Global Economic May Thread

Talk about the global and national economy to your heart’s content, as much as it takes to get it out of your system so the rest of the site can stick to real estate and housing.

For previous economic open threads, click here.

As of 09/07/2010, global economic comments that do not directly relate to Seattle-area real estate go only in threads designated for this specific subject.


About 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.

327 comments:

  1. 251
    David Losh says:

    RE: pfft @ 244

    Well you should be paid.

    Yes the Republicans, and Tea Party are trying to put on a big show. Now there is a chair person of the Tea Party who is bashing Newt.

    It’s Paul Ryan? I don’t follow any more since he emerged from a budget meeting with the most limp set of proposals I’ve ever heard from a politician. He was supposed to be the great hope for the Republican Party the same as the Bobby Jindal guy with his man made sand bars in the Gulf.

    You really nailed it with the Hispanics and Arizona. We came back from Miami last week and come on, there is no way you are going to tell me we have borders with South or Central America. Come on, there are miles of open ocean with boats, and airplanes passing every direction.

    Arizona is a pimple on the ass of America with wide spread corruption. It’s a God fearing State, but the politicians are stirring the racial pot while ignoring deep seated fraud. In my opinion many of the developments there over a couple of decades are worse than Nevada, and the Las Vegas valley. Purely bogus suburbs have been springing up for years with the thinnest of economic incentives. Arizona has encouraged, in my opinion, the purchase of these properties by any means to generate some tax revenue. It was OK when Hispanics were buying up the carp, but now that the bubble is burst the last ones in are taking the blame for the collapse.

  2. 252
    pfft says:

    By Kary L. Krismer @ 249:

    RE: pfft @ 244 – From reading that you’d almost think the D’s never make any mistakes that effectively shoot themselves in the foot. ;-)

    no I’ve got plenty of criticisms of obama.

  3. 253
    Scotsman says:

    Hey pfft! Hey, OneEye!

    I want to believe! I want to see the light and smoke the pipe of recovery and good times for all. But to do so, I have to completely refute the argument put forth by this wack job. Can you show me the way?

    “There has been no economic recovery and we are in an economic Depression right now and have been since 2008.

    There was no economic recovery after the 2001 Nasdaq collapse. The government borrowed and spent about 5% of GDP at the time every year to fake a recovery and we ran a debt-based false “recovery” when in fact we were in a five year long recession marked by an orgy of false “wealth” through bubbling home prices.

    Now we’re borrowing and spending 12% – more than double that amount – a year to fake a recovery that has shown up in stock prices, and it mathematically must end the same way.”

    http://market-ticker.org/cgi-ticker/akcs-www?post=186444

  4. 254
    Blurtman says:

    RE: Scotsman @ 3 – Borrowing metrics: interest payments as a percent of total budget. When is it too much? Debt as a percent of GDP. When is it too much?

  5. 255
    One Eyed Man says:

    RE: Scotsman @ 3

    “There was no economic recovery after the 2001 Nasdaq collapse. The government borrowed and spent about 5% of GDP at the time every year to fake a recovery and we ran a debt-based false “recovery” when in fact we were in a five year long recession marked by an orgy of false “wealth” through bubbling home prices.”

    Although it may not have been clear to you, I have always been in general agreement with the above statement. While I’ll acknowledge that my comments are sometimes a bit cryptic and laced with dark, and often prurient humor, they have also acknowledge the truth of the above statement.

    Last week I mentioned that if I were a cartoonist, I would have drawn George W creating an economic bubble by actions analogous to performing a blow job on America (Uncle Sam). W’s tax cuts and the accompanying deficits and low interest rates were nothing but immediate and transitory economic gratification with no lasting benefit. They were in effect as transitory as a sodomy from a hooker. The result was that several percent of the economy was nothing more than financial pimps collecting other peoples money and loaning it to get rich quick addicts to gamble in the real estate and financial market place.

    After its over, all you’ve got are some sleazy memories and the lingering fear of STD’s. The economic activity of the last 10 years lacked the substance and commitment to the future of a lasting family relationship and investment in the future. It was only economic sodomy with an anonomous stranger. There was no act of procreation, no nurturing or child rearing and no commitment to building a sustainable future. In effect, the economy of the last decade was analogous to hookers, drugs and gambling.

    But if you immediately strip out the hookers, drugs and gambling, you suffer a huge loss of GDP not to mention all the unemplyed people who used to change the sheets at the No-Tell Motel. The question is then, how do we fix it without economic consequences that are more devastating than necessary. The answer probably isn’t a liquidation. America still has “going concern” value even without the financial hookers. Much of that value is probably lost (unnecessarily) if you liquidate.

    The appropriate answer as to how to preserve going concern value is to structure a work out or reorganization. A work out won’t save the dead tissue of the bubble. You won’t save the construction and financial jobs of the housing bubble. But hopefully you keep the economic impact of losing those portions of the economy from causing the collapse of everything else.

    In 2008, the powers that be took the position that it was necessary to save the financial system first. They did that thru TARP and the steep yeild curve of ZIRP. They threw in some financial stimulus and QE2. Would the patient have survived without these remedies? Maybe, but maybe not. Just because you don’t think you’ll have a car accident doesn’t mean you stop buying insurance. But whether you agree or not, those actions have arguably stabilized the patient and taken him out of the ICU. The financial system is functioning again.

    Is that “recovery?” Not exactly. Its only recovery if you think that being out of the ICU is “recovery.” But it is arguably the first step to saving America from Liquidation, and that is part of a process that could be described as recovery. That obviously begs the question, if we are in a process, what’s the next step.

    If the patient is now getting financial transfusions equal to 12% of annual GDP, how do you fix that. My answer is the same as it was several months ago. You preserve the functioning portions of the economy by structuring a workout. You have to do that by allowing the healing portions of the economy to fill the void as the artificial support is removed. That takes time, capital and cost restructuring, which are classic components of any reorganization.

    If you stop the transfusions cold turkey, you cause a collapse of too many vital systems for the patient to survive without drastic and unnecessary consequences. That doesn’t mean you keep the patient on the transfusions forever. It means you withdraw them at a rate that the economy can absorb, hopefully through growth in the private sector. If we have 2% real growth in the private sector, then you can probably cut spending by 1% of GDP per year without causing a collapse to growth.

