Hillary Mortgages the Future

The promises she can't keep

You will count speed as a virtue if you're going through a home remodeling, clicking on an Internet link or drafting a cornerback. But presented with looming calamity, most of us would much prefer one that moves slowly. Which is why there is no comfort in hearing that if Hillary Clinton is elected president, she will be "ready on Day One."

In her campaign, she presents herself as an experienced hand with a penchant for practical solutions, suggesting that her opponent, Barack Obama, dispenses nothing but vaporous oratory detached from the real world. When it comes to the mortgage meltdown, though, her policy rests on the assumption that upon arriving in the Oval Office, she'll open the closet and find a magic wand.

Obama, by contrast, acknowledges the bitter truth that when government regulators clamber into a carriage, it can easily turn into a pumpkin.

Their approaches to the problem are not an aberration but a symptom of a larger difference. Obama is not a staunch free marketeer, but he grasps the value of markets and shows some deference to economic laws. Clinton, however, tends to treat both as piddly obstacles to her grand ambitions.

You don't have to take that from me. Some on the left see the Illinois senator as suspiciously unenchanted by their goals and methods. Robert Kuttner, an economics writer and co-editor of The American Prospect, scorns Obama's advisers as "free-market guys who want to use markets to somehow solve social problems, which is like squaring a circle." New York Times columnist Paul Krugman denounced Obama because his health care and fiscal stimulus plans "tilted to the right" and concludes he is "less progressive" than Clinton.

If progressive means issuing dictates that prevent informed people from entering into mutually agreeable and economically valuable transactions, that is undoubtedly true. Many liberals prefer to rely more on command and control. Nowhere is the contrast between the Democratic contenders more vivid than on how to deal with the fallout from the epidemic of mortgages gone bad.

Clinton has a stunningly simple solution, as stated in one of her TV ads: "freeze foreclosures" for 90 days and "freeze rates on adjustable mortgages." Those are a perfect answer, assuming this is the question: How can the government reward irresponsibility, discourage mortgage lending and raise the cost of financing a home?

After all, it's easy to pass a law prohibiting lenders from foreclosing. But the first result of that would be a lot more borrowers deciding that paying the mortgage is no longer the highest priority. Those who have practiced strenuous frugality in order to meet their monthly obligations would get nothing, and those who behaved recklessly would prosper.

The second result would be to choke off the flow of credit. When a bank makes a loan, it needs some assurance of being repaid. When it isn't, foreclosure offers a way to minimize its loss. If Clinton blocks that option for a time, banks will be markedly less eager to offer loans—particularly for anyone with a less than perfect credit history.

Then there is the matter of the interest rates future borrowers will have to shoulder. Lenders offer adjustable-rate mortgages, which carry low rates in the early years, in the hope of reaping higher rates later on. If a President Clinton were to void the second part of these deals, many mortgage companies would stop offering the first part, in effect saying: Freeze this.

Obama is not willing to let this turbulent market sort itself out without the intervention of government, but he offers nothing remotely as alarming as Clinton's dual freeze. Among his main proposals are tougher enforcement of laws against fraud and deception and mandates for "easy-to-understand information" for borrowers -- ideas few advocates of economic freedom would find objectionable.

More important than what he advocates is what he doesn't. His chief economic adviser, Austan Goolsbee of the University of Chicago, told me that Obama thinks "we shouldn't have a blanket policy of bailing out everyone." In formulating remedies, Goolsbee says, "you have to think how not to reward bad behavior."

In Clinton's world, that is not a concern: The government can take from the lenders and give to the borrowers without any unwanted consequences. Now who's telling the fairy tale?

COPYRIGHT 2008 CREATORS SYNDICATE, INC.

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  • ||

    How come "reason" isn't covering this story about how illegal immigrants are stealing our jobs.

    It's only the biggest story of the weekend that every mainstream libertarian news is covering.

  • Eric Dondero||

    Isn't it amazing, both Hillary and McCain get bashed mercissly here at Reason, but Hussein Obama gets a complete pass. Reason even implies that Hussein Obama is a "civil libertarian" in a recent post.

    Obama has a perfect 100 score from the Marxist ADA.

    Yeah, Hillary sucks. But she scored a 92 on that same survey. That makes her a 1970s version of Communist Vietnam, but Obama the reincarnation of Pol Pot.

  • Bingo||

    I'm not agreeing with Dondero but Steven Chapman is going to need to turn in his libertarian credentials if he keeps this up.

  • ||

    I wasn't aware the American Dental Association has a Marxist tilt. You learn something new every day.

  • Taktix®||

    I'm not agreeing with Dondero but Steven Chapman is going to need to turn in his libertarian credentials if he keeps this up.

    I recall someone posting a while back that if you give everyone a blank slate, they will project what they want upon it. A perfect example of this, from Chapman's article, is quoted below:

    Obama is not a staunch free marketeer, but he grasps the value of markets and shows some deference to economic laws.



    Ha! You believe that? I've got some land in Florida for sale, too.

    Call me.

  • Episiarch||

    I still can't tell if it would be better to have Hillary or Obama as president. Hillary would polarize everybody and very possibly cause a GOP resurgence in Congress, which would cause massive gridlock.

    Obama seems better than her, but that's what's dangerous about him--Congress would be willing to work with him more.

    It's good thing I don't vote because actually choosing would be like picking what caliber of bullet I want to be shot with.

  • ||

    Maybe Hillary will follow Gordon Brown's example and nationalize the financial sector. That will fix the problem. Maybe she will nationalize Centex, too.

  • ||

    Of course the American Dental Association has a Marxist tilt. Who was it who backed putting flouride in the water supply to poison our precious bodily fluids?

  • ||

    You keep using words like "Communist" and "Marxist". I do not think they mean what you think they mean.

    Oh, and his name is Barack Obama you fucking racist.

  • ||

    Among his main proposals are tougher enforcement of laws against fraud and deception and mandates for "easy-to-understand information" for borrowers -- ideas few advocates of economic freedom would find objectionable.

    That's also an idea that few advocates for economic freedom would find necessary.

    This current mortgage crisis has little to do with fraud and everything with idiots buying homes that they had no business purchasing. (This includes middle and upper income idiots.)

    Have you ever gone back and looked at that huge stack of papers that you signed without reading when you closed your mortgage?

    There are already regulations just like this to make sure that we understand what in the heck a mortgage is. The most obvious result of any new regulations of this nature would be to just make that stack larger.

    BTR

  • Taktix®||

    I'm liking the Rational Responders Cop Girl. She can no-knock raid me anytime.

  • ||

    I wonder what interest rates would be if they were determined by private savings and not the Federal Reserve?

  • ||

    mutually agreeable and economically valuable transactions

    You know, economically valuable. Like giving someone a mortgage they can't afford but convincing them they can, because you're going to sell it as part of an IBD package and don't have to worry about whether it goes into default.

    THAT kind of economically-valuable transaction.

  • Episiarch||

    Like giving someone a mortgage they can't afford but convincing them they can

    I didn't realize bankers had mastered mind control, joe. I mean, stopping someone from figuring out "can I handle paying x amount each month with my current income" is some powerful Jedi mind tricks.

    "You will take me to Jabba now. You serve your master well."

  • Gilbert Martin||

    "I wonder what interest rates would be if they were determined by private savings and not the Federal Reserve?"

    The fed can set the fed funds rate and discount rate and effect interest rates at the short end of the yield curve but it does not set or control longer term rates. The market determines that.

  • ||

    Too many word:

    Take from the lenders, give to the borrowers, and do whatever else it takes to become president.

  • Gilbert Martin||

    "I didn't realize bankers had mastered mind control, joe"

    LOL

    Now you know that a basic tenet of liberalism is denying that people are responsible for their own actions. It always just HAS to be somebody else's fault.

  • BTS||

    Dondero, wanna source that survey you quote? Just so I can see it exists?

  • ||

    You can't really look at Obama's plan for the school districts (they need more money, as if they're not already wasting their money on extracurricular utilities already), Obama's health care plan (Hillary's minus mandates), and Obama's plans for our economy ("here let me help you with that") and say that he's going to be great. Can't the writers on reason bash Obama at least once?

  • ||


    her policy rests on the assumption that upon arriving in the Oval Office, she'll open the closet and find a magic wand.



    More likely, she´ll pull out her broomstick.

    BTR

    I´d agree that more regulation isn´t ideal, but the fact is that, for most people, a mortgage document is virtually incomprehensible. (I worked as a bank loans officer for several years and I couldn´t fully understand the documents myself.)

    A simple disclosure of: Interest rates, how long they are effective, how much money the borrower will have to pay back and what penalties the borrower will have to pay would go a long way to making the business much fairer. I´m surprised some company hasn´t used that as a marketing ploy already: ¨With Forever Mortgage Company, you will pay an effective rate of 5% over the term of the mortgage. It will cost you $X to pay it back.

    Gotta go now. They´re closing here.

  • robc||

    Gilbert Maring,

    The fed can set the fed funds rate and discount rate and effect interest rates at the short end of the yield curve but it does not set or control longer term rates. The market determines that.

    I remember reading some economist back in the late 90s talking about how the fed basically follows the market. Like with any other price control, if they get too far off market price, in either directions, it leads to shortages (too high and no one will borrow at that rate, too low and the supply will be used up quickly).

  • Elemenope||

    Now you know that a basic tenet of liberalism is denying that people are responsible for their own actions. It always just HAS to be somebody else's fault.

    Now you know that a basic tenet of conservatism is affirming that people all have economics degrees and millions of dollars, and if they have problems it's CLEARLY their own fault.

    IMHO, both assumptions are fucking stupid. Sometimes it's a person's fault, and sometimes they are victims of circumstance. Often, [gasp!] it is a combination of the two.

  • BTS||

    Wait, never mind, this must be the ADA you're talking about.

    http://en.wikipedia.org/wiki/Americans_for_Democratic_Action

    The funny thing is, it's staunchly anti-commie. Hmm, and another funny thing is, while conducting my own little google search, the only person I see calling them marxist (and fascist) is YOU, Eric.

    Really, now I can't speak for the Urkobold, or anyone else, but the reason I hate you is because you're an lying cock who fabricates material, then copies it and calls it "truth"

    How about getting some real statistics that actually mean what you say. Oh, and how's Rudy doing? Oh, and Mitt?

  • robc||

    Now you know that a basic tenet of conservatism

    Are there any conservatives posting on this thread? We had a liberal posting, we have many libertarians posting, why do we need to know the tenets of conservatism?

  • robc||

    Basic tenet of robcism:

    Figuring out interest rates and etc is a middle school math skill.

  • Gilbert Martin||

    "Now you know that a basic tenet of conservatism is affirming that people all have economics degrees and millions of dollars, and if they have problems it's CLEARLY their own fault."

    It doesn't make any difference whether you have an economics degree or not - you are entirely responsible for your own actions and your own welfare in any and all circumstances.

    The people who took on a loan they couldn't afford didn't "have" a problem - they created their own problem. No one put a gun to their head and made them do it.

  • ||

    I didn't realize bankers had mastered mind control, joe.

    Well then, I'm one up on you, because I did realize that libertarians go into deep denial of objective reality at the first hint of problem that their ideology renders them incapable of addressing.

    Maybe you should go back to Econ 101, and learn about assymetrical information and how it distorts market transactions.

    How cowardly to pretend that this simple, basic, oft-observed, universally-recognized problem needs to be described in the language of psychic powers. But how sadly typical.

  • ||

    Sometimes it's a person's fault, and sometimes they are victims of circumstance. Often, [gasp!] it is a combination of the two.

    And here's the really important part: people did not magically become stupider or less responsible between 1997 and 2002. Ergo, stupidity and irresponsibility on the part of borrowers does not explain the mortgage meltdown.

