Posted by: The Tim

Tim Ellis is the founder of Seattle Bubble. His background in engineering and computer / internet technology, a fondness of data-based analysis of problems, and an addiction to spreadsheets all influence his perspective on the Seattle-area real estate market.

163 responses to “Weekend Open Thread (2010-08-20)”

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  1. Cheap South

    By David Losh @ 52:

    RE: Cheap South @ 44

    Education is a relative thing. I went to the Linkedin meet up posted by sniglet this week. It was hands down the best networking I’ve been to this year.

    Anyway, I was talking with a young man from India who is here to get his MBA. He’ll have been in school until he’s 30 before he graduates.

    In the United States any one with an MBA can walk around looking for a job, anywhere. It helps if you are connected to a social class, but every one has an opportunity. Even an African American can become the President in the United States. We also elected Bill Clinton, who by all practical purposes was, and is, a nobody. Ronald Reagan was an actor.

    Those things don’t happen in Japan, China, or India. They almost don’t happen in South America, until Evo Morales. In most other countries you really have to be of a certain class of people for success.

    Education is a means to have the status to get a job. There are billions of working class, but in order to have the few million management positions you need to be over qualified.

    As Americans we can go most places, and do business. We can have the most bogus of degrees, and we are Americans, so we have a certain status.

    It concerns me when people say education is a “relative thing”. Anyway, on that Indian fellow; his chances at employment back home are better than here (and for young educated Indians, it’s been the case since the dot com implosion).

    But let me tackle the other comments you made about presidents. Clinton and Obama have no pedigree; but both were educated in world renowned Universities. Reagan was an actor; but he had been the governor of the most populated state in the country. Hardly “nobodies”.

    I understand that the election of an African American was historic; absolutely. But in many other countries, milestones have been crossed a generation ago. Do you want to hear about real nobodies from overseas? Names that just come up without even researching: Juan Domingo Perón (president of Argentina) some 60 years ago. Today, Evo (as you mentioned), Lula (Brazil – just the largest country in Latin America), Chavez (Venezuela). Minorities? How about Women leaders? In many cases, in countries that Americans consider “macho societies”: Isabel Perón, Cristina Fernandez (Arg.), Bachelet (Chile), Gandhi (India), Meir (Israel), Bhutto (Pakistan), Thatcher (UK), Corazón (can’t have too many shoes) Aquino (Philippines); and I am sure there are a ton more in Scandinavia.
    Disclosure: I did look up the spelling of some of these names.

    “As Americans we can go most places, and do business. We can have the most bogus of degrees, and we are Americans, so we have a certain status.”
    You obviously have not been overseas much, have you?

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  2. Pegasus

    RE: pfft @ 97 – The truth is America can not afford to end “chinese poverty” at the expense of American workers. The Chinese can’t afford to do it why should we? Why are we selling secret technologies to a corrupt and inhumane country? Why are we giving away American jobs? That is NOT competing. Could it be that a select few elites are making money by destroying America as we knew it? You bet! What do you think NAFTA was all about? The liberal dream of a global economy comes at the expense of American citizens. Lower wages , less wealth, less everything except the net worth of our Congress members and elites. Power and wealth have become more concentrated into fewer hands in the past 10-15 years while the middle class has almost disappeared. We are rapidly becoming a third world country. Will your children have the opportunity to become slumdogs?

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  3. Blurtman

    RE: Kary L. Krismer @ 99 – Kary, Thanks for brining up auction rate securities. You may recall that brokers who misrepresented the risk of these securities were successfully prosecuted, unlike those who sold fraudulently rated mortgage backed securities, like those who work at the investment bank headed up by a recent former Treasury Secretary of the USA.

    ARS became illiquid because the auctions that set interest rates for ARS ceased. That is quite different from what is occurring now with mortgages and mortgage backed securities held at incorrect valuations by banks. The market is there and it is much broader that that of ARS, but because of the commercial and residential RE crash, these mortgages and mortgage backed securities have lost real value. That is, the cash flows associated with these have have declined as RE owners default. That was not the case with ARS.

    Another large difference between the ARS situation and debt backed securities like MBS is that the USG forced sellers of ARS to take them back from buyers at par. Is the USG forcing Goldman Sachs and Morgan Stanley to take back fraudulently rated MBS at par?

    BTW, there is a secondary market for ARS, and I don’t believe it is the pennies on the dollar scenario you represent.

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  4. Kary L. Krismer

    By Blurtman @ 103:

    RE: Kary L. Krismer @ 99 – Kary, Thanks for brining up auction rate securities. You may recall that brokers who misrepresented the risk of these securities were successfully prosecuted, unlike those who sold fraudulently rated mortgage backed securities, like those who work at the investment bank headed up by a recent former Treasury Secretary of the USA.

    Actually, I don’t recall any prosecutions over that at all, if you using the term in a criminal sense. There was a lot of pressure put on for the brokers to buy the things back (as you mention later), and undoubtedly some civil suits (which happen no matter what the merits). But I don’t recall any prosecutions. Cite please.

    ARS became illiquid because the auctions that set interest rates for ARS ceased. That is quite different from what is occurring now with mortgages and mortgage backed securities held at incorrect valuations by banks. The market is there and it is much broader that that of ARS, but because of the commercial and residential RE crash, these mortgages and mortgage backed securities have lost real value. That is, the cash flows associated with these have have declined as RE owners default. That was not the case with ARS.