    Do we really have 2% real growth? That’s an open question. Will the politicians agree to a long term plan to cut spending by 1% of GDP per year for the next 5+ years? That’s also an open question. But remember, we’ve already absorbing a large hit to GDP through state and local spending cuts (as shown in the 1st qt gdp numbers). The process has already started at that level. And government revenues at all levels are increasing which will help solve the problem if it continues.

    We also have private sector job growth of over a million jobs in the last year according to ADP and Trim Tabs as well as BLS. And moderate inflation of several percent may help eliminate the true cost of our debt assuming that borrowing rates don’t increase dramatically.

    Recovery is a process. It’s arguably ongoing. Globalization and other competitive forces, probably dictate that we cut military spending, healthcare spending, business tax rates and other budget items to be far closer to world averages. And low cost foreign labor may impact our average standard of living if we aren’t able to compensate fully by increasing productivity through technology and innovation. But it’s still in my opinion worth while for all parties concerned to pursue recovery thru a work out rather than a liquidatin. The GM employee’s took wage cuts and the bond holders took a huge haircut and conversion to equity. But if they hadn’t gotten the financing to do a reorganization the workers would all have been unemployed, and the plant and equipment may well have been worthless and yeilded nothing to bond holders and other creditors in a liquidation.

    Recovery doesn’t mean bring back the old bubble. But its not a liquidation either. Its probably a long slow process commonly referred to as a “workout” through a crafted plan of reorganization as described above.

  6. 256
    David Losh says:

    Well, it’s actually very simple in a world of high finance money for debt swaps. We borrow to spend on debt.

    Let that sink in for a minute because every one here says the same thing; we borrow to pay debt, or interest on debt.

    Well, why does any one expect a return on that investment? Why is any one entitled to more than what was borrowed on a continueing basis? Why does compound interest, that is now due, and payable, have a higher priority than paying bills for goods, and services.

    Why is something for nothing more important than doing the work we need to do to keep the economy moving forward?

  7. 257
    Blurtman says:

    RE: David Losh @ 6 – Well, you need more heroin, so the kids get no food.

  8. 258
    Blurtman says:

    RE: David Losh @ 6 – Seriously, if we do not pay bondolders, interest rates shoot up, eating away at more of the moneys available to spend on other pograms. You really do not want to be in a situation where you have to borrow to pay off debt. as One Eye has eloquently described, discontinuous changes are usually unpleasant, and so the direction and rate has to be changed, but not overnight.

    But the gorilla in the room is the trade imbalance.

  9. 259
    Scotsman says:

    RE: One Eyed Man @ 5

    Ok, fair enough, but to my mind too conventional and conveniently math free. The math for doing what bankers refer to as a “workout” is pretty grim and stretches out for decades. It’s complicated by the fact the the world is rapidly changing, equalizing in terms of technological advantages and production costs. This is not a good time for the U.S. to burden itself with high costs and low productivity gains due to outdated investment and non-productive (interest) capital allocations.

    To continue your medical analogy, the patient is indeed very ill and completely reliant on external support. We can keep her alive for decades, but she’ll still be a vegetable. The good news is she’s pregnant- a healthy baby lies inside, full of potential and all the traits that once made its’ parents a force to be respected and admired.

    Let the patient die while saving the baby. Cut away the dead flesh, the fat, the atrophied muscle, and focus on growing the still healthy core of what made this country great. We’ve defaulted several times in the past and survived, we can do it again. Let’s have a conversation as the political class says, and try to get it right this time.

  10. 260
    One Eyed Man says:

    RE: Scotsman @ 9 -The thing that’s starting to baffle me is that despite any ideological differences you and I may have, I think if it was our job, you and I could sit down and put together a workable compromise deficit reduction plan in 30 to 60 days or less. Obviously we couldn’t work out all the details in a several thousand page budget, but we could probably work out the round numbers in the same manner that a Senator or Representative might set forth the numbers, leaving the micro management to staffers and bureaucrats.

    With due acknowledgment to how egotistical that may be, and my belief that many of the 400+ house members probably don’t have the intellect to do it, I think there are a significant number of people in both the House and Senate, including people from the Deficit Reduction Commission, Paul Ryan, and the “Gang of Six” that probably have the ability to recognize the need, understand both sides of various issues and propose reasonable and workable compromise solutions.

    Our political system may be known for checks and balances and the often resulting sluggish response to need, but I think its to the point now where even Patty Murray would say the situtation is dire. If Obama, or a bi-partisan coalition of Congressional leaders doesn’t take the lead on establishing fiscal responsibility soon, business leaders and the bond market will eventually feel they have no choice but to react accordingly. I think a lot of politicians don’t realize that Bernanke (despite what anybody might think of him) is holding off potential private sector spending cut backs, negative business sentiment and bond vigilantes with QE. Congress and Obama probably still have time for the calvary to reach the settlers before they’re over run, but they better get saddled up and moving or there will be a masacre with few if any survivors. Time is now probably of the essence. Playing politics for some sort of election blame game in 2012 is putting everybody at risk.

  11. 261
    David Losh says:

    We haven’t heard much from Bernanke. Gietner has taken the lead after the Paul Ryan fiasco. Attacking social programs might, and I mean might of worked if it weren’t so off the mark to the wishes of the people. The Tea Party was infuriated by the spending to support the Health Insurance Industry. The Tea Party says that you are infringing on the rights of the citizens by forcing us to “buy” health insurance. The Paul Ryans want us to think that we passed single payer, government run health care, but that isn’t what happened.

    The Tea Party, and Republicans are at sever odds. That’s fine, but when you throw in Boehner who has some political agenda as yet to be determined we are only getting circular motions.

    The way I look at it no body is doing their job. Bernanke, and Geitner, or any committee in Congress can make a proposal to solve the budget “crisis.” My proposal would include separating out Social Security, and Medicare to be addressed another day. I would stop borrowing to pay on the $5 Trillion in US government debt. I would pay foreign debt with a proposal to pay it off. I would separate out those foreign debt holders as a priority.