  • robc||

    joe,

    Whats the asymetric information in the mortgage industry? If anything, it is the borrower knows how much he is lying on his application.

  • ||

    I don't believe you are actually dumb enough not to know that, robc, so I'm not going to answer you. You damn well know what the assymetry in the relationship between a bank and homebuyer is.

    The fact that playing dumb is such a necessary part of libertarians' argumentation should suggest something to them.

  • robc||

    joe,

    people did not magically become stupider or less responsible between 1997 and 2002.

    This isnt a given. If, for example, we assume people are getting more irresponsible with time, then, in fact, responsibility may have decreased in that time frame. If every generation is less responsible than the previous, as the old fogeys always argue (and Im becoming one and agree with them :)), then there would have been more young people getting loans in 2002 than in 1997, just on basic demographic trends. Thus, less responsibility.

  • ||

    Oh, yeah, and backwards thinking. Once you know your conclusion - there were no structural problems with the mortgage industry that could be solved with better standards, so it must have been a surge of stupidity among the general public - then it just becomes a game of figuring out how the assumptions you need can be assumed into existence.

  • robc||

    joe,

    No, I really dont know. The banker fucking gives you a piece of fucking paper with every piece of fucking information on it. With my first mortgage, I read every fucking piece of paper. I also bought my first home from someone selling by owner, so I hired my own property lawyer because I knew nothing about the process. The bank was going to provide someone at closing, but I brought my lawyer instead to make sure I understood everything that was going on. This cost me a little extra, but was well worth it to me. There was ZERO information I didnt have that I needed to know.

  • robc||

    Oh, and that purchase was in 1998. Were these people in 2002 hiring a external lawyer and bringing them to closingS? If not, then they were less responsible than I was in 1998.

  • ||

    But setting aside the finger-pointing and Episiarch's dodge, I'm sticking with my original statement: the mortgage companies giving out these loans then selling them as derivatives, and the homeowners taking them out, were NOT engaged in "economically valuable transactions." They were engaged in economically destructive transactions.

    It is a matter of blind faith that a transaction must be valuable if the people involved choose to engage in it. As we see, millions of times over, with the foreclosed mortgages, the lost pension funds, and the collapsing lenders, transactions can be economically harmful, to the parties involved and to society as a whole, despite being entered into freely.

  • ||

    fuckty fuckity fuck fuck

    Not playinig, robc. If you actually don't understand, I'm not going to waste my time bringing you up to speed. But I don't think that's what's actually going on; I think you're just playing dumb.

    Either way, it would be a waste of time to try to explain this to you.

  • Episiarch||

    joe, how much did you drink last night?

  • ||

    Medium.

  • robc||

    They were engaged in economically destructive transactions.

    This I agree with. But, I assume that people can make that decision for themselves. On both sides. It is no different than the baseball trade that hurts both teams.

  • kinnath||

    Stupid people make bad decisions on a regular basis. Smart people make bad decisions occasionally. Throw in a little greed, and the whole population has short-term bout of systemic stupdity. Then reality sets in.

    This is the birth and death cycle of every bubble. Government cannot change this without regulating every fucking aspect of private life.

  • ||

    If the mortgage meltdown was only hurting the particular borrowers and lenders involved, then the "They knew what they were getting into. I say, let 'em crash!" line from Airplane would make more sense.

    Net loss of jobs last quarter, during what should be the good part of the business cycle, as the real economy was finally getting strong and picking up real steam after the 2001 recession.

  • Episiarch||

    joe, I am only saying this because I care - there's a lot of no-alcohol beer brands on the market that are just as tasty as the real thing.

  • robc||

    joe,

    No, I really dont understand. I dont know why you dont want to educate me, Im not playing with you. Im a very smart guy, maybe thats why you think I really understand and maybe I should, but I dont understand what information the borrowers dont have.

    It will take you all of one or two sentences to explain it to me. Im teachable. I really dont understand your point about assymetry.

  • ||

    Sure, but not as tasty as Pete's Wicked Ale.

  • Gilbert Martin||

    People have the right to make decisions for themselves and with that right comes the responsibility to live with the consequences of the decisions they make.

    It isn't the responsibility of the government to bail them out - at the expense of other people who were more prudent with their decision making.

  • ||

    Endless semantic argumentation aimed and defining away observed, documented, and well-understood problems, and avoiding getting into the substance of the issue, is too common a dodge to tempt me at this point.

    Gilbert Martin, see 10:15.

  • ||

    The experience with which someone can better judge could be considered asymmetrical information when utilized. Is that what you're talking about, joe?

  • kinnath||

    To put things in perspective, here in the heartland sales of new homes where down slightly from the record setting pace the year before. Average prices continued to rise. I could hardly care less about the speculators on the two coasts that drove housing prices through the roof.

  • Gunter||

    I say we go back basics: draft Ron Paul for a third-party run, portray Obama as a watermellon-eating welfare sambo who´s just itching to stick his shlong in a white girl, and watch the money pour in from Nazis and the KKK. Forget Hillary, Obama´s a gift. We need the "old" Ron Paul.

  • ||

    Donald Luskin has a pretty good post on subprime loans.

    [I]n the New York Post, economics professor Stan Liebowitz writes that the subprime mortgage problem is in large part due to government mandates on lenders to lend money to poor people

  • robc||

    If the mortgage meltdown was only hurting the particular borrowers and lenders involved

    And the companies buying the packaged mortgage instruments and the individuals investing in those companies and people who didnt take risk of a mortgage correction into account when they priced property in their neighborhood.

    Really, Im trying to figure out who got hurt who didnt make some sort of mistake in the process. Not to be like Rand with the train tunnel scene, but everyone on board has some responsibility. :)

    The lack of properly accounting for risk seems to be the major mistake that everyone involved made. Risk assessment is an advanced topic. Unlike interest rates, it isnt a middle school skill. But, then again, there is the guy who saw it all coming and was yelling it out to everyone and built the hedge funds around the mortgage crash. I think his two funds brought in $17 billion in 2006-2007. Its not like the rest of us couldnt have read the tea leaves too (not that most of us were in a position to capitalize like he did, but could have avoided some losses.

  • ||

    robc, willful ignorance still creates a disadvantage in information. Being able to access the information and knowing it are two different things.

    But I seriously think joe is being snobby. Just tell him and shut up. If you tell him, you sound a lot more intellectually superior than someone who says, "you should know, but I won't tell you."

  • ||

    Dan,

    That's one aspect, but really, the levels of assymetry in a transaction between someone who originates mortgage for a living and most people taking out mortgages are legion.

  • robc||

    Episiarch,

    Name one no-alcohol beer as tasty as the homebrewed Uerige doppelsticke alt clone I was drinking last night?

  • ||

    the mortgage companies giving out these loans then selling them as derivatives, and the homeowners taking them out, were NOT engaged in "economically valuable transactions." They were engaged in economically destructive transactions.

    And were encouraged to do so by government initiatives.

  • ||

    robc,

    How about, everyone with money in an index fund? How about, everyone who purchased a home in most markets in the country? How about, the 1-2% of the labor force that will be out of a job over the next 2-3 years because of the recession?

    Are those broad and innocent-enough categories for you? Because those people have all taken serious economic hits.

  • ||

    P Brooks,

    You will get no argument from me on that. Government mortgage policy has been awful for, oh, I'd say about 7 years.

    Barney Frank was screaming about this problem years ago, but nobody was listening.

  • kinnath||

    How about, everyone with money in an index fund? How about, everyone who purchased a home in most markets in the country?

    Every part of my 401K is down 5% to 10% since the beginning of 2008. The sooner the bubble breaks, the sooner my 401K will recover.

    How about, the 1-2% of the labor force that will be out of a job over the next 2-3 years because of the recession?

    If you are worried about these people, then provide assistance directly to them. Far more efficient than keeping a bad economic situation going.

    Are those broad and innocent-enough categories for you? Because those people have all taken serious economic hits.

    Life is not risk free.

  • robc||

    joe,

    1. Index Fund: Those who invest in index funds realize they invest in financial markets. Those chose to keep their money there.

    2. Home purchasers:
    A. They could have chosen a different market, North Dakota is still going up. :)
    B. Like I said above, risk assessment. I knew when I bought last fall that I was buying in a falling market that probably hasnt hit bottom. (My current home was put on the market at $210, I got it in low $180s. $210 was probably a reasonable starting price 2 years ago, wouldnt have got it, but a good point to start negotiation from. Will it still be worth $180 in 2-3 more years? I dont know, but Im knowingly taking the risk, mainly because I expect to be there the rest of my life)

    3. Are we going into recession? There are still doubts. That 1-2% should have chosen a recession proof job.

  • Episiarch||

    robc, my statement was a paraphrased quote from Real Genius.

    Non-alcohol beer is an abomination.

  • Gilbert Martin||

    If the economy is temporarily boosted by wads of money being deployed on bad loans, then the economy has to take the hit when the those loans go into default. There is no free lunch.

    The real macro-reason behind all this is the federal reserve creating too much money for too long a time period. It continually tries to insulate the market from the effect of asset bubbles created by prior rounds of it's own meddling.

  • ||

    P Brooks,

    The problem with that Luskin post is that loans to poor people in redlined areas represent only a tiny fraction of the bad loans that have so harmed the industry, and only a tiny fraction of the accounts on the books of the mortgage companies that have run into such trouble.

    There's a one-drop rule that seems to apply in so much libertarian political thought - if you can find any example of government involved in a problem, the entire problem is therefore defined as a government problem, and all other factors can be ignored. So we see people like Luskin, attempting to argue that Countrywide was giving ARMS for McMansions in the suburbs to people who could just barely afford their payments at the teaser rate because of anti-discrimination-in-lending standards.

  • ||

    kinnath,

    Why are you addressing me with arguments about what to do about the problem now that a bubble has burst?

    I haven't written anything about that. I've been writing about what created the problem and how to avoid such problems in the future, not how to handle the fallout.

    Life is not risk free. No kidding. That's why we have things like handrails, steel-toes, and lending standards.

  • robc||

    Non-alcohol beer is an abomination.

    I agree. I have forgotten that bit from Real Genius, havent seen that movie in a decade or so.

  • Elemenope||

    And here's the really important part: people did not magically become stupider or less responsible between 1997 and 2002. Ergo, stupidity and irresponsibility on the part of borrowers does not explain the mortgage meltdown.

    Due to circumstances and trends, though, both they and banks became less risk-averse...which is a smart sort of stupid, in my book. Many factors play into the meltdown, but robc does have one decent point (overplayed): ultimately, people who couldn't afford these mortgage loans were taking them, and they thus bear some responsibility for that decision.

    Now, on the other hand, you make a good point in that banker-jedi-fu powers re: obscuring the real costs of adjustable rate mortgages and making pie-in-the-sky predictions about realty appreciation probably convinced those who knew no better to take risks they otherwise would not have.

    Hillary's "let's just freeze foreclosures" is a stupid plan, primarily because it short-circuits the risk factor which would bring the markets back to sanity. On the other hand, standing by and doing nothing is also stupid, because the fallout of a rash of bankruptcies and credit failures that will inevitably follow such a foreclosure sweep will cripple other portions of the economy.

    Plus, people's lives will be ruined. I hear that matters to some people, too.

  • ||

    robc,

    Straining to come up with a post-facto course of action that would have allowed people to avoid their problems is not the same thing as demonstrating that their actions were so irresponsible.

    Were you telling everyone to take their money out of index funds and move to North Dakota in 2001? Of course not. Ergo, arguing that people "could have" taken some implausible course of action that only makes sense in hindsight doesn't get you a single inch towards proving that their actions were irresponsible.

