Has capitalism been judged in the last US election?

[2046]

As for comparisons with the modern United States, an article which at least appears on the internet edition of Newsweek declares that we are all socialists, now, thanks to the 'stimulus' and partial nationalization of various things like banks. Take that as you will.

I mention it merely to bring up the point that occasionally things of one type could slide toward another over time, at least appearing if not actually being that other. Certainly that isn't limited to economics, either.

Scotty "bought" a boat. Does that imply a monetary transaction or barter, or does it simply imply that he punched the right buttons in the computer to make a successful request for a boat, as per the rules of the "Board of Prosperity and Providence" that calculate your long-term need for a boat which government then provides?

Don't laugh too hard . . . the mortgage crisis is based on houses being similarly "bought", with differences that are significant but still just a matter of some degree.

Certainly one can see how easily one can twist any economic system to suit the Federation, if one starts from a certain view of what that system should be. It took me a while to find a model that made sense, since neither capitalism nor communism seemed to do the trick across the whole spectrum of Trek.

Trek, after all, had Ferengi and 20th Century financiers on one side, and the Borg collective on the other. It had to either be somewhere in between or beyond them all, economically speaking.

Also, Cocytus:

The "communism as Other" idea is, I fear, on the wane in Western circles, as recent dismissals of capitalism (on tenuous grounds) may demonstrate.

If by "recent dismissals" you're referring to the election cycle just past

I was not.

, it proves only that "communism" is nothing more than one of a million brand-name labels people slap on something in lieu of presenting actual arguments

So you declare me a fool . . .

, a hallmark of American politics no matter your ideology.

. . . and all my countrymen, besides? What country are you from (or prefer the politics of) so that I may insult all of its citizens just as broadly and vapidly?

Any further discussion of that should be relegated to the "Other" section of the forum.

Don't insult me then tell me to reply elsewhere. That's like sucker-punching a guy then screaming "not the face, not the face!"

[Cocytus]

, it proves only that "communism" is nothing more than one of a million brand-name labels people slap on something in lieu of presenting actual arguments

So you declare me a fool . . .

Because I said that. And you can quote it verbatim . . .

Perhaps it might help to elaborate on these recent dismissals. We've "dismissed" capitalism many times. We did it with the flood of progressive legislation that followed on the heels of the Triangle Shirtwaist Factory fire, when factory owners decried the new reforms, saying "to own a factory in New York is now a calamity." We "dismissed" capitalism when J.P. Morgan took over vast numbers of troubled companies, merging them into massive conglomerates. How about Republican Dwight Eisenhower increasing Social Security and enacting the Interstate Highway Act? Socialism? Pork? Would we be better off without them?

[The Corporal]

So you declare me a fool . . .

. . . and all my countrymen, besides? What country are you from (or prefer the politics of) so that I may insult all of its citizens just as broadly and vapidly?

Look, no offense but it's certainly true that the political decisions of American politicians have had far reaching and sometimes negative effects. The recent financial meltdown is certainly the result of aspects of the US government encouragaging people to spend vastly beyond their means with the promise of easy credit thanks to deregulating a large portion of that industry. Which then found it's way into other countries with varying effects.

Where one chooses to place the blame for that is up to them. Should we blame the guys in expensive suits that run things, the voter for lapping it up, the guy who takes the loan knowing he could never realistically afford it or should we just declare the whole kit and kaboddle to be "fools"?

[Cocytus]

So you declare me a fool . . .

. . . and all my countrymen, besides? What country are you from (or prefer the politics of) so that I may insult all of its citizens just as broadly and vapidly?

Look, no offense but it's certainly true that the political decisions of American politicians have had far reaching and sometimes negative effects. The recent financial meltdown is certainly the result of aspects of the US government encouragaging people to spend vastly beyond their means with the promise of easy credit thanks to deregulating a large portion of that industry. Which then found it's way into other countries with varying effects.

Where one chooses to place the blame for that is up to them. Should we blame the guys in expensive suits that run things, the voter for lapping it up, the guy who takes the loan knowing he could never realistically afford it or should we just declare the whole kit and kaboddle to be "fools"?