    Taxes could be raised by 5% on those making over a million. We should have a committee to close tax loop holes especially those dealing with over seas investment, Cayman Islands comes to mind.

    We can cut a whole bunch, or suspend a whole bunch, of military spending on non essentials. Contractor accounts can be severally reviewed to get rid of programs that are detrimental to our National Security; there are lots of those that are only an irritant, war on drugs comes to mind.

    There’s a lot that can be done, but no one wants to risk a career over it.

  12. 262
    Blurtman says:

    Throwing Israel under the bus, or, do some Palestinians have more rights than other Palestinians?

    http://abcnews.go.com/Politics/us-israel-tensions-high-obama-meets-netanyahu/story?id=13647528

  13. 263

    RE: Blurtman @ 12 – Maybe we should fix the immigration problem by giving California and Texas back to Mexico? ;-)

    Seriously, I don’t know why President Obama thinks he can tell one country it should give up territory obtained in a war they he probably hardly remembers.

  14. 264
    Blurtman says:

    RE: Kary L. Krismer @ 13 – No easy solutions. Killing the natives with disease or violence was a solution in the past, but I would not apply 1500-1800’s solutions to the 1940’s and beyond. Part of the problem is the hubris of Western powers determining cookie cutter style what would be countries in the Middle East. Why did they not also reincarnate Samaria? There are never enough good Samaritans around when you need one.

  15. 265
    David Losh says:

    RE: Kary L. Krismer @ 13

    I was given a “tour” of a refugee camp in Jordan. It’s been there since World War II. Europe, and the United States decided to repatriate people to Israel and have defended that decision ever since. If you want to ignore the problem fine, no one really cares. However border protection in a nomadic culture, society, and lifestyle is problematic.

    In other words, we may have run off the indiginous people to south of the border we imagine, but it doesn’t change the fact that we are the invaders.

    Best of luck with that.

  16. 266
  17. 267
    pfft says:

    calling blurtman…

    Justice Department Plans to Subpoena Goldman Sachs for Documents “Within Days”
    http://news.firedoglake.com/2011/05/20/justice-department-plans-to-subpoena-goldman-sachs-for-documents-within-days/

  18. 268
    Blurtman says:

    RE: pfft @ 17 – Thank God for Carl Levin, most of the times. The GS business model – create toxic securites, pay Moody’s and S&P to rate this toxic swill as Triple A. You know what crap it is, so while you are telling your clients what a great buy it is, you take out multiple CDS on it and make lots of bucks. Think about it – Hank Paulson was CEO of GS when a lot of this was going on, and he lobbied the USG to bail out AIG so GS could collect on its winnings. Think about it again – when we bailed out AIG, we bailed out folks who were betting, not hedging. That is, we bailed out folks who did not hold the underlying securities that they bought CDS on. Bettors. The bookie went bust, so US taxpayers had to intervene. Tim Geithner. Ben Bernanke.

  19. 269
    Scotsman says:

    RE: One Eyed Man @ 10

    I have no doubt we’d get along well. I value intelligence and wit, and will always listen to a well reasoned argument and go with what makes the most sense. It’s the non-thinking idealogical types that drive me nuts, and that’s not you.

    Could we come up with a solution to the current process? Sure, because we’re not running for re-election, and probably wouldn’t be as concerned with the background noise as others. Do those in D.C. really understand what’s coming? Some certainly do, most don’t care or understand, and apparently almost none are willing to take responsibility and lead- which means being the ones to deliver the bad news. I believe the vast majority of politicians run because they want attention, and want to be loved. They accomplish their goals by giving gifts to those who vote. Because of this, we’re screwed. There is absolutely no incentive in the current system, and the current environment, to do the necessary thing and take back from the people what the voting public thinks it’s owed. The system will choke on it’s own vomit before it quits the addiction. The adults willing to sacrifice while focussing on the longer term will certainly be out voted by self serving short term thinkers and the complacent who only see the cookie jar in front of them.

  20. 270
    David Losh says:

    RE: pfft @ 16

    That was a useful article. It’s more to the point that we have a global unification of economic involvement.

    Let me put that another way, that in my opinion we are at the end of seeing who can produce the most garbage. If I had more time I would research when we had computer chip dumping that was intended to corner the market for computer goods. We’ve had several rounds of economic jousting that has just produced a bunch of crap that ends up in our land fills, and scrap heaps that are now headed back to China.

    If it’s true that we have a slow down on a global scale that would make anything possible. That was a great find.

  21. 271

    By David Losh @ 20:

    If I had more time I would research when we had computer chip dumping that was intended to corner the market for computer goods.

    That’s not what it’s about at all. If effect the anti-dumping rules are anti-anti-trust, because it’s collaborating without being allowed to collaborate.

    In that particular market (computer components) the development of a product (e.g. a new style of memory) can be very expensive, but the production is cheap. Once the product is developed, if the market turns soft there’s a lot of incentive for a manufacturer to produce and sell cheap because they’re still making a lot of money off of each unit produced. It’s just that at such a price, they’re very unlikely to ever break even on that model, but if the market is soft for the product, selling as many as they can at a lower price is their best outcome. That then harms the other manufacturers, because it then makes it tougher for them to sell in a soft market. So the anti-dumping rules effectively prevent any of them from doing that.

  22. 272
    pfft says:

    from my reading I am not sure if GS is in trouble. it could be semantics. Goldman was short but were they net short? was one part hedging a downturn but another was just putting GS in a neutral mortgage position. does it matter? did the whole company have to be hedging and if one was just short to make a profit does that matter as per Blankfein’s statement before Congress? I don’t know, if I did I’d be a lawyer.

  23. 273
    pfft says:

    By Scotsman @ 19:

    RE: One Eyed Man @ 10There is absolutely no incentive in the current system, and the current environment, to do the necessary thing and take back from the people what the voting public thinks it’s owed.

    so what aren’t people owned? a honorable retirement? honorable care for the elderly? I’d love to hear this.

    you’re a deficit fraud. you wanted an extension of the unpaid tax cuts for the rich that would add trillions of dollars to the national debt. the healthcare bill was the biggest deficit reduction act in years and you’re against it. you were against the measure to save the economy from very high unemployment and even larger deficits. you talk a good debt game but when it comes down to it you act the very opposite of someone who is concerned about the debt and deficit.