    Are you trying to claim that there have been no defaults on ARS instruments? I find that extremely unlikely. But you’re missing the point entirely. Let’s say that in your response above after your saying “Thank you for bringing up ARS” you had said “I own $10T of them, and I’d like to sell them to you, but: (1) I want $20 per million of face value; (2) To take any of them you have to buy them all; and (3) You have to close the deal in 6 hours.” Well obviously in that time frame I couldn’t investigate all the entities that issued the ARS you own, and so although $20 per million seems like a screaming deal, I’d probably be reluctant to make that investment . (BTW, I’m using a really low price purposefully.) That’s the situations banks face when taking over other banks. They don’t have the time to investigate all of the insolvent bank’s assets, but they do know that the insolvent bank didn’t do a good job with its loans/investments (which is why I used the low price, because that would give the same impression as to the quality of your hypothetical ARS instruments). Also, they probably lose a good portion of the deposits fairly quickly, which creates a cash flow drain, which would be a minor PITA for them, although that technically wouldn’t affect value.

    Another large difference between the ARS situation and debt backed securities like MBS is that the USG forced sellers of ARS to take them back from buyers at par. Is the USG forcing Goldman Sachs and Morgan Stanley to take back fraudulently rated MBS at par?

    I’m glad you brought that up, because I was going to. Somehow I’ve totally missed the news reports of massive losses that these entities have taken after having taken these things back. I haven’t researched it, but I suspect that’s because they’ve probably actually been making a profit on the items, even with their having bought them at par. Connecting that back up with the takeover banks, or even the government buying RE securities, its entirely possible that in the long run they too will make a profit on the RE securities they buy at a discount. But as to the banks, when taking over another bank they’re going to want to have some significant possibility of a profit on those assets, because other than the assets the only thing they’re buying is the locations (and again note that they probably lose many customers at each location, so what they’re buying there is also uncertain).

    BTW, there is a secondary market for ARS, and I don’t believe it is the pennies on the dollar scenario you represent.

    I didn’t made any such representation. I just made a facetious offer to buy your probably non-existent ARS for a very low price. It doesn’t surprise me that there is such a market because some of those things have clear value (very solvent issuers), and I suspect they pay a very high return.

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  5. Kary L. Krismer

    RE: Pegasus @ 102 – The thing about NAFTA and other trade agreements is that over the short to medium term, they will cause a lot of pain for the larger countries (e.g. the U.S.) and many of those in those countries. The idea is to get a smaller share of a larger pie, but it’s not really disclosed that it will take a long time for the size of the pie to increase to the point where the portion isn’t smaller.

    Over the longer term, there’s a lot of benefits to reduced trade barriers. That’s why most of the 50 states of the United States have done a lot better over the last 50 years than most of the countries of Europe, and why Europe created the Euro and all that entails. Unfortunately the “longer term” is probably longer than the remainder of my life, so for many people and companies NAFTA will clearly not have been a good thing.

    But what’s the alternative? Over the longer term I don’t think it’s really viable to have a world where you have a relatively impoverished Mexico right next to a very successful U.S. That leads to immigration issues, crime and even terrorism. To end those problems you don’t need to equalize the per capita output of each country, you just need to change the rules such that the people in the smaller countries see the chance for opportunity.

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  6. David Losh

    RE: Cheap South @ 101

    I’ve been over seas a lot, and you should look at some of the people, and countries, you are pointing out.

    We are crazy Americans. The gentleman from India, as I pointed out to him, did the right thing by coming here to get his MBA, it will give him more status. Having a doctorate from the United States opens a lot of doors “back home” almost anywhere.

    Even though our education system is a joke in many other countries, the degrees you get here have meaning.

    In my opinion, it’s the connections you make here, rather than the degree.

    We are crazy Americans who can go into a well run company in Japan, come up with some cockamamie ideas, turn the company around, and make it profitable. Profit is what it is all about.

    BTW, I was going to give you some examples of leaders in other countries, but then thought about it. Can we really compare a Jimmy Carter, Bill Clinton, even a George W. to Golda Meir, Margaret Thatcher, or Isabella Peron? Come on, seriously.

    We are a country of buffoons, anyway you want to portray us, the world sees us as uncouth, loud, risky, and unsettled.

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  7. Ira Sacharoff

    RE: Kary L. Krismer @ 105
    I agree.There’s almost an inevitability to trade agreements, but very little attention was paid to insisting on labor and environmental standards.
    I think the first thoughts were given to the potential for profits of multinational corporations. They were just frothing at the mouth at the prospect of not only lowering their labor costs by 90%?, but also the ability to not have to fuss with making sure that the workers were safe or not exposed to cancer causing substances.
    On the plus side, apparently the Chinese government has agreed to allow the remnimbi( or is it the yuan?) to float, which “experts” predict will mean higher wages for Chinese workers, which means they will have more discretionary income, which means more profits for American companies that sell to Chinese workers. So if you own shares in Yum Brands, the parent company of Kentucky Fried Chicken, Pizza Hut, and Taco Bell, the future looks pretty good.

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  8. David Losh

    RE: Kary L. Krismer @ 105RE: Pegasus @ 102

    Long story short is that Canada, the United States, and Mexico can all prosper. You’d have to show me how we would lose anything by having a strong, and financially secure Mexico. They produce enough food to feed everybody, so where is the down side?

    It’s just a stupid game that people play about how employment is related to consumption, so that drives the economy. It’s a simple matter of distribution of perishable goods. Every one could be employed, it’s just not good business to do so.

    There is much more profit in creating worthless paper instruments that are promises to pay.

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  9. Cheap South

    RE: Ira Sacharoff @ 107 – Renminbi is the currency; yuan is the unit.

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  10. Blurtman

    RE: Kary L. Krismer @ 104 – Kary, There are an unlimited number of stories on the internet regarding charges of fraud and successful proecutions of fraud of brokers who misrepresented the risk of ARS. When the ARS market was seizing up, brokers were urged by their superiors to pump and dump these on unsuspecting dupes. There would be more successful prosecutions, but many brokerage chose to settle rather that be convicted of fraud. Note in the below “..those firms violated the Federal securities laws, including the broker-dealer antifraud provisions.” Is that clear enough for you?

