djsunshine

The Downfall of Keynesian Economics and the U.S. (Part 3 of 3)

I think you are making too much of Keynesian theory. It is like comparing Model T with a Toyota hybrid. Even though auto industry started in big time with Model T comparing it in today's market is absurd. All it was an advancement to horse cart. Period.

You can not even talk about crash of 30's and Keynesian theory in today's context. It is like living in past. It is about creating values and greater utilities toward the perceived human advancement. I stress 'perceived'. No amount of improvement in Iraq will be a meaningful advancement if all Iraqis and the world think 'It is a wasted result of Bush aggression'. That is why my friends 'perception becomes (and is) a reality. That is why we say 'Beauty lies in the eyes of the be-holder’. This way we have an 'International human value perception' It is difficult to define and quantify but it is there. Ignoring it is a suicidal mission. So what ever we come up with like a 'Green movement' and 'improved infrastructures' we have to have a consensus 'value' and 'true utility' that brings about a true improvement in human experience. Why are we happy about electing Borak Obama? Because it truly demonstrate our tolerances to diversity and an appreciation to the qualitative value system and an election process it represents. We won cold war by default. We have to win world opinion by a demonstration of making a right choice in an authentic democratic transfer of power. Now we have demonstrated that ours is a better system. We f'ud it up when we elected Bush for the second time (thanks to Carl Row winning at any cost and a 'Hanging Chad' episode with Al Gore). We did not demonstrate that we have a better system of government.
Coming back to Keynes...
You are not considering population growth, productivity growth and internet based e-commerce and globalization in to an equation.
This episode is nothing but de-leveraging. All the risk and profit prices were rigged by lop sided Chinese currency manipulations and 30-100 times overleveraging by hedge funds. Now risk pricing, values and productivity have to be added to justify current level of GNP. Expansion by any which way will not work. All commodities can not demand to 'an inflation adjusted pricing'. Now the moors law is deeply embedded in to all the goods and services, because high-tech and internet based ' flattening' is commoditized. High tech hardware industries have learned to prosper with it. Oil and health industry can not sustain it with out heavy duty increase in productivity. Same goes to Housing construction and 'Government politics' and defense industry. Borak Obama is a result of that. Republicans’ were inefficient and unproductive in delivering 'public good' they have to be replaced. They were stupid enough to mask the truth and 'get in' (with Bush's 2nd term with manipulations) but paid by heavier back lash. If they had been truthful about 'the fallacy' of Iraq war and other dealing they would have been better off.

Citigroup: The End Draws Near

City should buy own stock. It is stupid not to. If they can not support their ow stock who will? Board should vote for it.

Does the Auto Industry Deserve To Be Bailed Out?

Real issue is :
Is this a viable business?
I think so.
As it stands?
NO.
Needs to reinvent.Structured bankruptcy is more liberating. All CEOs will have to give up private jets..get a co-op jets. or fly first class.
Set an example for corporate America.

Does the Auto Industry Deserve To Be Bailed Out?

'American citizen' and him being student have nothing to do with topic.
Seems you have a hard time focusing on the issue.


On Nov 21 04:42 PM Bababooie wrote:

> With a psudeo of Investor Nirav, It's highly unlikely that the author
> is a North American Born Citizen. Protectionest legislation in other
> countries are not allowing natural growth of an industry globally.
> The car companies are taking actions by exporting some of their labor
> overseas. The Author cited details on wages at the Auto Companies,
> but failed to mention the actual education that the workers have,
> and are striving to obtain. The current model of wage is abnormally
> high, but so are the wages of Financial managers of companies that
> are fialing and have failed. I am talking about MBA's, & Professors
> from the likes of Harvard, and Yale. The good ol' boys network got
> them in a position that their fathers might have been able to handle
> with LESS education.
>
> The author had indicated that the conversation was with a "fellow
> student". The Author is obviously in the process of getting an education.
> Every education comes with a cold shower of reality once in the marketplace.
>
>
> The Autoworker are getting paid exactly what the marketplace demanded.
> There are varying degrees of education by these workers. The SMART
> ones can get a comfortable income, while not having to deal with
> a lot of stress.
>
> My advise to the Author.....Try and get a job (and Keep it!!)

The Humpty Dumpty Economy

Home prices all over are so high no one can qualify at the guide line. The system is woring on at 7-10% home appriciation rate.We need to bail them and do a Loan MOD or they all stop playing in the system. Whole episode of 'slowing the economy' by Fed's rate increase is outdated. That cause more problems then solutions. Global economy is too big and so complex our law abiding citizens are being crushed every month. They are borrowing from Paul to pay Peter. In this case to pay Iraq war or Saudi OPEC. Loan MOD will bring some stailisation..too late to worry about moral hazard...This much borrowing was a moral problem to begin with.


