United States Heading towards a Depression?

I'm not sure that alone would do it. Sure, Fannie and Freddie played a part in creating the problem by encouraging loans to poor credit risks -- but it appears that the artificially low interest rates created by the Federal Reserve played a larger role in creating this bubble.

I'm more of a Chicagoan than an Austrian (Hayek > Mises), but it seems impossible not to place a significant amount of blame for this mess upon the Federal Reserve. I am not saying that we need to abolish the Federal Reserve, but I do believe that we need to rethink the notion that government can prevent recessions by pumping cheap money into the economy. It appears that the eventual costs outweigh the immediate benefits.

 

Eliminating Fannie and Freddie is the simpleton response. Its like the politicians who voted against the financial bailout on the first vote and the DOW dropped its highest 1 day total ever and LIBOR shot up 2 points immediately. Its the perspective of people who make financial decisions based on rigid politics and don't have any knowledge on anything else.

Here is what Fannie and Freddie do:

1. Provide a 2ndary market for mortgage loans. W/out the 2ndary market the whole real estate business would collapse. so much for the economy
2. Historically provided the basis for 30 year fixed rate mortgages at low rates. That made mortgages affordable and took people out of the risk world for interest rates. Again it made home ownership affordable.

3. until it jumped into the buying of crap ass mortgages like the rest of the investment world it had a good record for not holding crap mortgages and bad debts.

Now it also has weaknesses. It requires a lot of thought and a mechanism to both support mortgage lending without falling into excesses.

I'm sure the whole concept is too difficult for the extreme right wing.

 

Yeah, there couldn't possibly be a secondary market without Freddie and Fannie and there was no such thing as a real estate business before Freddie and Fannie came along. What a load of poo.

 

I'm afraid there is a monumental difference between what I did(pointing out that the "stimulus" money was spent on government salaries and Democratic special interests, both of which are facts), and referring to those who differ with these policies as the "extremist right wing", which you did repetitively. You might say my motives were partisan, but certainly not the words you quoted.

And here I thought I was being generous. The original Obama stimulus bill was 787 billion, not 757 billion, though it looks like the total will come in well over 800 billion. TARP1&2 combined were 700 billion. You couple in the new lending from the fed and the real stimulus commitments come in at over $11.6 trillion(with a T) .

If you really want to nit pick the issue, I'd be more than happy to settle on the $500 billion dollars that has already been distributed and has, according to Joe Biden, failed.

What about the recession? Excessive government spending is one of the contributing factors and you make it sound like more of it could somehow be a solution. Isn't the first rule of practicing medicine to do no harm? Democrats blamed the trillions of dollars Bush spent on Iraq(CBO real number is 709 billion) for our economic crisis, so their answer was to spend another 800 Billion on themselves? That sounds like offering a bottle of Whisky to an alcoholic to cure alcoholism.

Your god damn right it did damage. Its like getting in trouble with a bookie and your wife goes on a shopping spree and maxes out the credit cards to "help". Mind you, if they had actually spent the money on something stimulative, it could have helped, but they didn't and so it didn't.

Again, to spend even a single dollar and have it help "stimulate" the economy, you would have to put the money into the right things. Offering cheap money to "green energy" initiatives and Academia does almost nothing to stimulate the economy. Propping up bloated state government payrolls had a negative overall effect.

Right. Fannie and Freddie, issuing loans that should never have been made. You saw their names front and center on the wall street "reform" package that just passed, right? Funny, cause I didn't.

There may not be any "easy" solutions, but there certainly are some "obvious" solutions, none of which are being addressed by this administration.

Straw man. Current Right Wing? Who exactly is that? I think you will find general support across party lines for raising the capital gains tax. At 5%, 10% would be a double. Not sure how you got on this topic, but it belongs on another thread.

They may say demand is down, but I highly doubt most of them will agree with your oversimplifications, or with your assessment that either A) the president is doing the right things, or B) there is nothing the president can do. I'm sure big business guys, on the other hand, are quite content. Most of my friends are entrepreneurs. A couple even voted for Obama. Trust me when I say, nothing alienates a supporter like watching your net revenue stream shrink from 7 digits to 5. It seems the only sector that isn't feeling the pinch are government employees, after all demand is certainly up. Perhaps everyone can get a government job.

Fannie and Freddie now hold 52% of all home mortages. Taxpayers now own 80% of Fannie and Freddie. There are a myriad of other issues with Fannie and Freddie that persist today, including the continued issuance of loans that are not credit worthy. Aside from all those issues, their biggest problem IMO is that they are too big to fail. That is, after all, why we own 80% of their business. Just like Wall Street, there has not been a single reform put in place to address the systemic risk inherent to organizations of this size. In fact, the consolidation that has happened under Obama has actually made matters worse. Why don't we just install a heart plug in our economy that these people can threaten to pull every time they want some more taxpayer dollars.

