Weekend Open Thread (2010-04-09)

Here is your open thread for the weekend beginning Friday April 9th, 2010. You may post random links and off-topic discussions here. Also, if you have an idea or a topic you’d like to see covered in an article, please make it known.

Be sure to also check out the forums, and get your word in the user-driven discussions there!

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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. Tim also hosts the weekly improv comedy sci-fi podcast Dispatches from the Multiverse.

69 comments:

  1. 1
    The Tim says:

    Back in early 2007 a coworker had just moved to Seattle from another market that was a little further ahead of us on the bubble timeline. He and his wife had a bit of difficulty selling their old house, but they managed to unload it without too much pain.

    When he started looking at real estate around here, I showed him Seattle Bubble, told him about how I had been watching the market closely for quite some time, and strongly suggested that he hold off on buying a house in the Seattle area for two reasons:

    1) Home prices around Seattle were very likely to start falling soon, and if he waited a year or two he would most likely get a much better deal.
    2) Renting for a while would give him time to figure out what neighborhoods he really wants to live in long-term.

    Despite my warning, he bought a house anyway. Paid $420k for a place in south Snohomish County (Mountlake Terrace / Lynnwood / Bothell area). He put $84k (20%) down. Closed on it in August 2007, one month from the peak.

    Fast-forward two years… Turns out he and his wife aren’t so fond of the quiet semi-rural suburban life. They want to live closer to town where there’s more to do. They put their place on the market at $355k late last year. IF they are lucky enough to get that price, their entire $84k down payment plus an additional $8k or so is gone, poof, just like that (after agent fees and excise tax).

    Oh and by the way, their next-door neighbors whose home is ~150 square feet larger and on 4x the land just sold last month for $350k. Doh.

  2. 2

    RE: The Tim @ 1 – South Snohomish is a place where I would expect that kind of decline, especially if they bought in 2007. I had a listing up that way that had sold as new construction for almost 700k in late 2006 that sold for under 500k in early 2009. And there were several in the area just like it. A massively overbuilt area (as are parts of South King County–but not nearly as bad).

  3. 3
    David Losh says:

    Ohhhh, my favorite topic, South Snohomish County, It’s just like being in Seattle, only cheaper. How many times have I heard that.

    South Everett is another of my really, seriously, pet peaves. These are examples, in my opinion, of homgenis pricing that have confounded the financial market. When you look at a map it seems that a house selling for $400K in North King County should be the same price as a $400K home in say Mount Lake Terrace, home of the blocker.

  4. 4
    Fran Tarkenton says:

    FWIW, I was in the Brix condos recently. They advertise as being 85% sold. That didn’t seem right to me, so I checked the county records. They have 136 residential units of which 58 (or was it 54?) are unsold and 5 commercial units, all of which are sold. Eyeballing it, 85% couldn’t refer to the ft2 sold, even if you count all common areas as sold (maybe if you count the parking lot, I guess, but 58 parking spaces are unsold). I dunno, maybe they count pending as sold, and it’s taking forever to close those units sold at auction way back when. Also, the unit next to the one I visited is labeled on the door “Owner Occupied, Do Not Disturb” but it’s owned by Brix Condominiums, LLC.

    I was there pretty early in the morning, early enough that anyone who was going to have a car in the parking lot was going to have a car in the parking lot, and the lot was clearly less than 50% full – maybe 40%ish (some people don’t own cars yada yada).

    So, I’ll finish pooping all over the Brix by relaying what my dad said when I told him I was there: “You mean the place on Broadway where Safeway was? It’s only reinforced concrete to one story above grade, and then its mostly sticks. It’s the slum of the future.”

  5. 5
    The Tim says:

    RE: Fran Tarkenton @ 4 – If I had any skills of an artist I would draw up something like this awesome Wondermark poster with some stylized versions of recently-constructed Seattle condos making up the background and some sort of slogan like “Housing Bubble Condos: The Slums of the Future”

  6. 6

    RE: The Tim @ 5

    Reminds Me of the 1962 World’s Fair Posters in Seattle

    They promised us flying cars by the year 2000….LOL….overpopulation energy demand killed that dream IMO, we may have the technology for flying cars, but not enough fuel or takeoff space for all the units we’d need IMO.