Considering how much blame there is to go around, your last proposal might just be the easiest :)

Activists lobbied Congress to elmininate discriminatory practices in bank lending, resulting in such laws as the Community Reinvestment Act which requires a portion of bank loans to be made to low-income brackets. The companies themselves often offered perverse incentives to employees who steered borrowers towards higher-interest loans, did not tell them the full terms of the loan, etc. Predatory lending practices such as these, which relied either on the purposeful deception of borrowers, or on borrowers simply not asking enough questions, contributed to the mess. (Countrywide has several fraud allegations against it.) The three credit rating agencies also bear responsibility for incorrectly assigning ratings to companies which didn't merit them. The government is certainly culpable, both parties of it. You want to blame deregulation? Lord, you have many choices. Nixon, Carter, Ford, Reagan, Clinton. It's no surprise both candidates this time around incorporated some form of regulation into their platforms.

But you know something, 2046? In the context of the election, my statement was absolutely correct. Talking points are what many people in America, primarily the bases of either party, vote on. It doesn't mean they're stupid, they just don't want to devote a whole lot of thought to issues. And really, who could blame them at a time like this. When Americans are facing layoff, foreclosure, falling revenue, having their retirements dry up, having no job prospects, they couldn't care less about the intricacies of Congressional bills. They want things fixed fast. How it gets fixed is less of a priority. Unfortunately, swift action is often poorly thought out. Whether it is true of this stimulus remains to be seen.

[The Corporal]

Considering how much blame there is to go around, your last proposal might just be the easiest :)

Activists lobbied Congress to elmininate discriminatory practices in bank lending, resulting in such laws as the Community Reinvestment Act which requires a portion of bank loans to be made to low-income brackets. The companies themselves often offered perverse incentives to employees who steered borrowers towards higher-interest loans, did not tell them the full terms of the loan, etc. Predatory lending practices such as these, which relied either on the purposeful deception of borrowers, or on borrowers simply not asking enough questions, contributed to the mess. (Countrywide has several fraud allegations against it.) The three credit rating agencies also bear responsibility for incorrectly assigning ratings to companies which didn't merit them. The government is certainly culpable, both parties of it. You want to blame deregulation? Lord, you have many choices. Nixon, Carter, Ford, Reagan, Clinton. It's no surprise both candidates this time around incorporated some form of regulation into their platforms.

But you know something, 2046? In the context of the election, my statement was absolutely correct. Talking points are what many people in America, primarily the bases of either party, vote on. It doesn't mean they're stupid, they just don't want to devote a whole lot of thought to issues. And really, who could blame them at a time like this. When Americans are facing layoff, foreclosure, falling revenue, having their retirements dry up, having no job prospects, they couldn't care less about the intricacies of Congressional bills. They want things fixed fast. How it gets fixed is less of a priority. Unfortunately, swift action is often poorly thought out. Whether it is true of this stimulus remains to be seen.

What's really ironic about this whole mess is that if Obama was a Bush clone in attitude (rule by decree) he might actually be able to fix or at least soften the blow to a degree by just imposing the solution. Assuming there is a solution and that you can get two economists to agree.

[Mr. Oragahn]

Where one chooses to place the blame for that is up to them. Should we blame the guys in expensive suits that run things, the voter for lapping it up, the guy who takes the loan knowing he could never realistically afford it or should we just declare the whole kit and kaboddle to be "fools"?

The bolded part sounds highly bogus. Your train of life is so poor that you can barely get anything relatively decent without credit. You're always living on the edge, always engaged to contract debts, and the loaners clearly held a speech telling people that all was fine and you could get all you wanted.

Not counting the fact that for millions of people, contracting loans avoids spending vast portions of the money from your last paycheck, because the systems forces you to keep a security, no matter how miserable it truly is, otherwise you're one paycheck away from losing your goods.

With so much risks, you simply attempt to acquire goods with minimal risks.
However, the house loans' "sudden recall" parameters all too well mirror some of the systems which led to the massive acquisition of theoretical amounts of money at little real expenses.
The trick, in all of those offers, is that loaners, or bankers, had the ability to immediately recall these loans.