    1. bush tax cuts are the largest components of our coming deficits

    2. the government rescue measure add little to the debt in the next years.

    3. the government rescue kept unemloyment lower and more paying taxes.

  24. 274
    David Losh says:

    RE: Kary L. Krismer @ 21

    Not to be snide, but you missed my point. Business is war. Dumping computer chips, cars, car parts, fish, timber, and intellectual properties has been a staple for decades the same as out sourcing labor is today.

    We are now all in this same economic morass. You can talk jobs in South Carolina, or Seattle, India, or Mexico, even those cheap consumer goods from China, but the bottom line is no corner of the globe is immune from today’s economic slow down.

  25. 275
    David Losh says:

    RE: pfft @ 23RE: pfft @ 22

    OK, you have me convinced that you actually have a point of view that is more than contrary.

  26. 276
    David Losh says:

    RE: Scotsman @ 19

    “The adults willing to sacrifice while focusing on the longer term will certainly be out voted by self serving short term thinkers and the complacent who only see the cookie jar in front of them.”

    OK, you lost me. Both you and the One Eye Man, while eloquent, are also missing some key points.

    The short term thinkers are the bankers, financiers, and marketeers who are squirreling away trillions of dollars in cash in hopes of buying up some bargains. For whatever reason people from all over the world, who are the ones making the sacrifices, talk to me about what they want from the future. They want family cared for. They want to live work, survive, and die with dignity.

    Dying with dignity is an area of my expertise. As many people have said throughout history, it’s better to fight, and die in battle, than to live a life of desperation.

    Laugh if you want, but the people aren’t going to let 1% or 2% of the population keep our money. We aren’t in the Middle Ages, there are no new worlds to conquer, no diversion that will calm the masses.

    Government is to help keep a civilized discourse. Our government will either help for us to have an fair, and equitable redistribution of these stolen goods, and monies or the people will take it back independently.

    When you look at the migration of wealth into fewer, and fewer hands you get an idea of the magnitude of the problem. The fact government loop holes, and lack of regulation allowed this migration of wealth makes it worse.

    How will you address that? Do you really think this is a welfare to work situation?

    Well I think that yes I could spend more time building my personal wealth, it’s a stupid endeavor in life, or I can fight. Fortunately for me I have a good balance of both, but I applaud those people who make it a mission to protect us from the barbarians.

  27. 277

    From this thread several months ago:http://seattlebubble.com/blog/2010/10/01/september-stats-preview-falling-into-fall-edition/By Pegasus @ 48:

    RE: Kary L. Krismer @ 47 – Thanks for the twist. Here is a link to that poor man’s new movie info that is suffering from…. honesty. The movie is called “Inside Job: Criminal Fraud in the Financial Services Industry” Hopefully you will catch what he caught…..Do your homework before you open your uninformed yap and cut this guy up…You will find that he has a big local connection and you probably use his product. His last film was nominated for an Oscar. What have you been nominated for…to take out the garbage?http://www.npr.org/blogs/monkeysee/2010/10/01/130273644/-inside-job-director-charles-ferguson-taking-aim-at-wall-street

    Okay, I’ve now seen the movie, and it anyone has an “uninformed yap” it’s the person(s) behind that fake documentary. That movie makes 60 minutes look like fair unbiased reporting.

    But on the issue at hand which where I first mentioned this person, and his spouting off about the lack of criminal prosecution without specifying any crimes, his entire movie hardly mentions crimes at all. He mentions two people who were acquitted, and then he has one guy being interviewed that lists of several companies which that person thinks had people in it that committed crimes. And from there he goes to Eliot Spitzer who suggests that the prosecutors could use the personal behavior of underlings (e.g. drugs and prostitution) as leverage to get testimony. That’s rather ironic! But it’s also not at all a substantive demonstration of any criminal activity, and again didn’t mention any specific crimes.

    But in any case, the style of the movie was simply to make an accusation and then never back it up. For example, he asked someone if they were embarrassed by the criminal activity in their industry. The person responded that he would need to be more specific about what incidents he was referring to and that criminal activity should never be tolerated. There was nothing later that backed up any claim of criminal activity.

    He had a number of basic errors in the movie to that indicates a failure to understand the topic covered. He referred to Fannie and Freddie as “mortgage lenders.” He stated the specific amount that the AIG bailout cost the taxpayer. He said the estate tax had been eliminated.You owe me one hour and 40 minutes of my life back. Watching moronic material like that was painful, and only someone who doesn’t understand our world would find the few good points (e.g that the rating systems suck) worth watching the whole movie.

  28. 278

    RE: David Losh @ 24 – Not to be snide, but you missed the fact that I was only addressing one part of your post–dumping of computer parts. I was explaining why it tends to occur in that particular industry.

  29. 279
    David Losh says:

    RE: Kary L. Krismer @ 28

    Again you missed the point. Explaining an industry from 1987 has no bearing on the business we are doing today. That is the point.

    Today we talk about out sourcing labor like it is a topic of conversation. It’s irrelevant because as time goes on labor, to the price of goods, will be homogeneous. We pay less in a country with a lower cost of living, but it will all be factored into the price of the product.

    What the article is indicating is that we have a global economy, that is slowing down.

  30. 280
    Blurtman says:

    RE: pfft @ 22 – Perjury if that. That’ll teach ’em. Yesiree.

  31. 281
    Scotsman says:

    RE: pfft @ 23

    You’re like a old parrot, nothing more. Not a reasoned thought in your head. Give it up.

  32. 282

    By David Losh @ 29:

    RE: Kary L. Krismer @ 28

    Again you missed the point. Explaining an industry from 1987 has no bearing on the business we are doing today..

    Wrong. The same factors affect that industry today. I’m not addressing your broader economic topics at all.

