.
If you look at the actions of the EU, they are moving for ward with regulations to prevent this from happening again (I know we will stall), the are moving forward with bonus rules and pay rules> All things that won't happen here because lobby influence will dictate that those with the most money get more.
We will have people sell it to us as something that is good for us, but being the sheep we are it will pass
On Mar 25 12:13 PM Speedspirit wrote:
> In four years it will be too late to vote for someone else. The facts
> are even if McCain got elected this is the same s!@# we would be
> feed. Its a set up. If we still cant tell right from wrong then we
> must suffer the consequences. But true Americans will find solutions,
> bankers and politicians will suffer the most because reality will
> be too much for them to handle.
On Mar 25 03:38 PM Just Say Whoa! wrote:
> >These Austrian Economists have been shown to be right, but the Keynesians
> are still in control of policy.
>
> Yeah!
>
> The Hoover administration practiced Austrian economics ("laissez
> faire approach to the economy").
>
> That was fabuously successful! Why it led to something called "The
> Great Depression".
>
> The Great Depression was loads of fun for Americans and Europeans,
> too!
>
> 25% of young American boys were too malnourshed to be accepted by
> the military in WWII. What a stroke of genius these Austrian economists
> are, huh?
>
> And who ended the Depression? Austrian economists?
>
> Yeah, it's not like the massive Keynesian spending on military equipment
> that the US did in it's buildup to WWII pulled us out of the Depression?
>
>
> What? It did?
>
> But this guy says that Keynesian spending don't work!
On Mar 25 04:36 PM paultaut wrote:
> I taped the entire ONE hour show. The 880 he mentions is the potential
> for This leg only.
>
> The Bull Market, he talks about, refers to the future after the Market
> Bumps along the Bottom for a while.
>
> It is Not an All Clear and away we go buy signal.
>
> Commodities, emerging markets. Greatest weights given to China and
> Brazil.
>
> That's right, good old fashioned VHS tape. My VCR has none of the
> Modifications built in to prevent the taping of whatever I choose,
> I have two replacements.
Obama's proposed programs are less "socialistic" than anything in the UK or Western Europe and they were doing great until they bought into our mortgage backed securities. It was our laizzez faire capitalism that has brought them down along with us.
You should look up the defintion of laissez faire. Our government has been intervening in our capital markets to an escalating degree throughout the century. Government has consumed more 40% of worker's incomes, it has depegged and inflated our currency, it has set up various social programs from social security to medicare, it has regulated housing industries, loans, interest rates, etc etc. We did NOT have laissez faire capitalism (if we did, one of hte biggest contributors to housing woes, Freddie Mac & Fannie Mae would not have been subsidized by tax dollars).
Also, to a previous post, Hoover was a maniacal interventionest. The guy passed the Smoot-Hawley Tariff Act... how can anyone remotely call this guy a free market capitalist?! I don't know whether to laugh or cry at such commentary.
> >These Austrian Economists have been shown to be right, but the Keynesians are still in control of policy....The Hoover administration practiced Austrian economics ... That was fabuously successful! Why it led to something called "The Great Depression"...
The Hoover administration was neither laissez faire nor Austrian. It did not facilitate bankruptcies, takeovers, or liquidations. Not only was the bank leverage in 1928 many time today's leverage, Hoover's socialist attempt at intervention was to increase leverage and regulate international trade! Sound familiar? The Great Depression ended when the USA became a manufacuring & less-regulated export economy, followed by a massive return of soldiers (went into manufacturing) who paid low taxes. 21st century manufacturing is dying, and taxes must doubled (or the dollar halved) to cover federal debt, so this recession will end differently.
And KELM wrote:
"But, if and when it happens, America will still be here and there will still be a bunch of middle age guys commenting on SA."
Hey, now! Middle-aged like a fine wine...
(...if wine could go bald.)
On Mar 26 10:53 AM sickofthehype wrote:
Hey Marc, check out my user name. It applies to you as well as the other fear-mongoring know it alls who are out to make a buck.
On Mar 26 11:36 AM I weep for this country. wrote:
> People we own AIG! Why are we trying to destroy it? It should be
> unamerican to bash the good people at AIG who are now working there
> knowing how bad they are perceived and yet staying loyal to the company.
> Keeping good employees who see some future in their current roles
> is the only way we will see any of that money that Congress decided
> to give to Goldman and France. Remember the people who caused the
> crisis left! And most of AIG is made up of good, solid insurance
> units that up until now were making money. But this grandstanding
> is now hurting that part of the business that had nothing to do with
> Financial Products whatsoever and which hold the key to taxpayers
> recouping what the Fed gave to the counterparties!