  • robc||

    joe,

    If it makes you happy, I dont think the mortgage problem is primarily a government problem. They played a role, but smaller than the role played by primarily 3 groups:

    1. Idiot borrowers
    2. Idiot lenders
    3. Idiot financial companies who failed to price the packaged mortgage instruments properly.

  • robc||

    joe,

    Were you telling everyone to take their money out of index funds and move to North Dakota in 2001? Of course not.

    No and yes. No because Im a believer in dollar cost averaging and yes in that I told people back then to stop living in CA and move to middle america instead of whining about housing prices.

    I still think I was right on both. I dont try to time the markets and I know the coasts are evil places to live.

  • ||

    Glibert,

    There were asset bubbles long before there was central banking. Ever read about tulips?

    Sadly, bubbles are a natural, market-driven phenomenon, or at least they can be. Government activity can certainly worsen them, and I agree with you that Greenspan's low-rate-all-the-time tenure and unwise counsel about ARMs worsened this one, but good policy can even them out.

  • kinnath||

    Why are you addressing me with arguments about what to do about the problem now that a bubble has burst?

    I haven't written anything about that. I've been writing about what created the problem and how to avoid such problems in the future, not how to handle the fallout.


    My apologies. Since the source article compared Clinton's and Obama's plans to deal with the collapse of the housing market, I was assuming you were addressing that point.

  • robc||

    In additon to my last post: Im one of those people who claimed we had a housing bubble early on, but also claimed that housing bubbles dont burst (except in localities), they deflate and that eventually prices were going to stagnate for 10-15 years in the high prices areas of the country (maybe falling somewhat in the highest) until reality caught up. I was wrong, and thus any money I lost in investments is my own damn fault.

  • ||

    robc,

    If "idiots" can do this much damage to the entire economy - and not just themselves and each other, but the whole economy - then that's why we need guardrails. And don't give me that crap about "we don't know" if we're going to technically meet the academic definition of a recession. The economy has taken a serious hit, and millions of people are going to be harmed by it. That's bad enough.

    We require railings on the balconies of highrise buildings, not just so that idiot condo owners won't kill themselves, but also so that they won't kill people going about their business on the sidewalk by falling on them.

  • Elemenope||

    It doesn't make any difference whether you have an economics degree or not - you are entirely responsible for your own actions and your own welfare in any and all circumstances.

    Hmm. At first I was thinking about being snarky, but I'll give you:

    ...you are [almost] entirely responsible for your own actions and [the impetus to better] your own welfare in any and all circumstances.

    It is nearly absurd to claim that a person is responsible for *all* of their actions *all* the time. Free will is not a resource of infinite depth, and it can be diverted with a lever big enough. Also, freedom of choice (and responsibility) is attenuated by the length and breadth of options available. Sometimes, there are no good options. Still, I will grant that most of the time, in most situations, a person has a sufficiently good option and sufficiently free hand to hold a majority of responsibility.

    On the other hand, the second part I'm willing to give you far less. A person is responsible for *attempting to change for the better* their circumstances. You can't very well complain that your life is shitty if you never act to attempt to rectify it. However, there are portions of a person's life that can be insurmountably bad regardless of their choices. Do you seriously blame a person in a war-zone for their present condition? A child with AIDS? A schizophrenic?

    Absolutism in these areas are precisely where conservatism and the ideology of personal responsibility deserve to be ridiculed, just as liberal "society-made-me-do-it" often deserves derision for its deemphasis on obviously willful self-destructiveness and/or laziness.

  • robc||

    Here is an interesting question:

    Should we even be trying to prevent future bubbles? Isnt it possible that boom/bust cycles are actually the best way to do things? Even though it means pain for some people in the bust part of the cycle?

    To make a lame sports analogy: I prefer break but dont bend defenses in football. You end up with boom/bust games but I think its better overall, although that may depend on your style of offense.

  • ||

    robc drives around with the plans for every bridge he drives over, and inspects the support beams before crossing.

    He also carries around lead swabs and bacteria-culture tests whenever he goes into a restaurant.

    And don't even get me started on his practice of climbing into elevator penthouses to confirm the equipment's condition.

    Because robc not only knows that he is responsible for his own welfare, but understands enough about each of the particular risks we face in life to know precisely how much and what type of individual due diligence is appropriate for every one of those risks.

  • robc||

    No, joe, I just take my chances. But I do as much due diligence as I think the risk deserves. That has meant avoiding certain restaurants at times. I almost fell to my death twice hiking on the Matterhorn, but I dont think the Swiss need to put up guardrails, I should have been less of an idiot. (Laying down and stretching out over a 500+ ft dropoff to get a picture wasnt the wisest idea in retrospect. Especially when I got past the balance point and my feet started lifting off the ground.)

    Is taking a lawyer to your closing the first time you get a mortgage really unreasonable or unusual? It might just be paranoia on my part. I assume a lawyer hired by the bank represents the bank's interests, which may or may not be mine.

  • ||

    How about, everyone with money in an index fund? How about, everyone who purchased a home in most markets in the country? How about, the 1-2% of the labor force that will be out of a job over the next 2-3 years because of the recession?

    in order:

    there are two types of players in index funds. there are the financial sharpies, for whom this is all part of the landscape. and there are folks like me, who use them as a major part of a retirement account. don't weep for me, though, i didn't put all my money in two years ago and pull it all out now. over the course of my life until i retire, the return would be terrific.

    i honestly can't say that i'm an expert in the demographics of the gimmick loans, but around here (near napa), the typical gimmick loan "victim" got a house for a pretty minimal down payment, paid a monthly mortgage, took a deduction for it (i.e., already took a subsidy from you and me), and had a house to live in during that time. if you amortize the minimal (in some cases *zero*) downpayment over the several years before the implosion, what the "victim" got was a nice place to live for a couple of years in a nice neighborhood at a pretty good rental rate.

    although you're free to predict the direction of the unemployment rate, you're not free to turn this from future tense to (in the next sentence, which i didn't quote) past and present tense. it's a prediction, not an existing fact.

  • ||

    You know, economically valuable. Like giving someone a mortgage they can't afford but convincing them they can, because you're going to sell it as part of an IBD package and don't have to worry about whether it goes into default.

    Dammit, we've got to protect the simple childlike poor, who are completely unable to make rational economic decisions without the government's wise, benevolent, and fiscally prudent (what is the national debt these days anyway?) protection. And those businessmen have to be protected from buying a pig in a poke as well. Lord knows that MBAs or pension fund managers should actually be held responsible for their own decisions.

    If mortgages become more expensive ar harder to get as a result of the government's altruistic intervention in the home loan business, making it harder and more expensive for a fiscally responsible buyer to finance a home, that's OK because we have good intentions, and people who don't pay their voluntarily incurred debts are the real victims after all.

    That's pretty much it, isn't it joe.?

  • ||

    If "idiots" can do this much damage to the entire economy - and not just themselves and each other, but the whole economy - then that's why we need guardrails.

    Look at all of the good folks who have lost their jobs in the auto industy. The government should have stepped in and prevented the big 3 from giving those overgenerous contracts to UAW workers. (And from producing the Pinto and the Vega).

    Where were the guardrails?

  • Fluffy||

    Joe,

    I was a principal in a mortgage bank for many years. I would submit to you that the existing mortgage regulations played a substantial role in producing the current crisis.

    To understand why, it's important to understand that money is a commodity. As such, it naturally wants to be priced as a commodity - and everyone in the mortgage industry [and just about every financial services industry, really] who isn't a discounter spends all of their time trying to figure out how to avoid having their product treated as the commodity it is.

    One way they do this is by trying to sell "service" or a "relationship" with the customer. The overwhelming majority of subprime customers who got hosed got hosed by local loan officers who convinced the borrower they were friends. Minority customers in particular were undone by judases in their own communities. The problem was particularly bad in churches. But that's not the part of the problem I'd like to talk about today.

    The part of the problem I'd like to talk about is the federal disclosures currently mandated for home loans. These documents date back several decades and were designed to deal with an earlier "problem" - the fact that many consumers refused to shop for a loan on the basis of price, and like anyone who doesn't look at the price tag, these borrowers tended to get fleeced. The Good Faith Estimate of Settlement Charges and the Truth In Lending statement were designed to provide pricing information to borrowers in a format that would be consistent across all lenders and that would be comprehensive. And except in cases of deliberate dishonesty, these documents actually do that job pretty well - they provide a way for borrowers to identify and compare information about the price of a loan in terms of its rate, points, and associated fees.

    The problem as usual is the unintended consequences of the existence of these regulations. Providing price information in a consistent format tended to increase the commoditization of mortgage loans - particularly fixed-rate mortgage loans - driving down net margins for lenders and brokers. Since mortgage lenders and brokers want to make money, products gradually evolved to escape this commoditization process.

    As it turns out, the federal disclosures are not very good at communicating non-price loan terms to borrowers. At all. The TIL tends to underestimate total borrower payments for ARM loans [for various technical reasons I won't go into here]. The TIL also contains extremely vague language when it comes to prepayment penalties. And the impact of negative amortization on the total cost of a loan is almost completely overlooked. As a result, over time lenders discovered that they could increase the value of their loans by incorporating negative amortization, steep ARM reset margins, and prepayment penalties into their products.

    Not only were these time bombs in loans not adequately revealed by the standard disclosure documents, I would argue that the standard disclosure documents actually made them look more appealing. An ARM loan with a low initial rate, but with all of these abusive features, actually looks cheaper on the existing GFE and TIL than a vanilla fixed rate loan. And when the government has put disclosures in place and spent a couple of decades training consumers to rely on those disclosures, that's a bad situation.

    The Paulites tend to focus on the Fed's responsibility for creating the subprime mess with excess liquidity, but I think we should not overlook the way the existing regulatory system created a moral hazard that certain mortgage industry figures were happy enough to exploit. When you tell borrowers that the mortgage industry is heavily regulated and put all these disclosures in front of them, you help to lull them to sleep.

  • Gilbert Martin||

    "There were asset bubbles long before there was central banking. Ever read about tulips?"

    I never said there weren't. But some asset bubbles have been caused by central bankers attempt's to manange the economy. And the recent one's we've had are ones that were.

  • Gilbert Martin||

    " Do you seriously blame a person in a war-zone for their present condition? A child with AIDS? A schizophrenic? "

    It doesn't matter whether I blame them for their condition or not - I am still not responsible for their welfare unless I choose to be on an individual basis.

    Government has no authority to mandate charity.

    There are no affirmative rights and there are no affirmative obligations.

    You are born, you have the right to be left alone by the government unless you have actively done something to harm someone else and then you die.

    That's all there is and ever should be.

  • ||

    Are those broad and innocent-enough categories for you? Because those people have all taken serious economic hits.

    And every single one of them was investing in securities, taking risks in return for hoped-for returns.

    So now some of those risks came home to roost. Boo-fuckity-hoo. If you wanted guaranteed returns with no risk, buy CoDs.

    The same thing goes for all these people who suddenly can't afford their mortgages. Absent outright fraud by the lender (of which there have been few to no accusations), they were making a bet - either that the real estate market would continue to go up allow them to lay off their house at a profit, or that their income would go up so they could actually afford their mortgage.

    They made these bets in hopes of reaping economic returns. They lost those bets. Boo-fuckity-etc.

  • ||

    Oh, BTW -

    Very interesting Fluffy @ 11:17.

  • Elemenope||

    You are born, you have the right to be left alone by the government unless you have actively done something to harm someone else and then you die.

    That's all there is and ever should be.


    That seriously breaks down in times and in places where people are *not* left alone. Libertarian utopia only works *after* it's established. What about a hypothetical world...where governments more or less interfere all the time in the lives and well-being of their citizens?

    Do we just say, um, "Fuck 'em", as you seem to imply?

