June 17, 2009
– Comments (7)
If they wanted to solve the crisis.....it would be EASY!!!!!!! RESTRUCTURE!!!!! Wa La...it's over!!!!
IT'S GOOD TO KNOW SOME GET IT!!!!!!!!
you know alstry, I always post about pie in your blogs and I don't think armageddon is a likely outcome here but...
i think we agree on alot of things from our very different spots in the bleachers.
there is no question, no question that the country needs to focus on production. manufacturing, mining, tapping the vast coil and oil reserves that we have, maybe nuclear power, maybe taking the lead in green power manufacturing, I don't konw.
But making a truck is, as stated in the videos above, much more valuable to the economy than a bank. Banks are servants to the economy, and cannot sustanable, and should not ever be a focus of it.
Wow Alstry. My hat comes off on this one. The case is perfectly stated now. But will they decide to live, or will they decide to die? Perhaps that answer lies more in the stars than in antiquity when Civilization was civilized. It is the difference between the mathematical assent of interest accounts exceeding the rate of growth in asset accounts which CAUSES this crisis. And yes, the answer is the Biblical Jubilee. I wonder if we'll be hearing from the 'I hate God' nuts out there as they insist on brutalizing their neighbor, as they pull all of us into the abyss.
but that noted, his proposal to cancel debt or reduce it to what cna be paid is very morally wrong.
we go to everybody with a failing mortgage and reduce their payments to what they can manage? that, my good man, is a transfer of wealth on an epic scale to the lowest common denominator (in many cases, I've no doubt many people have lost their homes due to no gross lack of thought or responsibility).
we let a guy with a $35k job keep a 600,000 dollar house for 100,000 because thats what he can afford to pay?
when that house is again worth $600k on the market, presuming this person has maintained it properly, and it goes for sale does the $500k profit go back to taxpayers, to the banks that lent in the first place, or does this person get to keep it?
and at the end of the day, the total losses in the mortgage industry (factoring out inflation and costs of issueing them, etc.) will be something about like
$ value of bad mortgages (ones that cannot be paid)
$ value of payments made before the mortgages failed
$ value that can be recouped from the properties
$ value of carrying the properties until they can be sold. as in th cost of money to the lenders or whatever party is holding the properties until they find a sale on the market
So if mortgages on $1 trillion worth of houses are going to ultimately foreclose, and if the value of those homes is ultimately 40% below the mortgage value, and if $100B of payments were made... the losses are $300B.
I have not sat down and tried to do the math for the actual situation the country faces, but I strongly suspect that it isn't as dramatic as it is presented much of the time.
Ultimately we will only see losses less than the actual default rate, much less than 1/2 of it because eventually the foreclosed homes can be sold for something probably better than 50% of the loan amount.
The proposal above, used in ancient times, can't be applied as today the debt isn't owed to the government but rather its owed to banks, ... ultimatley perhaps to the shareholders of those banks. The shareholders should without any doubt lose, thats fair, the owner of a failed business should be a loser.
But the delinquent homeowners should not be made victors.
Our society needs to reinject some element of darwinism - survivla of the fittest. Or at least prosperity for the fittest.
For people who create jobs, who create wealth. Creation of jobs and wealth is much more valuable to soceity than transferring of wealth.
I have in my life made money by creating jobs and wealth (starting a business), resulting in exports, job creation, salaries paid, some tiny tiny balancing of a trade deficit and transfer of wealth from abroad to the US. Thats good.
I have also made money in my life by transferring wealth to me from others. For example when Doug Kass called a short term top on the S&P last week I figured he has the hottest hand of any market caller these days so I bought puts on SPY. I cashed them out at a profit, ultimately a loss to the counterparty.
Shouldn't I be taxed more heavily for the latter than the former? Shouldn't starting a business be treated better by my society than buying puts on SPY?
We need to prioritize value. The value to an economy or a society is about like this, in my moderately uneducated view:
1. production from zero. farming above all, mining. things that get something from essentially nothing
2. manufacturing. making things
3. any type of service
1 actually, literally creates wealth. 3 is often more of a transfer. Acknowledging that its not that simple, as a service may transfer wealth to our society from another (a positive for our society) or it may create a new demand and elevate economic activity and blah blah blah blah blah.
But ta the end of the day categories 1 and 2 need to be prioritized higher by any society that hopes to have an optimized "business plan".
But to succeed in 1 and 2 requires a stratified wealth structure within a society, it just does.
I must conclude this rambling rant as I do realize that its getting disorganized...
you get another rec, not because I agree but because this is good food for thought.
You really can't trust this analysis. The math doesn't work even from the start. The title of the video is "Six minutes with..." BUT!!!! youtube indicates that the video is 9:36. I mean, if they can't even get the time of the video right, how can we trust anything else that it says?!? ;)