    Here is one excerpt from SEC testimony to Congress:”Our actions were necessary because broker-dealer firms that underwrote, marketed and sold auction rate securities (ARS) misled their customers. Through their sales forces, marketing materials, and account statements, firms misrepresented to their customers that ARS were safe, highly liquid investments that were equivalent to cash or money market funds. As a result, numerous customers invested in ARS their savings and other funds they needed to have available on a short-term basis. These firms failed to disclose the increasing risks associated with ARS, including their reduced ability to support the auctions. By engaging in this conduct, those firms violated the Federal securities laws, including the broker-dealer antifraud provisions.”
    http://www.sec.gov/news/testimony/2008/ts091808lct.htm

    I never claimed that brokerages that were forced to buy back ARS at par lost money on these so I am not sure where you are getting that from. What I am making is an analogy between one type of instrument that brokerages fraudulently misrepresented and were forced to take back at par, and another type of security that brokerages fraudulently misrepresented and are not being forced to take back. But since you asked, there is also no shortage of links describing writedowns by holders of ARS, including companies that purchased these from brokerages as well as the brokerages themselves. see: http://www.stockbrokerfraudblog.com/2008/08/survey_finds_auctionrate_secur.html

    With regards to the USG making money in the long run on RE securities it bought in this latest instance of massive financial fraud, I think you should research how much money taxpayers lost in the last big one, the S&L bailout – losses estimated to be between $100-300 billion. It is estimated that the current baliouts will lose over $2 trillion. Add to that the money savers are losing on interest rates held low to bail out the fraudsters, and the loss in 401k’s caused by this financial fraud, and the losses are likely higher.
    see: http://www.zimbio.com/mortgage+industry/articles/2312/Fed+Bailouts+Cost+Taxpayers+2+5+Trillion

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  11. David Losh

    RE: Ira Sacharoff @ 107

    That was one of the things I noticed this week about the rise in Chinese wages. It’s a new group of consumers. You can walk around in a lot of Third World countries to find a Pizza Hut, or KFC. Of course McDonalds is in the plaza, but there is plenty of room for the TCBY Yogurt franchise in some back alley.

    On my Face Book page there are some pictures of a family in a Super Market, and a Buffet Line. That Super Market sits on what was an empty lot outside of a town in Peru. Six years ago all the shopping was done in open air markets, today we have multi national corporations, mostly based in Chile, building shopping Centers.

    The drain of the profits will weaken the economy without reinvestment back into the community.

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  12. Kary L. Krismer

    By David Losh @ 108:

    RE: Kary L. Krismer @ 105RE: Pegasus @ 102 – Long story short is that Canada, the United States, and Mexico can all prosper. You’d have to show me how we would lose anything by having a strong, and financially secure Mexico. They produce enough food to feed everybody, so where is the down side?

    The downside is that in the short/medium term people in the U.S. will become unemployed and some U.S. companies will go under.

    It’s sort of like technology. It puts people out of work, but in the long run everyone benefits because those people eventually get new jobs and overall society is more productive.

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  13. Kary L. Krismer

    By Blurtman @ 110:

    RE: Kary L. Krismer @ 104 – Kary, There are an unlimited number of stories on the internet regarding charges of fraud and successful proecutions of fraud of brokers who misrepresented the risk of ARS. When the ARS market was seizing up, brokers were urged by their superiors to pump and dump these on unsuspecting dupes. There would be more successful prosecutions, but many brokerage chose to settle rather that be convicted of fraud. Note in the below “..those firms violated the Federal securities laws, including the broker-dealer antifraud provisions.” Is that clear enough for you?

    Actually, now. Claims of “stories on the internet” isn’t at all satisfying for my inquiry to you. There are lots of stories on the Internet that Obama is Muslim, not born in the U.S., etc.

    ,

    Here is one excerpt from SEC testimony to Congress:”Our actions were necessary because broker-dealer firms that underwrote, marketed and sold auction rate securities (ARS) misled their customers. Through their sales forces, marketing materials, and account statements, firms misrepresented to their customers that ARS were safe, highly liquid investments that were equivalent to cash or money market funds. As a result, numerous customers invested in ARS their savings and other funds they needed to have available on a short-term basis. These firms failed to disclose the increasing risks associated with ARS, including their reduced ability to support the auctions. By engaging in this conduct, those firms violated the Federal securities laws, including the broker-dealer antifraud provisions.”
    http://www.sec.gov/news/testimony/2008/ts091808lct.htm

    Thanks for providing a link. If you read through it, one of the specific examples of fraud was where they misrepresented the investment (backed by student loans rather than mortgage backed securities). The problem there wasn’t necessarily the problem with the auction market as much as the actual security, because that would have lost value even if the auction market had continued to function.

    I never claimed that brokerages that were forced to buy back ARS at par lost money on these so I am not sure where you are getting that from.

    I wasn’t trying to make that claim. I was only pointing out that the market value of something isn’t necessarily the value that will ultimately be obtained. It goes back to my point that to determine the value of a bank’s holdings of RE securities you can’t just look at the market value of those items. You would need to appraise the land and determine the solvency of the maker, etc. It gets to the heart of your claim that more banks should be going under–which is based on a false premise. It’s not quite as bad as the link someone had recently comparing the government’s exposure to mortgages without looking at the value of the assets, but it’s close.

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  14. Kary L. Krismer

    RE: David Losh @ 111 – Do you have more than one FB page? I’m not seeing the pictures you reference.

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  15. David Losh

    RE: Kary L. Krismer @ 112

    Complete fear mongering.

    When the Teamsters first went after NAFTA it seemed an odd misstep. More drivers mean more members. The bottom line was that Teamsters were afraid to organize in Mexico, it was dangerous.