Guys like Peter Schiff and Mark Faber would be pallatable if they had some positive ideas for our economic future (free trade, rule of law, private property rights) that included how to keep the biggest losers turning into the biggest winners when the economy goes into meltdown and the big losers take bankruptcy while the rest of us just see our wealth killed off.
Me? I think if the Fed just kept short term interest rates reasonably low until inflation and inability of the economy to substitute to deal with it emerged, the economy would do alright if we stuck to the basics (free trade, rule of law, private property rights). But it takes years now for this to happen- the substitutionary labor is on the other side of the planet instead of in the next county, and the substitutionary technology like desalinization and alternative energy are big capital items- so you can't jack up rates (and invert the yield curve) at the first sign of price increases.
The other problem with Faber and Schiff is their message gets reduced to "things are bad", and further feed the angst of the "when are the jobs coming home" and "let's move to Montana" crowds- doing nothing to build consensus for a true high performance economy...
Austrians do not promise a solution to 80 years of Keynes. Sometimes you really ARE past the event horizon. That doesn't mean that if you get a next time you should ignore advice to steer clear of the black hole (and instructions on how to do just that).
I think it is dishonest of you to characterize Schiff as not promoting a plan for what the US Government should do. He has (as part of Ron Paul's campaign and many other times). Over and over and over (sometimes here on SA).
Gold standard? I now believe Americans will eventually have the option of a widely accepted, gold-backed currency even if the US dollar remains fiat. That's good enough for me as it will have all kinds of impact globally.
On Mar 26 09:40 AM KFC007 wrote:
> Economic recovery is a momentum game. While irresponsible and greedy
> people running major institutions take the major blame, those who
> discourage spending also share the responsibility for the crisis.
> We must handle all, i.e. bring honesty, transparency and control,
> punish those responsible, and encourage spending.
all of you are WAY too optimistic ! I just read where Hilary Clinton had a " private deal " with the Chinese , whom own 1/2 the US now , That they can have imenent domain over private + public US properties to make up for their losses .Funny , none of this makes it to Bloomberg ! This person has many ties to " international financial markets " The Global economies are now planning to " debase away " from the US dollar , Russia , Germany + China will make all future financial decisions ! Hey , even the IMF is stating the world needs another currency besides the US dollar .Food + Fuel shortages are about to commence in the US as it's currency finds it's intrinsic value = zero . My own attorney sister did not listen to me years ago when I told her to sell her condo + that a depression was coming .She is not laughing now , at 59 , she's about to be laid off + will have to walk away from her condo where she responsibly put 20% down + had spotless credit ! WHERE is her bailout !
The starvation rampant in the thirties came about because the government was buying and burning or destroying crops to keep the prices high... the prices for farm goods collapsed in the late 1920's due to an abundant harvest, and the farmers were crying about not making any money. That's the real reason for the bread lines, soup kitchens, and rationing.
Keynes advocated deficit spending in an era when the US had virtually no debt, and he advocated pulling the stimulus back after the economy recovered, something conveniently forgotten by everyone who worships that hack. Also, the country had a huge, idle manufacturing system that could turn out real goods for sale to the rest of the world, something that does not exist today. Dumping trillions and trillions of dollars into the black hole where financial engineering used to be will not restart this economy. Keynesian economics falls apart in the face of such high structural debts.
The Austrians are right. We have to allow things to crash and burn, albeit in a controlled manor, before we can restart the system. Until we do, we will see everything slowly spiral down into the mire. It did not matter who assumed the office of president in 2009, because the problems have become so huge that he or she would have been a one-termer. Either they would have done the right thing, and caused a lot of pain; or they would have done the WRONG thing (think Obama) and the mess would just accelerate.
On Mar 25 03:38 PM Just Say Whoa! wrote:
> >These Austrian Economists have been shown to be right, but the Keynesians
> are still in control of policy.
>
> Yeah!
>
> The Hoover administration practiced Austrian economics ("laissez
> faire approach to the economy").
>
> That was fabuously successful! Why it led to something called "The
> Great Depression".
>
> The Great Depression was loads of fun for Americans and Europeans,
> too!
>
> 25% of young American boys were too malnourshed to be accepted by
> the military in WWII. What a stroke of genius these Austrian economists
> are, huh?
>
> And who ended the Depression? Austrian economists?
>
> Yeah, it's not like the massive Keynesian spending on military equipment
> that the US did in it's buildup to WWII pulled us out of the Depression?
>
>
> What? It did?