    The initial approx $50,000 price tag once it’s in full production and the need for a flat take off area is holding one prototype up, see article for picture of it [it’s the red one]. I hear the red two seater one gets about 20 mpg. Don’t worry about flying them, I hear they fly themselves on GPS.

    http://www.associatedcontent.com/article/321676/flying_cars_when_will_they_be_a_reality.html?cat=27

  7. 7
    Ross says:

    “Pray for inflation — it’s our only hope”
    link

    [Interesting opinion point]

  8. 8
    Daniel says:

    Yes, inflation or “quantitative easing” will be the way, but why anyone would pray for that is beyond me, as peoples incomes will be affording much less and the general standard of living will tank. This way we bailed out a bunch of rich guys and the average Joe will pay the bill. Do you want to pray for that?

    Well maybe I am not the best one to ask: I would have let them all go bankrupt, no matter the consequences. But people are so easy to scare: After all we spent 300 billion dollar on a millennium bug that always was more of a minor issue than a big problem.

  9. 9
    DLS says:

    RE: Fran Tarkenton @ 4
    ‘Then just sticks’, wow, that pretty much sums up most Puget Sound area condo structures, with the exception of a few downtown (Seattle and Bellevue) high-rises, nice to know I’m not alone in noticing it. The Portland market may not be any better than the Seattle area market, but the condos I’ve seen there seem to be concrete and steel, no sticks. Helps confirm my decision to remain a lowly renter (and keep squirreling away the bux to buy at a later time).

  10. 10
    pfft says:

    By Daniel @ 8:

    Yes, inflation or “quantitative easing” will be the way, but why anyone would pray for that is beyond me, as peoples incomes will be affording much less and the general standard of living will tank. This way we bailed out a bunch of rich guys and the average Joe will pay the bill. Do you want to pray for that?

    Well maybe I am not the best one to ask: I would have let them all go bankrupt, no matter the consequences. But people are so easy to scare: After all we spent 300 billion dollar on a millennium bug that always was more of a minor issue than a big problem.

    we all were bailed out. if the car companies failed and wall street/AIG did it would have been a disaster.

  11. 11
    pfft says:

    people don’t realize how big this almost was. most reporters believe wall street would have went under. who the hell would have bought stocks? all those institutions are the market. who would they possibly sell too? who would GM possibly liquidate their real estate too? it would have been a disaster. we probably would have had bank runs.

  12. 12
    David Losh says:

    RE: Fran Tarkenton @ 4

    Stick built mid rise are just a waste of every one’s time. I think it was Murray Franklin who was building concrete and steel downtown. There really is a lot of carp construction in condos, and conversions.

  13. 13
    Scotsman says:

    RE: Daniel @ 8

    Yup. People forget both inflation and QE will kill the currency and our standard of living along with it. And they forget that neither will help resolve the entitlement, pension, or energy issues where the mathematical imbalances and political posturing will remain.

  14. 14
    softwarengineer says:

    RE: Fran Tarkenton @ 4

    Check it Out at Night

    The empty Condo and New Home complexes are easy to count by night….count the dark ones….LOL

  15. 15
    softwarengineer says:

    RE: Scotsman @ 13

    But Scotsman, You’re Being too Selfish

    Our grandkids need more corporation sponsered horrifying debt so uncontrolled population growth can perhaps continue for another year or two, before we all just stop driving our cars and eating…LOL

  16. 16
    Scotsman says:

    RE: softwarengineer @ 15

    Well, eating less for a couple of months wouldn’t hurt me. But I want a tax credit of some sort to do it. ;-)

  17. 17
    The_Dude_Abides says:

    A youtube for all the equity & bond Megalodon-PermaBears:
    I Fought the Fed and the Fed Won.