The true problem is the complete LACK of regulation. It's that free-market pulling oversight away from the true state and people, it's the break of the Steagall Glass Act among many other things.

Calling this the failure of capitalism is just bull. It's the programmed failure of a certain form of capitalism that weakens hundreds of millions, while a low percentage of the US population gets impossibly richer.

Look out, you can be sure that there's going to be a bloom of companies proposing to buy those miserable loans at lower prices. You can be sure that's there will be a catch, which in a few years, will lead to another quietly calibrated bubble and another crisis.

[The Corporal]

The bolded part sounds highly bogus. Your train of life is so poor that you can barely get anything relatively decent without credit. You're always living on the edge, always engaged to contract debts, and the loaners clearly held a speech telling people that all was fine and you could get all you wanted.

You know a simple glance at the "no down payment" mortgages that were offered in Canada was enough to tell me I couldn't afford it.

Not counting the fact that for millions of people, contracting loans avoids spending vast portions of the money from your last paycheck, because the systems forces you to keep a security, no matter how miserable it truly is, otherwise you're one paycheck away from losing your goods.

I fail to see how not being able to buy things on credit is a bad thing and if you must then your interest rate should reflect if you have bad credit. Offering someone a vehicle loan at 5% (I'm just using an example) when their credit is abysmal, instead of 13% is irresponsible.

With so much risks, you simply attempt to acquire goods with minimal risks.
However, the house loans' "sudden recall" parameters all too well mirror some of the systems which led to the massive acquisition of theoretical amounts of money at little real expenses.
The trick, in all of those offers, is that loaners, or bankers, had the ability to immediately recall these loans.

Really? I wasn't aware of that.

The true problem is the complete LACK of regulation. It's that free-market pulling oversight away from the true state and people, it's the break of the Steagall Glass Act among many other things.

Calling this the failure of capitalism is just bull. It's the programmed failure of a certain form of capitalism that weakens hundreds of millions, while a low percentage of the US population gets impossibly richer.

Who said anything about capatilism being a failure, IIRC I said unfettered capitalism and I even cited the lack of regulation as being a cause. Look at the nations that have more stringent regulation, they are in a better position.

Look out, you can be sure that there's going to be a bloom of companies proposing to buy those miserable loans at lower prices. You can be sure that's there will be a catch, which in a few years, will lead to another quietly calibrated bubble and another crisis.

Actually I beleive that has already happened, part of the recent problem was companies buying up bad debt and then offering the people that had defaulted previously another loan.

[Jedi Master Spock]

Activists lobbied Congress to elmininate discriminatory practices in bank lending, resulting in such laws as the Community Reinvestment Act which requires a portion of bank loans to be made to low-income brackets.

The CRA has been recently blamed by some pundits for the banking crisis, but in truth, the CRA didn't even apply to most of the institutions manufacturing, repackaging, and selling toxic loans, i.e., as explained here.

I will say, though, I've been watching a little bit of television lately, and it seems that advertisements along the theme of "Bad credit? No credit? No problem!" are being aired these days in the US viewing markets. If the problem is making loans to people who can't handle their money wisely, then the problem is not going away any time soon.

The big problem of the market, I think, has to do with the time scale that people think in. Short-term returns are the main focus of a lot of trading and investment activity, and the strategies to optimize short-term returns are not the same ones that optimize long-term returns. Making, bundling, and reselling toxic loans was a good move in the short term for your profit margin; in the long term, it blew up in everybody's faces.

Ponzi schemes also make excellent short-term investment opportunities - provided you get out before they collapse.

[Cocytus]

Thanks for the article, JMS. I guess the question one needs to ask is whether or not it spurred, even indirectly, predatory lending practices. Though I agree the lack of bank regulation is a far bigger contributor. One major culprit in that field is the Gramm Leach Bliley act, which undid most of the banking regulations that had been in place since the 1933 Glass-Steagall Act Oragahm mentioned. GLBA was drafted and passed by a Republican-controlled Congress, and signed into law by President Clinton. (Kudos for bipartisanship, I suppose.)

Yes, I've seen a fair number of those ads. Cash advances, payday loans, car title loans, that sort of thing. All short term, all with huge interest rates.