On Nov 16 10:53 AM dinochick wrote:

> Excellent article.
>
> It bothered me when they brought the bailout proposal on three sheets
> of paper, then it expanded to over 50.
>
> The prosperity that we were living in was false, created by credit.
> The inflation of housing prices is what caused many to use their
> "easy credit", and of course the "disposable goods". When a toaster
> broke, you tried to fix it. Now you throw away and spend another
> $20 on one.
> However, this "tude" has gone on for a long time. While allot of
> goods are cheaper than they used to be, some don't work as well.
> And, of course by the time you buy a laptop, it is outdated.
>
> The old underwriting formula was 29/33 ratios. (yep I am an underwriter)
> and we didn't even include women's income of child bearing age (yes
> there was that "prejudice" in the seventies). So obviously, there
> is a serious "gap" that needs to be closed. Increase salaries or
> lower housing prices..
>
> When companies lower salaries (as many are doing now due to the extensive
> unemployed who are desperate for anything) they contribute to the
> problem. Until standardized salaries for specific work, and limitations
> on housing inflations are regulated, you will continue to have this
> mess. I know this affects free enterprise, but obviously we didn't
> handle it very well.
>

Are Big Banks Too Big to Fail?

Why blame banking!!!
Housing became unaffordable long time ago..30% DTI is not possible specialy on east and west cost. No income verification was a natural answer by wall street to gain and keep market share. The problem was HIgh leverage, risk pricing and default swaps..when it becomes a 'econpmics of large numbers' behaves diffrently..the whold model was not functioning..Now we have a choice..go japan way making home mortgage rate 1% payable in two genration or let home prices go down at depression level at least on east and west coast. I think option ARM was an answer to that problem( or 30 yr baloon). But feds raised 12 MAT so much and margins on them are so large it killed everyone.
NOw rates are down but margin is killing everyone. House prices has not gone up and payments have adjusted too high.
Feds must cut down the margin and put everyone on a baloon and or lowrate fixed rate.

Vultures Covet Infrastructure in Financial Wreckage

WB has a world saving (Golden West) component that have been doing option ARMs for years. In fact that is the only thing they did. Al these others Indymac, WAMU ,CITY Downey etc tried to copy and f'up the whole system that has been functioning for years..Eating up and digesting is two diffrent thing..

6+ Questions About the Government's Stake In Those Bailed-Out Companies

Should be gradualy sold off or gifted to every tax payer in the country. They can decide if they want to keep it or sell it off..Contol freaks would be scare..do not under estimate joe six pack..

Fannie and Freddie Did Not Cause This Crisis

US Sovereign Fund
You can say 700 billion is US Sovereign Fund.
Created to support US housing industry.
It some level it is government’s job (and public policy) to help people have neighborhoods with home ownership. That is what makes our nation strong and our future generation competitive. This homeownership and home equity afforded by this safety net is the only retirement nest egg most common citizens have.

If you wake up and think about it you will end up paying more in taxes to get equivalent result. Inflation caused by this 700 billion is also a kind of tax that you and I will have to pay but in different form. In conclusion ‘Expansion required (not just inflation protection) portion of fed’s mandate’ is what put us apart from our friends in Europe.

Thank god for that.

Doing a surgery by a chainsaw

Basic requirement was house be a home and a shelter. To the extent there is no monthly payment shock home owner have to live and pay rent or a mortgage. This was a fundamental assumption. As long as they can afford monthly payment they will stay. That is why home ownership is different kind of investment.

Even this bail out has this assumption. To the extent home owner can afford to make monthly payment lenders with HUD’s co-operation can do loan modification so, people can stay in home.

Unfortunately insensitive consistent prolonged reduction in interest rate and after that prolonged increase in interest rated created dramatic inflated home prices and now deflated home prices.* Just now feds have understood that old fashion monetary policies (raising and reducing interest rate) do not have precise effect. Remember conundrum? Long rates were cheaper than short and world kept on throwing money at leveraged hedge funds. In this global financial market that is loaded by sovereign funds is a different animal. It took so long to have an effect that it damaged the entire credit market. It is like doing a surgery by a chainsaw where you need a laser beam. Now our economy patient is in critical condition. This collateral damage caused by lack of leadership can cost our country a super power status.

Fierce competition and outdated regulations created a disconnect between borrower and lender. Prolonged lower interest rate and inflated home prices created a feeling of have and have-nots home owners. Toward the end 2005-2006 most of the houses were bought by these have-nots who felt left out. To make it affordable they were given teaser rate payments assuming prolonged lower rates.
The real problem was marking to market and it is still a marking to market. SEC is a sleep on the wheel hoping that two wrong will make one right. First when problem started risk pricing was done based on ‘marked to market’, based on previous five years’ experiences. Ignoring the imminent increase in market risk. That caused disaster to investors. Now second time same thing is being done ignoring ‘there is no market CDOs’ there for requiring ‘balance sheet’ and ‘Capital’. Common sense should prevail.
Two wrongs does not make on right.