>
> But this guy says that Keynesian spending don't work!
On Mar 25 04:42 PM Lee Eugene Munson wrote:
> It's easy for a bunch of guys commenting on Seeking Alpha to take
> a long term view--in 20 to 30 years America will still be here, etc.
> This does not address the very real pain that a lot of people who
> aren't commenting on Seeking Alpha are feeling today, who have seen
> their savings and pensions evaporate. We have a lot of control over
> what's happening to us, because we're in the investment business,
> but most people don't, and those people are wondering where their
> next round of food, or medicine, is coming from.
>
> As to the Austrians--they have been predicting this crisis for some
> time. We all would have done better to listen to them. If you want
> evidence, go look at what Ron Paul was saying would be the consequence
> of the last Greenspan put, or check out what Peter Schiff has been
> saying the past few years, to start. The comments board isn't the
> best place to provide tons of evidence, especially when its easy
> to find. The crisis we are experiencing is a classic example of Austrian
> economics at work.
>
> Ludwig von Mises, the preeminent Austrian, turned down a post at
> the largest bank in Vienna because he expected a crash to come and
> did not want to be associated with it. President Hoover did not follow
> laissez-faire policies after 1929. He was grossly interventionist,
> so much so that Roosevelt campaigned in 1932 against it and for a
> return to free market principles. Unfortunately for everyone living
> then, he was lying.
--I don't think we're going to economic hell, at least not the bottom rings, but at times in the next two years it may sure seem like it. Unemployment (U3) could easily reach the teens, GDP could stay negative through the years, the markets could (& I believe are likely to) drop well below their recent lows, etc. But we won't reach Great Depression era U levels or GDP & market drops.
--I do believe his characterization of the Administration's economic policies, especially the G-plan, as a paint job instead of a much-needed overhaul is apt. I view the chances of the first trillion dollars achieving bank system stability as remote, and I fear the prospect that more funds--avoiding Congressional approval--will be spent on the banking paint job thereafter--robbing future generations. So, I share his view that the long-term prospects for these policies are negative.
NTL, I always enjoy reading or hearing him. He makes you think your own assumptions or analysis about the economy & markets. Just wish we could hear more, and that it included more prescription (personal & national) than what he normally provides.
On Mar 26 11:23 AM 31October wrote:
> So why did your name not apply to the permabulls from 2002-2007 who
> were know it alls who are out to make a buck, even after economic
> fundamentals weakened?
>
> On Mar 26 10:53 AM sickofthehype wrote:
> Hey Marc, check out my user name. It applies to you as well as the
> other fear-mongoring know it alls who are out to make a buck.
Neville? The guy who sand Tell It Like it Is?
What me must realize is that nothing stays the same, evolution is the only constant. The way Americans are living is not sustainable- perception adjustment is in order, expectation adjustment is in order.
On Mar 25 03:41 PM CJJ wrote:
> Exactly...
>
> Its complaining to complain. Wait until some of these people actually
> get out from in front of their computers and go rally somewhere.
> They'll talk about it like its the Revolutionary War or something.
> In the PAST PEOPLE ACTED. Today they write a few comments about how
> they are 100% correct, throw out a few economists or bloggers that
> promote their agenda, wipe their hands and go along with their lives.
>
>
> Problem is many of the people complaining live comfortably, don't
> really know what its like to be poor or really struggling. Maybe
> its their wish to know it.
>
> For the person who says Austrian Economists have been proven correct,
> care to add any proof of that? I can come out with a plan that to
> win baseball games a team should bunt every at bat of the game...does
> that mean then that if a team bunts one time and wins the game that
> that proves my theory correct? You yourself say it isn't practiced,
> so how then is it proven to work?
>
>
>
>
Austrian Economics says:
-Make stuff people really need and sell it.
-If you don't make stuff people really need you are bad and make the economy bad
-The economy is going to suck anyway there are far more people in the world than it would take to make the stuff people need by like a 10:1 margin
-Bells and Whistles like car air conditioning, online banking, new health procedures are all economy negatives. They are bad and unnecessary.
-Human sufferring is fine, expected and applauded as obvious side effects of the economy.
Who the hell is to decide what "stuff" people really need. Are you the same people that claim the health care mess can be solved if people stop drinking, smoking and eating fast food? Why not step into reality and offer some solutions.
This won't end until the banks are nationalized/bankrupted, broken up and re-distributed to private hands.
The investment bankers run Washintgon and direct policy. Washington (i.e. taxpayers) is being held captive by 'too big to fail' financial institutions. No company that can take-down the entire economy should be allowed to exist.