If anything was rejected in this election, it was the supply-side model of economics, popularized by Reagan as "trickle-down," though it certainly isn't a new idea (see Horse and Sparrow theory). Now we're moving back towards Keynesian economics, of which infrastructure spending is a large component. Obama's stimulus also includes his signature middle-class tax cut. I'm honestly not sure how effective that will be in the short term, since Americans are in full survival mode at the moment, and are likely to sit on any additional cash they get. Consumer spending accounts for a large percentage of our GDP, and right now it's at its lowest level since 1961, even with companies practically giving things like electronics away. The economy needs consumers to spend in order for it to recover, and consumers are waiting for the economy to recover to start spending, a nasty little paradox. Thrift is a virtue until it isn't. But back to the main point. We're not repudiating capitalism at all. We're refocusing the system here in the US, adopting another model of economics in order to compensate for the excesses of the previous one.

I'm quite confident in the infrastructure expeditures as both a short- and long-term investment. Many Americans have unfortunately gotten it into their heads that infrastructure equals pork. In the context of something like Alaska's infamous Bridge to Nowhere, that's true. But tighter, faster (and as an added bonus for us environmentalists, cleaner) linkages between the major cities can only be a positive thing for the economy. We need to be able to move human capital around. And in the short term, such massive projects will indeed create jobs.

[Mr. Oragahn]

You know a simple glance at the "no down payment" mortgages that were offered in Canada was enough to tell me I couldn't afford it.

Unless a crash would occur, most Americans could allow these variable rate loans. The point being that it's America, it's the super power, people think nothing can bring the country down, it's prosperous and there's no reason rates would rise.

I fail to see how not being able to buy things on credit is a bad thing and if you must then your interest rate should reflect if you have bad credit. Offering someone a vehicle loan at 5% (I'm just using an example) when their credit is abysmal, instead of 13% is irresponsible.

Sure, but again, that's the great America, and there was just too much money to make by keeping the broad population in the illustion that anyone could have a Desperate Housewives house, a shiny car and more.

Really? I wasn't aware of that.

For a few details here and there, notably on what type of good the "get more for less" formula applied to, parameters were the same.
Anyone thinking this crisis was a surprise is wrong, and there's just as much evidence that this was not an accident.
Now look where we're going with that crisis. There are coutries where there are 80,000 fired people a month, misery is growing high, and we have, geopolitically speaking, a super explosive cocktail being prep'ed for Lebanon, involving the whole military spectrum of this planet.
Guess who are the billions who are going to pay for this, again, and the very few millions who are going to gross a ton lot of cash on this, once more time.

Who said anything about capatilism being a failure, IIRC I said unfettered capitalism and I even cited the lack of regulation as being a cause. Look at the nations that have more stringent regulation, they are in a better position.

It wasn't directed at anyone, sorry.

Actually I beleive that has already happened, part of the recent problem was companies buying up bad debt and then offering the people that had defaulted previously another loan.

OK, it's time to read the small lines now.
Let's go find an example, on internet, of one of those "buy my fucked loan" offers and find the catch. This is going to be very interesting.
That's nothing more than rescheduling the bad loan on a longer period, to strike again in a couple of years.

[2046]

The CRA has been recently blamed by some pundits for the banking crisis, but in truth, the CRA didn't even apply to most of the institutions manufacturing, repackaging, and selling toxic loans, i.e., as explained here.

Singletary's editorial utterly ignores the presence of Fannie and Freddie, not to mention the simple fact that you can't blame the CRA all by itself. The CRA all by itself wouldn't have been likely to hurt too much . . . it's the liberal agenda's successes in aggregate that start to interact like too many drugs in the body. In this case, it was CRA plus Fannie and Freddie plus an utter failure of Congressional oversight even when watchdogs, the Bush administration, and others were crying foul.

Try Bloomberg instead of some Idaho editorial:

http://www.bloomberg.com/apps/news?pid= ... KSoiNbnQY0

[ILikeDeathNote]

This is only ancillary and tangential to the debate at hand, but...