  • ||

    J sub D,

    Most of the loans that are going belly-up were not made to poor people. Strike one.

    Having less information than a professional in a field is not "simple or childlike," it is the natural state in which even educated professionals live, as they go through their lives - I guess that whole "bridge/elevator/restaurant" thing went over your simple, childlike head. Strike two.

    And every recession in American history has seen significant slowdowns, or even reversals, in the growth of homeownership, because the primary issue keeping the poor from being able to buy homes is a lack of wealth. Regulations which prevent the sort of business practices that sent our economy into a recession would help the poor increase their wealth by promoting growth, not restrict that opportunity. You might have noticed that the greatest increase in homeownership rates took place in the two decades following the New Deal, with its regulation of the financial sector. Strike three.

    Your argument is shit, J sub, but damn, I bet it felt really good to call a liberal an elitist who hurts the poor, and that's what really matters, right?

  • ||

    Dondero, do you realize that Americans for Democratic Action (I presume thats what you mean by ADA) was founded in part to remove socialist and communist influence from the Democratic Party in the 1940s? They're a liberal group, but I'm not sure how you can call them "Marxist" since their origins are explicitly anti-Communist.

  • ||

    Oh, and J sub,

    Look at all of the good folks who have lost their jobs in the auto industy. The government should have stepped in and prevented the big 3 from giving those overgenerous contracts to UAW workers. (And from producing the Pinto and the Vega).

    Since I'm not the one who argues that every bit of government intervention is exactly like every other bit of government intervention - since I'm the one who frequently shreds this argument - it's absolutely no skin off my nose that you can think up an example of a completely different problem that a completely different type of regulation would have failed to solve.

  • ||

    I do agree that the "libertarian" Obama meme is false and projecting onto a blank slate like so many do with Obama.

  • ||

    RC,

    Expressing your lack of concern for people suffering from a problem is not the same thing as demonstrating that that problem is irrelevant.

    If a tax had caused the market to drop like it has, you would be howling "Think of the children!" from the highest steeple you could find - EVEN THOUGH the people who bought stocks were taking a risk.

    It is better for the econonomy to be strong than weak. Duh. That your concern for people harmed by a weak economy is selective tells us absolutely nothing about the cause of the problem or the best way to avoid similar situations.

  • ||

    A little off the track but I'm thinking of taking a mortgage out to buy a new car. I can get a good Mercedes for about a 100k or so. I'll be able to finance it for 30 years at about 6-6 1/2 percent. The car dealer and the bank says it makes sense, I could have that car I've always dreamed of and my credit cards are maxxed out now. I dunno, I could use some advice on this. Besides, I'll have my old car paid off in another year or so anyway and my new loan would have lower interest. What's a "rollover"?

  • ||

    Fluffy,

    Loans made to poor people in redlines areas are a tiny fraction of the bad loans.

    People have been trusting mortgage companies' qualification judgements as credible for a long time, and not just since those disclosure forms came out. When you lull people into believing that business won't act irrationally against its own interest, as market-fetishists have been doing for a few decades now, you're lulling them to sleep.

    And finally, there were forerclosures long before modern financial regulations. Many more, in fact, and happening in the midst of much lower rates of homeownership.

  • Gilbert Martin||

    "That seriously breaks down in times and in places where people are *not* left alone. Libertarian utopia only works *after* it's established. What about a hypothetical world...where governments more or less interfere all the time in the lives and well-being of their citizens?"

    What about it?

    I take no responsibility for government actions that infringe on the rights of others. I didn't tell the government to do it.

    There are no utopias, libertarian or other wise.

    What I am talking about is the notion of collective responsibility vs the notion of individual responsibility.


    "Do we just say, um, "Fuck 'em", as you seem to imply?"

    Me refraining from assisting someone does not constitute fucking them. I can only do that by actively doing them harm.

  • Fluffy||

    You might have noticed that the greatest increase in homeownership rates took place in the two decades following the New Deal, with its regulation of the financial sector.

    How do you figure that?

    The New Deal financial regulations had almost nothing to do with housing. And then there's the problem of accounting for that 25 year lag in time between 1933 and the real beginning of the suburban housing boom.

    Housing rates definitely grew as a result of government intervention, but not New Deal intervention. The VA and massive investment in highway construction had much more to do with it than any financial services regulations of Rooseveltian vintage.

    Having less information than a professional in a field is not "simple or childlike," it is the natural state in which even educated professionals live, as they go through their lives

    Joe, I would submit to you that very few people who called 5 lenders and compared their offers before getting a loan get ripped off. Some people like that may have gotten fucked because they bet wrong on real estate, but as a general rule the kind of equity stripping, churning, and steering that took place in some subprime transactions just didn't happen to those people. And that doesn't require expert status. You just have to be anal, or even just be a dick.

  • ||

    Hussein Obama? You trying some weird guilt by association there or something, Eric?

  • Jennifer||

    People have been trusting mortgage companies' qualification judgements as credible for a long time, and not just since those disclosure forms came out.

    I was offered a mortgage a few years ago, and for all that I suck at mathematics it took me only a few minutes to crunch the numbers and realize that "too good to be true" deal was indeed unrealistic. So I said "no;" maybe they said I was qualified but I knew damned well I wasn't. It doesn't take a professional mathematician to look at how much money you make versus how much money you're expected to pay, and see if the former is enough for the latter.

    But let me guess: the MORAL thing for me to do is continue living in my crummy apartment whilst I pay higher tax rates to bail out the fools who took out mortgages they couldn't possibly afford. I suppose maybe I should've taken out that mortgage a few years ago too, and then screamed about how I'm a victim desrving of a bailout when the adjustable-rate mortgage went up to a number higher than my actual take-home pay.

    I say let the chips fall where they may. If that means dumbass mortgage companies go out of business because they kept doing stupid things like making $300,000 loans to people with $25,000 annual salaries, so be it. The dumb companies go under and the good ones thrive.

  • ||

    I've bought two houses -- they disclose everything relevant to the transaction. Stacks and stacks of paper, with you getting carpal tunnel syndrome from signing and initialing everything.

    If you go through all that and then claim you're a fucking victim because you didn't know what the interest rate could be because you didn't bother reading what you signed, and you didn't bother getting a non-adjustable loan so there wouldn't be any surprises, and you want to seize someone else's taxes to bail you out, you're not the victim, you're the perp.

  • robc||

    joe,

    People have been trusting mortgage companies' qualification judgements as credible for a long time

    Ive got 2 responses, the first is "no they havent" but that probably isnt true, Im just projecting from myself. Which leads to my 2nd, which is "then they are idiots".

    When I bought my first home, back in 1998, as we discussed above, I called up the bank for preapproval, well before I had found a place. I had already decided a max of 100k (I was going to put 20% down - I figured I could afford the payments on an 80k loan - I ended up buying a place for 115 instead, but 100k was just a rough guideline). The bank told me they would loan me up to 220 or something like that. I literally (and I mean the word literally, literally) laughed at the mortgage officer. A 220k mortgage would have broke me. At this point, I realized you had to calculate these things yourselves because the banks werent trustworthy. I think I probably already suspected that, but that moment verified it for me.

  • ||

    How do you figure that?

    Uhhh...by looking at homeownership rates by year?

    I know, your ideology tells you homeownership rates cannot go up in the aftermath of an increase in financial regulation. And yet, it did.

    Your ideas about how government regulation influences the economy of logical, internally consistent, and incapable of making accurate predictions about the real world. This means that at least one of your Ps is wrong.

    BTW, once again, as so often happens, you managed to read a statement in which I rebutted a theorized causal relationship between government and economic performance as one in which I theorized a causal relationship. Why does this keep happening?

    I wouldn't pretend to know what % of the people in bad mortgages called around, but I'm willing to believe that many didn't. A lot of people just didn't know enough about how sleazy some of these mortgage companies are, and figured that "they wouldn't give a loan if I couldln't afford it." That's not a wholly irrationaly decision to make - the "bankers" know more about this than ordinary people, and in theory, the "bankers" have a strong disincentive to avoid giving out bad loans.

  • Eric Dondero||

    The best reason NOT to vote for Obama:

    Justin Raimondo is now switching his support from Ron Paul to BHO. He says that BHO is the "best on opposing the War."

  • Fluffy||

    People have been trusting mortgage companies' qualification judgements as credible for a long time, and not just since those disclosure forms came out. When you lull people into believing that business won't act irrationally against its own interest, as market-fetishists have been doing for a few decades now, you're lulling them to sleep.

    OK, now we're moving the discussion a bit farther afield.

    Until late 2007, the data on these loans was telling the street guys that they weren't acting irrationally. That's the "cheap money" part of the problem. The housing boom masked foreclosures because troubled borrowers could almost always just sell for a profit.

    I thought we were talking about the current foreclosure crisis as it relates to customers being put into loans that were effectively traps. If you want to talk about the fact that the models underlying loan pricing in general were whacked because of the data set that came in from 2001 to 2006, that's a different issue.

    And finally, there were forerclosures long before modern financial regulations. Many more, in fact, and happening in the midst of much lower rates of homeownership.

    I don't consider the existence of foreclosures to be a problem. If X% of people are given loans, Y% will default on those loans and lose their security. That is not a particularly surprising fact to me and does not constitute a problem that needs to be solved. Again, I thought we were talking about those aspects of the current situation which are unusual or anomalous.

    I take no responsibility for government actions that infringe on the rights of others. I didn't tell the government to do it.

    Here's the only problem I see with that: if the economic outcomes produced by free markets are just, that implies that the economic outcomes produced by unfree markets are unjust.

    Since we currently live in a society with an unfree market, that further implies that the economic outcomes experienced by participants in our unfree market have been unjust. What, if any, recourse do those who have experienced unjust outcomes have? Are they entitled to be made whole - or if that is impossible, to compensatory treatment of some kind?

  • Elemenope||

    Me refraining from assisting someone does not constitute fucking them. I can only do that by actively doing them harm.

    You're on a boat, and a stranger on that same boat is swept overboard by a freak wave. They will drown if you do not throw them a life preserver.

    Now, in what way exactly would you not be fucking them by doing nothing? It sounds like an ostrich theory of ethics to me...

  • ||

    Obama is a blank slate people project their hopes (or fears) onto.

    That includes the people who say hes the Muslim Manchurian candidate, btw.

  • ||

    If a tax had caused the market to drop like it has, you would be howling "Think of the children!" from the highest steeple you could find - EVEN THOUGH the people who bought stocks were taking a risk.

    Not really - right now, lots of people I know are getting out of the market because of the increasing likelihood that taxes will go up and crater the market. Those who stay in, well, risk, reward, boo-fuckity, etc.

    Expressing your lack of concern for people suffering from a problem is not the same thing as demonstrating that that problem is irrelevant.

    And demonstrating your concern for people suffering from a problem is a long, long way from demonstrating that some kind of increase in state control is the answer.

    You look around the banking and finance sectors, and one thing you find is that the major government interventions all create moral hazard - they remove some of the risk from transactions, which means that people then go on to take on more risk than they can afford because they know they will be bailed out.

    Unfortunately, systems that are carrying too much risk tend to have cascade failures, where all the risk chickens come home to roost at the same time.

    State intervention may or may not alleviate short-term pain, but it will almost certainly guarantee that we will have more frequent and/or severe financial crises in the future.

  • ||

    Most of the loans that are going belly-up were not made to poor people. Strike one.

    Even better if true. Fuck 'em.

    Having less information than a professional in a field is not "simple or childlike," it is the natural state in which even educated professionals live, as they go through their lives - I guess that whole "bridge/elevator/restaurant" thing went over your simple, childlike head. Strike two.