    I’m dealing specifically with an item which is somewhat fungible, has a low marginal cost to produce, but requires the sale of millions of units to break even due to high development costs. I’m not addressing labor markets, world economies, or anything else. I’m just trying to help you understand why there is “dumping” of such products, when there’s not dumping of other products, like say oil.

  33. 283
    David Losh says:

    RE: Kary L. Krismer @ 32

    Once again Kary I understand the theory. My point is that today’s market place is vastly different than it was in 1987.

    The internet, and computer changed everything. I like the idea we can have these discussions on line. What I’m also fascinated by is that China wants to limit the internet. Al Quida uses the internet for propaganda. The uprisings in North Africa are helped, or encouraged by the use of “Face Book?”

    The financial system we have today is because computers can make complex calculations. Business models and scenarios are worked out in minute detail. We call it speculation, but it’s actually, as the other blog site says, a Calculated Risk. I’m questioning if it’s a risk at all, or just simple money in, profit out situation.

  34. 284
    pfft says:

    By Scotsman @ 31:

    RE: pfft @ 23

    You’re like a old parrot, nothing more. Not a reasoned thought in your head. Give it up.

    I can give you the links and the math if you want(please please). you’re a deficit fraud.

    two links for everyone.

    When Doomsday Isn’t, Believers Struggle to Cope
    http://news.yahoo.com/s/livescience/20110521/sc_livescience/whendoomsdayisntbelieversstruggletocope

    austerity is failing again in real-time. keynes wins.

    30,000 Protesters Are Still Camped Out In Madrid As Spain Goes To The Polls
    http://www.businessinsider.com/spain-election-day-protests-2011-5#ixzz1N7IO9Sw7

  35. 285
    pfft says:

    By Blurtman @ 30:

    RE: pfft @ 22 – Perjury if that. That’ll teach ’em. Yesiree.

    you’re going to send someone to jail and ruin their career because of semantics on a subject that really doesn’t matter? the crisis didn’t happen because GS was short outright in one division but not net short or neutral…

  36. 286
    pfft says:

    I’m sorry, one more link. the recovery measures that are supposedly to weigh our economy down are very small compared to everything else. tarp+recovery measures are one of the smallest components.

    What’s Driving Projected Debt?
    http://www.offthechartsblog.org/what’s-driving-projected-debt/

    in 2012 tarp+recovery measure will cost less than $80 billion. is that really going to collapse the economy or cause hyper-inflation? no.

  37. 287
    Blurtman says:

    RE: pfft @ 35 – Contributing to the crisis was bankers knowingly selling garbage that did not conform to the representations made. Or, simple fraud. Throw in complicit rating agencies, and you have the recipe for disaster. As the GS execs know if GS made money or not, they may have lied. But perjury did nto cause the crisis. Simple and widespread fraud did. Just read the FCIC report and Congress’ report on the rating agencies. But, I waste keystrokes.

  38. 288
    pfft says:

    By Blurtman @ 37:

    RE: pfft @ 35Just read the FCIC report and Congress’ report on the rating agencies.

    did you? the FCIC report is almost 600 pages.

    why did you change the subject?

  39. 289

    RE: Blurtman @ 37 – I wonder what the rating companies’ definitions were, and if maybe people (e.g. those investing pension funds) just weren’t paying attention? I suspect they were half asleep anyway if they accepted any instruments that had 2nd mortgages.

    Rather obviously when you’re dealing with multiple deeds of trust in one device, you’re likely to have at least one default, even on the best ones. But that might be only 1% of the value of the entire instrument, and not a big deal. Rather clearly there definition of AAA couldn’t have excluded the possibility of only having one default. In contrast, when they’re rating a normal corporate or municipal bond, having a default would be huge. So there must have been some defining term of what they meant by AAA on these types of instruments.

  40. 290
    Blurtman says:

    RE: Kary L. Krismer @ 39 – Well, nothing could be more thrilling than reading financial documents. But please can the revisonsist history.

    If you give securities AAA ratings and then in a few weeks or months it is being re-rated as junk, well,,,, incompetence, yea dats da ticket! Coburn and Levin deliver the one-two pucnh in this indictment of the ratings agencies.

    “WASHINGTON (Rachelle Younglai and Sarah N. Lynch) – Moody’s Corp and Standard and Poor’s triggered the worst financial crisis in decades when they were forced to downgrade the inflated ratings they slapped on complex mortgage-backed securities, a U.S. congressional report concluded on Wednesday.

    In one of the most stark condemnations of the credit rating agencies, a Senate investigations panel said the agencies continued to give top ratings to mortgage-backed securities months after the housing market started to collapse.

    The agencies then unleashed on the financial system a flood of downgrades in July 2007, the panel said.

    “Perhaps more than any other single event, the sudden mass downgrades of (residential mortgage-backed securities) and (collateralized debt obligation) ratings were the immediate trigger for the financial crisis,” the staff for Senators Carl Levin and Tom Coburn wrote in their report.”

    http://www.huffingtonpost.com/2011/04/14/credit-rating-agencies-crisis-congressional-report_n_849032.html

  41. 291
    Blurtman says:

    Bring back the public stockades!

    “Marty Likier … put almost 20 percent down to purchase a $312,000 townhouse in Westmont in 2006 and lived there until two years ago, when he remarried and bought a home in Chicago Ridge. For a year he rented the townhouse. When a change in rules at the community meant Likier’s days as a landlord would end, he called his lender and asked if he could rework the loan, but he didn’t have enough equity left to refinance the $240,000 mortgage.

    Likier … decided last fall that the struggle wasn’t worth it.

    He listed the townhouse … [and has dropped the price to] $179,000, which is lower than the unit sold for when it was built in 1999. He stopped paying the mortgage in January and recently was served with foreclosure papers.

    Despite the fact that he and his wife are employed and have an annual household income near $150,000, he’s comfortable with his decision.
    A few comments:
    • These properties with large negative equity positions are like ticking time bombs for the banks. Eventually these owners will grew tired of the monthly loss, and try to take action. Corelogic reported there were 11.1 million properties with negative equity at the end of last year, and close to 5 million properties with more than 25% negative equity.”

    http://www.calculatedriskblog.com/2011/05/walking-away-in-chicago.html

  42. 292
    Scotsman says:

    RE: pfft @ 34

    Thanks for the links- they are a perfect illustration of just how useless your comments are. The first is about a guy who has a history of inaccurately predicting the rapture- a Christan event- and you think it has something to do with economics? The second is supposed to be an illustration of austerity’s failure- protesters in Spain- when in fact the conservatives (i.e. those for austerity) just swept the elections by a margin of 10% or so, ending the rule of the socialist party.