    They have the same fight today, as do all labor organizations. God forbid we would pay a living wage to Mexicans, or force American coporations to follow EPA standards no matter where they do business.

    The facts of life are that we can all win. We can allow Mexican drivers into the United States, we can allow American factories to pay living wages in Mexico, and we can be swept up in a continental pride that Europe will never acheive.

    If we had a strong economy all the way to Panama we would be a part of the greatest nation on earth. I just don’t see a prosperous Mexico as a threat.

    As another fact, we could increase the velocity of our dollar by including both Canada, and Mexico in free trade.

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  16. David Losh

    RE: Kary L. Krismer @ 114

    You’re right, those pictures are long gone. It’s under a search for: Las brujitas

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  17. pfft

    By David Losh @ 96:

    RE: pfft @ 68RE: pfft @ 89

    I’m well aware. Your claim about stimulus spending is best illustrated by war.

    You took issue with Jonness, and I’m trying to explain it to you.

    The government can spend directly to durable goods during a time of war. The economy looks great. It stimulates investment in factories.

    We are past that time. There is no more war on the horizon, unless we invade Iran, so the war stimulus has run it’s course. What do you suggest next?

    Here’s what’s going to happen. Defaults, global, and in country, California more specifically.

    You brought up the bond yields. Did you look at any other countries? You brought up the two year yield. Did you look at the ten year yield?

    We are at par with Peru, which by the way is one of the most rapidly expanding markets in the world, today. It’s one of those emerging markets that is propping up your stock market. It was at par with Brazil, whose yield is closer to 11% not that long ago.

    Did you look at how stable Germany was, with it’s austerity programs?

    You can’t be this obtuse. Everything you point out, points to disaster. In Real Estate all this good news is bad news.

    All that’s happening now is interference. The United States, Europe, and China could dump in a trillion dollars each, and the situation wouldn’t change. Wealth is still concentrated with a very few, and unless they spend, there is only debt.

    war is the worst illustration of stimulus. it’s the destruciton or resources and people not to mention young people’ time. that is no comparison to building bridges, roads and etc that will help the economy. teacher, firefighters and cops all keep us safe, learning and working.

    “Did you look at how stable Germany was, with it’s austerity programs?”

    germany’s stimulus was 3.4% of GDP. check out the table.

    http://voices.washingtonpost.com/ezra-klein/2010/06/research_desk_responds_how_do.html

    “The United States, Europe, and China could dump in a trillion dollars each, and the situation wouldn’t change. Wealth is still concentrated with a very few, and unless they spend, there is only debt.”

    yes it would. people would be back to work and keep their homes and cars instead of sending them back to the bank(the rich).

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  18. Jonness

    By pfft @ 68:

    I think what you’re trying to say is the government is crowding out private investment. right now they aren’t and during the downturn they weren’t beacuse people were and are still spending their money on US government bonds and not as many cars.

    No. What I’m saying is we just witnessed a massive borrow and spend policy. Unfortunately, government mismanaged the money and we lost 8 million jobs. How does temporarily providing $8000 for an overpriced home or $4500 for a new car create long-term employment? According to the experiment we just performed, it doesn’t because when the stimulus runs out, so does the consumption pool.

    It would have been much better to have put the money into long-term infrastructure that could support the growth of the economy for the next century, such as a modern electrical grid. Each new job in such a project would create greater than one additional job elsewhere in the economy. But really, not even that would have worked because the government would have simply doled the money out to their friends instead of targeting it in a manner that could add to long-term economic growth.

    So even if Keyne’s was right about his borrow and spend philosophy, the U.S. stands a 0% chance of having it work since it’s actions in no way represent Keyne’s recommendations. We are simply spending for the sake of spending. All this does is leads to additional debt and a greater problem down the road.

    CEO: No need to invest right now

    Once you get to zero interest and you don’t solve the problem, what do you do next? Japan lowered rates to zero and still suffered a lost decade.

    But this is monetary policy, and we are discussing fiscal policy.

    the stimulus has worked.

    If the stimulus worked, where are the 8 million jobs?

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  19. Kary L. Krismer

    RE: David Losh @ 115 – I would (and did) agree with you over the long term. But you can’t deny the fact that if a company moves its supplier from one US company to another located in Mexico, that’s bad in the short/medium term for the employees of that company and the company itself.

    Some people don’t like change, even if the change is better. But when things get worse at first, many more people don’t like change, even if over the long term it will provide benefit.

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  20. Kary L. Krismer

    RE: Jonness @ 118 – I would agree with a lot of that, although I don’t think it’s all that clear about stealing demand.

    But my point in responding is more to point out that to the extent they concentrated the spending too much in one area (e.g. the electrical grid), the costs would rise dramatically, reducing any benefit. Thus it was probably better to spread the spending widely and to try to hit areas that were otherwise depressed. For example, in the road construction area they apparently were still getting pretty good pricing because the industry was so depressed.

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  21. pfft

    By Pegasus @ 102:

    RE: pfft @ 97 – The truth is America can not afford to end “chinese poverty” at the expense of American workers. The Chinese can’t afford to do it why should we? Why are we selling secret technologies to a corrupt and inhumane country? Why are we giving away American jobs? That is NOT competing. Could it be that a select few elites are making money by destroying America as we knew it? You bet! What do you think NAFTA was all about? The liberal dream of a global economy comes at the expense of American citizens. Lower wages , less wealth, less everything except the net worth of our Congress members and elites. Power and wealth have become more concentrated into fewer hands in the past 10-15 years while the middle class has almost disappeared. We are rapidly becoming a third world country. Will your children have the opportunity to become slumdogs?

    I don’t think you know what compete means. it means that some jobs won’t be in the US. the lower wage companies will have an advantage. the jobs will go there. that is competition.

