Topic: Economics
The Economy, Stupid With economic answers so easy to come by, the author is losing patience with nervous nellies.by John Kusumi
(centrist liberal)
Thursday, October 16, 2008
If, economically, Americans have too much burden and not enough income, then the answer ought to be "less burden and more income." That's exactly the slogan that should be adopted by any economic recovery plan.
Belatedly, John McCain finally hit on the right idea when he suggested buying and flattening the adjustable rate mortgages that are threatening to reset and to cause foreclosures to the victims of predatory lending. I believe I heard Barack Obama criticize this move, because if ARMs are purchased based on the original price of the house, well -- the value is lower now, and the government would face that loss. Senator Obama is quibbling while Rome burns. I believe that it is feasible to have the government purchase the houses at the midpoint between the old and new prices; this would "split the difference" with the mortgage holder (which may or may not be the original lender).
I believe there should be a moratorium on ARM resets, and a moratorium on post-reset foreclosures. Both moratoriums could require that the house in question be owner-occupied; therefore, the help is for families rather than speculators. Then, the government should use the "buy and flatten" approach, above, to refinance the affected homeowners into affordable, fixed-rate mortgages. No more quibbling; my article here is moving along to additional economic topics.
Are jobs an issue? Not with me. Is the Middle East more important than the MidWest? Not with me. Is energy independence an issue? Not with me. Do I worry about carbon emissions and global warming? No. Why is it that I float above these problems, seemingly unconcerned? --It is because when I was an independent candidate for U.S. President, I suggested work, effort, and something to do in the 1980s. (In 1980, I advocated solar energy, and in 1984, I added hydrogen as my suggestion for how we should power vehicles.) If a society has a lack of jobs, that suggests that it has not found "something to do."
It is amazingly short sighted and boneheaded of some politicians to oppose sharp cutbacks of carbon emissions, because certain other countries are not mutually signed up in a world-wide treaty to cut emissions. Meanwhile, under my plan from the 1980s, there are no emissions. If we had begun back then to take the right path, we would by now be energy independent; unconcerned about the Middle East; and, unconcerned about emissions. And, should we really delay our work any further because certain other countries are not likewise committed? No! Other countries might follow our leadership. They too have the headache of worrying about the Middle East, and they too understand that fossil fuels are not renewable (hence, a finite supply will at some point run out).
In other words, if anyone would whine about jobs, the Middle East, energy independence, or carbon emissions / global warming, well then I have one thing to say: Quit your whining and go build a solar-hydrogen economy.
It seems that back in the 1980s, I had the patience to be more polite. Instead of "quit your whining," I "advocated a solar-hydrogen economy." But, America, you've been dissing my advice for 24 years. Therefore, I am making this a short article with concise economic solutions.
Politicians are broken records with two notes in their vocabulary: taxes and spending. They think that somehow, the answers for the economy are to be found in rejiggering the government's taxes and spending. Politicians grew up in a time when the Federal Reserve handles monetary policy, so they figure that in Washington, all they have to worry about is fiscal policy: taxes and spending. So, they are silent about monetary policy, and for different reasons (corruption and ignorance), they are silent about trade policy. All they remember from school is that a tariff is a bad thing, and they've never given it a second thought since they learned that. This paragraph is my quick synopsis of "politician brain damage."
As a result of politician brain damage, we hear Barack Obama decry "tax breaks for companies that ship jobs overseas." But we do not hear him decry "tariff breaks for communists, dictators, tyrants and thugs." He might admit that a trade deficit is bad, but he doesn't connect it with the leading cause of trade deficits: tariff breaks for communists, dictators, tyrants, and thugs.
If it is important to fight trade deficits (and it is vitally important), then the correct answer is to raise tariffs. We should fight the good fight all the way up to the point of balanced trade: a zero trade deficit. In the good fight, tariffs are our friends. They are the best tool to regulate the pace of imports. We should reach for a tyranny tariff, a currency manipulation tariff, a labor exploitation tariff, an environmental pollution tariff, and a tariff for regimes with substandard consumer protections.
If an unfortunate nation such as China has all five of these problems, then they can have five (additive, cumulative) tariffs! I do not have sympathy for communists, dictators, tyrants, and thugs. They too can quit their whining and democratize their political systems, float their currencies, and protect their labor, environment, and consumers. In the alternative, they give us convenient grounds for the tariffs which will reduce our trade deficits.
In line with what I said about politician brain damage, note that the tariff maneuver is not a fiscal solution. Taxes and spending are not required.
Here is another boost-the-economy idea, and again taxes and spending are not required: Raise the minimum wage. There you go. I've listed two easy fixes for the economy, with no new taxes and no new spending.
Another idea for the economy is to "get real" about government statistics. "Headline" inflation is actual inflation minus hidden inflation. Headline inflation is so fakey that only a network TV anchorman or talking head would believe it, or pass it along. Perhaps that's why they call it headline inflation: it exists only for teleprompters. If the federal government adjusted its numbers to "get real," here is what we'd have: The federal poverty line would be 150% of what it is now. The minimum wage would be 150% of what it is now. Social security benefits would be 150% of what they are now. And inflation would be 300% of what is now reported as headline inflation.
(Note to Americans: The bogus inflation statistics have served for many years to cheat senior citizens out of cost-of-living adjustments to their social security benefits.)
My advice? The federal government should get real. If we value the thought of arriving at actual solutions to the genuine problems of our economy, well -- how can we solve a problem while the federal government distorts the problem, and so makes it difficult to clearly and accurately see the problem? The federal government should get on the same page with reality, instead of whining when reality hammers federal plans that were made with reference to their own toxic statistics.
