Shopping at Amazon?
Wait! If you click on the Amazon banner link at the top of the page first, HCN will get a percentage of anything you purchase for 24 hours!
Open predictions
Our local book authors
User login
Who's online
There are currently 29 members and 158 guests online.
Currently online
Recent Recommendations
obody is first
No hat tip CR
I get no love!
I suggested this article a few threads back
This article is filled with errors. The most obvious is that home prices never decline.
dis, sorry.
bbb, the excerpt I posted said prices are flat or falling.
Best to all.
hi, i am kind of interested in amortization schedules (some friends buying into bubble, i need to convince to take a fix
).
i found with google among others this excel sheet http://www.firstcapitalmtg.com/downloads/Mort_Amort_Sched.xls
is there something like an official amortization schedule or a standard or every bank has it different?
thanks
An excellent article well worth hunting down the whole thing - hope folks can get to it. Part of the article is an excellent set of charts that my be more readily accessible:
WSJ.com
Other than the borrowing-funded buyback surge it covers the reach & range pretty well.
I think an untold portion of the story is the pressure from the administration to allow the housing boom to continue, regardless of obvious negative consequences. Surely the Fed has people whose job is to review ongoing economic developements and commentators on those developments.
Like I said before, the excuse of this administration for everything--"No one could have foreseen"--when multiple responsible, authoritative parties DID foresee. Not just ignorance of cause and effect, also just plain willful disregard, cupidity, and self-serving.
Where would the economy have been without housing investment and the associated fiancial boom? What was the most important result of the boom?
Was it the never ending credit which made people feel wealthy in the face of an actual decline of economic prospects? Was it the much trumpeted rise in home ownership, especially in minority population? Was it the stuffing of the pockets of the plutocrats? All were were factors in recent election campaigns.
Another example of long term harm done to the USA by the current administration.
Neal, you have hit the nail on the head.
Comrad Hilary said that she will allow the Fed to manage monetary policy. That's nice of her. She's runnin' the country.
Alway lookin' out for the little guy (and the attornys, hedgies...) Gotta love her.
Buyin' '09 puts on the S&P & health care at some point here.
Neal, I think there is a lot missing from this article. But I do think it hits on a few important points.
Best to all.
Yeah Hillary won't actually say she wants to raise taxes she says she would "repeal" the Bush tax cuts.
Too funny- the spin stops there.
ALL politicians (GOP included Gary) never call a spade a spade.
S&P may downgrade 207 Alt-A RMBS
SAN FRANCISCO (MarketWatch) -- Standard & Poor's said on Tuesday that it may downgrade 207 classes of Alt-A residential mortgage-backed securities because of rising delinquencies on the underlying home loans...Delinquencies that have not abated," S&P said.
S&P may downgrade 207 Alt-A RMBS - MarketWatch
revro, there are actually tiny differences among various amortization calculators. It's a matter of where you round/if you truncate instead of rounding. The differences are miniscule: like usually no more than a 0.01 difference in the payment. The Excel Loan Amorization template is limited--it won't let you amortize for more than 30 years and it doesn't do ARMs--but it's fine for calculating a fixed payment and generating a balance schedule.
FYI: Any lender should be able to give you an amortization schedule for any loan product at the time you apply, if you ask for one. If you are told that is not available, run like hell to another lender.
The credit debauchery began in earnest when the Street started buying servicing & origination platforms 5-6 years ago. Period. End of story.
Now we need a new Glass-Steagall to prevent the dealers from ever originating a loan again.
They are much like pedophiles, not genetically capable of resisting their urges (to increase volume & fees).
This is a bit of a puzzle. Didn't Greenspan make his pro-ARM statements in February of 2004? How could he possibly have believed there was 'fizz' that he was trying to eliminate with higher rates at the same time that he would recommend ARMs?
Neal,
Very good points. I agree they were all factors in the recent elections. I'm not sure I would conclude that the Administration understood what the ultimate consequences would be. I think, like with Iraq, Katrina, etc., the administration was more grossly negligent rather than willfully malicious. Some may argue there is no difference or that gross negligence is worse because is implies a level of intellectual laziness. I don't know. I just know that if anyone tried to bring up the intricacies of the capital markets, CDOs, MBSs, etc. with George Bush, his eyes would have glazed over and his mind would start wandering to god knows where. I really don't think he could comprehend anything remotely this complex.