    “We are rapidly becoming a third world country.”

    no we aren’t. I know that is so fashionable to say because I read it everywhere. wages have only stagnated. our economy is still the largest in the world. we export a lot. once the dollar goes down wages will rise. the yuan also has to be revalued. things change. the last few decades returns to capital(stocks and etc) have been good. this makes the rich richer. pretty soon when the dollar goes down and wages rise we’ll export more and our wages will go up. this is returns to labor. this all moves in cycles. wealth disparity was big before the depression and flattened out until the 80s or maybe late 70s.

    a lot of the inequality is due to politics. lack of healthcare in response to sky-rocketing health costs but we’ve dealt with that. there was also big tax cuts for the rich. if you want to be rich(basically an owner of a business) just buy stocks. you don’t have start your own business. you just buy a share of an already existing one.

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  22. pfft

    By Kary L. Krismer @ 105:

    RE: Pegasus @ 102
    But what’s the alternative? Over the longer term I don’t think it’s really viable to have a world where you have a relatively impoverished Mexico right next to a very successful U.S. That leads to immigration issues, crime and even terrorism. To end those problems you don’t need to equalize the per capita output of each country, you just need to change the rules such that the people in the smaller countries see the chance for opportunity.

    this is a very good point. the drug war is out of control down there. the peso is weak so those that have dollars like the drug lords have that much more power.

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  23. Jonness

    By pfft @ 68:

    deficit spending is not an experiment. it’s the result of almost 70s years of economic research and learning. the fact that you don’t know that is important.

    Please show me conclusive evidence that Keyne’s recommendations actually work. The fact that you can’t do this is important. :)

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  24. Blurtman

    RE: Kary L. Krismer @ 113 – You are being silly. Read the numerous links from credible media sources regarding charges of fraud by AG Cuomo and federal prosecutors.

    Again you are being disingenuous. You focus on a specific reference in the SEC testimony that describes misrepresetation fraud that might not be typical of the ARS market. So? You attempt a strawman argument when in the same document, the entire SEC testimony describes ARS fraud as occuring beyond these two convicted UBS brokers and beyond UBS itself.

    You then state that “market value of something isn’t necessarily the value that will ultimately be obtained..” I assume you mean that the market value is not what the market will pay for it. That is, or course, illogical.

    The price the market will pay is the market value of an asset at that point iin time. The asset can have sentimental value, it can in one firm’s view have more value than what the market will pay at that point in time, but the market determines the price at a given point in time. And please don’t try to equate appraisals with real value. I think we’ve seen where that leads.

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  25. pfft

    By Jonness @ 118:

    By pfft @ 68

    It would have been much better to have put the money into long-term infrastructure that could support the growth of the economy for the next century, such as a modern electrical grid. Each new job in such a project would create greater than one additional job elsewhere in the economy. But really, not even that would have worked because the government would have simply doled the money out to their friends instead of targeting it in a manner that could add to long-term economic growth.

    So even if Keyne’s was right about his borrow and spend philosophy, the U.S. stands a 0% chance of having it work since it’s actions in no way represent Keyne’s recommendations. We are simply spending for the sake of spending. All this does is leads to additional debt and a greater problem down the road.

    CEO: No need to invest right now

    Once you get to zero interest and you don’t solve the problem, what do you do next? Japan lowered rates to zero and still suffered a lost decade.

    But this is monetary policy, and we are discussing fiscal policy.

    the stimulus has worked.

    If the stimulus worked, where are the 8 million jobs?we did spend the money on long-term stuff. infrastructure, firefighters, cops teachers and etc.

    DOT Announces Stimulus Light Rail Projects
    http://www.propublica.org/article/dot-announces-stimulus-light-rail-projects

    Stimulus Dollars Energize Efforts To Smarten Up the Electric Power Grid
    http://www.washingtonpost.com/wp-dyn/content/article/2009/03/09/AR2009030902712.html

    Stimulus for Homes: Obama’s $5 Billion Weatherization Plan
    http://www.popularmechanics.com/home/improvement/energy-efficient/4306631

    remember the stimulus had a lot of tax cuts.

    Your share of stimulus tax breaks
    http://money.cnn.com/2009/02/21/news/economy/tax_savings_stimulus/index.htm

    1. the stimulus was too small. that was known from the beginning. you can’t fault it for losing jobs when it wasn’t the right dose.

    2. the stimlus did save jobs.

    One year after the stimulus, several independent macroeconomic firms including Moody’s and IHS Global Insight estimated that the stimulus saved or created 1.6 to 1.8 million jobs and forecasted a total impact of 2.5 million jobs saved by the time the stimulus is completed.[73] The Congressional Budget Office considered these estimates conservative.[74] The CBO estimated 2.1 million jobs saved in the last quarter of 2009, boosting the economy by up to 3.5 percent and lowering the unemployment rate by up to 2.1 percent.[75] The CBO projected that the package would have an even greater impact in 2010.

    http://en.wikipedia.org/wiki/American_Recovery_and_Reinvestment_Act_of_2009#Developments_under_the_Act

    “Japan lowered rates to zero and still suffered a lost decade.”

    they waited years too late for zirp and stimulus. we acted right away and prevented a depression.

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  26. pfft

    By Jonness @ 123:

    By pfft @ 68:
    deficit spending is not an experiment. it’s the result of almost 70s years of economic research and learning. the fact that you don’t know that is important.

    Please show me conclusive evidence that Keyne’s recommendations actually work. The fact that you can’t do this is important. :)

    I’ve done it many times.

    How do stimulus size and economic growth compare internationally?
    http://voices.washingtonpost.com/ezra-klein/2010/06/research_desk_responds_how_do.html

    Asia went through austerity in the late 90s and they want no part of it.

