Crisis Management I-A

About: obama outlines job-creation plan - cnn.com

Back in 10752 the concept of political change through orchestrated crisis was unconcealed. The concept is further enlarged & instantiated in the American Thinker here. The author of that article, Jim Simpson, elaborates in his own blog here.

And now Obama shows US how it's done here at CNN. Notice how much of a crisis he must summon to pass public & congressional muster for his version of a WPA (FDR's economic plan) - basically government employment for everyone out of work! Obama during his recent 60 minutes interview (last week) said that his priorities for the next few years was not balancing the budget, but spending to end the problems in the economy & elsewhere. FYI, the Great Depression was ended by WW-II : nothing like a massive war effort to change the dynamics. It wasn't the WPA.

I tend to like Steve Forbes ideas - lots of them here. In one article he identifies the fall of some financial institutions with the requirement that they must write-off their housing assets, immediately devaluing them even before they are sold. Apparently they had enough money to do business before that requirement was made. FYI, the value of my house is what I sell it for ultimately & not what the media hypes the market with either up or down. Other causes like the shenanigans associated with Congress & Fannie Mae & Freddy Mac may not be unconcealed for a long time, if ever. Returning to the gold standard in a modern form might be interesting but unacceptable to those in government as it would decrease their abilities to manipulate the economy for their own purposes & power.

Until people realize that government doesn't produce anything then we are in for a long line of crises. Government employment only produces what is politically interesting to those in power with a forced consumption & payment by the public: taxpayers & all of us affected by our government printing money with abandon.

BTW, I was fairly convinced in Econ 101 in college that most wars are caused by economic problems. End the absurdity of effects of some of the forces in the economic system & you might end wars!

Anyone remember the movie The Sting? Remember how the con depended upon the urgency with which the transaction had to be consummated? Most con games depend upon a perceived urgency so that the mark ends up working with his emotions & not his rationality. Often his emotions can be led down the primrose path to believe that something can be had for nothing if he acts fast enough. Today BHO announces that "... there isn't a minute to waste" when it comes to rebuilding the economy." The $$7,400,000,000,000 con is on! That's ~ 25K$ for each man, woman & child alive in the USA today. I need a bailout, I'll take mine in gold.

Comments

Seth says

Actually the new deal was 1933-36 and you can see the recovery on the stock market in the charts here. Me thinks the Great Depression was not ended by WW-II which didn't start until after 1939. Your three years off.

source:M above
FYI, the value of my house is what I sell it for ultimately & not what the media hypes the market with either up or down.

Well that may be true if you sell, but what if you just refinance? I recently refinanced to a lower rate and the value of my house had actually increased the media hype that prices were going down notwithstanding ... or at least that is what the mortgage company got the appraiser to put down.

Me thinks those conservatives who dream of a perfect market economy ruled only by the law of the jungle should stop giving away trillions to their banker buddies. Putting those billions into real jobs and real building sure sounds better to me. Besides it's going to make for some interesting construction pictures.

Seth says

M 2008-11-22 10:30:59 10923

WW-II was in it's incubation long before 1939 hostilities broke out.

The question is when did spending on munitions begin, not when Hitler started to mouth off in the beer halls. Me thinks it did not begin in 1933. But you are welcome to find actual statistics to prove me wrong.

When you refinance you resell your house to the bank. At that time the bank sets a value on your house. Apparently the bank has more fudge room there than you think. Just like the rating firms, the appraiser firms are in the pocket of the banks. But, yes, when you actually try to sell your house to a real person, then the shit hits the fan.

Mark de LA says

You just need to work a little more on your history & your economics. You can say, of course, that WW-II started with Adam & Eve. OTOH, the economic precursors began long before that with the conditions after WW-I in Germany & Europe in general. What I see now without some people waking up, is WW-IV in the making. Look at the economic workings in Russia with the start of collapse of their oil economy. Ditto for the Middle East oil baron states. Look at Russia & China meddling in South America & the Caribbean.

Mark de LA says
BTW, Forbes seems to support the selection of the new secretary of the treasury.

Mark de LA says
I am more interested now in the dynamics of what is going on in the economy & the world in general with respect to politics etc, rather than the RWG (polarity) of it all.

Mark de LA says

http://www.youtube.com/watch?v=_mzcbXi1Tkk <-- Rahm Emanuel groks crisis opportunities.