Simon Johnson (from the IMF) wrote a great article about this:
www.planbeconomics.com.../
Solutions to what?
A tipping point has been reached and a forceful moneyflow fleeing high and leveraged risk towards relative safety creates turbulence that blows away derivative contracts, gambling banks and companies.
It follows economic heating and cooling as inevitably as a weather extreme does in the athmosphere.
The real economy has to hunker down until it is over.
This storm creates many humanitarian problems that will need realistic solutions, but the for the underlying unsustainabilities in the system, the storm *is* the solution.
The less it is interfered with, the better.
On Mar 24 04:52 PM schlumpf wrote:
> 30 years ago he saw the end of the world.
Laws and Acts are being changed at a fevorish pace, almost as if there is little time left, before people realize what is going on. Your constitution has been flushed down the toilet in more ways than you realize. Financial institutions and billionaires took control of your government by lobbying and donating to ensure the puppet they needed is the puppet you elected.
Police and military are being prepped as we speak to deal with severe riots and revolution and some states are considering going it alone, to protect their citizens, without Washington in the picture.
the state of affairs in Mexico is now being blamed on U.S. citizens, so your government can begin to initiate further controls on your independence, in the guise of public protection.
From where I stand and what I see, I'll predict that within six to twelve months, your banks will fail, go on holidays and leave you out in the cold, financially. Municipalities and States will be bankrupt, or near bankrupt and not have the ability to provide the power, water and sewer services that you have come to take for granted.
After a while of suffering and food riots, your government will conveniently step in to rescue you, with an already planned and ready to impliment social state. You had better be prepared for what you never thought your country could ever turn into.
That's what happens when citizens are continually fooled into looking the other way and keep missing the signs until it is happening right on your doorstep. Look around, you'll be shocked. If not, then you'll probably still be arguing about Keynesian financing and not bothered to learn the new national language of the country that will be calling in the markers and taking ownership of your lives.
Good luck to you all!
> faire approach to the economy")."
Completely wrong view, and a myth the socialists and Democrats like to spread. Anyone who repeats this myth just shows their ignroance. Hoover raised taxes (increasing high end tax ratesfrom 25% to over 60%), raised tariffs, and ramped up spending. It only made the economy worse.
FDR in 1932 ran on balancing the budget(!!), although he ended up increasing deficits and budgets massively. It too failed economically, but worked politically by creating a Govt-spending-dependent class of voters.
I hear ya. The news today:
AIG director named to Obama task force
www.freerepublic.com/f...
www.freerepublic.com/f...
bailout benefitting exec (Goldman Sachs) gave the max to Obama's 2010 Senate campaign in Dec.
www.freerepublic.com/f...
Cali Democrats in lege putting friends and family on lege payroll
"At least a dozen political allies, relatives and friends of legislators, including political candidates in need of a salaried landing or launch pad between elections, were on the legislative roster last year at a cost of $754,000."
www.freerepublic.com/f...
The Obama administration rejected a Tribune request under the Freedom of Information Act to review Freddie Mac board minutes and correspondence during Emanuel’s time as a director.
www.freerepublic.com/f...
Another high-ranking official in the Obama administration has had to leave his position, and in this case, one has to wonder how he got the job in the first place. Scott Polakoff, the top bank regulator for the Treasury, has taken a leave of absence after internal audits uncovered his allowance of backdated capital infusions, which could amount to cooking the books for IndyMac and other institutions. But the OTS chief had also been responsible for regulating AIG as well..
...AND SO IT GOES, using the taxpaying wealth-producers funds to help the politically connected.
BUY PHYSICAL GOLD. Whether you also arm yourself is up to you.
None of the programs to date are going to "restart lending" for the consumers. Every day fewer consumers qualify to borrower any more at all (that might be a good thing) but also don't qualify to refinance existing debt that's bound to fail sooner or later, if it isn't made more bearable. The best solution to detoxify the toxic assets is to detoxifying consumer balance sheets that underlie the toxic assets, by using direct government lending to consumers and their lenders to replace some upside down mortgage debt or credit card debt that's usurious or has payments too high to afford. A program to convert the most troublesome private debt to more affordable government debt (secured by tax obligations, not by homes) and recast paid down mortgage debt to reduce payments, would not only rescue consumers and the economy in general, but automatically restore value, and most likely liquidity, to toxic debt.
One plan to do that is The AllStreets Bailout Plan detailed at themortgagenews.info. It's relatively fast and easy to implement, fast acting, fair to all citizens, massively helpful to all lenders and investors in debt securities, will decrease the deficit from day one, and can be easily understood by most, unlike complex and uncertain programs to simply buy toxic assets.
