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America's Financial Mess

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Wotan

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Hmm. Smoot-Hartley anyone? History may not repeat, but it sure does rhyme.
It boggles the mind that people can still have protectionist views, with all the history to prove them wrong. Hazlitt's one lesson needs to be part of every high-school's curriculum.
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I remember someone who wanted government to do three things: catch crooks, defend the country, and protect against foreign imports.

It took me over a year to convince her that the last item made no sense. To her, the imports were being dumped as some sort of attack on our country (the possibility that the other country might be able to do things cheaper and/or better never seems to have ocurred to her).

Even after I convinced her that *even if* the foreigners are deliberately taking a loss to sell to us, it's a net benefit to us, she still insisted on buying only American cars, in spite of the fact that her cars spent as much time at the shop as in the garage. Well, it was *warranty* work so it didn't matter, you see.

(I understand American cars are somewhat better today than they were in the 1980s but in my own experience with rental cars they still have a long way to go.)

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A teacher in my son's school is constantly on a "buy American cars" trip: addressing his advice to parents who come to pick up their kids in Toyotas and so on. I think people like that aren't thinking about how they hurt Boeing and Caterpillar every time they refuse to send dollars out of the country! Not that that should be a consideration, as such, but that is what one boils down to. Anyone who "buys American" for reasons other than quality and price is helping a bad-performing American producer at the cost of a good-performing American producer.

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A teacher in my son's school is constantly on a "buy American cars" trip: addressing his advice to parents who come to pick up their kids in Toyotas and so on. I think people like that aren't thinking about how they hurt Boeing and Caterpillar every time they refuse to send dollars out of the country! Not that that should be a consideration, as such, but that is what one boils down to. Anyone who "buys American" for reasons other than quality and price is helping a bad-performing American producer at the cost of a good-performing American producer.

I don't know if you saw this Snerd, but it's so bad here in the Detroit area that there was a story on the news the other night about a group of union contractors picketing a builder who was putting up a new dental office. The local union thugs were mad because the general contractor was bringing in labor from out of town. This "foreign" labor was coming from Flint! For those of you who don't know, Flint is about a 45 minute drive north of Detroit. Sometimes you can't make this stuff up, it's so ridiculous.

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The U.S. House of Representatives passed legislation yesterday that includes a controversial provision barring virtually all foreign iron and steel from the $820-billion (U.S.) stimulus package's infrastructure projects. A Senate version of the bill, which hasn't yet been voted on, goes a step further, extending the U.S.-only requirement to all goods and equipment paid for with government stimulus cash.

It is another form of redistribution - forcing higher cost on the taxpayers than necessary for the sake of their fellow citizens.

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To his credit, Obama seems to be backing off of the "buy American" language:

President Barack Obama said on Tuesday he did not want to send a protectionist message on world trade and would look at altering "Buy American" language in an economic stimulus bill coming out of Congress.

"I think it would be a mistake ... at a time when worldwide trade is declining for us to start sending a message that somehow we're just looking after ourselves and not concerned with world trade," Obama said on the Fox television network.

http://www.reuters.com/article/politicsNew...E51307220090204

With a bloated "stimulus" bill that is now expected to cost more than $900 billion, it's hard to find any merit in the things that Obama is doing.

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  • 11 months later...

Hark back to Paulson's notorious meeting with bankers, in Oct 2008 (discussed around post #260 in this thread).

Paulson called in top bankers. Those from weaker banks wanted government funds; others did not. Paulson forced them all to take government money.

Soon enough, the stringer banks started to point out that they would like to give the money back. Finally the government allowed most, if not all, to do so.

However, huge amounts of government money went to really weak financial companies: AIG, GMAC and Citi. Also, the government guaranteed debt of some banks.

Now, the government is on the verge of announcing a fee for having forced those banks to take government money. And, guess what... the weaker guys -- AIG and GMAC -- will be exempt.

Edited by softwareNerd
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Hark back to Paulson's notorious meeting with bankers, in Oct 2008 (discussed around post #260 in this thread).

Paulson called in top bankers. Those from weaker banks wanted government funds; others did not. Paulson forced them all to take government money.

Soon enough, the stringer banks started to point out that they would like to give the money back. Finally the government allowed most, if not all, to do so.

However, huge amounts of government money went to really weak financial companies: AIG, GMAC and Citi. Also, the government guaranteed debt of some banks.

Now, the government is on the verge of announcing a fee for having forced those banks to take government money. And, guess what... the weaker guys -- AIG and GMAC -- will be exempt.