Mark de LA says

seth 2008-11-22 11:32:53 10923

M 2008-11-22 10:50:51 10923

I am more interested now in the dynamics of what is going on in the economy & the world in general with respect to politics etc, rather than the RWG (polarity) of it all.

Hard to believe that when the basis of your item is blaming democrats for the mortgage meltdown. Perhaps they did have some effect there but i would not underestimate the greed of Wall Street that created mortgage backed securities out of packets of bad loans and rated them AAA. Like all things the answers are not simple, but continually blaming the democratic push to get people into homes looks to me as just partisan rwg.

I follow the leads wherever they take me! If your ox is gored, tough shit! The basis (thesis) of this item was political change through orchestrated crisis. Let's use the information we have to see who is doing that, if at all, & to what end.

Mark de LA says

Although it is an interesting thermometer, the rise & fall of the stock market should probably be disinterested on purpose in the midst of troubled times hyped both by the M$M & the Internet. (to what end?) Everything that is NOT going on locally is a "story" - sometimes that which is going on locally is also a story; sometimes what is going on with you, yourself is just a "story".

Did you ever wonder why it appears that the whole economy tanked in a matter of weeks. Yet you & I are still the same; commerce goes on, people need goods & services. Who let the air out of the balloon? Why was there air in the balloon in the first place? Why is it not possible to go back to the way things were before the forward leaning hype to a recession or worse? Why can't we just go back just by general agreement without the need for a "7.7$$ trillion" so-called bailout? Qui bono? How could accountants fuck up so badly?

Seth says

M 2008-11-25 09:02:01 10923

Interesting ... yeah ... why not just have Congress pass a law that says: Everything goes back to the way it was in August.

Thing is Paulson went to Bush and said, hey the banks don't have as much money as they have been carrying on their books in reserve and these banks are going to start failing (and they were), and then he went in front of the American people and said give me $700 billion to make these reserves what they should be, and then the credit market froze up in response, and then he just gave out money instead, and then banks used that to buy each other instead of loaning it out, and now he is doing another shuffel shoe in front of us trying to get money flowing ... but will it? I do wonder what would have happened if he had just shut his mouth and quietly did a docey-doe with the rules such that the banks would not fail just because their assets were overstated. Thing is, though, you can't just unring this bell. So maybe your solution is the best afterall ... just go back in time and disbelieve that the banks money ever actually needs to worth anything very much at all.

Mark de LA says

Again, I like Steve Forbes's idea to jump-start the mortgage industry. Apparently it was an accounting requirement that causes lenders to hold their collateral below loan value before it was even sold. Suddenly your bank thinks your home is worth a lot less & therefore their loan portfolios loose value. Regulations then dried up the ability to loan for financial institutions.

BTW, I wasn't saying anything about passing a law to go in reverse. Passing a law would be the last thing I would do. Laws don't do anything except make politicians feel good; as if they had done something! If you want money to flow, lower capital gains, lower small business taxes & take your foot off the brakes to innovation, business & progress. All that money thrown into Katrina recovery is stalled by regulations and red-tape; very little is getting done except by private citizens. I suspect that 7.7 Trillion$ could fix most of the loans which went into default. Some process engineering would have to be finely tuned, though. Like atomic bombs & abortion some bells of this last year can't be unrung.

P.S. Please no RWG on abortion on this item.

Mark de LA says

See 10957 for a magnitude of the bailout mental adjustment!

Seth says

Well, yes, i expect Obama to use his bully pulpit to change the narrative ... and that will help ... but there can only be one president at a time ... so wait till after inauguration to hear that.

Re your capital gains idea: Banks make their profit from interest charged, not capital gains. I doubt that the old Bush/McCain's magic bullet will help you get out of this frozen credit market.

Mark de LA says

seth 2008-11-25 12:45:12 10923

You may misunderstand capital gains. If I sell my house for a gain of > $250K I pay capital gains tax. If I invest in the stock market & sell my shares at a profit I pay capital gains. If I were to buy gold at one price & sell it later for a higher price I would pay capital gains. All of these kinds of transactions, particularly the stock market thingy, makes capital for business more readibly available to the people who start & continue actual production of goods & services. With commerce better then the banks can begin to make more loans available. Banks holding onto money make no profit. Growing bigger makes no profit & except for being to write off (pay less taxes) restructuring costs they are not making any money by doing so. Let's "hope" that BHO doesn't change the narrative to something worse; so far I'm real concerned about the apparent lack of concern for the Budget Deficit & the National Debt which he seems to want to blow out of all proportion [see also: item 10957]. I don't, nor do I care to know what you mean by "the old Bush/McCain's magic bullet" snideroony.