If such a plan is not implemented, soon there will be many millions more of short sales, deeds in lieu of foreclosure, and foreclosures as millions of hugely upside down homeowners walk away from their hopeless mortgages and go rent, and others default due to unemployment or under-employment. The lack of effective government action, the dismal failure of the few programs tried to date to fix the mortgage problem, and the refusal to help property investors or second home owners ("speculators and house flippers," as if all lenders and investors aren't equally speculators, then and now) is setting up millions of owners to give up and walk away soon. There are currently about 27 million or 25% of owners of residential properties who have zero equity or are upside down with their mortgages. The S&P Case-Shiller Home Price Index has home values down a national average of 26.7% from their August, 2006 peak, and that data was for December, 2008 values which have dropped even more since then. Naturally a huge portion of home equity loans, and any securitized bundles of them, are nearly worthless to lenders and investors. If an effective program isn't implemented soon to convert excess mortgage debt, the fallout to lenders and the credit system is going to be incredible, and largely irreversible.
Having government buy toxic assets isn't going to solve anything for consumers, and taxpayers are going to eat huge losses if that's the only major program. The programs announced by Treasury to remove toxic assets from lender balance sheets, is basically a government-funded and government-guaranteed margin lending program to let investors speculate on supposedly low risk debt securities with taxpayer funds . That might be lots of fun and potential profit for prospective investors, but it doesn't do anything at all to solve the consumers' problems. It's even questionable whether the big money center banks can get enough price for the assets to be able to sell without unacceptable write-offs. My expectation is that the forthcoming changes to mark-to-market rules might more effectively solve their problems by allowing revaluation at more higher present values than market speculators are willing to give them.
The new Homeowner Affordability and Stability Program won't help enough borrowers or lenders to fix the main problem of excess mortgage debt. For starters, all investment properties and second homes are excluded, and we estimate that 6-8 million of those are under water, and the mortgages on those are the ones from which owners are most likely to walk away to further sink the housing and credit markets. The program will help some homesteaders who are not upside down, or mildly so, to get a lower interest rate, assuming lenders are actually going to assume the risks of such loans and rates stay low, but it doesn't relieve any excess mortgage principal, so it doesn't help the most critical problem of the many hugely upside down loans. Another part of the program that modifies loans imminently at risk of default, has the same basic problems as the failed Hope for Homeowners program that encouraged voluntary FHA refinances, namely, it requires lender decision to voluntarily devalue their loan. The Hope for Homeowners program started in October, 2008, so far has had only 775 applications and exactly one loan refinanced (per CNN Money money.cnn.com/2009/03/...).
According to Freddie Mac Update January, 2009 there is a total of about $12.2 trillion in mortgage debt on 1-4 unit residential properties in the U.S. Tallies by various sources for the total amount of taxpayer bailout loans, guarantees and stimulus spending so far totals about $10.9 trillion. Throw in a few cost overruns for the newly announced toxic asset rescue program, and you have enough government commitments to replace all U.S. residential mortgage debt!! Yet, the commitments to date have not relieved any mortgage debt at all, an aren't likely to. The ultimate absurdity is that those who remain, or become, upside down, not only aren't getting any help from the trillions of existing government bailouts, but also get to pay taxes to fund rescue programs that mostly save the interests of executives and investors in their own lender who is being rescued from their own bad loan.
If you want to help save the American economy, please actively support a government direct lending program like The AllStreets Bailout Plan.
Since the plan involves loans, it doesn't increase the deficit. As a matter of fact, it will bring new revenue from interest payments and reduced home mortgage interest deductions.
Under the plan all owners of 1-4 unit residential properties get a right to a government loan equal to 60% of the drop in their property value since 2006. All adult citizens who are non-owners get a right to a government loan equal to 10% of the median property value in the area they reside. It is sugested that the loans all be 30-year 3% fixed rate.
A homeowner must use her loan to pay down mortgage debt, if she has a mortgage. Two loans equalling the total payoff are created, half to the homeowner and half to the lender, so both the lender and the homeowner share equally in the loss of home equity, but balance sheets are actually improved by the liquid funds and the long term loan from the government that counts as Tier 1 capital. The loans are not secured by the properties, so that leaves most owners free to refinance or sell without a loss.
Those who don't have a mortgage, or don't own a property, can use a government loan to pay off credit card debt, or other debt, or finance a busines, as a personal loan, or as second mortgage funds to purchase a property. None of the loans require any qualifications. They are all secured by the tax system.