    Professional advice when making the biggest investment in your life? What a fucking concept! No, joe that is a sieve of an argument. If you buy a used car on the word of the seller, you are a fool. If you buy a home mortgage on the word of the seller, you are also a fool. And fools get took. Yesterday, today and forever, fools will get taken. It is not my problem and I don't appreciate do-gooders trying to make it mine.

    So your premise is that midlle and upper class people took out loans that they couldn't afford to pay and somehow it is the lenders fault. Is that it? Fuck the borrowers for being stupid, fuck the lenders for being imprudent, and fuck the financial geniuses who bought the packages. I do expect this will be beneficial to renters of houses and property management firms. Good for them.

  • ||

    Yes yes, that's nice that you're all so much smarter and better than other people. Me too; I've gotten four mortgages in the last nine years, and did just fine with all of them.

    Nonetheless, people haven't gotten stupider or less responsible in the past 9 years, so that cannot account for the change. What HAS changed are the business practices of the lending industry.

    Once again, if the fallout from this was only limited to the lenders and borrowers themselves, the line from Airplane would go down a lot easier, but those of us who got boring mortgages and signed up for 401ks are already taking a hit (as are homebuilders and their employees, and workers acros the economy), as the economy, the housing market, and the stock market are swirling around the drain.

    Now that the deed is done, there probably isn't much that can be done to avoid the recession by bailing out lenders and borrowers. That's why I've been talking about how to keep this from happening again.

  • robc||

    Fluffy,

    Here's the only problem I see with that: if the economic outcomes produced by free markets are just, that implies that the economic outcomes produced by unfree markets are unjust.

    I dont think that works. It is possible for both the free market and the unfree market to produce just results. Maybe. Your statement isnt intuitively obvious to me.

  • economist||

    I don't particularly care if Obama has "more deference to economic laws". He still has essentially the same view of individual rights and liberties as Clinton, which disqualifies him for my vote.

  • robc||

    That's why I've been talking about how to keep this from happening again.

    Better risk pricing by the purchasers of the packaged mortgages is all it takes. If they had priced them lower, the lenders would have been more careful in the loans they gave out. Ditto the insurers of those packages. Considering the losses, I think the big boys have learned their lesson. This is how things improve. Billion dollar losses tend to teach lessons well.

    those of us who got boring mortgages and signed up for 401ks are already taking a hit

    Your mortgage is fine, no hit there. If your 401k is invested in any of the companies from above, then you, as an owner, share the responsibility for the improper pricing.

  • economist||

    joe,
    The reason homebuilders are taking a hit is that home prices are lower because of the housing bubble that was caused, in part, by artificially low fed interest rates and an irresponsible fed promise to bail out the market.

  • robc||

    The free market is a cruel but effective teacher. How many of the people walking away from their homes because of a sub-prime mortgage gone sour will make that same mistake again?

    How many 20-somethings who havent yet bought a home will avoid the problem because of this crisis? How many young kids will never do something like that because of watching their parents make this mistake?

  • Fluffy||

    BTW, once again, as so often happens, you managed to read a statement in which I rebutted a theorized causal relationship between government and economic performance as one in which I theorized a causal relationship. Why does this keep happening?

    Hey, if that wasn't what you were trying to say, my bad. But generally people introduce facts to show causation.

    I know, your ideology tells you homeownership rates cannot go up in the aftermath of an increase in financial regulation.

    "My" ideology tells me no such thing. When have I ever said anything of the kind? If anything, my beef whenever we argue about planning is the state's investment in the suburban single family home.

    That's why I've been talking about how to keep this from happening again.

    This particular problem won't happen again, but if your aim is to find a way to prevent people from making bad decisions during a mania, I honestly don't know if that can be done.

  • ||

    Fluffy,

    I thought we were talking about the current foreclosure crisis as it relates to customers being put into loans that were effectively traps.

    Yes, we are. And one of the reasons people fell into those traps is because they trusted the mortgage companies, for the two reasons I provided above. We're not going far afield; we're talking about exactly the same thing we've been talking about since you responded to my comment; whether people who got into these loans were operating in a system of information assymetry.

    I don't consider the existence of foreclosures to be a problem. Me neither, it's the dramatic increase in foreclosures, and the harm its done to the economy, that is the problem.

    Again, I thought we were talking about those aspects of the current situation which are unusual or anomalous. We are. Once again, I was resonding to YOUR point. You really need to stop bringing up points, then telling me I'm track by responding to them.

    RC,

    State intervention may or may not alleviate short-term pain, but it will almost certainly guarantee that we will have more frequent and/or severe financial crises in the future. Is this the part where I cross myself, or where I beat my breast three times, Father? In reality, we have had zero (0) depressions and bank runs since the New Deal.

    J sub D,

    It is not my problem and I don't appreciate do-gooders trying to make it mine. Have you looked at your 401k lately? How about gotten your home appraised? How about tried to get a new job? This IS your problem, one way or another, because of the ripple effects it has caused throughout the economy.

    OK, this is the last time I'm typing this, so pay attention: How about, everyone with money in an index fund? How about, everyone who purchased a home in most markets in the country? How about, the 1-2% of the labor force that will be out of a job over the next 2-3 years because of the recession?

    Are those broad and innocent-enough categories for you? Because those people have all taken serious economic hits.


    That is cut and pasted from a comment I made hours ago. Feel free to rebut or disagree with it, but anyone else who raises the "it's not my problem, I didn't take out a dumb mortgage" argument as if it refutes what I've written is going to be mocked mercilessly.

  • ||

    "The free market with discipline them and keep this from happening again" is particularly inapt to this situation. The market has been sending very, very strong signals about lending to people without making sure they can pay back the loan for hundreds of years. And yet, here we are.

  • ||

    robc,

    Better risk pricing by the purchasers of the packaged mortgages is all it takes.

    And also, a pony.

    I'm sure human nature with change precisely on schedule, and neither lenders nor borrowers will allow greed to lead to overly-optimistic projections about borrowers' ability to pay. This will start tomorrow, at 1:21 PM EST.

  • economist||

    joe,
    Maybe you missed how government interference in interest rates and irresponsible government promises affected the market?

  • Gilbert Martin||

    "You're on a boat, and a stranger on that same boat is swept overboard by a freak wave. They will drown if you do not throw them a life preserver.

    Now, in what way exactly would you not be fucking them by doing nothing? It sounds like an ostrich theory of ethics to me..."

    I wouldn't be because it wasn't me who knocked the guy out of the boat. His welfare is not fundamentally my responsibility.

    I really don't care what your opinion is about ethics because that's all it is - your opinion.

  • ||

    economist,

    If the economic growth was staying level, and this was just a case of people shifting their money from home purchases to rentals, you might be right.

    But it's not; there is an absolute decline in both the economy, and what people are putting into the housing sector as a whole, so while rental property owners and management companies might see a gross gain, we're still talking about a big loss across the housing sector, and the economy as a whole.

  • Fluffy||

    It is possible for both the free market and the unfree market to produce just results.

    Shhhhhhh! If that is true, there's less reason to be an economic libertarian, if your interest in crafting your laws is to have a just society.

  • robc||

    The market has been sending very, very strong signals about lending to people without making sure they can pay back the loan for hundreds of years. And yet, here we are.

    People read the signals and stopped doing it. Im not sure your point here, unless you are complaining about the lag between signal and response. Try getting a sub-prime 125% loan now. Cant be done. In fact, part of the current problem is the lenders have read the signals so well that they wont give fixed rate loans as refis to many of the people with arms because they dont qualify under current standards, which are tougher than the standards 2 years ago.

  • ||

    economist,

    Maybe you missed my description of the libertarian One Drop Rule?

  • robc||

    If that is true, there's less reason to be an economic libertarian, if your interest in crafting your laws is to have a just society.

    My interest is maximizing freedom. I know that will lead to a just society. There may be other just societies, but I dont care, because I want freedom maximized. That is my goal.

  • economist||

    joe,
    While I can see how fear over housing markets might affect the entire economy, I don't see how a government policy that harms some for the benefit of others so that they can have a false sense of security is a positive development.

  • economist||

    joe,
    You'll have to repeat the One Drop Rule.

  • robc||

    I'm sure human nature with change precisely on schedule, and neither lenders nor borrowers will allow greed to lead to overly-optimistic projections about borrowers' ability to pay.

    This crisis is just further proof of the following:

    Bulls can make money. Bears can make money. Pigs lose money.

    If greed leads you to being overly-optimistic then you deserve the smackdown you receive. Those who want to maximize their earnings but without being greedy, will determine the proper amount of risk they can afford to take. And it will be less than this time around.

  • ||

    What's a "rollover"?

    Once the Mercedes dealer has you bent over his desk, you'll find out.

  • ||

    People read the signals and stopped doing it.

    Apparently not, robc. There is this thing in the United States that is called "the mortgage crisis," which involves a whole lot of loans that have been made on terms that the recipients cannot repay. Not only have they not "stopped doing it," they did it so much, and so badly, for enough years that it has sent the American economy into a recessionary period.

    I'm supposed to believe that the past 700 years of market signals, including bursting bubles, bank runs, and foreclosure crises, haven't done the job of getting lenders to stop making, and homebuyers to stop taking, stupid loans, but that THIS TIME, it's really going to work, so we don't have to worry about anything but market signals to keep it from happening again?

    I don't find that to be a terribly likely prospect.

  • ||

    The whole entrepreneurial class is, as it were, in the position of a masterbuilder whose task it is to erect a building out of a limited supply of building materials. If this man overestimates the quantity of the available supply, he drafts a plan for the execution of which the means at his disposal are not sufficient. He oversizes the groundwork and the foundations and only discovers later in the progress of the construction that he lacks the material needed for the completion of the structure. It is obvious that our masterbuilder's fault was not overinvestment, but an inappropriate employment of the means at his disposal.

    ~Human Action chapter 20

    Until we get rid of socialized financing it will be impossible to avoid the Fed Boom and Bust cycles...

  • ||

    economist,

    joe,
    While I can see how fear over housing markets might affect the entire economy, I don't see how a government policy that harms some for the benefit of others so that they can have a false sense of security is a positive development.


    I guess it depends on your values. If the "harm" is that mortgage companies can't make, and homebuyers can't take out, mortgages they will have no way of repaying, then the actual economic harm is minimal, compared to the gains of better economic growth and stronger economic fundamentals.

    But if you, like robc, only care about "freedom" - defined strictly as a lack of regulation - and put a great deal of weight on that, than one can find the "harm" of lenders not being allowed to give a $250,000 ARM to people who earn $55,000/year to be very weighty.

  • ||

    If greed leads you to being overly-optimistic then you deserve the smackdown you receive.

    Look, just read some merciless mocking of your choice into the following blank space. Please make sure it incorporates the terms"retirements," "roofer," "recession," and "unemployment."













    OK.

  • ||

    Have you looked at your 401k lately?
    Yep. Not good the last couple of years. Good for the last 10 though. I expect it will be good for the next ten.

    How about gotten your home appraised?
    I'm a renter who has no desire to deal with home ownership. Single guys are often like that.

    How about tried to get a new job?
    Nope, I'm retired. I've no doubt I could get back into the tech writing business if I want to, I don't. Is this a great country, or what?

    This IS your problem, one way or another, because of the ripple effects it has caused throughout the economy.
    No it's not. Any government response will also have "ripple effects" that will punish those who didn't jump on the bandwagon without looking to see if the wheels were firmly attached.

    joe, I'm pretty much insulated from the short term ups and downs of the marketplace. If you aren't thinking long term with your investments (>10 years) you are taking risks that cowards like myself find unpalatable. If you've been in your 401K for any length of time, (again >10 years) and bounce it against inflation, you probably won't feel too bad.

  • robc||

    joe,

    Apparently not, robc.