Fannie and Freddie may serve a legitimate purpose, but they are in bad need of reform. and Pres. Osama is too busy suing Arizona to do anything about it.

 

I appreciate what Ronald Reagan (pbuh) said on this topic, "They say the world has become too complex for simple answers. They are wrong. There are no easy answers, but there are simple answers. We must have the courage to do what we know is morally right."

 

Capitalism's blood line is expenditures that is lacking in the present recessionary environment and the very reason interest rates have been reduced to near Zero in an effort to expand the economy, liquidity - savings are for the other component inflation that likewise is tamed by artificially (inflated - high) interest rates contracting the economy from overextension.

China - Japan - Korea - Taiwan, all of them put together, who cares?...... Austria - New Zealand - Singapore - etc. etc. Europe....

 

I'm not certain the sole blame is left with the Fed. It has more to do with the system itself. There should really be two sets of interest rates. A rate for lenders and a rate for savers. The problem with lowering the lending rate is that you also lower the rate that is paid to those that infuse the money into the system. Sure, my rate on one of my properties went from 7% to under 5%, but my Money Market went from 6.08% to .016 over the same period. I'm losing money by saving it, based on the current rate of inflation.

That said, why would I or anyone for that matter put more money into a system that does not pay anything out? When we stop doing that, there's no money to lend.

There really needs to be a separate set of, or at the very least equalized rate structure when it comes to what is paid out in earnings interest for savings, vs. the rate charged on monies lent.

BTW, the root of the whole current housing mess can be blamed on the CRA, which is what fostered the bad lending, lower rates and otherwise stupid decisions made by both the Fed and the Government backed lending institutions. Thank Carter and Clinton for that.

 

An encouraging prelude for the Democrats leading to the Labour day Fall elections. To bad there is so little appreciation for the historic accomplishments of the liberal wing of the present goverment or Obama.

Good of the Tea Party Express to dump the very competent Republican Senator from Alaska.....maybe they will continue to help.

 

Ever notice how Breeze only comments on the markets when they are up?

 

Mia, do you ever read anything? ^ - I know of your dislike for the heart of our economy and this market has more than been in your favor (ugly) but have mentioned being above 10000 would be beneficial to the liberals and do keep in tune with previous posts, either way.

October and September are historically weak - influenced by year end tax settlements so there is great hope for the four horsemen, Obama haters and no I do not control its direction.

 

All I can say to that is WTF???

That's all "FOREIGN" manufacturing Breeze... Not much help for the manufacturing industry or jobs here at home.

Maybe you should read a little CLOSER???

 

This is a very informative interview with David Gluskin on BloombergTV:

[video=youtube;VuEPNOVPfCQ]http://www.youtube.com/watch?v=VuEPNOVPfCQ[/video]

And a quote from CNBC:

The 1929-33 recession saw six quarterly bounces in GDP with an average gain of 8 percent, sending the stock market to a 50 percent rally in early 1930 as investors thought the worst had passed.

"False premise," Rosenberg said. "And guess what? We may well be reliving history here. If you're keeping score, we have recorded four quarterly advances in real GDP, and the average is only 3%."​

 

WTF

Where is the Depression? The time is up for the Obama haters, there is nothing for them to cheer for - No Depression.

The only disturbance is the Great Recession caused by the Republicans and being brought to its knees by the present Administration - and the ending of their meaningless war, Iraqi.

Without their bank rolls, due to the activist Supreme Court, the radicals fate would already be a distant memory. Amazing what money is able to buy.

 

Breeze, half the country is out of work. The other half have no work. No one is building anymore. No one is pouring concrete. No one is buying anything. No one has any money. Those that do are not spending it. Things are pretty bleak for a lot of people. Even those who have been responsible are hurting.

I'm guessing you still live with mom and dad?

The only reason no one is calling this a depression is because the US Government keeps backing bad decision after bad decision with more unwarranted debt. Eventually that credit will run out too.

 

The depression is so bad now that even a few government workers have been laid off. State workers, not federal, of course.

And unemployment just increased, again.

The U.S. economy is going nowhere until the government stops making it impossible for most U.S. businesses to compete internationally.

 

Repeat: The Great Republican Recession is being brought to its knees by the present Administration....(hint) thats why they were elected to office in the previous two elections.

 

That's sort of like saying that Hitler eliminated racism in Germany or that Osama bin Laden stopped airline hijacking.

 

Are all Americans Paranoid or is it just ones on DP?

 

The question is, are we paranoid enough.

 

Just because you're paranoid, it doesn't mean they aren't out to get you.