    “I needed money, cause I had none.
    I fought the Fed and the Fed won….”

    http://www.youtube.com/watch?v=CPXnoLAEUSQ

    No matter your economic or political persuasion, just enjoy the dancin’ go-go chick.

  18. 18
    pfft says:

    By Scotsman @ 13:

    RE: Daniel @ 8

    Yup. People forget both inflation and QE will kill the currency and our standard of living along with it.

    I am glad you are so sure. the currency could just continue to fall like it has been. our current account balance will right itself and our export sector will add workers because US goods will be more competitive abroad.

    Argentina staged a stunning turnaround after their problems in the early 2000s. Same with the Asian Tigers were talked about a few months ago. remember Malaysia?

  19. 19
    pfft says:

    By softwarengineer @ 15:

    RE: Scotsman @ 13

    But Scotsman, You’re Being too Selfish

    Our grandkids need more corporation sponsered horrifying debt so uncontrolled population growth can perhaps continue for another year or two, before we all just stop driving our cars and eating…LOL

    ten bucks says you and scotsman believe peak oil will be a disaster!

  20. 20
    pfft says:

    A relevant op-ed on the dollar.

    Embrace the dollar’s downfall
    Banks might suffer if China stopped buying US debt, but the US economy as a whole would be much better off
    http://www.guardian.co.uk/commentisfree/cifamerica/2009/oct/19/china-us-economy-debt

    “A lower-valued dollar would also make our exports cheaper in China. That would allow us to export more to China.

    The net effect would be an improvement in our trade balance, bringing back some of the 5.5 million jobs that we’ve lost in manufacturing over the last decade. In fact, since nearly all economists agree that the current trade deficit can’t persist for long, China would be helping the country bring about a necessary adjustment if it stopped buying up dollars.”

    Economics is funny. US economists and pundits are scared the dollar will collapse while not too long ago the Europeans were afraid of a strong Euro. how can those two views exist simultaneously?

  21. 21
    BillE says:

    Well, it’s the big open house weekend. There’s a total of 1 house I might go see and it’s way overpriced. I really thought there might be a few more I’d go look at.

  22. 22

    By BillE @ 21:

    Well, it’s the big open house weekend. There’s a total of 1 house I might go see and it’s way overpriced. I really thought there might be a few more I’d go look at.

    An agent in our office told us he had 23 groups through his open house yesterday.

    He was joking. :-D

  23. 23

    http://www.komonews.com/news/local/90554479.html

    Wow. I like how KOMO tries to slant this as being the big bad owner against the tenants. I haven’t looked up how long the owner has owned this building, but they have to be financially hosed. I would even question whether after 9 years they have any kind of claim against anyone for their losses.

  24. 24
    softwarengineer says:

    RE: pfft @ 19

    Considering if We Fed the Rest of the 6.6B People on Planet Earth the Same N. American Diet We Eat

    It would use up every drop of oil in the world; none for cars, heat, plastics, etc….yes, peak oil WILL be a disaster.

  25. 25
    softwarengineer says:

    RE: pfft @ 20

    I Agree With You Pfft There

    Throughout 2009, the Chicken Littles have been predicting $2000/oz gold [like Glen Beck and his buy gold sponsers] and a falling dollar….it didn’t happen, the reason, when American consumption tanks [with it’s dollar], the Euro, Yen, etc have been tanking worse. We’re in uncharted global economic waters right now, don’t assume inflation of deflation….how about both on different items….

    You noticed when they raised oil and we stopped driving and buying food, it collapsed back down to $30/bbl from $150/bbl….don’t assume anything.

  26. 26
    David Losh says:

    RE: softwarengineer @ 25

    You agree with pfft?

    What I agree with is we are in a global economy that is dependent on feeding those 6.6 billion people. Actually I think it’s 6.7 billion, but give or take a few million.

    I think that’s the part people are having a hard time with. The days of building a wall, and keeping people out are way past. The United States this week has made a pact with Russia, the Evil Empire. China is our financial ally. If we expand our border cooperation, which we can, we would be the dominant power on earth.

    In my opinion we are in exciting times. if you look outside of our borders as an opportunity, rather than the enemy, there are more places to be, more money to be made, and all with a spirit of making a positive contribution.

    A full belly makes for bad soldiers. We have an opportunity.

  27. 27
    David Losh says:

    RE: Kary L. Krismer @ 23

    Look up Carrera II (sp?) on lower Queen Ann some time.

  28. 28

    Even though none of you were any help at all on my question several weeks ago about the net cost of leasing a third vehicle, I thought I’d share what I think I figured out. As you may recall, the issue was adding a third (leased) vehicle that would be used only for business, to take some mileage strain off our existing vehicles.

    The IRS standard deduction of 55 cents a mile is so generous, that basically it comes pretty close tax wise to being a wash. The 55 cents or deducting the actual expenses of the leased vehicle would be pretty close, either way, depending on the cost of gas and any repairs. Since those miles would be taken away from the miles of the other two vehicles, there would be no significant tax savings. Thus the cost of getting the third vehicle would be basically the lease payments, plus insurance, less any savings due to fuel efficiency.

    What’s crazy is that the IRS allows me 55 cents a mile for an 89 Ranger. Since gas for 10,000 miles would cost about $1,500, that would leave $4,000 for other expenses and depreciation. I think my original thought when I went into real estate is probably better than this leasing idea. Put as many miles as I can on the Ranger, because there basically is no depreciation at this point.

  29. 29

    RE: Kary L. Krismer @ 28
    Interesting, Kary. I almost always have this irresistible urge to offer advice even on things I know absolutely nothing about. This time I managed to stay silent, not an easy task.

  30. 30
    softwarengineer says:

    RE: Kary L. Krismer @ 28

    My Friend Runs His Own Company

    And I sit on his board, and he puts 100K milage on a car in a couple years or so…so writes it off as business expense milage. You can buy a 20 mpg luxury rig or a lower cost 35 mpg fuel miser; the milage deduction is the same, so he goes with cheaper cars higher milage rigs and the IRS milage deduction pays for them.

    I’ve been trying to get him to buy newer [2-3 YO] higher quality make devalued cars [low milage] like WSJ recommends; but he just hasta have new…LOL

  31. 31
    pfft says:

    By softwarengineer @ 24:

    RE: pfft @ 19

    Considering if We Fed the Rest of the 6.6B People on Planet Earth the Same N. American Diet We Eat

    It would use up every drop of oil in the world; none for cars, heat, plastics, etc….yes, peak oil WILL be a disaster.

    the rest of the world can’t use resources like we do so your point is not valid. something that can’t happen won’t so there is nothing to worry about.

  32. 32
    pfft says:

    By softwarengineer @ 25:

    RE: pfft @ 20

    I Agree With You Pfft There

    Throughout 2009, the Chicken Littles have been predicting $2000/oz gold [like Glen Beck and his buy gold sponsers] and a falling dollar….it didn’t happen, the reason, when American consumption tanks [with it’s dollar], the Euro, Yen, etc have been tanking worse. We’re in uncharted global economic waters right now, don’t assume inflation of deflation….how about both on different items….

    You noticed when they raised oil and we stopped driving and buying food, it collapsed back down to $30/bbl from $150/bbl….don’t assume anything.

    currencies can’t tank all at the same time. one currency is rising against another at all times. lately the euro has been tanking versus the dollar.

  33. 33
    Trigger says:

    RE: Scotsman @ 13
    What the inflation will do is the following:
    1) Inflation is good for the general population because can effectively pay employees less by keeping salaries at the same level. So employers cut costs. If employers cut costs – it is good for employees because they get to keep their jobs.
    2) Inflation does not mean currency going to the toilet. What other currencies are there to choose from? There are no safe havens. Would you rather take the EURO when you do not know the accounting standards over there?
    3) Sure living standards can go down a bit but so what? People just have to adjust to new living standards.
    4) People’s savings get wiped out a bit. But they can invest on other things and keep themselves liquid.
    5) Debt becomes less of an issue. So effectively the health reform, bailouts could be financed by people who have saved money. This should also not be a biggie as all the people who will make the sacrifices will feel they did a good thing. Helping out Uncle Sam is always an honor and pleasure at the same time.