    Completely wrong in every way, unreasoned, and a waste of bandwidth.

  43. 293
    David Losh says:

    RE: Scotsman @ 42

    Actually those links are about the pfft argument with you. The end of the world didn’t come, and economic collapse may be just as much of a myth.

    The election in Spain was actually a referendum on people rejecting austerity.

  44. 294

    By Blurtman @ 40:

    RE: Kary L. Krismer @ 39 – Well, nothing could be more thrilling than reading financial documents. But please can the revisonsist history.If you give securities AAA ratings and then in a few weeks or months it is being re-rated as junk, well,,,, incompetence, yea dats da ticket! Coburn and Levin deliver the one-two pucnh in this indictment of the ratings agencies.

    I’m not trying to defend the ratings agencies, because I’ve never thought much of them or the value of their services. I’m just suggesting that perhaps if you were investing pension funds and looked at what they claimed they were doing beforehand, that it would have indicated that it wasn’t a very useful service for such an instrument.

    If you think about it, to be able to effectively rate the instrument they had to be able to know the financial condition of every borrower. I’m sure they didn’t do that.

    Rather than think of what I’m writing as being a defense of the ratings companies, think of it as an attack on pension fund managers. They fell for the oldest con ever: That “secured by real estate” means safe.

  45. 295

    RE: Blurtman @ 41 – I would point out three things.

    1. What he listed it for as a short sale might not be an indication of it’s value. For that I would point to now suspended agents Hellickson, who allegedly listed short sales for less than what a bank was likely to accept.

    2. At least in Washington state, someone making $150,000 a year would face the possibility of judicial foreclosure and a deficiency, especially if the property were a rental (not homestead).

    3. Corelogic’s numbers on houses underwater are pure fiction. They can’t tell that information any better than Zillow can tell the value of a house without going inside it. In fact it’s worse because to determine if a house is underwater, Corelogic needs to determine both value and debt, not just value.

  46. 296
    Blurtman says:

    RE: Kary L. Krismer @ 44 – Sure, but pension funds and other investment entities are sometimes restricted from investing in anything but AAA. ANd no one would have expected securites rated triple A by the agencies to go so far bad so quickly.

    The investment manager of the King County pool’s defense for losing millions on SIV’s that quickly went south was that hey were triple A. Concealing risk is what the rating agencies were accused of. And why did they conceal risk? Because it was profitable to do so.

    http://www.bloomberg.com/news/2010-04-27/moody-s-s-p-lose-bid-to-dismiss-investor-suit-over-rhinebridge-siv-losses.html

  47. 297

    RE: Blurtman @ 46 – I agree with all of that, but I still have a hard time with the pension managers’ claims given the fact that they are professionals charged with investing millions of dollars of other peoples’ money. It just seems like they were either incredibly naive or lazy.

    I don’t think this is an area where you use comparative negligence, like in an auto accident where one person can be 80% at fault and another 20% at fault, so you reduce the one person’s claim by 20%. If it were though, I’d reduce their claims against the ratings companies significantly. Alternatively, and what might make the most sense if you’re dealing with professional managers and not government employees (possibly immune from suit) would be to have the pensioners make a claim that their moneys were negligently mishandled by the managers. That way they could possibly recover either way.

  48. 298
    Blurtman says:

    RE: Kary L. Krismer @ 47 – Larry Summers lost a ton of money managing the Harvard endowments funds. So perhaps your perception of fund managers is misguided.

    Well, now you are talking about solutions to make the investors whole. I think given the severe and widespread ramifications of the meltdown, folks should go to jail.

  49. 299

    By Blurtman @ 48:

    Well, now you are talking about solutions to make the investors whole. I think given the severe and widespread ramifications of the meltdown, folks should go to jail.

    That’s where I disagree with you. Bad things happening, by themselves, are not criminal. But I wouldn’t recommend changing your opinion because that type of thinking will get you a very high paying job as an assistant to the mayor of Seattle. ;-)

  50. 300
    pfft says:

    By Blurtman @ 48:

    RE: Kary L. Krismer @ 47 – Larry Summers lost a ton of money managing the Harvard endowments funds. So perhaps your perception of fund managers is misguided.

    Well, now you are talking about solutions to make the investors whole. I think given the severe and widespread ramifications of the meltdown, folks should go to jail.

    larry summers was not a manager of the Harvard endowments funds. he may have had a hand but he wasn’t a manager.

  51. 301

    By Blurtman @ 48:

    RE: Kary L. Krismer @ 47 – Larry Summers lost a ton of money managing the Harvard endowments funds. So perhaps your perception of fund managers is misguided.

    BTW, that should be in past-tense–was misguided. Same for the capabilities of MBAs.

  52. 302
    pfft says:

    more good news blurtman.

    U.S. State Legal Chiefs Sharpen Mortgage Investigation, WSJ Says
    http://www.bloomberg.com/news/2011-05-23/u-s-state-legal-chiefs-sharpen-mortgage-investigation-wsj-says.html

  53. 303
    pfft says:

    By Scotsman @ 42:

    RE: pfft @ 34

    Thanks for the links- they are a perfect illustration of just how useless your comments are. The first is about a guy who has a history of inaccurately predicting the rapture- a Christan event- and you think it has something to do with economics? The second is supposed to be an illustration of austerity’s failure- protesters in Spain- when in fact the conservatives (i.e. those for austerity) just swept the elections by a margin of 10% or so, ending the rule of the socialist party.

