Video of the year (economic)?

[Dave Siciliano]

Peter Schiff was the Lone Ranger on home prices and the economy.

http://www.youtube.com/watch?v=2I0QN-FYkpw

Best,

Dave

 

[ScottM]

It is more than just home prices that caused this. Since the 1980's when Reagan moved the tax burden from income tax to the consumption taxes while at the same time deficit spending like had never been done in peacetime before led to this problem. The canary in the coal mine should have been the 1987 recession. But few failed to heed the warning. Under Bush deficits continued to rise. When Clinton came into office and the Gingrich Congress that came later took a long hard look they were able to stop the madness and for a few short years we had a balanced budget with some of the debt being paid down. But then Bush Jr. came into office and he started spending like a drunken sailor.

That coupled with his tax cuts gave a double whammy to the deficit and really is the root of what caused this meltdown. We are still not over it yet. The DOW is still over priced we have huge debt and I fear that they way it will be dealt with is by devaluing our currency. It is the oldest trick in the world and is what Germany did after WW1. We know how well that turned out.

 

[Everskyward]

Not being an economist I have a question. Why are we trying to loosen the credit markets when too much easy credit was the problem to begin with?

 

[Bob Noel]

Let's get some things straight. Congress appropriates money. The President can't spend anything that wasn't in the budget passed by Congress. Congress, not any President, is responsibile for each and every deficit budget we've had.

 

[SCCutler]

Let's get some things straight. Congress appropriates money. The President can't spend anything that wasn't in the budget passed by Congress. Congress, not any President, is responsibile for each and every deficit budget we've had.

+1.

Nonetheless, I still fault President Bush (my choice both elections) for failing to exercise his veto pen.

 

[Dave Siciliano]

Not being an economist I have a question. Why are we trying to loosen the credit markets when too much easy credit was the problem to begin with?

Because we are so dependent upon them until we de-leverage. Loans are coming due that won't be refinanced; credit card companies sell receivables and re-lend the money; cities, counties and other municipalities access the short term debt market while awaiting collections. Small businesses use loans to finance equipment, inventory, etc. '

It would be like withdrawing from flying in one fell swoop! Tough to do; takes time to do it right

Best,

Dave

 

[Dave Siciliano]

Scott: The point was, some folks were giving warnings and were laughed at. Did you see the folks laughing at him? If we start debating who caused it, there is plenty of blame to go around and this will have to go to the hot section.

Best,

Dave

 

[ScottM]

Let's get some things straight. Congress appropriates money. The President can't spend anything that wasn't in the budget passed by Congress. Congress, not any President, is responsibile for each and every deficit budget we've had.

Wanna bet?

Look into 'off budget' spending, Bush excels at it.

 

[ScottM]

Scott: The point was, some folks were giving warnings and were laughed at. Did you see the folks laughing at him? If we start debating who caused it, there is plenty of blame to go around and this will have to go to the hot section.

Best,

Dave

Dave I got the point. I think you may not have gotten all of it from that short video.

The point is that the current economic model that has been foisted upon the American people by the so called Republican conservatives has lead us to a path of economic destruction.

Trickle down and deficit spending while cutting taxes simply is a failed economic theory and should be put to sleep and not brought forward again. What was being predicted a year ago was the same voices that have been shouted down for the past 28 years by the conservative movement. The person shouting them down on that video is one of the Reagan Architects of this bad economic policy.

Your initial post was highly political as the entire subject of economics and what has and has not worked in this country is the result of a political process. You simply did not post in the right section to begin with and the MC should have moved it as soon as they see it.

 

[Everskyward]

Because we are so dependent upon them until we de-leverage. Loans are coming due that won't be refinanced; credit card companies sell receivables and re-lend the money; cities, counties and other municipalities access the short term debt market while awaiting collections. Small businesses use loans to finance equipment, inventory, etc.

That's a better explanation than others I have been hearing. Most of what is in the news bemoans the fact that people won't be able to get consumer loans for cars and other merchandise which is causing a slowdown in the economy. If you can't afford it, don't buy it. Maybe the economy needs a slowdown to get over its problems just like Peter Schiff mentions in that video.

