RoR: Forum

You wrote: "That is why this once free nation once marched in arms against seething Totalitarians selling their forced association skull eating nonsense."

Presumably, you're saying that under FDR we were 'free', whereas today we are not. So in actuality are you a plant from The Nation magazine?

Post 81

Monday, January 13, 2014 - 10:02am

Eva:

Yes; good pickup.

Katrina Vanden Heuval is actually me, in drag. I try to keep that at a minimum, however, because wearing leather all the time makes me itch.

Post 82

Monday, January 13, 2014 - 10:21am

Eva:

Presumably, you're saying that under FDR we were 'free', whereas today we are not.

A nation with merely instructed children who openly sneer when using the word 'freedom,' as instructed at their mills, is pretty much free to follow other forced association paradigms, and fail.

Speaking of FDR...6.7% unemployment...and 97 million Americans not working.

You buying any of the artfully crafted cheerleading these days? If so, you need to get away from your Disneyland of complete subsidy once in a while during your extended vacation from reality, and count the dusty 'For Lease' signs all across this free America...

'The' Economy going to turn that corner any day now...just... not any day soon.

It's been a while; isn't it time for the fifth annual 'jobs, jobs, jobs' speech from a guy who's never run a lemonade stand?

regards,
Fred

Post 83

Monday, January 13, 2014 - 10:32am

Eva:

Is that too much of a paradox? A free nation...bound to each other by our belief in our freedom from each other, except under a model of free association?

Else...what is freedom? Freedom is really forced association?

That is Totalitarianism; the opposite of freedom.

In that pile is rape, gang rape, national socialism, communism, and slavery. No thanks. No part of me would ever advocate slumming in that pile, looking for a justification for what I was instructed to value.

I ever find myself sifting through that steaming trash pile for justification for anything, and I'd be wondering "Who sent me here?"

regards,
Fred

Post 84

Monday, January 13, 2014 - 11:30am

Fred,

My point in having brought FDR into the conversation was to indicate-- by your own standards!-- that America was not amy more free in the 1930's & 40's than today. 'Probably far less so.

My confusion with your particular brand of Objectivism is that it seems to be unable to locate in real history of what might consist a more free scoiety than the one we have today.

At least Trina VdH can do that. There was a progressive era between FDR's election & Reagan and right or wrong, Nation people want it back.

So the paradox seems to be that, since Reagan, America has taken another course, yet large government persists...

Eva

Post 85

Monday, January 13, 2014 - 1:12pm

Eva:

Yes-- who grew the size of government more than Nixon, Reagan and Bush 43?

I am no fan of Reagan's grand compromise with O'Neill; 'a little more guns in exchange for a lot more butter.' I voted for Clark in '80, not Reagan. Sleep like a baby; read Clark's 'New Beginnings' sometime.

Clinton(reasonably)leveled off Reagan's defense buildup;(what we call the catastrophe of sequestration today). The 'little more guns' is long gone from the budget. The 'a lot more butter' remains, the source of our current fiscal wreck on rails.

Reagan made his deal to perform an endzone dance on an already failed paradigm. The US Intelligence community -knew- that the USSR was farming with ox carts in the 80s; Reagan at most accelerated the free-fall.

To me, Reagan's legacy is not so much presiding over the end of the Cold War, but the end of the beginning of Catching The Cold.

In addition to reasonably leveling off the Reagan defense buildup after the fall of the Berlin Wall, Clinton also did the following:

1] Did not get his Stimulus Program passed.
2] Did not get his BTU Tax passed.
3] Did not get Nationalized Health Scare passed.

Those were the three 'must haves' he campaigned on in 1992. Got none of them passed.

Leveling off the Reagan defense buildup was enough(and any POTUS would have cashed in that 'peace dividend' in the aftermath of the fall of the Berlin Wall.) 90s America last time our economies breathed("The erah...of Big Guvmint....is Ovah..." from 1995 SOTU.)

Bush/Obama did the opposite post 9/11, expanded the size of government, and have achieved the opposite results.

Economies staggering as a result.

So who is surprised at any of that?

regards,
Fred

Post 86

Monday, January 13, 2014 - 1:42pm

Eva:

1998. Middle of the booming 'Miracle Clinton Economies.' (Translated: activist government spanked in 1994, lurch left halted in its tracks, welfare reform, gov't spending/Reagan defense buildup leveled off, no Stimulus Plan, no BTU Tax, no Nationalized Health Scare...Congress safely perseverating over the stains on Chubber's blue dress, doing nothing...economies booming for the last time in modern memory.)