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Posted By: Walt Thiessen
Date: 2008-10-17 09:56:21
Let me see if I have this straight. Predatory lenders talked foolish buyers into buying overpriced houses. Therefore, the government, who has already been duped into forking over $700 Billion to the banks, should now also bailout the ARM holders.
Yet, somehow, there will be no new taxes. I can only presume that you want the Fed to create the money and send the country even deeper into debt, since the only two fundraising mechanisms available for this kind of thing are debt and taxes..
Tell me something, John. Do you think that the national debt ever has to be repaid? Or do you think we can just endlessly go deeper into debt as a country?
If the debt has to be repaid at some point, how do you see it being repaid with out hitting up the taxpayer at some point?
And if you're going to hit up the taxpayer at some point to pay that debt, how can you claim that there will be no new taxes? After all, it's not like the income tax, for instance, isn't already being eaten up for other things (like paying the gargantuan interest on all that debt, which accounts for about one-half of all income taxes collected).
Bottom line: every time you talk about "the government" bailing somebody out, it always comes out of the taxpayer's pocket. The only question is when it will come out of the taxpayer's pocket, not whether it will happen.
Well Walt, you're a libertarian with some very good eyes. In the middle of my piece, I wrote about two ideas that do not need taxes or spending. But, other ideas in my piece (at the top and bottom) do need a budget.
In your note, you called out predatory lenders and foolish buyers, but you didn't acknowledge that the government itself had a hand in permitting the predatory practices, leaving such lending unregulated, and frankly encouraging a wave of lending to the marginally qualified. On Wall Street, the government should have regulated derivatives, SIVs, CDOs, and CDSs. On Main Street, the government should have regulated mortgages. If you tell me that you have no sympathy for the Wall Street big boys, that's fine and I would agree with you. But, I make a different call about sympathy for "the little guy" on Main Street.
Is it noxious, as a matter of policy, to pick up debts of the little guy? Yes. You can make the argument that they were offered a contract, and entered it voluntarily, and it was legal. But in many average cases, you can't say "knowingly," because the teaser rates were advertised and pushed in big bold letters, read loudly by the salesman, while the rate reset eventuality was only present in fine print, read not at all by the salesman. Just as Warren Buffet said about derivatives, these ARMs were time bombs and not advisable vehicles for the marginally qualified. To some, it was clear that ARMs would not be sustainable in the future. (The future doesn't matter to salesmen who can make a commission today and then sell the loan to Fannie Mae or Freddy Mac.)
Let's consider a different issue. How do you feel about boiler rooms or phone banks full of swindlers, in a fly by night operation, that calls elderly widows with bogus investments to cheat them out of their life savings? Isn't that an illegal operation that should be shut down? Well, if it was done by CountryWide Mortgages, then it's called "telemarketing," but these mortgages were a very similar proposition. And yes, they did fly by night. CountryWide is gone, but the problems they created remain. If you believe that they should be brought to justice, then you agree that injustice has befallen these marginally qualified buyers.
Next, I would say that to refinance is not the same thing as paying for the house. After refinancing, the same owner (whom I'll admit is marginally qualified) would be left with a fixed rate mortgage to pay for the house. So, my advocacy above is not for the government to buy and hold or hoard houses. It's a turnaround operation. It's rejiggering contracts, and it might cost the government a small chunk, but probably it's a single digit percentage of the price of the house. So, I don't feel that my proposal "breaks the bank" for the government. In fact, "breaks the bank" sounds like what this crisis is doing, in the absence of a solution.
After Hurricane Katrina exposed a lot of poverty, I said this:
On poverty, what if banks were not at war with poor people? What if usury laws protected them from predatory legal loansharking, late fees, over limit, and NSF fees? What if a credit amnesty was granted to the millions of workers whose jobs got outsourced to foreign slave labor? What if minimum wage was $8.50? What if traffic tickets were only one point, two points, or three points versus the book value of the car that is ticketed?
America is a land of regressive measures. A $200 traffic ticket is 1% of the value of a middle class, $20,000 car; but, that same $200 is 10% of the value of a poverty class, beater car (worth $2,000). --A car may be the only asset of a poor person, and routine traffic stops mean the government's hand is out for 10% of the net worth for such a person.
The "one point ticket" in such a situation would be just $20, far more affordable to a poor person. The difference, of $180, is enough to buy a ticket out of New Orleans; or, enough to fix faulty brakes on the beater car, where faulty brakes, kept so absent repair money, are a safety hazard of the first order.
Government has it in its power to make such adjustments.
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In the time since then, my view on the minimum wage has gone from suggesting $8.50 to now $10.50.
I started out disagreeing with the ( basically ) housing price supports but the rest of the article I can get behind 100 per cent. Government statistical prevarication is how the Fed has survived all these years. CPI of 1 or 2 per cent is a ridiculous figure to all but the clueless sheeple. Also, I believe "predatory lending" is a term best suited for a pandering politician. Caveat emptor is a concept fostered in a free society, not the nanny state we're experiencing today.
Posted By: Ben Dagworthy
Date: 2009-01-11 10:38:06
[from an Old English word wyrgan meaning 'to strangle']
Strangle verb to squeeze a person's throat, especially in order to kill them. 2 to restrict or suppress something so that it does not develop. [from a greek word strangale meaning 'a halter']
halternoun 1 a rope or strap put around a horse's head so that it can be led or fastened to something . 2 a style of dress top held up by a strap passing around the back of the neck, leaving the back and shoulders bare [from an old english word] halting adjective slow and hesitant
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