    Did you read the rest of my post, including this?

    In fact, part of the current problem is the lenders have read the signals so well that they wont give fixed rate loans as refis to many of the people with arms because they dont qualify under current standards, which are tougher than the standards 2 years ago.

    I also refer you to my question at 10:53.

    Lets give an example. Let us say that the economy is at 100 in some year 0. In a non-bubble economy it increases at 3% a year for 10 years. At the end, the economy will be at 134. However, the neighboring country has a overheated, out-of-control boom economy followed by a recession. They have 8 years of 5% growth followed by 2 years of -4% recesssion. At the end of the 10 years there economy measues in at 137. Sure it got up to 148, but even after the recession it is still higher. (yes, I picked numbers to make it work, its just to show that boom/bust may not be a bad thing).

    The fact that we MAY be entering a recession isnt necessarily a bad thing. Its a short term bad thing, but in the long run, I dont know which is preferrable.

  • ||

    economist,

    The Libertarian One Drop Rule:

    If a libertarian looks at a problem and can find one drop of government involvement, the problem shall be cast entirely as the fault of government, and any role that market forces and the private sector played in that problems creation is to be ignored.

  • ||

    People read the signals and stopped doing it.

    Of course we know that the bust is coming. However a business person won't refuse to make these bad loans because other businesses are using the new funds to compete. You can ramp up and then get out of the cycle quick enough and make a killing. Leaving the rest of the industry to get hurt, including the individuals creating the actual wealth. At the same time you can't afford to lose your market right now by refusing to participate in the cycle.

    Check out ml-implode.com for evidence of this..

  • economist||

    Well, not allowing lenders to minimize their losses in a way that their contracts with borrowers specifically allow does in fact seem like it harms them. Also, don't give me the bullcrap about "positive liberty thru government regulation". I really have little patience for it. Also, I think that potential lenders worrying that borrowers will get off without paying their loans, while they (the lenders) hold the bag, might indeed hurt economic growth.

  • Fluffy||

    OK, Joe, I think I understand why we've been having a problem communicating in this thread.

    We are concerned about two dramatically different aspects of the subprime problem.

    I'll go back to where we really diverged:

    People have been trusting mortgage companies' qualification judgements as credible for a long time, and not just since those disclosure forms came out. When you lull people into believing that business won't act irrationally against its own interest, as market-fetishists have been doing for a few decades now, you're lulling them to sleep.

    My primary concern has always been lower-tier borrowers who were sold mortgage products with exotic features. These borrowers generally were sold refinances on properties they already owned.

    Your primary concern appears to be people who bought too much house because, as you see it, they trusted the mortgage lender to only approve them for a loan amount that made sense. These borrowers were typically middle class or upper middle class [especially in the most frenzied markets, like California or Nevada] and didn't get products where the exotic feature was hidden, but where the exotic feature was the selling point: "You can use this feature of this loan to buy this overpriced house!"

    Because we aren't concerned about the same people, we aren't talking about the same problem, and we're arguing past one another.

    I'm concerned about the first group of people because those people typically had accumulated equity in their properties by having a payment history, and had "found" equity in their properties due to price appreciation, and some industry operators did in fact prey on those people with innovative products that the existing disclosure regime wasn't good at exposing.

    I'm not concerned about the second group of people because most of them were much more "in" on the game than you seem to realize, and also because frankly most of them didn't lose very much. If you made little or no down payment and get foreclosed on in the first 18-24 months of your mortgage, other than your credit score you aren't really losing a whole hell of a lot. It may hurt your feelings to get foreclosed on, but your actual quantifiable economic loss in dollar terms isn't that great.

    You're also, it appears, significantly concerned about the macro picture, and that concerns me less. The 1-2% in unemployment you've referenced a couple of times is offset by the 1-2% overage in employment experienced during the boom. If we're going to start including the opportunity cost of lower growth in our discussions, why not include the higher growth we already experienced? I don't see anybody giving that money back any time soon.

    I'm more concerned about individual people who were treated unfairly than I am about 700 marginal points on the Dow.

  • economist||

    Concerning the "One Drop Rule"
    I would say that having the ability to control interest rates counts as more than a drop of government involvement. More like a barrel full of government involvement.

  • Elemenope||

    I wouldn't be because it wasn't me who knocked the guy out of the boat. His welfare is not fundamentally my responsibility.

    I really don't care what your opinion is about ethics because that's all it is - your opinion.


    Welcome to the planet Earth, where you are not the only human, and where people who are not you are affected by what you choose to do or not do and so have a stake in those decisions.

    Ethics may be, on the human level, a matter of "opinion", but since the conglomeration of those opinions forms the framework of an equally illusory and yet important construct called "society" dismissing them is stupid and perilous.

    Any third party on that boat who witnessed your murderous indifference would undoubtedly pimp-slap you over the side for your obvious failure to fulfill a duty that the vast majority of humans expect from one another. Nobody will shed a tear.

    If you wish to march to the beat of your own ethical drummer, just be sure you do it far away from the rest of us, please, so that your inability to recognize simple duties doesn't harm anyone foolish enough to think he or she lived among real, feeling, thinking human beings.

  • ||

    Yep. Not good the last couple of years. Good for the last 10 though. I expect it will be good for the next ten.

    It is good that the stock market performs well over ten-year peroids, evening out the rough spots. It would be even better if it had fewer and shallower rough spots. This is not an observation libertarians have difficulty making when the meconomy is, allegedly, being harmed by taxes or regulation.

    I'm a renter who has no desire to deal with home ownership. Single guys are often like that...Nope, I'm retired. Gee, that's nice. Some of us have been discussing the economy as a whole, and what's best for society. As opposed to just you.

    Did you read the rest of my post, including this?... Yes, I did. And, once again, I'm not talking about cleaning up this particular mess, but about how to prevent it from happening in the future. If they didn't learn from the last 700 years, what makes you think that lenders, on their own, won't do this again the next time the housing market gets this hot?

    As for your question, I'd be careful about conflating "bubbles" with the ordinary business cycle. Should we prevent bubbles is a different question than should we level out the business cycle.

    IMHO, the ups and downs of the business cycle are a net gain up to a certain point, but the extreme volatility of bubbles is dangerous.

  • ||

    economist,

    Also, don't give me the bullcrap about "positive liberty thru government regulation". I really have little patience for it. Fine, but don't pretend that you are making an economic argument here, or that you needn't ever worry about your "liberty" value and your "economic well-being" values cannot ever conflict.

  • Fluffy||

    Any third party on that boat who witnessed your murderous indifference would undoubtedly pimp-slap you over the side for your obvious failure to fulfill a duty that the vast majority of humans expect from one another.

    The question would be whether or not that would be just. I can think of several reasons why it would not be:

    1. Since the witness is obviously with me on the boat, why didn't they save the drowning guy? How is saving drowning guys suddenly my job instead of theirs?

    2. If this is true, how come no one is pimp slapping you for not saving people dying from malaria in Africa, joe? Is this some special rule that only applies to boats? Or the rule applies if you can see the drowning guy, but if you close your eyes so you can't see him and only hear reports of his drowning it doesn't count?

  • Fluffy||

    Sorry, I guess that's only two reasons. I'll try to think of some more later.

  • economist||

    Elemenope,
    Have you actually bothered to answer the point of the person with the boat argument? While I am all in favor of lending a helping hand when it's not a huge problem (Golden Rule actually makes life somewhat easier overall), I don't think people should be expected to sacrifice their own legitimate interests in the name of some "Greater Good", even if it's "society's" opinion that they ought to.

  • joe||

    ME ME ME ME ME ME ME ME ME ME ME ME ME ME ME ME ME ME ME ME ME ME ME ME ME ME ME ME ME ME ME ME ME ME ME ME ME ME ME ME

    I HAVE NO LIFE AND CAN POST FOREVER. I HAVE NO LIFE AND CAN POST FOREVER. I HAVE NO LIFE AND CAN POST FOREVER. I HAVE NO LIFE AND CAN POST FOREVER. I HAVE NO LIFE AND CAN POST FOREVER. I HAVE NO LIFE AND CAN POST FOREVER. I HAVE NO LIFE AND CAN POST FOREVER. I HAVE NO LIFE AND CAN POST FOREVER.

    ME ME ME ME ME ME ME ME ME ME ME ME ME ME ME ME ME ME ME ME ME ME ME ME ME ME ME ME ME ME ME ME ME ME ME ME ME ME ME ME

  • ||

    Not only do we know why business will continue to engage in the cycle despite the wrecklessness of it. We also know that the Federal Reserve completely defeats the purpose of the market. Yes originally it was created to make cheap credit for guys like JP Morgan and Rockafeller, but it was also called The Lender of Last Resort. Bailing out banks after a series of bank runs. If a bank goes bankrupt, good! The more the better, this will force lenders to adopt more responsible lending criteria which will obviously make it that much harder to borrow. By preventing the liquidation of malinvestment so that the resources can be used in a more productive enterprise ASAP we only worsen the correction!

    Hell just legalize competitive currency and I'll take my crazy uninformed ideas with me to a gold backed currency.

  • ||

    Fluffy,

    I am concerned about that first group of people, too, for humanitarian reasons, and less concerned with the second group, because as you say, the actual harm they personally suffered is much less.

    But the it is the latter type of borrowing which, because of the much larger number and size of the loans, has caused such widespread harm to the economy, so I am more concerned ABOUT those losses, even as I am less concerned FOR those borrowers themselves.

    The 1-2% in unemployment you've referenced a couple of times is offset by the 1-2% overage in employment experienced during the boom.

    Ah, now I see how your question about whether to even out the economy relates. I would argue that, when we're talking about bubbles, the growth towards the end is so illusory and fleeting that it can't be counted on to even out the harm done by a popping bubble.

    Not to mention, there is the harm of disruption and dislocation itself. Especially since, human nature being what it is, people are going to tend to adjust their lifestyles to match what they can afford in the good times.

  • ||

    Fluffy,

    If this is true, how come no one is pimp slapping you for not saving people dying from malaria in Africa, joe? Is this some special rule that only applies to boats? Or the rule applies if you can see the drowning guy, but if you close your eyes so you can't see him and only hear reports of his drowning it doesn't count? I didn't write that response, Elemenope did. But I'd say that one's responsibility to others is based on one's ability to give. People have a duty to do what they reasonably can, and there will always be suffering beyond that which any one person can solve. This neither makes each individual guilty of not solving all the world's problems, nor eliminates their guilt if they do nothing to solve that suffering they can address.

  • economist||

    joe,
    was that you, or an imposter, with the weird post a few pegs up? I just wonder 'cause the name's not in orange.

  • ||

    Hey, look, my fan club showed up.

    *kiss kiss*

  • Jennifer||

    So all we need to do is avoid bubbles by passing the proper laws. How would that work? Maybe we can have a government agency decide what the proper, non-bubbly price of an item should be, and then make it illegal to pay more than that amount for a given object. Beats the hell out of letting grown-ups make their own less-than-optimal decisions.

  • Gilbert Martin||

    "Any third party on that boat who witnessed your murderous indifference would undoubtedly pimp-slap you over the side for your obvious failure to fulfill a duty that the vast majority of humans expect from one another. Nobody will shed a tear."

    Any third party on the boat could concentrage on rescuing the overboard man himself instead of wasting time on me. If he's seeing it happen he can't very well claim the responsibilty is any more mine than it is his.

    Besides it's highly unlikely that whoever else is in this hypothetical boat has ever lived so much as a single day in his entire life when he was tough enough to "pimp-slap" me over the side.

    Just as you never have - or will.