From Bankrate article by Ellen Cannon:
...the blogosphere is awash with complaints from CapOne cardholders citing the letters they've received announcing new rates. One woman says hers was raised from 9.9 percent to 19.9 percent; another said his went from 8 percent to 15.9 percent. I contacted Capital One to ask if this was indeed an across-the-board change and this is what the spokeswoman wrote back:
Capital One communicated to some customers that their APR is changing due to business and economic factors (a core one being rising interest rates).
The lending environment was very different a few years ago when these offers were made. Given the unsecured and open-ended nature of credit cards, we must reserve the right to change terms from time to time (which is clearly disclosed in our marketing disclosures and customer agreement).
We've made every attempt to be as upfront as possible, providing our customers advance notice and clear communications regarding the changes and their options.
We believe the new terms are still competitive, but customers can opt to decline the change. If they choose to do so, they can close their account and pay off their current balance under their original terms (over whatever timeframe they need).</i>
I pictured credit cards like a ducky tube leaking air that allowed consumers to stay afloat a while longer. Are they trying to discourage consumers from taking on more debt before they sink or do they honestly think they tread water long enough to bring them some more profits?
The reason the Bush tax cuts "expire" is that the only way they could be passed is by the sleight -of-hand that they were not "permanenet". Hence the ludicrous sunset provisions. That Bush fiscal policy is financed largely by the Chinese government's purchase of bonds should give us all pause about our national willingness to face up to cold hard realities. We are collectively 2/28 borrowers--and who's holding the note? And what do we owe our grandchildren?
Zebra, we have one incompetent, incurious, and fatally insecure man being operated like a puppet by truly malicious men.
Well put, Neal. I hate to admit this now, but I voted for Bush in 2000. Not so in 2004, I went LP as silent protest. I think Zebra also makes a good point about gross negligence. The current administration is too cocky, too thick-headed to listen to any contrary opinions. Younger generations will be paying for the last seven years well into their old age. Our economy has become a farce, just like our escapades in Iraq. I would love to see Ron Paul win the White House. Hillary and her ilk scare me as much as Bush and Co.
Shiller is not convinced by Bernanke's "excess savings" to explain the "world that is awash with liquidity". He thinks this has to do with a positive feedback mechanism for the creditors.
Project Syndicate - The Liquidity Puzzle
BR, thanks for the link to the Shiller paper. Puts in perspective the sense of being awash in references to being "awash in liquidity".
An Article about Jumbo Loans from cnn:
Jumbo jam: Traffic in non-conforming loans slows - Aug. 7, 2007
Now California and the NOrtheast, with high priced homes will go into more of a slowdown, which will just hurt the mortgage and Real Estate market even more.
It's an interesting summary, not least because it may give other mainstream media a little more willingness to address the subject properly.
There's been an inclination among print and broadcast media to whisper 'oxidation' rather than to risk shouting 'fire!'
So far we tend to get Cramer. Unhelpful.
Gary,
Yes, indeed.
In NYC it is virtually impossible to buy something for less than 500K. Even in the suburbs, its pretty difficult, if you want a decent neighborhood. If these tow area go into a prolonged slump, them the meltdown will go into 2009. Definitely.
I should have said "or else we get Cramer".
Cramer and Kudlow both see the way thing are. The economy is great and nothing is wrong from Larry and from Cramer you get a buy on Real Estate and a month later a sell or a hold. I guess it depends on how he feels that day.
That was sarcasm.
Neal,
It had nothing to do with this administration. Clinton and prior -- Regan yes, but not W, and while Republicans welcomed the sudden access to capital they tend to be more pro business than pro bank so in the long run I expect more downsides than upsides from a Republican point of view. Long run I think US industry might take it on the nose except those that make money off of rents -- and I mean economic rents like energy and minerals, not real estate rents.
Thought I would share a couple quotes from secondary market folks during the RE boom,
"There aren't any bad loans, only a bad price"
"There is so much liquidity from Japan the Secondary Market will NEVER return to the old days"
Never say never.