No market does not mean no value it is a short term assessment bookkeeping problem. There could be a one year ‘suspense account’ valuation or a gray area valuation lead by SEC. Book-keeping should reflect the market and not amplify… either way positive or negative…
Instead SEC, vested interests and politics are creating shotgun weddings and winners and losers of the centuries. This is lead ‘wagon circling’ by the same people who were supposed to help. No wonder banks and lenders do not trust each other and refuse to help. They have vested interest in not helping.

Now decentralized localized negotiated loan modifications with home owners is the only meaningful solution. Each individual mortgage has a home owner and each home owner has a family, neighborhood, township, school and communities that make this nation. Big time games on Wall Street and Washington should not ignore that.


* No one is talking about replacement cost of these houses. Material costs have gone up. These deflated prices of homes will cause another inflated response in future.

So the Perpetrators Are Now Our Saviors?

US Sovereign Fund
You can say 600 billion is US Sovereign Fund.
Created to support US housing industry.
It some level it is government’s job (and public policy) to help people have neighborhoods with home ownership. That is what makes our nation strong and our future generation competitive. This homeownership and home equity afforded by this safety net is the only retirement nest egg most common citizens have.

If you wake up and think about it you will end up paying more in taxes to get equivalent result. Inflation caused by this 600 billion is also a kind of tax that you and I will have to pay but in different form. In conclusion ‘Expansion required (not just inflation protection) portion of fed’s mandate’ is what put us apart from our friends in Europe. Thank god for that.

Leverage 101: The Real Cause of the Financial Crisis

Current crisis.

Basic requirement was house be a home and a shelter. To the extent there is no monthly payment shock home owner have to live and pay rent or a mortgage. This was a fundamental assumption. As long as they can afford monthly payment they will stay. That is why home ownership is different kind of investment.

Even this bail out has this assumption. To the extent home owner can afford to make monthly payment lenders with HUD’s co-operation can do loan modification so, people can stay in home.

Unfortunately insensitive consistent prolonged reduction in interest rate and after that prolonged increase in interest rated created dramatic inflated home prices and now deflated home prices.* Just now feds have understood that old fashion monetary policies (raising and reducing interest rate) do not have precise effect. Remember conundrum? Long rates were cheaper than short and world kept on throwing money at leveraged hedge funds. In this global financial market that is loaded by sovereign funds is a different animal. It took so long to have an effect that it damaged the entire credit market. It is like doing a surgery by a chainsaw where you need a laser beam. Now our economy patient is in critical condition. This collateral damage caused by lack of leadership can cost our country a super power status.

Fierce competition and outdated regulations created a disconnect between borrower and lender. Prolonged lower interest rate and inflated home prices created a feeling of have and have-nots home owners. Toward the end 2005-2006 most of the houses were bought by these have-nots who felt left out. To make it affordable they were given teaser rate payments assuming prolonged lower rates.
The real problem was marking to market and it is still a marking to market. SEC is a sleep on the wheel hoping that two wrong will make one right. First when problem started risk pricing was done based on ‘marked to market’, based on previous five years’ experiences. Ignoring the imminent increase in market risk. That caused disaster to investors. Now second time same thing is being done ignoring ‘there is no market CDOs’ there for requiring ‘balance sheet’ and ‘Capital’. Common sense should prevail.
Two wrongs does not make on right.
No market does not mean no value it is a short term assessment bookkeeping problem. There could be a one year ‘suspense account’ valuation or a gray area valuation lead by SEC.
Instead SEC, vested interests and politics are creating shotgun weddings and winners and losers of the centuries. This is lead ‘wagon circling’ by the same people who were supposed to help. No wonder banks and lenders do not trust each other and refuse to help.

Now decentralized localized negotiated loan modifications with home owners is the only meaningful solution. Each individual mortgage has a home owner and each home owner has a family, neighborhood, township, school and communities that make this nation. Big time games on Wall Street and Washington should not ignore that.


* No one is talking about replacement cost of these houses. Material costs have gone up. These deflated prices of homes will cause another inflated response in future.

Activity in CDS Market Works in the Fed's Best Interest

I think political wrengling and vested interest delayed the fix and put us all in to bigger hole. Today's fix was needed one year ago and every one new about it. Feds,Congress and Admin. All these vested interests prevents them to become bold leader. So we have this leadership crisis with world class problem.