    Completely wrong in every way, unreasoned, and a waste of bandwidth.

    a rough count shows you support programs(or weren’t in favor of programs) that will add at least $5 trillion to the national debt over the next ten years.

    the 2nd ten years will see obamacare save over a trillion dollars according to the CBO.

    on spain:

    His popularity has plunged since a U-turn last year forced him to bring in a strict deficit-cutting plan, which he has pledged to stick to, along with labour and pensions reforms.

    http://www.guardian.co.uk/world/2011/may/23/zapatero-socialists-defeated-peoples-party

    voters will vote you out in favor of anyone who is in a different party.

    “when in fact the conservatives (i.e. those for austerity) just swept the elections by a margin of 10% or so”

    link please.

  54. 304
    Blurtman says:

    RE: Kary L. Krismer @ 51 – MBA – More Bad Actors.

  55. 305
    Blurtman says:

    RE: Kary L. Krismer @ 49 – Are public executions really a bad thing?

  56. 306
    Blurtman says:

    RE: pfft @ 50 – Actually I chatted a few times with the King County pool’s investment manager. Nice fellow. Couldn’t go into specifics about a few things due to the lawsuits. Was shocked at the triple A to trash plunge.

    I had researched a few of the SIV’s and found information describing the imminent meltdown of the specific SIV’s prior to King County investing in them. So I think e-mails can be accessed at the brokers wh sold these describing them as pieces of dog doo. $10,000 gets you .01 point of the settlement money, but hurry, they are going fast!

  57. 307
    pfft says:

    By Blurtman @ 56:

    RE: pfft @ 50 – Actually I chatted a few times with the King County pool’s investment manager. Nice fellow. Couldn’t go into specifics about a few things due to the lawsuits. Was shocked at the triple A to trash plunge

    that was then though. a lot of MBS has come back. the problem was they were illiquid assets that had to be dumped all at the same time by very large banks. what do you think would happen?
    see LTCM.

  58. 308

    RE: pfft @ 57 – I don’t think they had to be dumped so much as no one really knew what they were worth–due to the issues I mentioned in my ratings comments. To know what they’re worth you need to know what’s going on with each of the parties to the deed of trust.

    Eli Broad, if I recall correctly, pumped a ton of money into buying those things at one of the early points in the crisis. I wonder how that investment turned out. Given the wave of refinancing resulting from low interest rates, I suspect he made a killing.

  59. 309
    Blurtman says:

    RE: pfft @ 57 – Well, when the music stops, that is, when banks, realizing how deceptive they had been to customers like pension funds, no longer trust each other, I suppose illiquidity would set in.

    But illiquidity did not cause the ratings crisis. Rather, the ratings were adjusted downward, drammatically, when it was obvious that the tiple A rated securities were actually junk.

    How exactly can you sell a security to anyone that later you will claim cannot be valued due to complexity and opacity?

  60. 310

    The Chrysler bailout is being repaid. Yet another cost of the bailout that was not a cost, and actually made the government some money (even ignoring the unemployment expenses that were avoided.)

  61. 311
    pfft says:

    it looks like scotsman has been emailing krugman.

    Debt Arithmetic (Wonkish)
    http://krugman.blogs.nytimes.com/2011/05/24/debt-arithmetic-wonkish/

    The way the story is often told, deficits mean higher debt, which means higher interest payments, which can mean a spiral into bankruptcy. And qualitatively that’s not wrong. If you put numbers to it, however, for countries that are not facing huge risk premia, the spiral is very, very slow.

    As I’ve often written, we’re in a strange state now where people who actually take textbook economics and simple arithmetic seriously are seen as dangerously radical and irresponsible, while people who believe in invisible bond vigilantes and confidence fairies, who claim to know what the market will want even though there’s no sign of that desire in current asset prices, are viewed as Very Serious.

    brilliant and confirmed by the bond market for going on 4 years.

  62. 312
    pfft says:

    By Blurtman @ 59:

    RE: pfft @ 57 – Well, when the music stops, that is, when banks, realizing how deceptive they had been to customers like pension funds, no longer trust each other, I suppose illiquidity would set in.

    But illiquidity did not cause the ratings crisis. Rather, the ratings were adjusted downward, drammatically, when it was obvious that the tiple A rated securities were actually junk.

    How exactly can you sell a security to anyone that later you will claim cannot be valued due to complexity and opacity?

    MBS are not liquid like stocks. heck even bonds aren’t all that liquid if they aren’t government bonds. even munis aren’t that liquid. one of the reasons bonds were downgraded most likely is because the models changed as the housing market crashed and recovery rates plunged. the models were wrong(garbage in garbage out).

    as an investor I wouldn’t blame the ratings agencies. as a citizen I would. if something is AAA and not a government security it is probably not AAA. if a bond is AAA but has a higher yield it probably isn’t AAA. many investors made the classic mistake of reaching for yield.

  63. 313
    Blurtman says:

    RE: pfft @ 62 – Well. it is not as if we are arguing if AAA really meant AA. I don’t think investors should have recognized that AAA really meant C.

    Another reason why the MBS and related mortgage backed securities crashed is because they were loaded with junk mortgages. And one (not the only one) reason the ratings plummeted is because the banks that created the MBS knowingly misrepresented the quality of the mortgages, that is, they committed fraud. And it became apparent that the gold was really doggie doo.

  64. 314
    pfft says:

    By Blurtman @ 63:

    RE: pfft @ 62 banks that created the MBS knowingly misrepresented the quality of the mortgages, that is, they committed fraud. And it became apparent that the gold was really doggie doo.

    not necessarily. that means that everyone knew that housing would tank and if that were true there wouldn’t have been a bubble.

    I know what you’re going to do. you’re going to post some emails where people said these mortgages were garbage. the fact is that there are hundreds even thousands of people working in these departments. one email may not represent the view of everyone or the people who matter- management and investors. like all assets there is ALWAYS someone who is bullish or bearish. there are always people who are right but too early and etc.r

    what you’re basically saying is that you think bankers are smart…

  65. 315
    pfft says:

    the auto bailout has been a success.

    Chrysler Pays Back Rescue Loan
    http://www.nytimes.com/2011/05/25/business/25chrysler.html?_r=1

    great video about all the wrong republicans.