Only in American bureaucracy can a disgrace of a bureaucracy like Freddie Mac and Fannie Mae exist. Decades of mismanagement and downright financial retardation - hell, even the names are downright retarded (Freddie Mac? Fannie Mae? You've got to be kidding me). Every decade you could expect TV tabloids and muckrakers like 20/20 and Dateline to do their traditional "Freddie Mac and Fannie Mae are controlled by corrupt retards" segments - hell, you could probably set a 10-year period calendar to the premiers of such segments. It truly boggles my mind how in all good ethical consciousness that any Presidential administration could allow such a corrupt and retarded organization to persist like this - if I'm not mistaken, purview of Freddie Mac and Fannie Mae had always fallen under the Federal Administration (what is commonly referred to in social studies class as the "Executive branch") so whatever Presidential administration in charge always had the authority to weed out whatever undesirable elements they wished without having to go through Congress.

[Mr. Oragahn]

This is only ancillary and tangential to the debate at hand, but...

Only in American bureaucracy can a disgrace of a bureaucracy like Freddie Mac and Fannie Mae exist. Decades of mismanagement and downright financial retardation - hell, even the names are downright retarded (Freddie Mac? Fannie Mae? You've got to be kidding me). Every decade you could expect TV tabloids and muckrakers like 20/20 and Dateline to do their traditional "Freddie Mac and Fannie Mae are controlled by corrupt retards" segments - hell, you could probably set a 10-year period calendar to the premiers of such segments. It truly boggles my mind how in all good ethical consciousness that any Presidential administration could allow such a corrupt and retarded organization to persist like this - if I'm not mistaken, purview of Freddie Mac and Fannie Mae had always fallen under the Federal Administration (what is commonly referred to in social studies class as the "Executive branch") so whatever Presidential administration in charge always had the authority to weed out whatever undesirable elements they wished without having to go through Congress.

Could it be that the whole political organ in the US of A is a supreme joke?
Impossible!
This is the US of A! The Great US of A! Get it?? 300 million people. You can't bullshit 300 million people. Not over decades. Not even over a year. You simply can't. Period. End of debate. Which never started anyway. Because there's no need to. Why are you still there?

[ILikeDeathNote]

Could it be that the whole political organ in the US of A is a supreme joke?

Deadpan sarcasm is 90's :p

[Jedi Master Spock]

Singletary's editorial utterly ignores the presence of Fannie and Freddie, not to mention the simple fact that you can't blame the CRA all by itself. The CRA all by itself wouldn't have been likely to hurt too much . . . it's the liberal agenda's successes in aggregate that start to interact like too many drugs in the body. In this case, it was CRA plus Fannie and Freddie plus an utter failure of Congressional oversight even when watchdogs, the Bush administration, and others were crying foul.

Try Bloomberg instead of some Idaho editorial:

http://www.bloomberg.com/apps/news?pid= ... KSoiNbnQY0

That would be because Bloomberg's editorial isn't about the CRA. There's little conflict in the opinions expressed in that particular editorial and Bloomberg's. The Bloomberg editorial is quite direct:

In 2005, 2006 and 2007, a blizzard of terrible mortgage paper fluttered out of the Fannie and Freddie clouds, burying many of our oldest and most venerable institutions.

FM & FM's behavior, 2005-2007, is the most immediate cause of this mortgage crisis. The CRA has so little to do with this that blaming the CRA amounts to a red herring.

There are three main causes of this mess, IMO.

There was a housing bubble (serious housing bubble kicking off around 2001ish, depending on where you were). This involves lots of people behaving in a manner that seemed rational to them at the time, but collectively looks irrational.

FM & FM behaved badly during this time as semi-public institutions that governmental bodies should have kept in check. FM & FM purchased subprime loans from private banks like they were candy.

Failure to regulate the private banking sector; this last factor is a combination of deregulation (under Bush and the late Clinton era; the only partisan constant is that Republicans controlled the House during this period, 1995-2006) and failure to actually watch banks closely using existing regulatory agencies (Bush administration).

Any chatter about the CRA is strictly red-herring territory. There's no demonstrable connection, and - as the article I linked to argues - you could even levy the claim that had more banking institutions been subject to the CRA, the subprime mortgage crisis would not have been as large. IMO, that's more a symptom of regulatory loopholes coinciding than anything else.