Just wait until credit markets loosen up, refi or take out a HELOC and go live it up - spend, spend, spend.
Corporations and our Government do it, why shouldn't you?
When the bill comes due, walk away, move to another town, file bankruptcy, whatever.
We are going to solve this debt crisis with more debt. When you lose in Vegas you just go to the ATM so you can win it back, no?
Happy Days are here again!
Then the real work starts - finding jobs for the millions of "hard-working families" (the blue-collars and middle class that politicians love to represent) who ain't got jobs or spare assets to sell.
Get the 'can do' and 'yes, we can' entrepreneurial spirit back into gear and sho' 'nuff the taxes won't rise and the Federal assets & liabilities will all balance off and the budget deficit will be cut in half by 2012 or maybe even earlier just like President Obama promises.
It's got to be better we all believe that for now and stop anxiety-griping and mad-frothing about political theology.
On Mar 26 09:40 AM KFC007 wrote:
> Economic recovery is a momentum game. While irresponsible and greedy
> people running major institutions take the major blame, those who
> discourage spending also share the responsibility for the crisis.
> We must handle all, i.e. bring honesty, transparency and control,
> punish those responsible, and encourage spending.
try to get along, work to understand others... yes excessive greed by big and little fish has led us here.
And there are no simple answers, no single class of people to blame.
Think of ways forward to create a better society, one that can transcend our natural greed and desire to dominate. Do not take too much advantage of the other guy, even when you are aware that he may be trying to take advantage of you, exhibit understanding and compassion for the basic greed and fear that motivates us all and got us to this point, maybe then we can take a pass on some of our worst excesses. Maybe then we can send the 200 day moving average of lying, cheating and stealing trending downward....eh??
The next crisis (resources and environment) will not be. So "we are going to hell in the long-term " is a true statement.
But all of you prophetic pessimists (realists) out there (whether of Austrian, Keynesian, Friedman or even Marxian "economic schools" please do give us a little bit more time to continue to enjoy our money, our complacency, economic growth, smugness, zipping around in jet planes, and generally enjoying first class (and even second or third will do) cabins on the Titanic. That is, please allow us to continue to enjoy (or imagine enjoying) "the good life" (in the short, medium and long term)
But I did forget something...
Most "long term" thinkers out there believe "long term" means five years. So please also do give the environmental catastrophe that is continuing to develop and manifest itself in millions of ways (mostly being ignored) and whose ever increasing impact is looming relatively soon after this depression is over and "solved" (whether it's solved easily or with a bit of difficulty in economic and financial terms) the chance to get up a really good head of steam.
And please don't worry we will fairly soon all return to very "normal" 3% "economic growth forever" under which we all can be happy consumers and the rape of the earth can continue unabated (for a few more years)
In fact, twenty or thirty years should be just about "long-term" enough to allow deforestation, global warming, desertification, toxification and resource wars to finally help reduce world population by about 50% and finally put us on a more sustainable path. So please just be patient.
This is NOT "The BIG ONE" (that one is coming in the "long-term")
Keyenesian did not get us out of the great depression either. After the War ended, the Government did a 'reverse Keyensian' , ending price and wage controls on the private sector, freeing up much needed private capital for the post war period.
If Keyensianism actually worked, the depression would not have lasted 15 years, thats a fact.
On Mar 25 03:38 PM Just Say Whoa! wrote:
> >These Austrian Economists have been shown to be right, but the Keynesians
> are still in control of policy.
>
> Yeah!
>
> The Hoover administration practiced Austrian economics ("laissez
> faire approach to the economy").
>
> That was fabuously successful! Why it led to something called "The
> Great Depression".
>
> The Great Depression was loads of fun for Americans and Europeans,
> too!
>
> 25% of young American boys were too malnourshed to be accepted by
> the military in WWII. What a stroke of genius these Austrian economists
> are, huh?
>
> And who ended the Depression? Austrian economists?
>
> Yeah, it's not like the massive Keynesian spending on military equipment
> that the US did in it's buildup to WWII pulled us out of the Depression?
>
>
> What? It did?
>
> But this guy says that Keynesian spending don't work!
On Mar 29 09:38 AM dividendgrowthinvestor wrote:
> Why dont we listen to aguy who has made almost 200 bililon in the
> market Warren Buffett. Smart investors buy great dividend growth
> stocks for their entire career and build a large dividend stream
> to take care of themselves at retirement
1. Warren has a number of good ideas, but he has made a number of mistakes lately and he did not avoid most of the recent mess.