Here's an interesting chart entitled, Look Out Below! from PolicyPete
It's a map of the USofA and the Subprime Serious Delinquency Rate Q1, 2007
Also, first time visitor to CR. I've learned more than I ever knew about "economics". Keep up the good work.
My question is if the new Dem-led Congress is any better than the current administration. Why were they elected in November and what have they exactly done since then?
Very close to nothing, if you ask me.
O-Joe
Wow - how dare Hillary say that she won't meddle with the Fed.
That communist witch! The sheer nerve of her...
And that Democratic Congress - how dare they let Republicans filibuster all legislation!
thanks tanta, i found another calculator spreadsheet, the numbers are same and difference is only 1,5$ on total interest payment after 30 years
the spreadsheet i mentioned first is better since it has a prepay option and my friends plan to prepay. so thanks
"When a technology stock and investment plunge and the Sept. 11 terrorist attacks pushed the economy into recession in 2001..."
I would expect a WSJ writer to know better than to claim the 9/11 attacks were one cause of the 2001 recession.
Sometimes it's hard to tell the difference between Optimism and mental retardation.
Why hasn't the new congress changed the world in the 7 months they've had?
kareliuan beat me to the first: GOP filibuster of every attempt at reform.
Add a guaranteed veto from President Pissy-pants . . . and the lack of a large enough majority to oveerride a veto (or even a filibuster).
Jesus wept. People can't be this obtuse.
Countrywide buying some HomeBanc assets
NEW YORK (MarketWatch) -- Countrywide Financial Corp. said Tuesday it would acquire part of HomeBanc Corp.'s retail-mortgage operations after the lender shuttered operations because its funding has dried up.
Atlanta-based HomeBanc said it can't borrow on its credit facilities and was unable to fund its mortgage-loan fund obligations beginning Aug. 6.
The company also plans to exit the mortgage-loan origination business due to what it called "extraordinary difficulties" in the market. HomeBanc has focused on originating primarily prime purchase money residential mortgage loans in the Southeast.
Countrywide to buy some retail assets from lender in Southeast - MarketWatch
Also, GM closed Allison today, looking for link...
The one thing that doesn't be mentioned much for some reason is that the cause of all this, according to former Fed members, is fear of deflation. That word get's mention several times in the article, but there's not much mention of inflation.
The Fed is so frightened by the prospect of deflation because once they cut rates so much there isn't really much more they can do, so they become much less prominent as an organization.
Still, the fact that the Fed seems so obsessed with deflation that they were willing to let an obvious real estate bubble get out of hand tells me that maybe this is a real threat.
And unless I can convince myself I know more then the Fed, I have to assume that's a valid concern even if everybody else is worried about inflation.
Personally, I think nothing would make the Fed happier right now than 70s-style inflation (the kind that wipes out debt, public and personal). I think that was the whole idea behind letting the housing bubble get out of hand - maybe we'd have all our debt problems taken care of by inflation.
Doesn't seem to be working out that way.
Shiller again, says that many Great Depressions have occurred around the world since but on a smaller scale but curiously enough since 1980 have been followed by accelerating inflation rather than deflation (and that Bernanke should be careful not to over-generalize from his research on the Great Depression)
Project Syndicate - Is Bernanke Ready?
Cramer and Kudlow both see the way thing are. The economy is great and nothing is wrong from Larry and from Cramer you get a buy on Real Estate and a month later a sell or a hold.
Huh? Are you talking about Jim Cramer from Mad Money?
The biggest real estate bear of all?
I've been more interested in fishing than finance for the past couple of weeks, but I'm amazed by how much the various mortgage markets have deteriorated, and how sanguine the broader markets remain to this. I would say the jumbo article refered to by another commentor is very significant as it shows credit is now being constrained to high income, prime borrowers. High end real estate is going to lead the next leg down, and if it wasn't for the assumed infinite balance sheets of the gse's, the whole mortgage market would be descending into a black hole at warp speed (which it may in fact be doing anyway).
Shiller again, says that many Great Depressions have occurred around the world since but on a smaller scale but curiously enough since 1980 have been followed by accelerating inflation rather than deflation (and that Bernanke should be careful not to over-generalize from his research on the Great Depression)
I've looked at some stuff like that. Some lead to deflation other's to inflationary type events (e.g. Indonesia). The difference seems to have a lot to do with debt as well as the self-sufficiency of the nation and how local officals react, etc.
My feeling is we have a situation here that would tend to be more deflationary, but a lot of that depends on the reaction to any severe economic downturn. Marc Faber may be right when he says the ultimate outcome will be hyperinflation, but I don't think any human can really see that far into the future.
Zebra said, "the administration was more grossly negligent rather than willfully malicious."
There are far too many instances where impartial and/or scientific facts have been actively supressed by this administation when those fact are "inconvenient". Examples range from toxic 911 dust residue, to climate change, to most recently blocking a release on world health programs that wasn't a lauditory about Bush programs as it apparently should have been.
With their track record of active concealment, it is a reasonable first supposition that there is a specific reason for their actions or lack of actions.
The Bush administration has used up their "benefit of the doubt" years ago.
Read this
The Fed and the Credit Boom: Greenspan, Others Reflect - Real Time Economics - WSJ
Weaseling....(maybe this, maybe that, possible this and that, we were not the only ones)
It may be that a side effect of those actions [is] that over the longer period, we helped to create excessive liquidity, possibly leading to some of the problems we have today. It may be in retrospect we should have begun to reverse that easing somewhat sooner I would add, there were other things [contributing]. There was a lot of liquidity being generated across other channels across the world economy.
Stubbornness...(I still would do almost all of the same again)
He says he wouldnt change any of those votes but wishes supervision of all mortgage lenders, not just the banks, had been stronger
Helplessness ...(we were helpless against those global savings glut)
We tried in 2004 to move long term rates higher in order to get mortgage interest rates up and take some of the fizz out of the housing market. But we failed. We were overwhelmed by excess global savings that continued to press real long term rates lower.
Appeal to authority ...(past history justifies our actions)
History tells us its far better to have people periodically going to excess with its adverse consequences than to try to block it off in the beginning. These adverse periods are very painful but theyre inevitable if we choose to maintain a system in which people are free to take risks, a necessary condition for maximum sustainable economic growth. We have learned to move risk from the leveraged institutions which are the major lenders in this country to those far more capable of absorbing loss. Its why our economy in recent years has developed the flexibility to absorb severe adjustments.
Arrogance ....(so what, we did what we could, who the hell are you to question us?)
We decided that in 2003 that though we judged the probability of severe deflation as small, were it to happen, its consequences were seen as devastating. So we chose to take out insurance against them, fully recognizing at the time that we were taking risks in the process. But central banks cannot avoid taking risks. Such tradeoffs are an integral part of policy. We were always confronted with choices.
It's all about plausible deniability.
They actively refused to look at reality, when this shit was in the making. [The Fed actually put out research that higher housing prices were supported by incomes, so that they could claim there were no problems]
Why? So that they could make these exact statements now.
ac,
You get it right. Deflation is such a fear because it is a lot harder and nastier to get out off.
Look at Japan.
Also inflation destroys the value of money, but deflation increases the value so that your debts get exacerbated.
The fed does become a lot less relevant and your monetary weapons lose their effectivity. The traditional cure of the printing press
is dangerous in this globalized world because with zero interest rates (effectively negative because of deflation) you get carry traded to death.
As nasty as inflation is, and it is a big evil, deflation is a farther bigger evil.
We will experience credit contraction with is mostly deflationary. Remember Japan--they can't inflate their way out of debt. My bias is that the Fed will again bring in the punchbowl but this time around it won't be spike with rum
We decided that in 2003 that though we judged the probability of severe deflation as small, were it to happen, its consequences were seen as devastating. So we chose to take out insurance against them, fully recognizing at the time that we were taking risks in the process. But central banks cannot avoid taking risks. Such tradeoffs are an integral part of policy. We were always confronted with choices.
I think they've actually increased the odds of "severe deflation" with this big credit bubble. I think they know this and are finally coming out to acknowledge their error and explain their reasoning: "It seemed like a good idea at the time!"
It's also notable that Greenspan was wrong about one of his fundamental beliefs about the monetary system:
Mr. Greenspan had once believed deflation was impossible with a paper currency, since the Fed, unconstrained by the gold standard, could simply print money until it created inflation. But Japans experience with deflation and economic stagnation in the 1990s had demonstrated otherwise...