Mark de LA says

seth 2008-11-25 10:35:25 10923

source: M above
BTW, I wasn't saying anything about passing a law to go in reverse.

Well yeah, you didn't say anything about the nature of your general agreement ("Why is it not possible to go back to the way things were before the forward leaning hype to a recession or worse? Why can't we just go back just by general agreement). The only thing i could come up with would be a law passed by Congress. But maybe you have a different way ... do you?

Btw, the Bush tax cuts on capital gains are still in effect and that did not prevent this crisis. I know of no connection between lowering capital gains as a solution to assets being dramatically devalued. Could you perhaps point to some kind of economic theory that would indicate that strategy for that ailment?

Capital Gains Tax is a tax on profit - it acts as a brake on investment. Reducing it whenever & wherever it occurs stirs the business investment. If BHO were to announce a reduction by half or more you would see banks begin to want to make profits rather than merge & grow larger. The power of the bully pulpit to hype exceeds any law that can be passed. Might want to put some substance underneath to make it more believable besides hope, eh? Could do a tiered reduction in capital gains for companies investing in green technology with one caveat: don't invest in things which will become business failures & need subsidies as far as the eye can see. (ethanol, biodiesel, fart-power ... etc.)

Other than that, the guillotine in the public square is a great motivator to stop corruption of which there is plenty in and out of government!

I can think of a few that .....

Seth says

M 2008-11-25 13:10:56 10923

seth 2008-11-25 12:45:12 10923

Yep, that's the way capital gains works ... no thanks for the review. But your assumption that "with commerce better then the banks can begin to make more loans available" is fundamentally flawed. Banks don't lend just because commerce is flowing, then lend because they have (1) sufficient capital available beyond their required reserve, and (2) they trust that they will be paid back, or that the borrower has sufficient collateral to repossess. Changing the capital gains addresses neither of those issues. Banks don't have sufficient capital to leverage because they are holding all of those toxic CDO's that they got the rating agencies to lie about, and they don't trust other banks to pay them back because they know the other banks probably have more bad CDO's than they have ....

... which suggests to me a solution: force all banks to immediately publically disclose and fairly value all of their assets. That way the good banks will not be dragged down by the bad banks. Let the bad banks fail. Have the Fed give easy, cheep credit to the good banks - let the Fed rate go negative.

Mark de LA says

-snip- (getting to long)

Banks don't lend just because commerce is flowing, then lend because they have (1) sufficient capital available beyond their required reserve, and (2) they trust that they will be paid back, or that the borrower has sufficient collateral to repossess. Changing the capital gains addresses neither of those issues. Banks don't have sufficient capital to leverage because they are holding all of those toxic CDO's that they got the rating agencies to lie about, and they don't trust other banks to pay them back because they know the other banks probably have more bad CDO's than they have ....

Well according to Steve Forbes doing exactly what you recommend is exactly what caused the collapes of the finanancial market in the first place. You might go back & read it for the first time. It's true about what you say about banks lending for an interest profit - no doubt! What I was saying is more of the big picture where in good times banks will lend more. Capital gains tax lowering will make investors, those with capital, more willing to invest without the penalty of taxes. That will spur the economy.

Mark de LA says

BTW, quit fueling the engine of fear in the M$M & pronouncements about the magnitude of the problem will do more than any big government bailout. Again ask Qui Bono? with this crisis!

Don't pardon this one!

Seth says

source: M above
Well according to Steve Forbes doing exactly what you recommend is exactly what caused the collapse of the financial market in the first place.

You really need to think clearly about about what you and Forbes are saying here. The banks were originally carrying the CDOs on their books at fictitious values. When it became evident that the value of their assets were fictitious, they got marked down to closer to reality. However these securities are so complicated that there is a problem with determining what their real value actually is. The markets started to collapse when the fiction became public - but that was ineviatable. Suppose you have a bill in your pocket that you think is a $100 bill but when you look at it, it is just a $10 bill. When did you loose the $90 - when you put the $10 in your pocket without examining it, or when you looked in your wallet and saw it was a $10?