  • economist||

    "One's responsibility to others is based on one's ability to give". Wouldn't that mean that self-improvement and growth are just ways to make your own life a bigger hassle. Wouldn't this mean its better, overall, to be the one who needs help than to be the one capable of rendering it? Then again, it wouldn't be a surprise if you thought "From each according to his abilities, to each according to his needs" is a wonderful philosophy.

  • economist||

    joe
    You've still failed to explain how government nullification of voluntary contracts helps the economy. The probability that the government will help the person I'm doing business with cheat on their agreements with me if that person portrays himself/herself as sufficiently pitiful makes me less likely to do business with that person.

  • Elemenope||

    Have you actually bothered to answer the point of the person with the boat argument? While I am all in favor of lending a helping hand when it's not a huge problem (Golden Rule actually makes life somewhat easier overall), I don't think people should be expected to sacrifice their own legitimate interests in the name of some "Greater Good"...

    joe already covered it pretty well, and my answer is similar--you help when it is reasonable to expect that your help will make an actual difference, you help when it is within your means to do so, and the degree to which your duty to help becomes supererogatory is the degree of hardship that aiding will cause to you.

    I used the boat example because helping the drowning man costs nothing and it is not particularly the drowning man's fault that he was drowning. The fact that Gilbert Martin persisted in his position despite these two conditions is what led me to take his position as morally vacuous.

  • robc||

    One's responsibility to others is based on one's ability to give

    From each according to his abilities, to each according to his needs.

    Yep, I think those are the same phrase. It was bullshit the first time around too.

  • robc||

    heh, me and economist are thinking alike.

  • ||

    "One's responsibility to others is based on one's ability to give". Wouldn't that mean that self-improvement and growth are just ways to make your own life a bigger hassle. Wouldn't this mean its better, overall, to be the one who needs help than to be the one capable of rendering it?

    Careful, economist, you start sounding too much like Ayn Rand and they'll take out the long knives around here.

    "Lifeboat Ethics," LOL, I love it when a concept Rand created as a caricature actually surfaces in supposedly serious philosophical discussions.

  • robc||

    supererogatory

    I learned a new word in this thread. I was about 80% sure it was a typo, but I couldnt figure out for what.

  • ||

    Elemenope's argument will eventually boil down to, "it's your duty to help because it's your duty to help."

    Why?

    Because Christ said so.
    Because "the vast majority of human beings" say so.
    Because Kant said so.
    Because Rawls said so.
    Because your parents said so.
    etc.

  • ||

    economist,

    Some nameless troll is constantly being driven to fury by the fact that I am a both a liberal, and manage to hold my own in arguments, so he frequently posts comments full of that sort of silliness to protest the fact that I dare argue my case here.

  • economist||

    Graphite,
    While "moderate Randian" is a contradiction in terms, I would say that many of my ideas are moderately Randian.

  • economist||

    Of course, that basically means "libertarian".

  • ||

    WON'T SOMEONE PLEASE THINK OF THE RECESSION?!

  • ||

    economist,

    Take just a second to actually think about what you write as it applies to real world.

    Wouldn't this mean its better, overall, to be the one who needs help than to be the one capable of rendering it? Now, put down the cheetos, slide Atlas Shrugged over the side of the desk, look out the window, and try to answer your own question:

    Do you really think it would be better to be a poor person, or someone else facing hardship who needs help, than to be a wealthy, comfortable person who is in a position to provide help?

    BTW, I didn't write "from each according to his ability, from each according to his need." I articulated a philosophy based on reasonableness. I'm not surprised to find that bit slipped your mind. Political fanatics often make the mistake of thinking in absolutes.

  • robc||

    I may have to start using the phrase "moderately Randian" just to see if I can cause people's brains to break.

  • economist||

    I think you should definitely help out if that person helped you out, and therefore as a matter of policy its best to help others out. Also, being willing to render help makes it less problematic to accept it yourself. I'm not against altruistic help per se, just the idea that I am morally wrong not to provide it all the time, in all situations where it is physically possible, even when it heavily infringes on my rights to live my own life. To quote Rand "It is not the question of whether one should help a beggar on the street, but the question of whether that beggar's existence constitutes a continuing claim on the life of another."

  • ||

    Just as it is unwise to take advice about democracy from people who don't believe in democracy,

    it is also unwise to take advice on which policies will maximize everyone's well-being from people who don't believe in maximizing everyone's well-being.

  • economist||

    "Political fanatics often make the mistake of thinking in absolutes"
    Can I refer to you from now on as "non-absolute"?

  • ||

    I'm not against altruistic help per se, just the idea that I am morally wrong not to provide it all the time, in all situations where it is physically possible, even when it heavily infringes on my rights to live my own life.

    Well, economist, if you ever find someone who tells you that have a duty to give "all the time, in all situations where it is physically possible, even when it heavily infringes on my rights to live my own life," you send 'em my way, so I can't straighten them out.

  • ||

    And, if you know a good grammar checker I can use, send that over, too.

    Sheesh.

  • economist||

    I guess I should be blunt: I don't "believe" in democracy. I THINK that governments with strong democratic elements are the least worst governments. However, the majority makes a crappy god.

  • ||

    Maybe you should stop thinking of the government as God, then.

  • ||

    "Maximizing everyone's well-being" ... now there's a floating meaningless abstraction if I've ever heard one.

    Is it really *everyone's* well-being you want to maximize joe?

    Well-being as defined by whom?

    Maximized in what sense--for the group as a whole (crude utilitarian), or according to Pareto optimality? Or some other standard?

  • Gilbert Martin||

    "Elemenope's argument will eventually boil down to, "it's your duty to help because it's your duty to help."

    His "argument" is that his opinion is fact and not merely his opinion.

    But of course, it isn't.

  • ||

    Nope, not interested in that particular rabbit-hole at this particular moment, Graphite.

    Oh my goodness, a less than precisely-defined term! Whatever shall we do?

    Tell you what, imagine I put a gun to your head and told you to define what I meant by "maximize everyone's well being," and that I would pull the trigger if you got it wrong.

    Read the statement with that definition. It's probably a close enough definition for our purposes.

  • Gilbert Martin||

    "it is also unwise to take advice on which policies will maximize everyone's well-being from people who don't believe in maximizing everyone's well-being."

    It is unwise to take advice from people who think we are all obilgated to work toward maximizing everyone's well being in the first place - since no one has established that we are.

  • ||

    It has been established to precisely the same degree as the proposition "We have a duty to respect others' rights and liberty."

    That is, it has not been established at all; it is a statement of faith and values.

  • ||

    Imprecisely defined terms in an internet debate are one thing. Empty, meaningless catch-phrases used to short-circuit thinking and claim the moral high ground are quite another.

    Perhaps I believe my well-being is better served by living in a society where individuals enjoy the freedom to take greater risks, but must accept proportionally greater responsibility if those risks do not pan out. What makes this belief of mine wrong, other than that Ruger you're holding to my head?

  • economist||

    "maybe you should stop thinking of the government as God then."
    Actually, I was referring to the fact that you seem to put a lot of faith in democracy and majority opinions, usually falling back on them when you are unable to convince people otherwise. So far you have, at some point, used democracy or majority opinion to justify:
    1. Chavez
    2. National Health Care
    3. Higher taxes
    4. government-sponsored contract nullification
    I definitely don't consider the government to be God. And you shouldn't be trying to make it a "God".

  • Elemenope||

    "Elemenope's argument will eventually boil down to, "it's your duty to help because it's your duty to help."

    In a sense, though I think just about everyone, including you, would find it at least morally questionable not to help the drowning man if it cost you nothing but five minutes of time. Duties *can* be self-evident. I know it's painful for some people around here to admit, but often our emotional reactions indicate a natural inclination towards positive duties, which we can ignore only with great self-discipline fortified by daily Ayn Rand readings and/or heavy medication.

    His "argument" is that his opinion is fact and not merely his opinion.

    But of course, it isn't.


    No, jackass, my argument is that mere "opinions" matter in ethics because upon the opinions of all is this rickety edifice of society based. Or, put another way, since *your* opinions could make the difference between someone living or dying (someone who may well not *share* your opinion), there must be a rough consensus mechanism for what actual duties, if any, exist.

    In reality, we balance our duties (both informal and legal) against our resources and our desires, and come out with a pattern of actions. Since *everyone* does this, and the resulting emergent behavior isn't *wholly incoherent*, we can assume at the very least that there are some moral imperatives that come somewhat naturally to people, ideology be damned.

  • Gilbert Martin||

    "It has been established to precisely the same degree as the proposition "We have a duty to respect others' rights and liberty."

    No it hasn't.

    Respect for other's rights has actually been codified into law for a very long time. Hence laws against theft, murder, assault, etc.

  • beezle||

    Then there is the matter of the interest rates future borrowers will have to shoulder. Lenders offer adjustable-rate mortgages, which carry low rates in the early years, in the hope of reaping higher rates later on.



    That statement is false. Banks make ARM's when rates are high, low and inbetween and their expectation of the future course of interest rates has nothing to do with whether they offer the product or not.

  • ||

    Grahpite,

    It is not a question of the freedom you mention not having value, but of how much to weigh that autonomy you mention against things like hunger and other human suffering. I don't think anyone who thinks seriously on the quesiton would say that the value to be placed on your concern is null.

    economist,

    I have not used democracy to "justify" - in the sense of demonstrating the superiority or goodness of - a single one of those things you listed. Not one, not ever.

    Some, like Chavez, I don't consider good. Those that I do consider good, I have defended on their own merits.

  • economist||

    Elemenope
    I'm glad you act as if everything welfare-statists, Rawlites, and joe thinks the government should do is as easy as "taking five minutes to save another person's life". Of course, don't listen to me because, according to joe, I'm a "political fanatic".

  • ||

    Respect for other's rights has actually been codified into law for a very long time.

    Wow. Now THAT, economist, is what it looks like when someone "justifies" something based on its support by a political system.

    Gilbert, what ever happened to "we get our laws from the Creator, not the government?" Sheesh.

  • Fluffy||

    I didn't write that response, Elemenope did. But I'd say that one's responsibility to others is based on one's ability to give. People have a duty to do what they reasonably can, and there will always be suffering beyond that which any one person can solve. This neither makes each individual guilty of not solving all the world's problems, nor eliminates their guilt if they do nothing to solve that suffering they can address.

    I guess the problem becomes how you decide the actual extent of responsibility that translates into. And who decides.

    Our "how" problem is that wherever you set the line, you will be leaving some people unhelped, on what amounts to an arbitrary basis. You have the "Schindler's Watch" problem. Or the reverse - you have a situation where the guy on the boat can say, "I helped a drowning guy last week; it's not my turn," which presumably is not what you're trying to achieve here.

    Our "who" problem is if you rely on some sort of political consensus about what level of help is appropriate, that creates logic holes I'm not sure you'd like. To name one, it would mean that if I can contrive it so that my political obligation to help is zero, your argument would mean that my personal obligation was zero, too. There'd be no mechanism possible to make my moral obligation ever be any greater than that declared by even the most odious regime. It also creates a chicken and egg problem where there's no way to determine what my opinion should be during the time period where we're actually making our collective decision. But if you let each person individually decide, then the guy on the boat can say, "I have decided I don't have to help this guy," which also presumably is not what you want.

  • Gilbert Martin||

    No, jackass, my argument is that mere "opinions" matter in ethics... blah, blah, blah,etc. etc.

    No jackass, a longer winded version of your opinion is still just your opinion - period.

  • ||

    Hey economist,

    Just so you know, nobody is noticing that you are bobbing and weaving between principles and practical applications. Or asking for defenses of things on principle, then observing that articulating a principle isn't enough to demonstrate how it can be effectively put into practice.

    Seriously, nobody has noticed that you keep doing that. At all. So don't worry.