I wonder what else he's wrong about.
ac,
You get it right. Deflation is such a fear because it is a lot harder and nastier to get out off.
Look at Japan.
Part of Japan's problem now is that they have a shrinking population. So they don't have much demographic support for strong ecnomic growth.
They've had a miserable time with deflation, but it hasn't been disasterous the way the Depression was. Of course they may have exported the disaster via the Yen carry trade.
But deflation, if it happens, may not be the sort of world ending catastrophe that justifies destroying the dollar via hyperinflation.
Do remember though that at least the mistakes of Japan are unlikely to be repeated
Speech, Bernanke --Deflation-- November 21, 2002
This market will be back to 14,000 by the end of the week/day...
we all know it.
Definitely End Times....
TRUMP MORTGAGE FLOP TIED TO CREDENTIALS FLAP - NYPOST.com
Greenspan: We tried in 2004 to move long term rates higher in order to get mortgage interest rates up and take some of the fizz out of the housing market. But we failed. We were overwhelmed by excess global savings that continued to press real long term rates lower.
This seems like an odd statement to me. The Fed is worried about deflation, but then claims that it's a global savings glut that's keeping long bond yields low. If the Fed is worried about deflation, why wouldn't the bond market be worried also? That would certainly explain the unusually low long rates.
I think that also explains the huge bond rallies that take place every time it looks like the leverage is starting to unwind.
Jumbo jam: Traffic in non-conforming loans slows - Aug. 7, 2007
"As far as non-conforming loans are concerned, "We are seeing essentially a frozen market," said Jay Brinkman, the Mortgage Bankers Association vice president for research and economics. "When lenders can't get a bid even on the AAA loans, it's a market that has ceased to function.""
dis,
After living with high inflation in Poland in 1980s and 1990s and I can assure you that getting rid of hyperinflation is lengthy and painful. The high inflation was present in the 1980s and it exploded in 1989 and 1990 to a few hundred percent per year. Then it took more than 10 long years to cool it below 10%. And it required interest rates of 20-40% for several years.
Shiller is right. Great Depression was quite unique and inflationary depressions are more common.
Every time I head that "we cannot allow deflation so let's inflate" I want to scream. It's easy to inflate. Really easy. Just print money. But it's only moving the pain from borrowers to savers and it's not a cure.
About Moodys' conference call today, Bloomberg:
(quote)
Ratings provider Moody's Investors Service said on a conference call that the fallout from subprime-mortgage losses will be manageable'' and the impact on investment banksmodest,'' according to T.J. Marta, a fixed-income strategist at RBC Capital Markets in New York. Moody's did not let reporters listen to the call.
(end quote)
Whew!
We have a solution. Hillary will set aside 1 Billion $ to alleviate foreclosures.
"When lenders can't get a bid even on the AAA loans, it's a market that has ceased to function."
But what does AAA mean in this context. Safe as GE or Treasuries?
Part of the problem ,IMO, is the use of familar bond ratings for securitized pools which have misled investors as to the actual risk they are buying. Perhaps a new rating system is in order.
Sort of like allowing testimony only without being sworn in and without a transcript. No long term "tails".
If you're not bored enough....
LoanPerformance—Mortgage Finance and Securities Risk Management
'straightalk
what time will the Fed statement be released?
poszi,
I of course not singing the praise of inflation. It is very nasty and value destroying and can only be brought down via a lot of pain.
Deflation is not a piece of cake either and the nowadays the printing press might not be a solution.
I ma not sure which is the bigger danger, it looks to me that painfully and lengthy it might be, the central bankers have more control over controlling inflation than deflation. By this I do not mean that they full control or is easy.
I certainly do not look forward to inflatio
"You'll get nothing and like it!"
Ben Bernanke
What I would love to hear: "Fed raises 0.5% says Boo Ya!!!"
Fed is out, 1115am PST. (two minutes ago)
Fed Keeps Rate at 5.25%; Says Inflation Is Still Main Concern
Fed Keeps Rate at 5.25%; Inflation Is Main Concern (Update6) - Bloomberg.com
Good by Bernanke! Good boy!
He held his ground and did not even moved to neutral
Jim Cramer as Spaulding?
mehl,
you were saying?
must be short for "Ken Mehlman"
dis,
I'm not such an expert of Great Depression as Bernanke but economics is not hard science. Generalizations based on just a handful of examples are tricky. I think that Great Depression would nevertheless have happened even if Fed inflated because I think the damage to the economy was made in the 1920s. Great Depression was a bad hangover after a drunken party. The only good cure for hangover is not drinking or at least in moderation.
Therefore, I think that fear of deflation is wrong. Deflation is only a symptom. It is not a cause of the depression.
"...but economics is not hard science."
Oh, I hope you mean it's not an exact science as opposed to not being difficult.
A pet peeve of mine (one of several, I guess) is those who dismiss things like economics and sociology as lesser due to its inexactitude. Frankly, the reason they're inexact is because there are so many variables that can't be isolated. And just as critical, it's extremely difficult if not impossible to replicate many experiments to test theories.
Look at physics or chemistry of 150 years ago and you see the same near-grasp. Heck, look at medicine today and note how often we get the "some may experience..." warnings - groups of "one person" are a lot easier to isolate and repeat and all the rest than whole communities, but a single person is still a very complex body.
I think economics (and sociology and so forth) are past comparisons to phlogiston chemistry (though the Laffer curve makes me wonder...) but they're still a long way from tailored antibiotics.
Oh, I hope you mean it's not an exact science as opposed to not being difficult.
Yes. Not exact (sorry for the imprecise language).
I think microeconomics is very well developed and pretty accurate. But macroeconomics is not. My biggest complaint is not that it is not accurate but that it is not cumulative. Scientific method does not imply that everything is correct but that it improves and we get rid of wrong theories. In macroeconomics, I think people never learn and there is more politics than science. And I seriously doubt we will see an improvement in the future.
By the way, 19th century chemistry was pretty well developed. I read some scientific articles from late 1800s and you can repeat the experiments and get the same result. They also understood quite a lot even though the atomic theory was not proved yet. Phlogiston theory was disproved already in 18th century.
If it was economics, you will still have phogiston believers. Maybe not mainstream but they will be invited on TV to have a "fair and balanced" coverage
poszi, thanks to the carry trade, simply printing money doesn't solve deflation anymore. The money you print just gets sucked overseas into higher yielding bonds.
The Carry Trade and the Trade of the Decade The Global Guru -
sb,
The question is if they really wanted to inflate or just to fuel the carry trade. I don't think it's a "failed" policy if they got what they wanted.
Somebody help me out here, but in the event of deflation in a world marketplace that will suck away any new money created by the central bank, couldn't you apply Keynesian theory and have the government step in with public works, education, healthcare, etc spending???
You want to keep the newly created dollars "in house," rather than being carry traded away to other markets? That would do it, no?
Frankly, I don't see deflation EVER being a problem in a fiat currency system. Inflation is by far the bigger concern in my eyes.
Modern monetary policy works best when it tries to smoothe out the business cycle, rather than eliminating it.
What we should have are more frequent, but less intense peaks and troughs. Instead we've had one incredibly long, drawn out, gigantic, unsustainable peak. And thanks to a miserably weak currency that's resulted, we've run out of magic bullets and will FINALLY have to take the entire set of declines in one huge blow.
Keep policy stable or tight and the markets will correct severely.
Loosen policy and the dollar crashes and we still get the correction, except that we also get a nice dose of inflation to help exacerbate the pain.
Modern monetary policy works best when it tries to smoothe out the business cycle, rather than eliminating it.
Yup - if they try to flatten the curve completely it tends to misbehave... the addition & withdrawal of stimulus can actually increase instability... like in engineering control theory.
But a light touch on the part of Central Banks at the right times can take the edge off what would be a nasty step down during a recession. The cycle still there but not as 'sharp' & spikey.
One of the major criticisms of the Fed during the period 1929-32 is it didn't loosen appropriately at the right times - if it had loosened a little at the right times we still would have had a rough recession but probably not the severe depression we got.
The risk of course, like with control theory, is that the operator in control will over do it. Too much stimulus, then too much correction, then even more stimulus then even more correction on top of that... Ka Booom!
FWIW - Greenspan did NOT have a light touch as we are now learning.
What we should have are more frequent, but less intense peaks and troughs. Instead we've had one incredibly long, drawn out, gigantic, unsustainable peak.
Do a Google on 'over-damping'... pretty much describes what you are saying there.
Frankly, I don't see deflation EVER being a problem in a fiat currency system. Inflation is by far the bigger concern in my eyes.
Me too. I believe deflation is far worse to live under but is so unlikely to happen as to almost beg to be ignored. Plus its pretty easy to fix - print money.
Inflation on the other hand is very likely to happen (or better to say continue) and still plenty painful... Plus very difficult to correct.
The fed is justified in fighting inflation as long as deflation isn't likely (and with the money growth we've experienced I'd say that's a safe call).
I'm not sure if this whole "cycle moderation" is not like communism: in theory it is great but in practice it cannot work. I don't think we can rely on wisdom of some Fed guys that will know what to do to make it better and not worse. It's easy to say it with hindsight. Who knows maybe after some time economists would claim that Fed should have eased today. Yet, great majority of CR readers voted otherwise. On the other hand, if lowering rates today was bad, we would never know it.
Moreover, this whole monetary stimulus is a suspicious theory. I think the only reason it might possibly sometimes work is because some prices (including labor) are sticky and without market equilibrium some problems can be amplified. So in this case monetary stimulus might be helpful. But apart from that money is just a medium. More money cannot create anything. I find it mind boggling that some people can claim otherwise. This whole Keynesism sounds really like the phlogiston theory to me.
The above may sound too much laissez fair. I think regulation is beneficial. But manual managing of economy is suspicious and dangerous.
Manual manipulation usually results in a euphorics high followed by a crash
Keynesian policy works if those building our infrastructure were american; most train builders are Canadian, French or German. Steel(ex Nucor) seems to be in a death spiral in America, Cemex I think is the #1 player in cement. Lucent sold their fiber maufacturing to anybody and everybody.
What kind of infrastructure play can the Feds make that fully benefits America? Nationalizing the pr0n industry?
poszi,
I too lived and breathed higher inflation than the kindly natives here have ever suffered. No fun, and damned hard to get rid of! The deflation bogeyman is invoked so often that I am suspicious, like you, that it's just an excuse to generate more inflation to transfer wealth from savers to borrowers.
"What kind of infrastructure play can the Feds make that fully benefits America? Nationalizing the pr0n industry"
LOL, why not, they are all pricks anyway. And sex takes your mind off mundane economics. I almost blew coffee out of my nose when I read that one. Thanx, Alex.
I'm not sure if this whole "cycle moderation" is not like communism: in theory it is great but in practice it cannot work.
It can and has worked - it just isn't very easy to to do * doesn't always work perfectly. Plus if you don't practice some 'cycle moderation' you will likely get communism (when people revolt at the bottom of a cycle).
Both boom and bust phases of the cycles tend to be self-reinforcing until they near bottoms & tops. The tops are very heady highs and the bottoms are terrible lows.
A small amount of intervention (both monetary & fiscal) at the right time on both sides can make a world of difference. The problem is it takes good judgment, great timing & a light touch - no guarantee we get any of that.
But taking our complex global economies and trying to go back to 'laissez faire' now would be like abandoning farming and going back to hunter gatherer... it isn't going to work with six billion people on the planet. With this many people & this much complexity we need some management even if it isn't perfect.
To expand on the farming analogy - some modern economic practices are sustainable & some aren't. We have clearly been on an unsustainable path the last ten or so years... pumping so much economic 'liquid' fertilizer into the fields as to almost kill them. That has to stop.
The first volume of
Fall and Decline of the Roman Empire
When all barbarians become well fed, we will have the peaceful " Brave New World"
Isn't it the ultimate common goal of Capitalism and Communisim? They just try to use different means.
The only cure for American malaise is "mannual work", " Math" and "Latin". But who wants these sufferings.
Secondly, the real science like math is built on pure logic and a few fundamental laws ( axioms). Any projection or hypothesis can not violate these laws. Some sciences including biology are devoid of these few laws, therefore they can only be called experimental sicence.
Sociology and the rest can not even meet the basic requirement of experimental science, because no perfect controls can be obtained and it is cruel to do experiment on society; they can only draw conclusion from the past.
Mere description of phenomenons without rigorous experiment test even with numbers can not be rigorously defined as science.