  34. 34
    BillE says:

    RE: Kary L. Krismer @ 22 – Yesterday I went to the only open house I was remotely interested in. It was late and I was the only person who attended all day.

  35. 35
    Scotsman says:

    RE: Trigger @ 33

    1.) No, it’s not good, and it doesn’t necessarily mean anybody get to keep their job.

    2.) Yes, it does. There’s more to currencies than just trust and power.

    3.) Yup, suffering is good for ya- builds character, especially when it’s unnecessary.

    4.) How do they invest after they’ve been wiped out?

    5.) You really shouldn’t post when you’re high. I don’t know where to start.

    Sure, wild guess are fun for a while, but maybe you should leave this to the adults?

  36. 36
    Scotsman says:

    RE: BillE @ 34 – the market is in recovery- open house traffic has increased from earlier estimates! I’d give a percentage, but it’s hard to calculate when the base is zero.

  37. 37
    wreckingbull says:

    RE: Kary L. Krismer @ 28 – I recently went through this with my wife’s business. Lease a small van like a Ford Transit Connect, or have her use my pickup with canopy. For us, taking the 55 cents was the clear winner. I built out a HVAC and storage system for the enclosed cargo area, and it and actually works quite well for her needs.

  38. 38

    RE: softwarengineer @ 30 – Well if he’s putting almost 50k a year on, I’d want to go new too. And with that many miles I wonder how expensive the car would have to be, and how much gas it would have to guzzle, for it to make sense not to do the mileage allowance? That would be over 25k a year in mileage deduction!

  39. 39
    Scotsman says:

    Bush’s fault:

    http://www.daybydaycartoon.com/041110.jpg

    (May have to cut-and-paste to exppand and read)

  40. 40
    sleepwalker says:

    RE: Scotsman @ 39

    http://z.about.com/d/politicalhumor/1/0/t/1/2/bush_economy.jpg

    Bush left America in fantastic shape. If only we could have had a third term.

  41. 41
    Snigliastic says:

    RE: Kary L. Krismer @ 38
    This is an interesting thread for me. My current car has about 177k miles on it, I love it, but I am concerned about its’ long term viability. I have my own business, and am thinking about a major (35k) upgrade.
    My current thought is to buy the nice car, then drive the old car for long distances (greater than 100 miles round trip). Any advice?

  42. 42
    Mikal says:

    RE: Scotsman @ 35 – As usual, you claim that deflation is happening. When the point is made that the stock market is rising, then you say that inflation is the cause. Well……
    And yes, the people that haved saved and are getting screwed to keep everything solvent, well, BUMMER.

  43. 43
    pfft says:

    By Scotsman @ 39:

    Bush’s fault:

    http://www.daybydaycartoon.com/041110.jpg

    (May have to cut-and-paste to exppand and read)

    the economic collapse caused by the housing bubble he didn’t regulate started on bush’s watch and he left office with a $1.3 trillion dollar deficit. so unless obama is running $4+ trillion dollar a year deficits your cartoon is just a cartoon.

    Bush Deficit-Cutting Vows Exclude Iraqi Spending
    By REUTERS
    Published: February 2, 2004

    WASHINGTON, Feb 2 (Reuters) – A Bush administration budget vow to cut the record $521 billion deficit in half by 2009 assumes higher tax revenues and restrained spending while excluding key areas sure to require hefty outlays, like Iraq.

    http://www.nytimes.com/2004/02/02/politics/02WIRE-DEFICIT.html?pagewanted=1

    he vowed to leave a $250 billion dollar deficit and he left a $1.3 trillion one.

    next.