  • economist||

    regarding joe's response to my argument
    I guess there's a little bit of cognitive dissonance here. I clearly remember him arguing that we shouldn't refer to Chavez as a dictator because of the Venezuelan people's "right to elect their own leaders" (socialistic, authoritarian leanings notwithstanding).

  • ||

    So if Obama is the most libertarian of the three candidates remaining and my man Steve Chapman is for him, then I guess it is safe to say Obama is also in favor of the breath-test-ignition lock devices to keep criminal drunk drivers off the road. Of course the related legislation of making it a felony to tamper with the devices or seek to "get-around" the devices by having your friends blow into it should also be made a felony. As I'm sure some trouble making anarachists will try to think of more ways around this lifesaving device.

    If so I hope that Obama will then consider lowering the BAC limits down to .03%...this would finally go a long way towards reducing the number of deaths due to drunk driving in this country.

    It would also help smoke out all the rather risky ":social drinkers" who continue to drink and drive hoping to "beat the system". Data has shown that these people are responsible for a large number of deaths EVERY year. These people should eventually put in jail or prison labor camps to help our economy through the recession.

  • economist||

    Explain how I'm "bobbing" between principles and practical applications.

  • ||

    OK. First, you asked Elemonope questions about responsibility to others, and she articulated her ideas and argued with you. In the process, she gave the example of how it might "take five minutes to help another person."

    Then you bobbed and wove into practical application, with I'm glad you act as if everything welfare-statists, Rawlites, and joe thinks the government should do is as easy as "taking five minutes to save another person's life". She, of course, made no such claim, she was discussing a principle.

  • Fluffy||

    Well, economist, if you ever find someone who tells you that have a duty to give "all the time, in all situations where it is physically possible, even when it heavily infringes on my rights to live my own life," you send 'em my way, so I can't straighten them out.

    The problem is that without the moral principle that help can be required on the basis of need, and that the obligation to help exists on the basis of having a surplus, it's hard to understand where the obligation to help a little is coming from. But with those moral assumptions in place, you rapidly end up with "give all the time until you run out of surplus".

    These are tough questions.

  • Gilbert Martin||

    "Wow. Now THAT, economist, is what it looks like when someone "justifies" something based on its support by a political system."

    No that's what it looks like when someone blows your claim out of the water that respect for the rights of other's has not been "established" any more than your notion of a duty to maximize everyone's well being.

    The former is more established because it's the law.

  • Crilltog||

    So a person who doesn't know how to swim (his responsibility) and doesn't wear a life jacket (his responsibility) gets on a boat anyway. Then thru an act of god gets thrown from the boat. Yes, despite his stupidity, 99 percent of us would still jump in and save his dumb ass. But the captain of the boat shouldn't be able to hold a gun to my head and force me to jump in and rescue him if I choose not to.

  • ||

    Fluffy,

    As with everything else in human experience, we try to do the best we can, and come up with something that is "good enough." If it turns out not to be good enough, or something changes so that it stops being effective, we make changes to the system, and once again, our democratic, consensus-driven system will lead us to design another effort to the level of "good enough."

    You certainly can't claim that the market produces perfect outcomes in all cases.

  • ||

    These people should eventually put in jail or prison labor camps to help our economy through the recession.

    LOL, well, as long as you can argue it does something to prevent recessions ....

  • ||

    Fluffy,

    I don't think But with those moral assumptions in place, you rapidly end up with "give all the time until you run out of surplus". is actually true.

    Our society has assumed a duty to aid the poor for the entirety of its existence, and has never gotten within 1000 miles of levelling. If you 1) only take that principle into your thinking, to the exclusing of all other, potentially counter-vailing principles, and 2) apply it ruthlessly and without an ordinary level of prudence, then I can see how one could get to that point. That's why it's best not be a political fanatic, but an FDR-style "I try something, and if it doesn't work, I try something else" liberal pragmatist; because only seizing on one principle to the exclusion of others, and hardening your heart in order to apply that principle as an absolute, tends to end with bodies is big ditches. And it doesn't matter very much what the principle latched onto is.

  • ||

    "You certainly can't claim that the market produces perfect outcomes in all cases."

    But when the government gets involved, they tend to make things worse.

  • ||

    Gilbert,

    If you're going to write something like, The former is more established because it's the law, you should capitalize the L in Law. And maybe the T in The. That's generally how deities' names are written.

  • ||

    joe says

    "It is not a question of the freedom you mention not having value, but of how much to weigh that autonomy you mention against things like hunger and other human suffering."

    yes, as cosmotarians we all know that freedom causes human starvation AND suffering and we urbanly hip freedom lovers must discuss these cost and benefits to determine how much freedom we'd like to give the peasants versus how much human starvation we are willing to accept. If the stravation meter gets too high then it is a simple libertarian principle that we need to pull down the freedom lever, tell the selfish peasansts to read the social contract some more and then starvation will cease shortly thereafter.

    Once we have succesfully blamed starvation on freedom we will be excused from ever returning any freedoms to the people and we can simply start the proccess over again. After we have done this a few times our prison labor camps will be throwing off huge profits and freedom will finally be secure.

  • ||

    it is also unwise to take advice on which policies will maximize everyone's well-being from people who don't believe in maximizing everyone's well-being.

    C'mon, joe, this is a discussion about how best to maximise everyone's well-being in the long run.

    Some of us think the degree to which long-term well-being maximization can be facilitated by the state is very limited, and that the best way to maximize well-being is to let people engage in the 'pursuit of happiness' as they deem best.

  • ||

    bookworm,

    I'll point you to the vastly superior economic performance our economy has turned in since the New Deal.

    I'll also point out that rules of thumb are good for telling you when to pay close attention and what to look for, but are not by themselves good enough to tell us what to do when faces with specific questions in specific situations.

  • Elemenope||

    OK. First, you asked Elemenope questions about responsibility to others, and she articulated her ideas and argued with you. In the process, she gave the example of how it might "take five minutes to help another person."

    Sex changes are not one of those things that I'd be comfortable leaving in other people's hands. ;-p

    Happily male, and intend to stay that way.

    Incidentally, do I come off as female?

  • Gilbert Martin||

    "Gilbert,

    If you're going to write something like, The former is more established because it's the law, you should capitalize the L in Law. And maybe the T in The. That's generally how deities' names are written."

    That's real cute.

    But it doesn't refute the point.

  • economist||

    Actually, I was just having some fun with the fact that you called me a political extremist for trying to articulate a coherent principle and even acknowledging its most extreme applications, while not noticing Elemenope's extreme example of not saving a person's life even if it takes five minutes. I think the big difference in our principles is: mine doesn't exclude people from practicing your principle (altruism) whereas yours excludes people from practicing mine (selfishness). Yes, if someone practiced selfishness to its full extent, they would not even take five minutes to save another person's life. But the extreme of yours is to force another person to give up his or her life if it would save more lives. Selfishness, however, allows but does not encourage self-sacrifice, while altruism requires it and leaves no room for self-seeking behavior.

  • ||

    See, look at dipshit "Cosmotarian Overlord" above, bookworm.

    "Pull down the freedom lever?" WTF is that supposed to mean?

    Lumping all government and all government actions into an undifferentiated mass, and then talking about that mass instead of the actual questions on the table, is what people who cannot hold up their end of an argument about government do to make themselves feel better.

    R C Dean,

    I failed to see you drawing any longrun/short run distinction in your "boo fuckity hoo."

  • ||

    LMNOP,

    As embarrassing as it is to admit, I think I assumed your gender from the fact that your name looks a bit like Penelope. Apologies.

  • thoreau||

    Maybe you should go back to Econ 101, and learn about assymetrical information and how it distorts market transactions.



    Oh, SNAP!

    I'm not even sure that I agree with joe here, but full props for turning around the Econ 101 talk!

  • ||

    "an FDR-style "I try something, and if it doesn't work, I try something else"

    Has anything FDR tried ever worked in the long run or would it have been better to have continued to rely on the private sector? It seems that nothing the Hoover or Roosevelt administrations did helped during the depression. Hoover's policies turned a what would have been a short term correction into a full blown depression and FDR's policies prolonged the depression all the way to World War II.

  • Gilbert Martin||

    "Selfishness, however, allows but does not encourage self-sacrifice, while altruism requires it and leaves no room for self-seeking behavior."

    Yes and it is only altruism when the individual decides for himself to make that sacrifice.

    Volunteering someone else's efforts or money isn't altruism.

  • ||

    economist,

    I didn't call you an extremist or an absolutist for using extreme examples to make your point. I called you an extremist for not recognize that there are countervailing concerns.

    Like you write here Yes, if someone practiced selfishness to its full extent, they would not even take five minutes to save another person's life. But the extreme of yours is to force another person to give up his or her life if it would save more lives.

    I certainly have no intention of applying anything to its severest extremes; therefore, I don't worry about what would happen on those extremes.

    I also don't believe in applying principles in a vacuum, in the absence of countervailing principles. There is still plenty of room for selfishness in my philosophy.

    Since you actually do argue based on what happens in the most extreme cases as reasons not to apply principles in a moderate manner, I can only conclude that you consider such applications to be a part of how you think principles should be applied. That makes you an extremist.

  • ||

    yes, Joe and are FDR style libertarians...you know round up all those gooks and put them in a prison labor camp and if that doesn't work then round up all the folks who think the the government lied about the Oklahoma City bombing as well. If you try a lot of things then we are bound to come up with some great ideas. Besides it's fun to make up lots of rules for everyone to follow and imagine how the peasants will react! Sometimes those mischevious little rodents even surprise me! Boy what good fun me and Joe and George W Bush have toying around with their lives!

    What if you have too much drunk driving deaths? Well then why not try some of Steve Chapman's ideas? At least we are progressively trying to help things get better. Our intentions are good and THAT is what matters, not your ivory tower philosophies and principles. Some of you juveneille libertarians get so bent out of shape about the smallest infraction of your precious "liberties". But you are part of the social contract and you are obligated to have some faith in our new programs and at lest give them a good effort.

  • stuartl||

    Since this thread is from an article making fun of HRCs economic policy and there are nearly 200 posts, can I safely assume it is not worth reading because it is mostly made up of: 1) people having fun poking joe; 2) people foolish enough to take him seriously on a democrat and economics; and 3) joe telling other commenters they are not smart enough to understand what he really said at 3:41PM?

  • Elemenope||

    I'm glad you act as if everything welfare-statists, Rawlites, and joe thinks the government should do is as easy as "taking five minutes to save another person's life". Of course, don't listen to me because, according to joe, I'm a "political fanatic".

    I don't, nor (as joe pointed out) did I ever indicate such. On the point of where duties stop and voluntary moral impulses start, I imagine I'm much closer to your end of the spectrum than joe's. But I think we can all get behind "five minutes to save a life". Well, all but Gilbert, apparently.

  • ||

    bookworm,

    Has anything FDR tried ever worked in the long run

    0 depressions

    0 bank runs

    0 stock market collapses comparable to 1929

    Social Security has resulted in the elderly going from the most povertry-ridden segment of our population to the least, without any other segment seeing its poverty levels rise. (In fact, they've gone down across the board.)

    A great deal of what FDR tried worked very well, judging from a utilitarian standard.

    Hoover's policies turned a what would have been a short term correction into a full blown depression and FDR's policies prolonged the depression all the way to World War II. A very large majority of economist and economic historians disagree with this eccentric position, you know.

  • ||

    For the noobs:

    99% of the comments you see on any discussion thread that begin with "Yes..." or "Yeah..." and then describe someone else's position can be safely skipped.

    Rounding up gooks? Go away, son, the grownups are talking.

  • ||

    "I'll point you to the vastly superior economic performance our economy has turned in since the New Deal."

    I can't think of anything that the New Deal put in place that is responsible for post-New Deal economic growth.

  • