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How incredibly generous of The Daily Sentinel to forgive us ordinary citizens for not understanding the complexities of the financial crisis. After all, if Ben Stein and Paul Krugman say this megabillion-dollar bailout of Wall Street is needed to keep the chain of privatizing profits and socializing losses going, then who are we ignorant walking wallets to say otherwise? We’re just here to earn and fork over the money, not decide how it’s spent.
Obviously, those kinds of decisions are best made by our dad (the Republicans) and mom (the Democrats). After all, they chartered Fannie Mae and Freddie Mac to begin with. Clearly they know what they are doing, and we should just shut up and get back to work.
DEBBIE SCHUM
Cedaredge
7 Responses to “Government expects us to shut up and fork over the money”
Posted October 7th, 2008 at 9:46 am Login to Send PM Report this comment
Ms. Schumm assumes that some of us who supported the bill did so because we we ’support’ bailout of the monied interests. Nothing could be further from the truth. In fact, appreciating the scope of the ‘mess’ we now find ourselves in, and how we managed to get to this point, we may be even more furious than she is.
The lady, whom I personally know but disagree with, might question the reason we are at this point. She might begin to question the philosopy she believes in, that of ‘laissez faire’ or ‘liberal economics’, that which enabled the de-regulation of the financial industry and allowing it to operate totally unsupervised. She might arrrive at the conclusion, as some of us have, that it is her own economic philosophy that laid the foundation for what was allowed to happen. In addition, she might have to consider the possibility that while it is just fine to think in theoretical terms, life is to be lived with pragmatism; i.e. the world of reality.
Posted October 7th, 2008 at 11:16 am Login to Send PM Report this comment
If you have come to the conclusion that laissez faire or liberal economics enabled the current debacle then you don’t have any clue how the monetary system works. The after the board of the Federal Reserve has been appointed by the President and Congress it is effectively a privately controlled, totally unregulated or monitored agency. The Federal Reserve Bank determines interest rates and makes loans of our Fiat currency as well as creates legislation to govern bank activities throughout the country. Their position enables them to inflate or deflate the money supply and thereby control how much our dollar is worth. As such, we have seen massive devaluation of our dollar internationally which has directly controlled the price we pay for oil. Secondly, the cheap loans provided by the Federal Reserve created a very aggressive housing and construction industry that depended on robust consumption. Robust consumption was facilitated in part by cheap credit created by the Federal Reserve and their fiat currency and partly by acts of congress such as the Community Reinvestment Act. This act compelled lenders to meet the credit needs of low income areas despite despite the risks of such activity.
You are correct “that which enabled the de-regulation of the financial industry and allowing it to operate totally unsupervised.” is responsible for the downturn we are in but you do not identify the entity that should be regulated. It is not Wall Street, it is the Federal Reserve.
Posted October 7th, 2008 at 12:26 pm Login to Send PM Report this comment
Mr. Cox and I come from different perspectives. And while the Federal Reserve is certainly not blameless, it is by no means the ultimate culprit in this case. Money, cash or other instrument, is but a means of valuing or transferring assets. In and of itself, it has no value.
The real problem, and what has caused the collapse has more to do with the ‘instruments’ developed by the financial institutions. They were really a variation on insurance, although they did not call it that. If they had, they would have been subject to regulation. One of the regulations is that one must maintain sufficient capital reserves to cover losses. The products developed by banks and other financial institutions, not being ‘called’ insurance, were not required to, and therefore did not maintain such reserves.
As an example: If A wants a loan and goes to a bank, party B. But, party A is too risky, and cannot get the loan for the desired amount. Enter pary “C” who says to party “B”, don’t worry about it. Give “A” the loan anyway, and if he doesn’t pay it back, I will. So, party B gives A the loan, believing their is no risk on his part.
Now, let us say that pary A does default. Party “B” then goes to party “C” and “C” says: “Oops, sorry! I don’t have the money to pay your claim, I don’t have the money.”
On an indivdual basis, that may not be of much consequence, but multiply that tens of thousands or hundreds of thousands of times, it does have an impact, and that is why even the biggest banks and institutions are threatened.
The cause of this debacle was caused, not by the monetary system itself, but by financial institutions such as banks and other financial institutions not paying attention to the ‘risk’ factor. And that is admitted to, at least by those responsible institutions and individuals who, a long time ago, recognized the developing problem.
That would not have been allowed to happen if those engaged in the process had been regulated and required to maintain sufficient capital to cover their exposure to the risks they were assuming. However, being as they were not, a direct result of the philosophy of the “laissez faire” and “liberal” economic theory; i.e. and the mythology of ’self-regulation’, the conditions were established that allowed the debacle.
Posted October 7th, 2008 at 1:44 pm Login to Send PM Report this comment
You are speaking of the fractional reserve system. This is indeed another problem but does not address the massive price inflation created by the Fed. The inflation of prices followed by the current deflation becomes the problem that it is today when loans are defaulted on because of lack of sufficient numbers of buyers to consume home sales. Prices naturally start to fall to motivate buyers; if prices fall significantly enough then borrowers are no longer profitable in their loans and begin to default. This, in itself, would not lead to the problems that we are seeing right now if not for the fractional reserve system. So, I think that you are right about half the problem and I am right about the other half. OR we are two blohards talking about a bunch of nonsense, either way it is entertaining.
Posted October 7th, 2008 at 3:26 pm Login to Send PM Report this comment
Let me ad a third blohard. My understanding of the Community Reinvestment Act was to stop the practice of “redlining”. There is nothing in the act that I know of that enables or even encourages “sub-prime” loans. Redlining is the practice of either not even considering loans in certain neighborhoods—read: minority neighborhoods—or charging exhorbitant interest, regardless of the personal credit-worthiness of the applicant. If some lenders chose to offer sub-prime loans in such neighborhoods, that was their choice and not mandated by CRA, or even encouraged or suggested. They were encouraged or mandated to treat applicants in such areas like they would in any other. Admittedly, there would likely be fewer credit-worthy applicants in such areas but lenders were not judged on the number of loans they made, only that they picked up those who could pay and were given fair interest rates compared to other ares. If they made such loans in neighborhoods covered by CRA, what is the excuse for such loans in non-CRA neighborhoods, which were the vast majority? The CRA is being offered up in many quarters as a very significant factor in where we are. That is a red-herring that smells a lot like racism. It also smells like trying to shift the blame by those caught up in the frenzy to make a quick buck and get out of town. I agree that Greenspan caused far too much easy money due to not watching the store. When we were being flooded by overseas money to support investment there was no need to keep the low interest floodgates open.
Posted October 7th, 2008 at 3:28 pm Login to Send PM Report this comment
And the headline reads: “Dow’s big dip surprises Junction advisers”. This was no suprise to me… It is time to abolish the link to the Federal Reserve System, which is NOT a government agency… All of this that is happening with money, war, oil, reducing our freedoms and liberties, putting us in fear so we will seek out the protection of our government is all by design! Yes this is their plan, everyone needs to do the research so that “they and their” can be properly understood. You can call me a conspiracy theorist, whatever, but we need the real truth about the real conspiracies out there. It only takes two persons to create a conspiracy. They have, they are, and they will continue to do so.
Start with the truth about 9/11, and I don’t mean the “official” story.
Have a powerful day!
Posted October 7th, 2008 at 3:36 pm Login to Send PM Report this comment
I see that cooldave gets it. I have been recommending ” the Shock Doctrine ” by Naomi Klein to anyone who will listen to me. Read it!
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