2. He might buy great cash flowing stocks and companies, but Berkshire does not pay a dividend, so a large number of investors are not holders.
3. He advocates Mark-to-market, but he uses SFAS 157 Level 3 for a few billion of assets and he ignores the distructive influence of MTM if a company has capital requirements. He will probably deploy more of his reserves if the markets correct more. Plus the market declines and tight credit are givign fits to some of his competitors.
The Quiet Coup - The Atlantic (May 2009)...if we are to prevent a true depression, we’re running out of time.
The conventional wisdom among the elite is still that the current slump “cannot be as bad as the Great Depression.” This view is wrong. What we face now could, in fact, be worse than the Great Depression—because the world is now so much more interconnected and because the banking sector is now so big. We face a synchronized downturn in almost all countries, a weakening of confidence among individuals and firms, and major problems for government finances. If our leadership wakes up to the potential consequences, we may yet see dramatic action on the banking system and a breaking of the old elite. Let us hope it is not then too late.
www.theatlantic.com:80...
The crash has laid bare many unpleasant truths about the United States. One of the most alarming, says a former chief economist of the International Monetary Fund, is that the finance industry has effectively captured our government—a state of affairs that more typically describes emerging markets, and is at the center of many emerging-market crises. If the IMF’s staff could speak freely about the U.S., it would tell us what it tells all countries in this situation: recovery will fail unless we break the financial oligarchy that is blocking essential reform. And if we are to prevent a true depression, we’re running out of time.
Ought this board be renamed the neocon crackpot's sound and fury board?
On Mar 27 12:53 AM Lin wrote:
> Re
>
> all of you are WAY too optimistic ! I just read where Hilary Clinton
> had a " private deal " with the Chinese , whom own 1/2 the US now
> , That they can have imenent domain over private + public US properties
> to make up for their losses .Funny , none of this makes it to Bloomberg
> ! This person has many ties to " international financial markets
> " The Global economies are now planning to " debase away " from the
> US dollar , Russia , Germany + China will make all future financial
> decisions ! Hey , even the IMF is stating the world needs another
> currency besides the US dollar .Food + Fuel shortages are about to
> commence in the US as it's currency finds it's intrinsic value =
> zero . My own attorney sister did not listen to me years ago when
> I told her to sell her condo + that a depression was coming .She
> is not laughing now , at 59 , she's about to be laid off + will have
> to walk away from her condo where she responsibly put 20% down +
> had spotless credit ! WHERE is her bailout !
Sorry, but the American public needs to wise up and get off their thumbs and start taking back our country. And quit looking for instant gratification. How about instant personal responsibility?? I have no sympathy for folks who claim to have gotten hoodwinked into a mortagage that they can no longer afford because 'they didn't know what they were getting into.' What they 'knew' is that their home value would continue to skyrocket, so no worries. That's like saying 'gee, I'll borrow against my 401k and pay it back over time since I know I'll have a job forever...'.
Cry doom and gloom all ya want, and point the finger of blame at whoever ya want. Just be sure that finger points in the mirror at least once....
On Mar 25 03:41 PM CJJ wrote:
> Exactly...
>
> Its complaining to complain. Wait until some of these people actually
> get out from in front of their computers and go rally somewhere.
> They'll talk about it like its the Revolutionary War or something.
> In the PAST PEOPLE ACTED. Today they write a few comments about how
> they are 100% correct, throw out a few economists or bloggers that
> promote their agenda, wipe their hands and go along with their lives.
>
>
> Problem is many of the people complaining live comfortably, don't
> really know what its like to be poor or really struggling. Maybe
> its their wish to know it.
>
> For the person who says Austrian Economists have been proven correct,
> care to add any proof of that? I can come out with a plan that to
> win baseball games a team should bunt every at bat of the game...does
> that mean then that if a team bunts one time and wins the game that
> that proves my theory correct? You yourself say it isn't practiced,
> so how then is it proven to work?
>
>
>
>
On Mar 26 07:20 AM Snoqualman wrote:
> Good on you! I like vacuum tubes myself - they sound like, well,
> like sound should sound. Plus I find that warm orange glow deeply
> reassuring.
Robbing Peter to Pay Paul is not the answer and can hardly be considered morally edifying even if the President suggests that it is. And converting the Fed Government into a massive money machine when no one knows whether they have won or lost in the game just encourages corruption on a similar scale. And all the masses know is that they did not get their "fair share" and that someone else has to be tapped for that as well. The end result, as a recent member of the EU said, is the "road to hell."
On Mar 25 03:38 PM Just Say Whoa! wrote:
> >These Austrian Economists have been shown to be right, but the Keynesians
> are still in control of policy.