Anyway we are way past that point now - the cat is out of the bag. My solution - though very painful for some bankers - may just be the easy way out of the banking crisis for Main Street. And has the added benefit of not costing the taxpayers any more trillions and running up the national debt.

Mark de LA says

An asset shouldn't be valued on a balance sheet subject to rumor, M$M, political & market hype. I believe that the rule came in around the Enron scancle since their books were essentially fiction. Anyway, you propose what has already happened. I trust that Steve Forbes is right he comes from a family with a long line of business & economic interests & publishes Forbes Magazine. The Ethos is correct here! You & I are amateurs with myself having only taken one basic course economics in college.

Seth says

M 2008-11-26 10:08:57 10923

You say it has happened, but i doubt that. Give me a place where i can go and find the value of the CDOs held by USBank and the method they used to value them.

Your using of Forbes to justify your opinion without even quoting him or providing exact references inline is totally meaningless to me.

Anyway my plan would also involve setting up the reverse auction where anyone with enough capital could bid on the CDOs along with the Treasury - that was originally supposed to be in the TARP, but never happened. The Treasury should carry through with that in addition to forcing full public disclosure. The point of the plan is to let some institutions fail if they cannot become solvent - not to prevent them from failing by bailing them out by borrowing money from China. As it is now the bankers are looting our Treasury. But as you say, real commerce is going on pretty much as usual - only problem for us folks is that the bankers are hoarding their loot and not lending it out. Off with their heads.

Mark de LA says

source: ... Also of immediate urgency is for regulators to suspend any mark-to-market rules for long-term assets. Short-term assets should not be given arbitrary values unless there are actual losses. The mark-to-market mania of regulators and accountants is utterly destructive. It is like fighting a fire with gasoline

Think of the mark-to-market madness this way: You buy a house for $350,000 and take out a $250,000 30-year fixed-rate mortgage. Your income is more than adequate to make the monthly payments. But under mark-to-market rules the bank could call up and say that if your house had to be sold immediately, it would fetch maybe $200,000 in such a distressed sale. The bank would then tell you that you owe $250,000 on a house worth only $200,000 and to please fork over the $50,000 immediately or else lose the house.

...

Some of his ideas are very cogent in the article. Others you can chase at his website from the home page. You probably should remove the red-herrings in your posts if you expect such ideas to be taken seriously or even read.

Seth says

M 2008-11-26 11:29:22 10923

...

Sorry, with due respect to Forbes, i'm not finding his ideas here cogent at all. He blames the "easy-money policy of the Federal Reserve" for failures of banking institutions. That's like blaming the rain for getting yourself wet. These institutions failed because they made bad loans, bundeled them up as over complex securities, and then colluded with the rating agencies to rate them as good loans. Then he suggests the cure is to go back to the gold standard. So let's all by declaration go back to a 19th century failed economy - give me a break.

Obviously mortgages don't work the way Forbes describes them - the bank never tells you to fork over the decrease in value of your home or lose it. But Forbes uses that fiction to project your thinking into the view the bank must have when the value of their portfolio decreases and they need to come up with more capital to compensate. He makes it sound to you like some grave injustice; but in reality it is sound accounting to prevent an even bigger crash in the future. Don't you see that he is practicing the old kill-the-messenger tactic?

In both cases here, his thinking is backwards - looking for causes to failures in the old boogey-men that he grew up with and now sees through his partisan eyes.

Btw, what was my allegid red-herring? I have no idea to what that refers.

Mark de LA says

Seth: ... Btw, what was my allegid red-herring? I have no idea to what that refers.

... most of your posts. If you do not want to learn from people who know more than you in the context under discussion then you will be recycling your own material ad infinitum & probably not get any smarter! (BTW, there were some red herrings in my last that you probably got lost on

) Your last set of paragraphs don't even make sense. The Fed determines easy money availability. The more the Fed lowers the prime interest rates the more is available to loan out. In a way the more money available to loan can slaken the requirements for loans, but regulations are set on the reserves that a bank must keep on hand & borrow from the Fed. That which made the banks loan to poorly qualified people was things like Fanny Mae & Freddy Mac, Acorn occupying banks with their community agitation & Congressional oversight pandering to minorities, etc. Normally, with no outside political pressure banks would not loan to unqualified people. That & the idea that houses would always appreciate were the main ingredients of the perfect storm which resulted in the mortgage meltdown. (there are some others) I would have left out the last sentences of Forbes' statgement & just said that instead of a bank asking for the monetary difference they had to write down the value of the mortgage. That is about the same difference. You don't change accounting methods in the middle of the stream. The last company I worked for did & the CEO got indicted. When the SEC (or whomsoever regulates banks) makes the rules you are SOL.