    EDIT:

    $5 trillion added to national debt under Bush
    http://www.politifact.com/truth-o-meter/statements/2009/jan/22/rahm-emanuel/5-trillion-added-national-debt-under-bush/

    bush doubled the national debt.

  44. 44
    pfft says:

    the unfunded bush tax cuts for the rich will add almost $2 trillion to the deficit while the health care bill will actually reduce the deficit.

    What Are These Three Numbers?
    http://www.econbrowser.com/archives/2010/03/what_are_these_1.html

    Obama will help tens of millions go to the doctor and/or not die do to lack of medical care while bush added trillions to the debt to give his buddies a tax cut. that should tell you a lot.

  45. 45
    Scotsman says:

    Like I said, it’s all Bush’s fault. But for how much longer?

  46. 46
    pfft says:

    By Scotsman @ 45:

    Like I said, it’s all Bush’s fault. But for how much longer?

    no, I just said what bush did and didn’t do is his fault.

    whatever happened to personal responsibility?

    No One Is to Blame for Anything
    http://www.nytimes.com/2010/04/11/opinion/11rich.html?scp=2&sq=rich&st=cse

  47. 47

    RE: Snigliastic @ 41 – I suspect that your situation would probably be the same as mine–that the net cost is the gross cost. In your case though their might be more of an advantage to having a second car, assuming it’s just you driving in the family, than for me to have three cars with two drivers.

  48. 48
    Daniel says:

    By pfft @ 11:

    people don’t realize how big this almost was. most reporters believe wall street would have went under. who the hell would have bought stocks? all those institutions are the market. who would they possibly sell too? who would GM possibly liquidate their real estate too? it would have been a disaster. we probably would have had bank runs.

    Even all that would not have scared me. It would have been a healing process. Instead of people holding entitlements that are not there, they would have realized that it was the case.
    And btw: I never said I would not have bailed out the innocent, but what was done is bail out the ones who caused it at the expense of everyone else. Why not bail out the clients instead of the banks?

  49. 49
    Mikal says:

    RE: Daniel @ 48 – Because then what are you left with. No banks means no lending.

  50. 50

    By Daniel @ 48:

    Why not bail out the clients instead of the banks?

    Because the economy would collapse. It’s sort of like the 911 victims compensation program. That wasn’t enacted within days of 911 to help the families, it was enacted to keep the insurance industry functioning so that the economy would not collapse. Without insurance there is no business. That’s even more the case with banks.

  51. 51
    David Losh says:

    RE: Kary L. Krismer @ 50

    You are very correct. The insurance companies were bailed out after 9/11 and Hurricane Katrina. The biggest problem I had with the finger pointing at the goverment was that insurance companies, still, to this day, have been negotiating claims in New Orleans.

    I think you are claiming we need banks and insurance companies in order for business to function. That’s just not true. In fact banks and insurance companies have become a huge part of our economy. They provide those good jobs. They are in every facet of business, they dictate business practices. The auto industry is almost all insurance company driven. Those safety features are the selling point.

    We bailed them all out. It should never happen again. They need sever regulation to get them back to being a managable part of an over all robust economy.

  52. 52
    Daniel says:

    By Kary L. Krismer @ 50:

    Because the economy would collapse.

    No their creditors would have owned what was left of the mess. There still would have been a market for both banks and insurances. Guarantee that small businesses and insurance services continue and let those who abused the system go bankrupt with it. It is a delusion to think that one would be better off to bail out the abusers rather than the victims. This just means that the real crash is still ahead, maybe in a year or maybe in 50 but none of the problems have been removed.

    By the way: All this talk about instant collapse is just purposefully instilling fear in people so that they will be like sheep. We see that all the time, whether it is the war in Iraq or the millennium bug, whether it is terrorism or whatever else. The strategy is used when one has no argument: One just claims everyone who opposes it must be a fool. Who wants to be a fool after all? The biggest economic damage done by 9 11 was not by the terrorists but by the measures that followed.