LTCM / MIT 'quant' magic telling marks with money that they have successfully calculated away risk, and are promising ridiculous returns on investments. Folks at the peak of the Miracle Clinton Economies seeking ridiculous guaranteed levels of returns get caught short when reality smacks the scammers up the side of the head. Oooops. All those 'non-modelable' terms in their model taht were simply ignored because they couldn't be modeled, reared their ugly head and the universe, as it is, declared the non-repeal of finite risk.

OK, so pension fund managers, teacher fund managers, all kinds of people chasing miracle returns at the peak of the Miracle Clinto Economies are about to take a 3.5 billion dollar bath. Heads will be placed on pikes...which is what happens in free market capitalism when necessary discipline erupts.

If folks can't take a 3.5 billion haircut at the peak of booming economies, then ... when can they take a haircut?

And..here is where it is born. Some risk shedding schmucks run to their crony fraternity brothers at the NY Fed and convince their fellow carcass-carving weasels that this potential 3.5 billion dollar hit represents 'systemic risk' that will bring 'the whole system down' ... at the peak of the Miracle Clinton Economies?

And so, the NY Fed must implicitly backstop guarantee the crazy-assed plays made at LTCM, so that all those poor pension funds and teachers funds don't take a hit.

With unlimited FED backing, LTCM 'works' its way out of its mess, and the 'catastrophe' of this 'once in a hundred year event' is averted... and the precedent of moral hazard is now firmly entrenched in our 'free markets', thanks to a cozy crony based melding of Wall Street with the guns of government.

Wall Street, by way of relationships once forged on Prospect Street, can count on the virtually unlimited shed risk guarantees of K-Street, and risk shed onto unwilling taxpayers becomes the new norm.

It doesn't take a hundred years for the next financial crisis; it takes ten, and the nation would have -killed- for a 'systematic crisis' that could have been averted with only 3.5 billion in taxpayer backstop. The cost to the taxpayers in this next round of shed risk tribal thievery is in the trillions, and we are living int he shell of something that once was, sustained today by endgame anecdotes of carcass-carving.

Our financial services weasels, colluding between Wall Street and government, have broken the engines of intelligent risk management that once was free market capitalism, permanently, until the current corporatist system fails(as it will)and blows away, and with it, takes along whatever was left of free market capitalism in this nation, long gone.

Then what? The vanguard of a bright new tomorrow?

Kampuchea, maybe.

I'm sorry you never got to actually see America. It was something. for a few moments.

regards,
Fred

Post 87

Monday, January 13, 2014 - 5:45pm

i agree that the problem of an oversized government won't be solved by playing the two institutional parties off of each other....

Post 88

Tuesday, January 14, 2014 - 6:00am

Eva:

I'll say.

1998. Look what the solution is among the entrenched DCWall Street corporatist weasels in the middle of booming economies: unlimited government subsidy by taxpayers directed from the CronyFest on the Potomac in a penguin armed constructivist chutes and ladders manner, picking winners and losers from among political favorites.

2008. Look what the solution is among the entrenched DCWall Street corporatist weasels in the middle of floundering economies: unlimited government subsidy by taxpayers directed from the CronyFest on the Potomac in a penguin armed constructivist chutes and ladders manner, picking winners and losers from among political favorites.

No matter who is driving around in the bullet proof limo.

DC is the problem, period. America is moving towards its own real life version of 'The Hunger Games.'

Post 89

Tuesday, January 14, 2014 - 8:10am

Interesting essay on LTCM from 2008.

We've double downed, we learned nothing.

Flight from risk is easy. Shedding risk onto others is easy.

But none of that is the intelligent management of taking on risk directly.

LTCM quants promised that they had 'calculated away risk' with their models, and offered ridiculous 'risk free' returns(20-40% 'risk free.') Wrong.

The 'fix' for that catastrophe was to shed risk unwillingly onto others by way of the guns of government.

We are -still- to this day clinging to that model, and the sad, sick result is our languishing economies.

Our tribal weasels have murdered free-market capitalism.

The potential rewards for intelligently and fairly taking on risk were once reasonably high, even as the potential risk of loss was also high(complete loss of investement at risk.) In modern times, the CEO of FED EXP -- a business that actually buys and operates airplanes, has facitlities, hires people and provides an actual useful service -- is limited to a debt/equity ratio of about 15% in order to ruin his uphill battle and create actual value in our economies.