In his appearance on Stossel's show about Atlas Shrugged, John Allison of BB&T said that TARP cost his bank $250 million and they didn't even want or need the money. Now they are going to have to pay an additional fee for having had the privilege of being forced to take the money and pay interest on it. The Mafia really ought to send its thugs over to the US Treasury Department for a training course in loan sharking. I'm sure they could learn a great deal. Can you imagine if the Treasury would start to regulate and license those in the business of loan sharking? Of course, with any sort of license like this there is always some sort of Continuing Professional Education (CPE) requirement. Treasury could charge a fee for the CPE classes and make an even bigger profit off of the economic crisis! Don't ever let anybody tell you that the government doesn't know how to handle our money responsibly. :D

In any event, things are looking up because the government's stimulus plans have been wildly successful. So says Christina Romer, one of the Obama Administration's more accomplished liars:

NEW YORK (CNNMoney.com) -- The economic stimulus program has boosted employment by 1.5 to 2 million jobs, the president's chief economic adviser said Wednesday.

The Obama administration estimate includes both jobs directly funded by stimulus money, as well as those created indirectly by companies buying supplies for stimulus projects, people spending their stimulus tax cuts and the like.

To be sure, the economy has continued to lose jobs despite stimulus - shedding 85,000 in December. The administration, however, maintains that things would have been much worse without the American Recovery and Reinvestment Act.

The stimulus act also added between 1.5 and 3 percentage points to the nation's gross domestic product in the last three months of 2009, the council said in its second quarterly stimulus report to Congress.

This is a slower pace than in the third quarter, for which the council estimates stimulus added between 3 and 4 percentage points. The economy grew at a 2.2% rate in the third quarter, according to the Commerce Department. The official fourth-quarter GDP report is set to be released later this month.

"Fiscal stimulus has the biggest impact on growth rates when it's first ramping up," said Christina Romer, chair of the council.

http://money.cnn.com/2010/01/13/news/economy/stimulus_jobs/

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  • 3 weeks later...

There are plenty of "Wesley Mouch" characters in this government. Barney Frank, Harry Reid, Nancy Pelosi, Dick Durbin, Henry Waxman, Chuck Schumer, etc...... and of course, the Chief Mouch: President Obama.

I'm sure there are more than a few Republican Mouchers, but right now they seem rather inconsequential.

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  • 2 weeks later...

http://www.cbsnews.com/blogs/2010/01/28/po...ry6152317.shtml

According to Hank Paulsen, Unemployment could have reached 25%.

I'm going to go ahead and call bullshit on this, because Hank Paulsen was told he could express opinions. That's all this really is, an opinion, not based on factual or empirical evidence.

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  • 2 weeks later...

An easy way to measure the minds and fortitude of the American public is to look at what percentage are willing to read this entire 27 page post.

... hope "the collapse" happens despite the government's bailouts and that with all the publicity concerning the dollar amounts the government is throwing out there and the control they are assuming, that people might have a thought of skepticism toward government intervention in business matters.

It depends on the perspective of the majority. If most people are feeling like victims of the system and the government is the only one offering to help them get their jobs back they could go right back into the arms of another Roosevelt.

A film like 'Atlas Shrugged' could be a major windfall in swaying public opinion if it is done right. It almost seems like a conspiracy that it hasn't been made. Does the Ayn Rand Foundation make enough money to fund the film?

Someone who makes $35,000 a year had no business taking out a $400k mortgage. ... spending beyond their incoming funds.

A lot of these new low income home buyers have been throwing their money away on rent for years, so to them, they don't think they have anything to loose. What is it going to take to inspire this kind of person to educate themselves in all manner of personal investment?

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  • 2 years later...
Since the CRA forced banks to lend to risky borrowers, it is obviously a part of the problem. However, what is not clear is this: what % of sub-prime were forced in this way? If it was so large, why are some banks so much more secure -- e.g. Wells Fargo -- when they were working under the same rules? Also, if CRA saddled banks with these risky assets, why did the Wall-street firms get in on the act? Since the CRA has been in place for so many years, why did the proportion of sub-prime grow so rapidly after 2004-05?

I think the "incentives" (low interest rates, Fannie Freddie buying 25% of sub-prime paper) played a bigger role than the "raw" CRA itself.

There's a paper "Did the Community Reinvestment Act (CRA) Lead to Risky Lending" that says that the CRA did have an impact.
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