Seth says

M 2008-11-27 12:03:41 10923

seth 2008-11-27 11:39:09 10923

source: M above
That which made the banks loan to poorly qualified people was things like Fanny Mae & Freddy Mac, Acorn occupying banks with their community agitation & Congressional oversight pandering to minorities, etc.

You would think that was the case - however it was not. Banks were so giddy high on their CDOs that their thirst for making loans outstripped their reserves (should those reserves be based on reality). When the real estate market collapsed, the shit hit the fan. I know because i was one of those people who got a "no documentation" loan about that time - well i could afford the loan, but at the time i was surprised that i did not come under more scrutiny. It was not Fanny Mae who invented the "no documentation" loan - it was some bright banker who wanted to increase his income.

Ad hominum remarks against me with no supporting arguments and supporting facts are worthless.

Well, you are simply wrong, tsk..tsk!

You are confusing the chicken & the egg! Why don't you make a timeline & see what preceeded the event of no documentation loans in congress & in the hood?

I acknowledge that the government's lowering of the rates and their encouragement to loan in the minority market preceded the meltdown. But Congress and the Fanny Mae did not establish the banks underwriting rules - the banks do. The government did not force banks to make bad loans. The case for that has been alleged, but the case has not been made. Also you might want to do some research on the distribution of foreclosures vs home price. I have a sneaking suspicion that the percentage above half a million would surprise even you. Those are not the the loans into the minority market that the government was encouraging. Back up your opinions with solid facts if you want me to take them seriously.

Mark de LA says

seth 2008-11-27 11:39:09 10923

Well, you are simply wrong, tsk..tsk!

You are confusing the chicken & the egg! Why don't you make a timeline & see what preceeded the event of no documentation loans in congress & in the hood?

Mark de LA says

Having actually worked in a bank for 5 years, I know that we were always looking over our shoulders for the changes in bank regulations. The bank regulations were not written by the bank but by the Feds. A bank just can't suddenly decide that it can handle loans which have a low percentage of being paid back. The purpose of Fannie & Freddy was to allow banks to make more loans available by essentially being a holding company for the loans the banks made; eventually marketing them to someone else in bigger packages. That's where the chain begins. I'm still looking, but skeptical whether he will ever do so, for BHO to convene an independent commission to investigate & produce clarity on the matter. I doubt that the Dems will ever go for it. IMHO, the domain of inquiry is below the complexity of Climate Change, but about the same as the complexity of the 9-11 commission. Such a commission should have about the same power as the 9-11 commission & include people who understand banking & finance, but not be the people where involved in the first place. None of the people who are appointed as BHO's economic team should be on it to insure the panel is unbiased.

Mark de LA says

MR 2008-11-22 16:01:26 10923

http://www.youtube.com/watch?v=_mzcbXi1Tkk <-- Rahm Emanuel groks crisis opportunities.

& now Secretary Clinton extolls the virtues of not wasting a crisis to the European Union for more Global Warming boondoggling!

Mark de LA says

I like the Valkyrie like picture Drudge posted next to the above article. I'm sure the Germans & perhaps even the French will love it.

Seth says

Well Rahm is spot on here: every crisis is a opportunity. Let me give you a real example in my own business. Last year our local Post office refused to take our packages in their front door and affix postage on them which had been a long standing agreement. This obviously sent our business into a crisis mode. But we used that crisis and now we affix our own postage and the post office picks up our packages at our front door. By adapting our postage expenses have dropped about 20%. That is something that we could have done years before but the crisis forced the new procedures which ended in the large savings. Now we are faced with the same kind of crisis with our credit card processing. Crisis is oppurtunity ... rail against if you want, but you might find it more profitable to adapt.

Mark de LA says

I understand that psychology - TR taught us to say the word challenge rather than the word problem so that we look at it differently. That's not what Rahm & Hillary are really talking about. They are talking about using the crisis mode to conn the country & the taxpayers into funding bigger government programs which have nothing to do with lessening the recession. You may wonder if the following has a forecast for your own business:

Crisis Management I-A

About: obama outlines job-creation plan - cnn.com

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