Everything I have been talking about RE: economy / middle class

Maybe they are, maybe they aren't. You know where it would be good to provide quotes from the protesters to show that perceived inequality was motivating them? In the article. Instead, we get a list of various cases of unrest, then we are told that there is no unifying theme and the malaise cannot be reduced to one factor, followed immediately by an implicit claim that inequality is the unifying theme/one factor but that it has multiple causes. No case was made that inequality (perceived or real) was the motivation for any of the events previously listed.

Again, are the markets free? What is "enough" demand. These are fundamental questions that are glossed over. The author is so vague that his point is meaningless. One can't entirely prove or disprove his assertions, because they are immeasurable. I could as easily assert that Democratic control of the US political scene has not resulted in enough good in America. Since I haven't established Democratic control or defined what I mean by enough or good, it is just a meaningless sentence used to get people (mostly those who already agree) to think Democrats should lose power.

There are many reasons. Primarily, there was a bubble in one of the largest sectors of the economy (the housing market), this sector was the biggest component of the average American's wealth, and the bubble burst. This was compounded by the fact that the bubble was driven by loans that never should have been given (at least partially supported and encouraged by government interference) and these loans where securitized and sold (with nonsensical ratings attached). Bubbles should not be a surprise to anyone though, because they have been going on for a long time. This is made more obvious by the fact that the housing bubble was right on the heels of the tech/.com bubble. I don't blame free markets for people taking out loans they can't possibly afford to pay or for banks handing out those loans, I blame idiots. The fallout of those decisions was forced on the American people when the government decided to bail out the banks and AIG.

 

It isn't in the article, which is what you posted and asked for responses too. In fact, the title of the thread states that the article is everything you have been talking about. There was no request to bring outside knowledge to bear, so I took you at face value and responded to the article. Maybe instead you wanted some sort of scholarly paper on the reasons for and solutions to the jobless recovery, but that isn't what you said.

So free markets can't create the demand that was seen in 2006? What created the demand that was seen in 2006? Are the markets radically freer now than they were then?

I would prefer that no institution be declared too big to fail. I would prefer that the government not privatize reward and socialize risk. I would prefer that companies that do shady things like bundling mortgages designed to fail not get paid off when the mortgages fail.

I disagree that TARP was necessary to prevent a great depression. I think the decline would have been much sharper and much deeper, but the recovery would have occurred faster. We would be looking at a much different landscape than we are now, as many of those assets would have been bought for pennies on the dollar by institutions that were not ties up in toxic assets and had cash reserves. Instead the losses instead of being catastrophic but limited only to those who had invested in the toxic assets were spread around to everyone. Under TARP, a great many Americans lost money on bad investments that they didn't make.

I do find it funny that the left tries to make out TARP as solely owned by Bush though, as though the Democrat controlled congress had no say in it whatsoever. Not that Bush is any less liberal a spender than the most spend happy Democrats. It's funny, he spent more on entitlements than any previous president, and the Dems hate him, but love Obama who spends more and has the same tax policies in place.

I am perfectly aware of CDS, MBS, ABS, etc. Your condescension is unwarranted and unappreciated.

None of that changes the underlying fact that the reason these assets were toxic was because banks were giving out loans to people that they should not have been giving out. The rest exacerbated the problem, it didn't create it. If the loans were not being given out (many at the behest of the government which wanted to make home ownership more available to the poor and minorities) they could not have been securitized, could not have been fraudulently rated, and could not have been insured. Go ahead and keep living in your world where the root of the problem starts at Wall Street though.

If I and 50 other people print out fake Super Bowl tickets and sell them, then you buy them all up and sell a block of 100 seats to someone else, that doesn't make it okay what all the individual counterfeiters did, it just added another layer. You didn't even mention the security rating agencies that were getting paid to rate these investments AAA.

You still haven't answered my one question (after I was nice enough to respond to you many times over).

 

I just want to discredit that whole notion that the Community Reinvestment Act and GSEs like Fannie Mae and Freddie Mac were somehow significantly responsible for 2008. It seems to be a popular conservative talking point.

First of all, CRA was really principally targeted at race-based redlining, which had to be one of the most f**ked up scenarios this side of the Civil Rights Act.

Second of all, CRA-mandated loans were such a small part of the subprime mortgage pool. Most subprime mortgages were driven by pure profit by unregulated shadow banks. CRA has been shown to have no empirical relationship with 2008---

Third of all, even if banks had been "forced to lend to poorer lenders" (Which the evidence clearly shows they weren't, with market-driven demand that was purely unassociated with CRA regulations being the driving force behind most subprime loans (Issuances of private-label mortgage-backed securities increased dramatically from 2001 to 2007), and the peak periods of explosive subprime growth being more correlated with Greenspan violating the Taylor rule in unspeakable ways, and cheap credit, than any change in CRA regulations), nothing excuses the fact that the banking system was filled with moral hazard and fraud as these crappy products were passed along. Nothing excuses the fact that banks were so deregulated in their handling of financial products and counter-party risk, that they almost sank the system on stupid bets. Nothing excuses the insane leverage ratios that allowed subprime to take such a dent out of the shadow banks in the first place.

Finally, as to the role of GSEs in 2008---

I realize it is an incredibly popular position (especially among conservatives) to demonize and scapegoat the poor for every failure that occurs, but if you're still doing it for 2008, then it occurs to me that perhaps the fantasy world is yours---where the poor, unconstrained by asymmetric information, somehow once again caused the failure of America by causing unregulated shadow banks to take on more risk than they ever could. You seem to posit, as many of your thinking do, that by merely existing, the poor are incentives to madness, counter-party risk, 30:1 leverage ratios, and shoddy loans. I guess that fits well into your narrative of the poor as parasites, but you should be keenly aware that empirically speaking, that thread of thought is at best a misrepresentation of the facts, at worst a delusion that will make worse the problems revealed by 2008, rather than cure them.

 

You must spread some Reputation around before giving it to Northside Storm again.

 

You are the one that posted an article, basically pulling a Margaret Thatcher, "This is what we believe" moment.

If you didn't want the article discussed, why post it? The article didn't really provide anything of merit, you would have accomplished as much by simply posting that you think the stratification of wealth is the root of unrest in the world and that increased redistribution was the cure. I guess I am in the wrong for taking your suggestion to read and consider the article as an invitation to comment on the article.

Finally, I do not agree that income inequality in and of itself is either the cause of the unrest or required remediation. So long as real wealth of most people is the same or similar as it was during good times, the fact that the most wealthy people are further away should make no difference. I'm pretty sure there is something written somewhere about not coveting about what someone else has.

The article you posted (along with a statement that it represented your views) claimed it was a market issue.

Did you even read the article?

Deregulation doesn't encourage businesses to take risk at consumers expense, it allows businesses to take risks at their own expense. Bailouts shift the risk of loss from the business to the consumer. That is why the banks that took the bad risks and didn't get bailed out went under (see Bear Sterns) while the ones that did get bailed out are bigger than ever.

Irrelevant. The taxpayers should not have had to carry a private company for any period of time.

Geithner?

If the borrowers made the payments on the loans, they would not be toxic. To say that the bad loans are not why the assets were toxic flies in the face of logic. A poop sandwich is what it is. Cutting it up and repackaging it may convince other people to get stuck with it, but at the core the real problem it that it was a poop sandwich to begin with.

Go back to my first post, it is the only question in there.