As far as blame goes, there is plenty of it to go around, from the President, to both parties in Congress, to the banks who made irresponsible loans, to the consumers who bought more than they could afford.

 

[Keith Lane]

Because we are so dependent upon them until we de-leverage.

Just what the H-E double hockey sticks does leverage mean in non-economics speak? Until I really understand what leverage means I surely will not know "heavily leveraged" means or ""de-leverage". Does it mean indebted?
Just an inquiring mind here......

 

[Bob Noel]

Where does the "off budget" budget come from? What part of the Constitution
grants the President authority to raise revenues and appropriate revenues?

(and it's President Bush)

 

[ScottM]

Where does the "off budget" budget come from? What part of the Constitution
grants the President authority to raise revenues and appropriate revenues?

Well that is the point isn't it? Bush likes to have ltos of off budget items. While he is not the first he has been the one of the greatest users of this wonderful little loop hole. You see the US Constitution only talks about who makes the budget and who gets to approve it. So if it is not on the budget then it falls outside of the boundaries and controls of the US Constitution and can be handled by things such as Executive Orders or Congressional legislation. This got started in 1973 and has been used far too often. Most of the Iraq War was moved off budget by Bush and the Republican Congress when it became obvious that the cost were escalating to level that only the war opposition had the guts to say aloud.

(and it's President Bush)

Thankfully not for much longer.

 

[Dave Siciliano]

Just what the H-E double hockey sticks does leverage mean in non-economics speak? Until I really understand what leverage means I surely will not know "heavily leveraged" means or ""de-leverage". Does it mean indebted?
Just an inquiring mind here......

Keith:

Leverage comes in many forms and because all of it does not need to be reported, it's difficult to quantify. As a consumer, you can borrow to purchase a home or car which is leveraging. In simple terms, if you borrow to purchase an asset and it increases in value, it increases the return on your equity. If the value declines, the debt stays the same and your equity quickly decreases. For instance, if you purchase a home for cash, it isn't leveraged. If you put up 1 dollar and borrow 9, it is leveraged 9 to 1. If the home becomes worth 11, your equity doubles after paying off debt, from 1 to 2. If the home goes down 1, the debt stays the same and your equity becomes zero.

We have a lot of folks that borrow all the money to purchase a home or put up little equity. Homes have gone down over 30% in some areas, therefore, the homeowner's equity is zero or they actually owe money if they sell.

Banks leverage their capital 12 to 1. They only need to have $8 in equity for $100 in loans. Credit default swaps use high leverage. No matter what they call it, if one puts up a small amount of equity and the balance of the purchase price is carried by debt or contract, it's leverage.

We became addicted to leverage as a society. Brokerage firms made huge profits in an up market using leverage. Now that bubble has burst and assets are declining in price. The debt is still due and the equity is gone or is greatly diminished.

Best,

Dave

 

[Dave Siciliano]

Dave I got the point. I think you may not have gotten all of it from that short video.

The point is that the current economic model that has been foisted upon the American people by the so called Republican conservatives has lead us to a path of economic destruction.

Trickle down and deficit spending while cutting taxes simply is a failed economic theory and should be put to sleep and not brought forward again. What was being predicted a year ago was the same voices that have been shouted down for the past 28 years by the conservative movement. The person shouting them down on that video is one of the Reagan Architects of this bad economic policy.

Your initial post was highly political as the entire subject of economics and what has and has not worked in this country is the result of a political process. You simply did not post in the right section to begin with and the MC should have moved it as soon as they see it.

I'm sorry sir, the post was not political and was not intended to be. The post was made to show some folks were speaking out about the problem and were laughed at by nobel and other mainstream economists. You have taken this in a completely different direction than what was intended.

I identified with this gentlemen because I got out of the market when others were telling me the same thing. Who caused the problem is a completely different topic and this was not meant to take any position on that.

Best,

Dave

 

[ScottM]

I'm sorry sir, the post was not political and was not intended to be. The post was made to show some folks were speaking out about the problem and were laughed at by nobel and other mainstream economists. You have taken this in a completely different direction than what was intended.

I identified with this gentlemen because I got out of the market when others were telling me the same thing. Who caused the problem is a completely different topic and this was not meant to take any position on that.

Best,

Dave

I don't see how you can say it was not political when the two arguments that were presented are were the Bush view of the economy, i.e. 'the fundamentals of our economy are strong' sound bite and the opposition view that has been spouted and shouted down by all the right wing pundits for years.

This issue is a highly politicized one.

That is why the MC has been moving these topics off to SZ. I don't think they have seen this one yet and that is why it is still here. But that is jsut my guess.

 

[sba55]

Let's get some things straight. Congress appropriates money. The President can't spend anything that wasn't in the budget passed by Congress. Congress, not any President, is responsibile for each and every deficit budget we've had.

No, that's just factually incorrect.

It might seem that, in theory, only Congress appropriates money. In the past 7 years, however, the executive branch has effectively used Congress as a proxy for budget allocation. Need x billion for the "war on terror"? Sure, no problem, I'd never get re-elected if I voted against that. Or, if I did, I might get thrown out of the party. Not convinced yet? How about some fictitious information that will make the threat even more dangerous? Have we got your vote now? You do realize that virtually all the policy over the last 7 years was justified by one single argument.

I wasn't alive in the 1930s, but if I had been, I would see some very interesting analogies between the arm-twisting going on then and now. In the end, I don't think Congress or the President or any particular party are to blame. It's the voters who elected them and spent themselves into bankruptcy. Apparently, we don't deserve any better.

-Felix

 

[SCCutler]

Scott:

You need to separate your inherent animus for the President from your analysis of the current economic climate.

Lower taxes universally yield greater economic activity and, ultimately, greater revenues. Always the case. Less intrusive government allows greater success in the marketplace.

Where the breakdown has come, is in the persistent refusal of congress to spend less than the revenues, no matter how great, and the failure of the President to exercise political will and veto some of this crap. "Off-budget spending" is a drop in the bucket... another drop (of course) in the wrong direction.

Our current problem is one which has been in the making for decades, not for seven years and ten months, and while it is currently fashionable to lay the blame on one doorstep, to do so is intellectually lazy and agonizingly transparent.

---

Edit:

Felix:

Your perspective shows a great deal of cynicism. You are, of course, correct.

 

[sba55]

Felix:

Your perspective shows a great deal of cynicism. You are, of course, correct.

Thanks, Spike, I try to hide it! I think no matter your political beliefs, it's very easy to blame our elected officials for something we're all responsible for....

 

[SCCutler]

Thanks, Spike, I try to hide it! I think no matter your political beliefs, it's very easy to blame our elected officials for something we're all responsible for....

No victims, Felix- only volunteers.

 

[Dave Siciliano]

I don't see how you can say it was not political when the two arguments that were presented are were the Bush view of the economy, i.e. 'the fundamentals of our economy are strong' sound bite and the opposition view that has been spouted and shouted down by all the right wing pundits for years.

This issue is a highly politicized one.

That is why the MC has been moving these topics off to SZ. I don't think they have seen this one yet and that is why it is still here. But that is jsut my guess.

I see what you're saying. Here is what was intended and maybe I'm narrowly looking at that part and not seeing how someone else would view the entire thing:

Peter Schiff was out there saying the economy was over leveraged and there was a housing bubble while other economists and mainstream prognosticators where saying things were fine. Peter said there was too much consumption and borrowing and not enough production and savings. He forecast the housing bubble would bust, the stock market would decline and there would be a significant recession. Others completely discounted his opinion and Arthur Laffer actually laughed at him (inventor of the Laffer Curve).

Now, looking back I hope you can see that's what I focused on: Mr. Schiff's forecast and how absolutely wrong Laffer, Ben Stein and others were. Since I re-viewed it, I do see that other policies were discussed which one could look at as political in nature. That's not what I intended, but now that I look back, those ingredients are sure present if one focuses there.

Sorry if I stirred things up. Was just trying to point out how correct Mr. Schiff was back as early as 2006; didn't mean for the other issues to become the focal point.

Best,

Dave

 

[Keith Lane]

Thank You Dave. The term finally makes some sense, though it seems like calling a garbage collector a "sanitation engineer".