    Keynes In Asia
    http://krugman.blogs.nytimes.com/2010/07/24/keynes-in-asia/

    for all you republicans mark zandi was Mccain’s economic advisor and he is for stimulus and the bailouts.

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  27. David Losh

    RE: pfft @ 117

    You should really look at the charts you put up.

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  28. pfft

    By David Losh @ 127:

    RE: pfft @ 117

    You should really look at the charts you put up.

    what’s the matter? the only place where stimulus hasn’t worked is Spain. all the others show a postivie correlation.

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  29. David Losh

    RE: pfft @ 125

    You should really read the links you provide.

    Rate this comment: Thumb up 0

  30. David Losh

    RE: pfft @ 127

    Look at the numbers.

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  31. Cheap South

    By pfft @ 125:

    for all you republicans mark zandi was Mccain’s economic advisor and he is for stimulus and the bailouts.

    Of course; there can’t be any doubt that a McCain administration (or anyone’s administration) would have done the same (Bailout and Stimulus). For crying out loud, this country subsidizes the oil industry and mega farming!!!. What do we think? That he was going to sit back, watch everything collapse and say “the market will take care of this”? Of course not; and Fox News, Beck, Limbaugh and the rest of the party leaders would’ve been backing him up; after all, what kind of American would oppose job creation (and under McCain they would’ve come up with daily proof the Stimulus was working and that things were getting peachier by the hour).

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  32. pfft

    obama gets a lot of flak for the stimulus(as well as TARP we he didn’t do). however 65% of the deficit is bush’s spending. without bush’s spending the deficit for most the next 10 years would be near $300 billion per year. the wars and tax cuts that weren’t paid for make up most of the deficit. recovery measure and tarp/fannie freddie aren’t much. it’s tax cuts and wars that weren’t paid for.

    the Bush tax cuts and the wars in Iraq and Afghanistan will account for nearly $7 trillion in deficits in 2009-2019.

    Whose Deficit Is It, Anyway?
    http://www.offthechartsblog.org/whose-deficit-is-it-anyway/

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  33. pfft

    By Cheap South @ 131:

    By pfft @ 125:

    for all you republicans mark zandi was Mccain’s economic advisor and he is for stimulus and the bailouts.

    Of course; there can’t be any doubt that a McCain administration (or anyone’s administration) would have done the same (Bailout and Stimulus). For crying out loud, this country subsidizes the oil industry and mega farming!!!. What do we think? That he was going to sit back, watch everything collapse and say “the market will take care of this”? Of course not; and Fox News, Beck, Limbaugh and the rest of the party leaders would’ve been backing him up; after all, what kind of American would oppose job creation (and under McCain they would’ve come up with daily proof the Stimulus was working and that things were getting peachier by the hour).

    most republicans in congress voted against tarp and that was when bush was in office. I am not sure what would have happened with mccain in.

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  34. Kary L. Krismer

    RE: Blurtman @ 124 – As I assume you know, charges and proof are entirely separate things. And in any case, the link you provided wasn’t clear whether they were talking civil fraud or criminal fraud. What started this debate between us was your reference to “prosecution.”

    As to the “illogical” reference being disingenuous, I think you need to look in the mirror there. I’ve been very clear what I mean by how market value doesn’t necessarily mean value in some instances, specifically ARS and mortgage backed securities. If you want to treat a $300,000 mortgage as being worth nothing during a period of time that few people want to buy such assets, that’s fine. But to suggest the feds should seize a bank because they should value that asset at zero is crazy if the value of the underlying property is still $500,000 and the person making the note has a net worth of over $2M.

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  35. Kary L. Krismer

    RE: David Losh @ 129 – You should really be more specific. ;-)

    Rate this comment: Thumb up 0

  36. Kary L. Krismer

    RE: pfft @ 132 – I wouldn’t really look at the number of Rs and Ds voting for things. They play games between themselves as to who votes for what to get a certain final result.

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  37. pfft

    By Kary L. Krismer @ 136:

    RE: pfft @ 132 – I wouldn’t really look at the number of Rs and Ds voting for things. They play games between themselves as to who votes for what to get a certain final result.

    congressional republicans voted against everything having to do with the bailouts no matter who was president. they voted against TARP while bush was in office. remember the first time it failed and the market plunged?

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  38. Kary L. Krismer

    RE: pfft @ 137 – But what I’m saying is that in the end they come around, and they sometimes literally pick who will vote for something that needs to pass.

    If a large asteroid was headed directly toward earth, and the possible fix to avoid the destruction of all life on earth was going to cost $10T, the Rs would all vote against it at first wanting the cost to be funded. Then, before it was too late, exactly enough would change their vote so that it passed. ;-)

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  39. pfft

    By Kary L. Krismer @ 138:

    RE: pfft @ 137 – But what I’m saying is that in the end they come around, and they sometimes literally pick who will vote for something that needs to pass.

    If a large asteroid was headed directly toward earth, and the possible fix to avoid the destruction of all life on earth was going to cost $10T, the Rs would all vote against it at first wanting the cost to be funded. Then, before it was too late, exactly enough would change their vote so that it passed. ;-)

    ok, I see what you mean.

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  40. Kary L. Krismer

    RE: pfft @ 139 – Remember, I think the Ds and the Rs are part of the same organization, and that most of their posturing is just a game to gain support and campaign contributions. If they were baseball, one would be the NL and one the AL.

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  41. David Losh

    RE: pfft @ 132

    Now you’re getting my war reference. Stimulus is a meanless term unless it’s beneficial. Bush dumped billions of dollars into stimulus, now that it’s over, it’s over.

    There’s more. Once Afganistan starts winding down, and the troops come back, there will be more people in the work force with even fewer jobs available.

    In your Krugman link he talks about how the Bush years should have been a time to pay down the deficit. He says something like they should have used those “good” economic times to pay down the deficit, or something like that.

    The idiot never made the correlation that those “good” economic times were a direct result of unfunded stimulus.

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  42. David Losh

    RE: Kary L. Krismer @ 134RE: Blurtman @ 124

    This was a fascinating exchange that goes to the very heart of the economic melt down.

    Here’s a good example, I think. There was an earthquake off the coast of Greece today. There is a hillside outside of Athens that has had sheep grazing on it since the beginning of time. It is now covered with condo projects. What every one know is that the hillside is unstable, the stupid Europeans however came in a bought, sold, and traded those units like they were assets. One earthquake away is a pile of rubble with mortgage Notes attached.

    Of course there is the insurance, or not, as the case may be, and the law suits, if they are allowed there, and the personal injuries, but bottom line the Notes are based on a pile of rubble.

    So, will there be a pile of rubble? Will this earthquake change the value of the properties? Are, or were, the properties there over priced to begin with?

    There may be a moral dilemma about selling properties built on unstable soil, or maybe an engineer came up with a way to make construction viable. Still, that’s a lot of unknowns to buy in a packet of Mortgage Backed Securities.

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  43. pfft

    By David Losh @ 141:

    RE: pfft @ 132

    Now you’re getting my war reference. Stimulus is a meanless term unless it’s beneficial. Bush dumped billions of dollars into stimulus, now that it’s over, it’s over.

    There’s more. Once Afganistan starts winding down, and the troops come back, there will be more people in the work force with even fewer jobs available.

    In your Krugman link he talks about how the Bush years should have been a time to pay down the deficit. He says something like they should have used those “good” economic times to pay down the deficit, or something like that.

    The idiot never made the correlation that those “good” economic times were a direct result of unfunded stimulus.

    not all of the economic growth was from the wars. a lot of it was because we were coming out of a recession.

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  44. Blurtman

    More examples of the corrput players in the fradulent US financial system. This former Federal Reserve governor authors a bogus paper on the outstanding Icelandic economy, which was, of course, flat out erroneous. Worse, this fellow does not disclose that he was paid by the Icelandic chamber of commerce to write this crap. Even worse he changes the title of th paper on his CV to cover up his crime. Can’t wait for the movie.

    Of course it was an honest mistake. He is incompetent see, not corrupt.

    http://www.wcvarones.com/2010/08/incompetent-paid-shill-frederic-mishkin.html

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  45. Blurtman

    RE: Kary L. Krismer @ 134 – Kary, the recent flash crash was an example of a malfunctioning market, not the market that is pricing RE today. Please provide a link where a $300,000 mortgage held by a bank was valued at $0.00.

    And I am telling you that this $630,000 house is worth $361,900. That is what the market transacted. whether you think it is the “true value” or not.
    http://www.doctorhousingbubble.com/burbank-real-estate-still-in-housing-bubble-after-40-percent-price-decline/

    And if banks are claiming such assets at $630,000, but if they valued such assets at $361,900 their liabilites would exceed their assets, yes, the bank should be seized by the FDIC.

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  46. David Losh

    RE: Blurtman @ 145

    How could they seize without transaction data. That’s the problem. It will be another month, or two before the Real Estate market settles to after stimulus pricing.

    It’s like my example about condo development in Greece. Those are viable housing units until, or if something happens.

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  47. Kary L. Krismer

    RE: Blurtman @ 145 – Where do you think that they are going to get the data to value all properties that are security for the loans that banks hold? Zillow?

    Where do you think they are going to get the data to determine the solvency of the makers of the notes? Are they going to subpoena the financial records of the XX% of Americans that owe mortgages?

    Where there is no functioning market, there is no realistic way of valuing the loans. Shutting banks down based on such valuations would be foolhardy because it would be based on information that you know is bad, where no better information is available.

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  48. pfft

    By Blurtman @ 144:

    More examples of the corrput players in the fradulent US financial system. This former Federal Reserve governor authors a bogus paper on the outstanding Icelandic economy, which was, of course, flat out erroneous. Worse, this fellow does not disclose that he was paid by the Icelandic chamber of commerce to write this crap. Even worse he changes the title of th paper on his CV to cover up his crime. Can’t wait for the movie.

    Of course it was an honest mistake. He is incompetent see, not corrupt.

    http://www.wcvarones.com/2010/08/incompetent-paid-shill-frederic-mishkin.html

    it’s possible that he was just wrong. lots of people were wrong. I wouldn’t rush to call incompetence corruption.

    what is probably the root cause it that people are not sketical and they are too ideological(free market lovers). especially right-wing types who often become economists or pundits like larry kudlow.

    this isn’t really a big deal. it’s only a paper. no need to make a movie.

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  49. Pegasus

    RE: pfft @ 148 – A leading economist who rubs elbows with Krugman takes 140,000 dollars to write a bogus paper on how safe the Icelandic economy and banking system was without any proof and does not disclose the money taken to perpetrate a fraud on investors and you think its not a big deal. What a maroon! Its called payola! The guy should be in prison singing in a falsetto voice for his new friends.

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  50. Blurtman

    RE: Kary L. Krismer @ 147 – Why do you continue to state that there is not a functioning market? And are you going to post a link to back up the $300,000 mortgage that is valued at zero dollars, or are you making up unsupportable stories to prove a point?

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  51. Blurtman

    RE: Pegasus @ 149 – And that is the Columbia U. business school. And the Dean of the Columbia Business School, the freaking Dean, is also a posturing fraudster. This is exactly what is wrong with the US economy. Business students are being trained to dismiss the consequences of fraud.

    IWhen the internet bubble was in full swing an analyst at a now dissolved San Francisco investment bank (Lauren Cooks Levitan, Robertson Stephens) was shamelessly pumping grossly overvalued internet stocks, even when it was clear the bubble was imploding. She was a Stanford MBA, and featured glowingly on the cover of their alumni publication. Message – fraud is good, accountability is for suckers.

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  52. pfft

    By Pegasus @ 149:

    RE: pfft @ 148 – A leading economist who rubs elbows with Krugman takes 140,000 dollars to write a bogus paper on how safe the Icelandic economy and banking system was without any proof and does not disclose the money taken to perpetrate a fraud on investors and you think its not a big deal. What a maroon! Its called payola! The guy should be in prison singing in a falsetto voice for his new friends.

    yeah because we all know how unstable the banking system was at the time, right? everyone was short Iceland. weren’t you?

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  53. David Losh

    RE: Blurtman @ 150

    Because we are in a dead market. This is completely without a history, there is no data, or statistics to compare with what is going on right now.

    It’s just bizarre that housing unit prices are all over the board.

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  54. Pegasus

    RE: pfft @ 152 – Try and defend the facts…false statements based on…..nothing….non-disclosure of taking money to write puff piece….Federal Reserve governor…..cush job as a professor at Columbia after writing con….Columbia refuses to fire crook…. no crook goes to jail….investors in Iceland f*c*ed in the a**….pfft sees no problems here….

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  55. pfft

    By Pegasus @ 154:

    RE: pfft @ 152 – Try and defend the facts…false statements based on…..nothing….non-disclosure of taking money to write puff piece….Federal Reserve governor…..cush job as a professor at Columbia after writing con….Columbia refuses to fire crook…. no crook goes to jail….investors in Iceland f*c*ed in the a**….pfft sees no problems here….

    it’s a non-story. he would have written the story that way anyways. heck, the banking system might have been good then. it’s a bubble. people get euphoric and believe crazy things, even very smart people.

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  56. David Losh

    RE: Pegasus @ 154

    OK, I believe you are right, there is a lot of fraud in the banking system, financial markets, and the selling of Mortgage Backed Securities. There is fraud in the insurance of these high risk instruments. Fannie Mae, and Freddie Mac were involved as well as several government officials, politicians, in my opinion, including the Presidents, both Bush, and Obama.

    Now prove it.

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  57. Pegasus

    I will now take my own sage advice often proffered that even I forget occasionally….Never argue with a fool or a lunatic. It will only attract other crazies. Bye now. Good luck loon.

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  58. Dave S

    Cheap South@101 wrote: “Corazón (can’t have too many shoes) Aquino (Philippines)”.

    No. The one with all the shoes was Imelda Marcos, whose dictator husband had Corazon Aquino’s husband murdered before she was elected President after leading a popular uprising that overthrew Marcos. The discovery of Imelda’s shoe collection followed the revolution.

    (And Obama did not make the decision to invade Iraq, and Martin Luther King did not assassinate Abraham Lincoln.)

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  59. Dave S

    RE: Dave S @ 158 – That is, Marcos had her husband killed, after which she led the revolution and was elected.

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  60. Ira Sacharoff

    By Kary L. Krismer @ 140:

    RE: pfft @ 139 – Remember, I think the Ds and the Rs are part of the same organization, and that most of their posturing is just a game to gain support and campaign contributions. If they were baseball, one would be the NL and one the AL.

    Which party has the designated hitter?

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  61. Kary L. Krismer

    By Blurtman @ 150:

    RE: Kary L. Krismer @ 147 – Why do you continue to state that there is not a functioning market? And are you going to post a link to back up the $300,000 mortgage that is valued at zero dollars, or are you making up unsupportable stories to prove a point?

    It doesn’t have to be valued at zero to not be a functioning market. But why do you think the government proposed the original version of TARP (buying such assets directly)if you think there is a functioning market for such instruments? Do you think Freddie and Fannie have been functioning normally the past two years, just processing the mortgages and then selling them off? Why do you think they call them “toxic assets?”

    Buy in any case, you’re the one that thinks the banks are all largely insolvent based on what you think the value of these assets are. You’re saying we should destroy the entire economy because you think these assets are not worth much and fairly valued. Why should we take such an action (shutting down all the banks and thereby forcing millions into unemployment) without actually knowing that the assets are in fact worth as little as you think they are?

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  62. Kary L. Krismer

    RE: Blurtman @ 151 – You’re well beyond the point of overusing the term “fraud.”

    Rate this comment: Thumb up 0

  63. Blurtman

    RE: Kary L. Krismer @ 161 – Kary, you have a great talent in ascribing statements and positions to people that they did not make. You are a master of the ad hominem attack, and of fabricating and exaggerating to prove a point. Again I ask you to support the statement you have made in a recent ad hominen attack that I support a market that values a $300,000 mortgage at zero dollars. Where is the link supporting this $300,000 mortgage that is valued at zero dolalrs? Just another irrelevant exaggeration, eh?

    I have posted countless links to support my statements. You – zero. I have posted a link where a home formerly valued at $630,000 sold in the $300’s. Not zero, mind you. While I do not support bubbles, I do support the market clearing prices, whether you like it or not. And the market will work if everone gets out of the way and lets it work. Not, as the Great War Criminal said: “I’ve abandoned free-market principles to save the free-market system,”

    And the reason for the TARP bailout proposed by criminal fraduster Hank Paulson was to enable the privatization of profits and the socilaization of losses. That is, to have the folks engaged in a great non-productive Ponzi scheme keep the gains, but pass the losses on to the taxpayer. Couldn’t work if someone was not left holding the bag.

    Sweden is doing quite well today, after having engaged in nationalizing its banks, firing the incompetent managers, and forcing shareholders to eat the losses. We passed on that course of action. Instead, we are on our way to becoming Japan.

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