    “Let Detroit Go Bankrupt?”
    http://www.democrats.org/video/let_detroit_go_bankrupt

  66. 316
    David Losh says:

    RE: pfft @ 64

    The banks were never the issue. It’s the people who packaged the debt for resale who most certainly knew they were bundling junk. The financial markets were buying what ever was available without consideration.

    The bubble happened because of the exhuberance of the economy. I, for one, saw a robust “global” market that was adding trillions of dollars in net worth. Feet on the ground never saw the over all picture that was a pile a poo.

    Banks, lenders, and financiers are paid to know what was in the pipe line. Claiming ignorance isn’t a defense. Not only that, they relied on the law. They followed the letter of the law. They had learned from the Savings and Loan scandal, and this time involved the consumer.

  67. 317
    Blurtman says:

    RE: pfft @ 64 – Please read the Congressional report on the rating agencies. You will read there, as well as has been posted on blogs, rating agency managers ordering their analysts to not examine the mortgage files of the underlying mortgages securities they were rating. Why was that?

    The CitiGroup head auditor is on record stating 80% of the mortgages Citi was selling were non-conforming. Hardly isolated e-mail strawmen.

  68. 318
    Scotsman says:

    “The truth? QE2 has created a massive new bubble in dollar-based financial assets, from stocks to gold. Meanwhile, it has had zero visible effect on the real economy.”

    ” Turns out the program has created maybe 700,000 full-time jobs — at a cost of around $850,000 each.

    House prices are lower than before QE2 was launched. Economic growth is slower. Inflation is higher.

    Yes, it’s sparked a massive boom on the stock market. . . But even the stock market boom hasn’t been what it appears. An analysis shows that most of the rise in the Standard & Poor’s 500 Index under QE2 has simply been a result of the decline in the dollar in which shares are measured.”

    http://www.marketwatch.com/story/qe2-was-a-bust-2011-05-21?Link=obinsite

  69. 319

    By Scotsman @ 68:

    Yes, itâ��s sparked a massive boom on the stock market. . . But even the stock market boom hasnâ��t been what it appears. An analysis shows that most of the rise in the Standard & Poorâ��s 500 Index under QE2 has simply been a result of the decline in the dollar in which shares are measured.”http://www.marketwatch.com/story/qe2-was-a-bust-2011-05-21?Link=obinsite

    That doesn’t make a lot of sense. First, we’re Americans, so that decline is effectively irrelevant to us. If you were investing in foreign equities, that would be relevant. Second, unless foreigners investing here are expecting the slide of the dollar to turn around, that would cause less investment by foreigners in US equities, and a decline in stock prices.

    I would add, correlation does not prove causation.

  70. 320
    Scotsman says:

    RE: Kary L. Krismer @ 69

    That’s not what’s going on here. It’s an accounting quirk where overseas operations of multinational companies (much of the exchange) look better than they actually are when adjusted for currency valuations on the home country’s books. You can even have falling sales and profitability, but when adjusted for changes in currency valuations suddenly profits appear and stock values soar. One of the great potential illusions of international business.

  71. 321
    pfft says:

    By Blurtman @ 67:

    RE: pfft @ 64 – Please read the Congressional report on the rating agencies. You will read there, as well as has been posted on blogs, rating agency managers ordering their analysts to not examine the mortgage files of the underlying mortgages securities they were rating. Why was that?

    The CitiGroup head auditor is on record stating 80% of the mortgages Citi was selling were non-conforming. Hardly isolated e-mail strawmen.

    I wasn’t talking about the rating agencies. I was talking about the big banks.

  72. 322
    pfft says:

    By Scotsman @ 68:

    “The truth? QE2 has created a massive new bubble

    I stopped reading right there. A massive new bubble? like 2000? idiot.

  73. 323
    Scotsman says:

    Recovery is about to fall flat:

    “New orders for manufactured durable goods in April decreased $7.1 billion or 3.6 percent to $189.9 billion, the U.S. Census Bureau announced today. This decrease, down two of the last three months, followed a 4.4 percent March increase. Excluding transportation, new orders decreased 1.5 percent. Excluding defense, new orders decreased 3.6 percent.”

    http://www.census.gov/manufacturing/m3/adv/pdf/durgd.pdf

  74. 324
    Scotsman says:

    “U.S. commercial property prices fell to a post-recession low in March as sales of financially distressed assets weighed on the market, according to Moody’s Investors Service.

    The Moody’s/REAL Commercial Property Price Index dropped 4.2 percent from February and is now 47 percent below the peak of October 2007, Moody’s said in a statement today.”

    http://www.bloomberg.com/news/2011-05-23/u-s-commercial-real-estate-prices-decline-to-post-crash-low-moody-s-says.html

  75. 325
  76. 326
    pfft says:

    By Scotsman @ 73:

    Recovery is about to fall flat:

    so you finally agree there was a recovery?

  77. 327
    David Losh says:

    RE: Scotsman @ 74RE: Scotsman @ 73

    You happened to pick two of the articles that I was reading.

    First commercial Real Estate inflated before housing. You can blame Walgreen’s, Wal Mart, Chili’s, Outback, Urban Outfitters, and Starbuck’s. We don’t need them. They, in many cases were the anchors to residential housing development. What was missing is job centers. I would love to debate that because financing, banking sector jobs, over ran manufacturing in this country. Finance collapse means job loss.

    Durable goods isn’t far behind. If we don’t have factories, we don’t have equipment.

    We can also look at lending as killing durable goods. We can’t afford $1K for a washer or dryer. $500 gets you a base model of a stove. Forget about cars when GM introduces a tree hugger model, the Volt for $30K or was it $40K. We have the most screwed up sense of value in the world. We finance everything so money is no object. Let’s sell less for a higher price, that’s the Home Dopey motto.

    Did I forget to mention Home Dopey, and Lowe’s in the commercial Real Estate section?

    What you have pointed out is another area of opportunity. Commercial Real Estate is especially over built, but even at that it was twice over priced. First in terms of how many players would use the warehouse style of construction, and second is that as national franchises did income averaging it pushed up the price of all locations of retail space. The price per square foot was used to sell commercial paper that also ended up as security instruments.

    More plainly, there is a lot that can be done for cheap, and getting cheaper.

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