  53. 53

    RE: David Losh @ 51

    I Agree More With You David

    Had we simply let the big banks collapse, used FDIC to cover the savers and chopped all the failed big banks down into small “ma and pa neighborhood banks”, like we had 20 yrs ago [remember Washington Mutual before it got big and unethical]….all this toxic waste hedge fund acronym hogwash we’re still faced with today, would be prevented in the future.

    The bank regulations would have happenned automatically with small honest banks again, IMO.

  54. 54

    RE: Daniel @ 52 – Well that’s one way of thinking. I think it’s all incorrect, but you’re entitled to your opinion. The thing is, once a system starts collapsing, it can be impossible to stop. Look how many idiots were withdrawing money from banks on rumors even though the amount they had deposited was well under the insured amount.

    I’m curious though how you think those insuring the various 911 entities were somehow the abusers?

  55. 55

    RE: Kary L. Krismer @ 54

    Let’s Hope Bailouts to Insurance Companies Aren’t Politically Motivated

    Like AIG was singled out for mass bailout cash and ironically, their stranglehold on lobbyist Democratic/Republican politician contributions was epidemic.

    If anything, bailouts to insurance companies should be done with a random lottery to the winner.

  56. 56

    RE: softwarengineer @ 55 – Although AIG historically was a large insuring entity, I don’t view their bailout as being a bailout of an insurance entity, as opposed to a general purpose financial entity (e.g. they leased airplanes, etc.). It wasn’t their traditional insurance businesses that got them in trouble, or that were in trouble. In fact, I wonder if AIG’s various insurance entities could have survived if the main entity had been allowed to collapse.

  57. 57
    Daniel says:

    By Kary L. Krismer @ 54:

    I’m curious though how you think those insuring the various 911 entities were somehow the abusers?

    I actually have not claimed that at all. The 911 part purely referred to the actual direct damage being rather small. Think of a 9.0 earthquake in the LA area when we talk disaster. And even that is not a “natural disaster” but just what happens sooner or later when you massively build in earthquake zones.

  58. 58

    RE: Daniel @ 57 – An earthquake in LA doesn’t typically kill 3000 people, and when it does it’s not necessarily the result of anyone’s negligence. I suspect the insurance companies did have to pay off on the buildings damaged. It was all the lives that would have been costly, especially given the salaries of the people who likely worked in the buildings that came down.

  59. 59
    Daniel says:

    By Kary L. Krismer @ 56:

    RE: softwarengineer @ 55 – Although AIG historically was a large insuring entity, I don’t view their bailout as being a bailout of an insurance entity, as opposed to a general purpose financial entity

    I guess I can agree that a CDS is not a traditional insurance, but who if not an insurer would do such a thing? The simple fact is that AIG considered the risk to be so low they engaged in a business where they knew very well they could not settle the claims that followed large numbers of defaults.

    The bailout achieved one thing: In the future all the professional gamblers know they will not be held accountable by this government, so they can continue the gambling with no risk.

  60. 60
    pfft says:

    By Daniel @ 52:

    By Kary L. Krismer @ 50:

    Because the economy would collapse.

    No their creditors would have owned what was left of the mess. There still would have been a market for both banks and insurances. Guarantee that small businesses and insurance services continue and let those who abused the syst

    and what is left is nothing.

    you people just don’t understand. does the liquidation of bear stearns, aig, fannie, freddie, AIG, general motors, chrysler and others give you a warm and fuzzy feeling? you can probably add even more names to the list as collateral damage.

    do you know what happens in bankruptcy? they dump assets on the market. the market would be toast. the march 9 lows were at 666 on the S&P. without the government rescue the market would probably have fallen 75%. that’s almost 50% FROM the march 9 lows. we are talking about 400 or lower on the S&P. the government just basically did an FDIC bailout. for large financial institutions. if intervention is so bad why have the FDIC?