The LTCM weasels, at the time of their collapse, had a debt/equity ratio of over 25:1. Not FED EXP and its 15%, but rather, 2500%. Because in order to provide their 'service' (which was, according to some, "running in front of a bulldozer and picking up nickles")and make ridiculous profits doing so, they had to run in front of a lot of bulldozers and pick up a lot of nickels, and so, needed borrowed capital in order to do so. Insanity. When you need a debt/equity ratio of 25:1 in order to 'do something' it is a screaming sign that whatever you are doing doesn't really need to be done. The 'financial services' industry spinning value proxies in going nowhere eddies is serving nothing but itself; value-proxies are not value.

Think of it this way: a group of folks chasing 40% returns on their money, pool together and come up with 4.5 billion of their own capital at risk. But in order to play their doing nothing game, they need to borrow 25 times that amount of OPM at risk from banks and others not paying attention to business, and put it at risk also.

If they were trying to run a FED EXP and actually create value, banks would suddenly look at what is reasonable risk and start putting on the breaks when they reached 15% debt/equity levels, and stop lending them more money. But because they were creating no value at all, and just betting on the scoreboard of a game played by others, suddenly banks and others had no qualms about lending them 2500% of their pooled equity to go place a lot of small bets and make huge returns on their 4.5 billion...

When this scam hit the inevitable downside of risk, it wasnt the players in the game who footed the bill. It wasn't the folks chasing the 40% returns. It wasn't the banks who blindly made the loans to these folks.

It was uninvolved taxpayers, far from the gambling, where connected cronies are playing a game of heads they win, tails they never lose.

And, none of that is possible without the guns of government in the game.

Same exact thing happened with government fatfingiering of housing market financing, resulting in the 2008-2014 and counting financial crisis. How does any of that happen without Freddie and Fannie and 'mortgage backed securities' and CRA bottom line only regulation of discrimination in fair lending laws?

regards,
Fred

Post 90

Friday, January 17, 2014 - 3:07pm

The idea that everyone should own his/her own house was an idea that Reagan took from Thatcher.

This was legislated accordingly--that the lending standards of private banks, in a certain % of cases, must be lowered.

But the ensuing default on these loans was the effect, not the cause, of the investment crisis. This we know because the average default effected those with standard, low risk credit,

OTH, standard, liberalite HUD stuff was all about standards, rent control, and subsidy.Conservative thought (rightly) said that HUD is redundant if everyone owns.

So Fanny and Freddy came into the market of offering loans to the un-qualified relatively late.

The size of their combined operation, moreover, was on scale significantly smaller to thet of even the largest of the privite lenders, Nationwide.

In this particular case, the lack of federal control can be blamed for the 2008 collapse: repeal of Glass-Steagall, by Clinton.

Furthermore, the Fed overseer who favored de-regulation, including repeal of G-S, was a follower of Rand, named Greenspan.

In other words, blame cross-cuts political loyalties. Everyone thoght we were better off by treating banks as normal, relatively unregulated capitalist entities...

Eva

Post 91

Friday, January 17, 2014 - 9:25pm

Eva:50 sets of independent state banking and lending regulations were systematically, via court case after court case and even USSC case, replaced with a single point of failure overbearing federal model of regulation. Single point of failure. Monopolization of regulation.

It was done so by a confluence of interests. As in 'duck!' That is one of the characteristics of monopolies that make them dangerous.

I think by 'Nationwide' you meant 'CountryWIde.' Either way, exactly the point; if it had been named 'StateWide' then the 2008 crisis would never have made it past page 8 of the local paper.

Another systemic reason to run, don't walk, from the insanity of National Socialism. Not to be confused with socialism.

It is terrible system design; single point of failure will.

regards,
Fred

Post 92

Friday, January 17, 2014 - 9:36pm

Yeah, I believe that state banks were given their RIP during the 1904 crisis, resolved by Morgan & his famour 'triage'.

As to whether we'd have been better off with new state banks is an interesting question...

My point, however, is that our present system didn't fail as much as fail to perform its regulatory oversight.

This was made far tougher with the repeal of Glass-Steagall.

As Volker noted, yes, we need to bring G-S back (opposed by the bank lobby, of course!),. but also regulations as to how anyting calling itself a 'bank' might operate.

Eva\\\\\\\\

Post 93

Saturday, January 18, 2014 - 3:50am

So Fanny and Freddy came into the market of offering loans to the un-qualified relatively late.

This is true in a narrow sense, regarding "conforming" mortgages that Fannie or Freddie insured starting at origination. However, Frannie and Freddie were already deep into subprime loans much earlier through buying pools of already securitized mortgages.

Securitizations of mortgages probably would not have become such a huge phenomena without Fannie and Freddie. Lewis_Ranieri's success -- starting in the late 1970's -- was highly dependent on Fannie's and Freddie's guarantees.

AIG's writing credit default swaps was prominent in assigning causes to the financial crisis. But who were the biggest writers of credit default swaps, even if the transactions weren't called that? Fannie and Freddie. Insuring a mortgage against default is in essence a credit default swap.
(Edited by Merlin Jetton on 1/18, 4:23am)

Post 94

Saturday, January 18, 2014 - 7:43am

Yes, the government institutions were 'deep' into sub-primes and insuring written mortgages.

Again, they were obliged to issue a certain # of subprimes by law; of course they would insure against a calculated rate of default.

In this sense, yes, all taxpayers would 'pay for the defaults as a deficit against budget.

But the rate of default remained low until the crisis hit in 08.

At that point, borrowers both from private and fed institutions became trapped in the same sinking boat: loss of job and devaluation of assets effected everyone.

To say that CDS's are just a form of insurance is interesting. As such, you still ask, is this particular form of insurance permissable by law?

Well, yes, according to Greenspan, but not to his predicessor, Volker.

Moreover, on a fed default, the assets remain within the system--feds sell the house on the cheep and you have another owner.

Legalities aside, CDS problmes begin with tracing ownership...

Eva

Post 95

Saturday, January 18, 2014 - 12:25pm

Eva,

Let me make it clear the cause of the humongous bubbles and thier pops. The cause centralized government monopolized control of money and interest rates. Legally some claim that the banks are not part of the government. Maybe so in some aspects to get around government reporting and other rules. But economically/forcefully they are the same entity.

The banks (such as Bank of America) no longer have to maintain a particular reserve ratio. I can't even find a statistic of what the banks' reserve ratios are. They lend at rates way below what free market savers and lenders would. Bank employees and owners are personally protected from bank default... They just get to ride the interest rate wave till they default or get bailed out to ride some more.

You can see above the downward sloping interest rate that caused the .com bubble, the rise that caused the 2000 pop... Then the downward slope that caused the housing bubble, and the rise that caused the 2008 pop... Then the downward slope that had been an attempt to keep the housing bubble inflated, and all the while for the last 30 years a US Treasury bond bubble has been growing...

Now the Federal Reserve is blatenly printing FRN at an annual rate of 1 Trillion per year devoted to buying all the loans just to keep the interest rate down. Despite the vast expansion of money supply, interest rates are still going up at the end of 2013 because they aren't buying every loan. With this rise in interest rates, will we finally see the bond bubble pop?

Post 96

Saturday, January 18, 2014 - 12:38pm

Banks are the "engines" of inflation. The Fed controls the "gas tank."

Post 97

Saturday, January 18, 2014 - 1:45pm

Dean,

Well, yes, I don't even think you need to padoodle out a Fourrier to see the 20-year trend: a drop .8 points per year.

As we speak, even negative interest rates won't encourage peple to buy--a liquidity trap, as it is said.

And yes, low interest rates, combined with loose qualification, combined with non-existant holding margins for banks do, indeed, contribute to a bubble.

But alll three effective causes were a result of The Fed accepting market principles:

*Of course banks want to sell money as cheeply as possible...It's the feds job to say 'no', this will flood the market
* Of course banks want loose qualification--default means a repossession. It's the fed's job to say, 'no', to homeowners, the risk is too high.
* Of course banks want to do business without securing their own assets--who wouldn't?! It's the feds job to pass laws that assured withdrawl of assets by customers.

Going back to 1800, American experience indicates that free-marketing banks don't work. That's why Clay wanted a national institution in 1828.

The Great Depression initiated reform a bit different that the European model suggested by Clay. We'd have private banks secured by FDIC rules which got to use legal tender, as well.

The 1980-ish hands off policy arguably put the fed on both wrong sides of the same fence. In other words, they'd be blamed for carrying out a policy of non-interference that appeared to be neither free-market nor mandated from above.

In other words, my disagreement with you is based on my observation that The fed made decisions that were virtual 'free-market' because, again, free-marketeers would have done the same things.

Eva

Post 98

Saturday, January 18, 2014 - 2:02pm

Eva,

The difference is systemic verses localized. I'd much prefer localized corruption rather than systemic. Then I can bank with people I trust.

With local private banks, the banks had to balance with each other once in a while, which helped the market quickly identify bankrupt banks. Interest rates couldn't be manipulated over tens of years, and the government couldn't spend much more than it taxed.

Verses its been 2014 - 1933 = 81 years of the Federal Reserve defaulting now. Furthermore it has enabled the Federal Government to deficit spend in an out of control manner.

Your preference for the later in my mind shows that you prefer big government spending and systemic market manipulation.

Post 99

Saturday, January 18, 2014 - 6:47pm