[y66]

Just watched this panel discussion:

http://www.epi.org/publications/entry/amer..._fiscal_choices

For the gist, skip to Jan Hatzius at 10:47ish.

[y66]

I'm feeling optimistic. Put me down for bad.

[kenberg]

Like Nellie Forbush I also have a bit of irrational optimism although it may be just that confronting reality requires effort. To quote the eminent philosopher W.C. Fields, "Sometimes you have to take the bull by the tail and face the situation".

This double dip banking crisis is sort of getting to me. Somehow we need to send the message that whatever the mistakes of the past were, it is time for bankers to accept that the bullshit must stop now or someone is going to spend some time in jail.

[awm]

I'm pretty optimistic. It seems there are correlations between raising taxes on the rich and a healthy economy. A US tax hike on the wealthy seems likely, quite possibly because the congress fails to get its act together and the Bush tax cuts expire for everyone.

The explanation I've seen is that when tax rates are high, business owners don't want to have to pay a large percentage of their profits to the federal government, so they reinvest the money in their business (thus avoiding taxes). This means more hiring and also better revenues for the business owners in the long term. A low tax rate encourages business owners to use their profits as personal income, and while everyone spends some percentage of their personal income, this is a much less efficient way to stimulate the economy than growing a business.

[Gerben42]

Specifically the US economy? Or the world economy?

Possibly the World moves on, leaving the US behind... If the US is going for bad, bad bad or the end, well we're not.

[Aberlour10]

Gerben42, on Oct 8 2010, 12:51 PM, said:

Specifically the US economy? Or the world economy?

According to the neocons who have announced The New American Century...its one and the same.

These guys must be very unlucky seeing now that some decisions about US finances are not more made in NY or Washington, but on the last floor in The Bank of China

[ggwhiz]

The Stimulous cash is over up here in Canada shortly and so are the jobs it created. I'm predicting pain until we come close to balancing the books but optomistic enough that it will be short term(ish?).

[Phil]

California hasn't spent about 50% of its stimulus. Things move slooowly here.

Let the damn foreclsoures happen. I don't understand this pocket veto. The quicker we work through the problems, the faster recovery can happen.

I'm mildly hopeful for next year, and I don't think the November elections will have much impact.

[Mbodell]

Put me down for very, very bad. The November elections will not help things, but the political gridlock will be just the icing on the cake as the real economy as a whole is still quite sick.

[kenberg]

It's not at all clear to me that "let the damn foreclosures happen" is an option. As I get it, the banks have largely lost control of the situation. Of course the situation is murky and facts are disputed but the old days, where the was the buyer and the bank and no third, fourth fifth, nth parties involved, seem to be a fading memory.

I am not at all advocating that people who cannot pay what they owe are entitled to keep the house anyway. Honoring a contract is an important point of law. The bankers, however, seem to focus on exactly this point and have a very casual attitude about all other points of law. Fraudulent documents are described as technical problems. We shall see. I am not prepared to take them at their word.

My next door neighbor works at a bank, a perfectly nice guy. I'm not trying to pick a fight with anyone. But this industry is not giving me confidence.

[Phil]

kenberg, on Oct 8 2010, 09:08 PM, said:

I'm not trying to pick a fight with anyone. But this industry is not giving me confidence.

Nor am I, but I fail to see how not paying a secured debt to a bank is 'murky'.

Banks are treading water. Money needs to get into the system for lending. The quicker these non-performing loans can work their way into cash for the lender, the better off the economy will be.

[kenberg]

Phil, on Oct 9 2010, 11:38 AM, said:

kenberg, on Oct 8 2010, 09:08 PM, said:

I'm not trying to pick a fight with anyone. But this industry is not giving me confidence.

Nor am I, but I fail to see how not paying a secured debt to a bank is 'murky'.

Banks are treading water. Money needs to get into the system for lending. The quicker these non-performing loans can work their way into cash for the lender, the better off the economy will be.

On this we agree. The murky part is, I think, the status of the loans. Yes, if payments are not being made,something needs to be done.


So foreclose, yes, if we need to. But do it so that the foreclosure stays foreclosed. There is some concern, perhaps legit perhaps not, that many of these foreclosures will not stand up to close legal examination. Foreclosure is bad but a glut of foreclosures that are later overturned will be total chaos. We will have people living in a house bought in a foreclosure sale who now must move out because the foreclosure is found to be invalid. This will not be good.

Fundamentally the problem is that people paid $500,000 of borrowed money for a house that is now worth $300,000. That house will go back up to $500,000 the same day that my age goes back down to 30. So it's a problem. I was sort of hoping bankers could grasp that shoddy paperwork is not their best choice for a solution.

I own exactly one house and it is paid for. I have zero interest in helping someone else, be it bank or home owner, close this $200,000 gap. I can be sympathetic but this is one pooch that I didn't screw. Maybe they will figure it out. And maybe I will turn 30 next birthday.

Added: The Sunday Post has a column by Steve Pearlstein
http://www.washingtonpost.com/wp-dyn/conte...0100903904.html

It's not fiery rhetoric but it sounds about right. In places he supports your view:

Quote

But none of that changes the basic reality that there are millions of Americans who took out mortgages they could not support on houses they could not afford.

But then

Quote

It may be necessary to postpone their day of reckoning for a few months to get the paperwork in order and ensure that all the proper procedures are followed, but the reckoning is inevitable.

and

Quote

A moratorium should also put pressure on banks and loan servicers to finally bite the bullet, as many of us suggested they do two years ago, and move more aggressively to restructure problem loans by writing off more of the principal and refinancing what remains at lower interest rates over longer terms.

The fundamental unchangeable fact is that the money is gone. If someone gives me twenty grand for my 2001 Honda, he won't be getting the money back. The borrower should not have borrowed, the lender should not have lent. But they did. Some everyday people were irresponsible. This is news? But bankers? Once a banker was a boring person who always had his tie correctly tied and regarded "Let's wing it" as a lewd suggestion. Times have changed, I guess.

[benlessard]

Paul Krugman as said that he consider Keynes GTE a more important book than A.Smith Wealth of Nation. After seeing the video Im sure M.Friedman is rolling into s grave and want to return his Nobel prize.