  61. 61
    pfft says:

    By Kary L. Krismer @ 56:

    RE: softwarengineer @ 55 In fact, I wonder if AIG’s various insurance entities could have survived if the main entity had been allowed to collapse.

    from what I’ve read they might not have.

  62. 62
    pfft says:

    By softwarengineer @ 53:

    RE: David Losh @ 51

    I Agree More With You David

    Had we simply let the big banks collapse, used FDIC to cover the savers and chopped all the failed big banks down into small “ma and pa neighborhood banks”, like we had 20 yrs ago [remember Washington Mutual before it got big and unethical]….all this toxic waste hedge fund acronym hogwash we’re still faced with today, would be prevented in the future.

    The bank regulations would have happenned automatically with small honest banks again, IMO.

    those small honest banks are going bankrupt like crazy in Georgia. read Paul Krugman’s column today.

  63. 63
    Daniel says:

    By Kary L. Krismer @ 58:

    An earthquake in LA doesn’t typically kill 3000 people, and when it does it’s not necessarily the result of anyone’s negligence.

    The 1906 San Francisco quake was a 7.9 and killed 3000 people. From a science point of view it is not a question that there will be large earthquakes in the LA area. Every year the risk is small but it _will_ happen.

    In some areas of California there is construction close to and _on_ the San Andreas Fault. This is not negligence?

  64. 64
    pfft says:

    I forgot to add bank of america and citigroup to my name of banks that needed rescuing.

  65. 65
    Daniel says:

    By pfft @ 60:

    and what is left is nothing.

    Sure. The moon would have disappeared and the sun would have stopped shining. The kangoroos in Australia would have been “wtf?” just before falling over dead. Or maybe not.

    Guess what: Even after almost 70 years of a socialistic dictatorship there are still people living in Russia today. When their broken system collapsed it was a big turmoil but live goes on. It will go on when the next bubble bursts as well.

  66. 66
    pfft says:

    By Daniel @ 65:

    By pfft @ 60:

    and what is left is nothing.

    Sure. The moon would have disappeared and the sun would have stopped shining. The kangoroos in Australia would have been “wtf?” just before falling over dead. Or maybe not.

    Guess what: Even after almost 70 years of a socialistic dictatorship there are still people living in Russia today. When their broken system collapsed it was a big turmoil but live goes on. It will go on when the next bubble bursts as well.

    there are also a lot of people not living in Russia today because they were killed by the millions under Soviet rule or they left for a better life. tens of millions actually.

    what I mean by saying what is left is nothing is the creditors who own GM get a commercial building in the middle of flyover country that won’t be used for 10 years and is worth 20 cents on the dollar because every other creditor is selling their commercial building too!

    you and the Austrians like peter schiff make it sound so easy! GM liquidates and someone picks up the pieces and someone starts a new car company to employ all those people! in a depression! when nobody has money to buy a car! it’s so easy! the creditors get the buildings and bam! cars! prosperity! magic!

  67. 67
    pfft says:

    Russia probably would be a developed country today on par with the rest of Europe w/o the communists. remember, they are the R in BRIC.

  68. 68
    Daniel says:

    By pfft @ 67:

    Russia probably would be a developed country today on par with the rest of Europe w/o the communists. remember, they are the R in BRIC.

    Hehe, you seem to misunderstand me: I stated that Russia needed to get rid of what was crippling it for those 70 years. I argue the same to a lesser extent for the United States, or for that matter for any country where people blindly follow an ideology without questioning it and leave it to a few corrupt individuals to govern them. Collectively speaking, everyone gets the government they deserve, even if this may be frustrating for a few of us.

  69. 69
    Daniel says:

    By pfft @ 66:

    you and the Austrians like peter schiff make it sound so easy!

    This is more of a side note: If you speak German compare the German and the English Wikipedia version about the Austrian school of economics. They differ greatly in their emphasis, to the point where I would argue the English article completely distorts some ideas. I encounter this a lot when reading statements in American newspapers about this topic, but this may just be a result of Wikipedia’s popularity.

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