>
> Yeah!
>
> The Hoover administration practiced Austrian economics ("laissez
> faire approach to the economy").
>
> That was fabuously successful! Why it led to something called "The
> Great Depression".
>
> The Great Depression was loads of fun for Americans and Europeans,
> too!
>
> 25% of young American boys were too malnourshed to be accepted by
> the military in WWII. What a stroke of genius these Austrian economists
> are, huh?
>
> And who ended the Depression? Austrian economists?
>
> Yeah, it's not like the massive Keynesian spending on military equipment
> that the US did in it's buildup to WWII pulled us out of the Depression?
>
>
> What? It did?
>
> But this guy says that Keynesian spending don't work!
Just don't spend it. (Unfortunately, we are).
It could be a long time to reach consensus on this one. I don't think we'll see rampant inflation, apart from oil. But stable oil at $80 dollars/barrel won't feel that much different than unstable oil at $50.
On Mar 28 03:12 AM User 384611 wrote:
> While most of you are busy trying to decipher the causes and predicting
> financial outcomes, you've become too sidetracked to see what else
> has been developing right before your eyes.
>
> Laws and Acts are being changed at a fevorish pace, almost as if
> there is little time left, before people realize what is going on.
> Your constitution has been flushed down the toilet in more ways than
> you realize. Financial institutions and billionaires took control
> of your government by lobbying and donating to ensure the puppet
> they needed is the puppet you elected.
>
> Police and military are being prepped as we speak to deal with severe
> riots and revolution and some states are considering going it alone,
> to protect their citizens, without Washington in the picture.
>
> the state of affairs in Mexico is now being blamed on U.S. citizens,
> so your government can begin to initiate further controls on your
> independence, in the guise of public protection.
>
> From where I stand and what I see, I'll predict that within six to
> twelve months, your banks will fail, go on holidays and leave you
> out in the cold, financially. Municipalities and States will be bankrupt,
> or near bankrupt and not have the ability to provide the power, water
> and sewer services that you have come to take for granted.
>
> After a while of suffering and food riots, your government will conveniently
> step in to rescue you, with an already planned and ready to impliment
> social state. You had better be prepared for what you never thought
> your country could ever turn into.
>
> That's what happens when citizens are continually fooled into looking
> the other way and keep missing the signs until it is happening right
> on your doorstep. Look around, you'll be shocked. If not, then you'll
> probably still be arguing about Keynesian financing and not bothered
> to learn the new national language of the country that will be calling
> in the markers and taking ownership of your lives.
>
> Good luck to you all!
and signed away US liberty
This is the best and most clear description of what actually occurred in the Depression. There is a perception among many that Hoover was a "free marketer" and wanted to let the market sort it out w/o intervention. But as you say he made several critical blunders as he tried to "fix" the problem:
1. Raising interest rates and tightening the money supply.
2. Raising tax rates on the upper income wage earners.
3. Enacting "protectionist" policies like Hoot-Smalley to "protect" US jobs.
Looking back we can now all see that these decisions were disastrous and actually led to a longer, protracted Depression. I'm afraid Mr. Obama has not read his history book and is about to make the same mistakes Hoover made. Does not bode well for this economy.
Yank
On Mar 25 08:42 PM growser7 wrote:
> Re: Comments about Hoover subscribing to the Austrian school and
> praciticing laissez faire economics---Hoover intervened heavily in
> the economy and FDR merely continued and expanded on his approach.
> In fact, Hoover was the greatest interventionalist in US history
> up to that point. He had works programs, wage controls, and something
> similar to TARP to prop up failing businesses and banks. The failure
> of these steps prompted Mellon to plead with him to let the banks
> and farms and insolvent industries fail, to get it over with. It
> was after the wave of bankruptcies crested and ebbed that recovery
> began after 1932, i.e after the burden of debt was extinguished.
> The economy was recovering by the time the US entered WWII; a closer
> look at the Great Depression I think is a sobering reminder of the
> perils of government intervention and supports rather than refutes
> the Austrian school. (I read an article in WSJ by the way, about
> the multiplier effect of wartime spending; it came out to something
> like 0.8. or less).
Dr. Marc Faber author of the Gloom, Boom and Doom report is a world class Investor, Doctor Faber 's typically controversial and contrarian views have earned him the label of Dr. Doom. Doctor Doom also trades currencies and commodity futures like Gold Natural Gas and Crude Oil.Even his harshest critics must admit that he's been unerringly correct in his market forecasts over the past three decades.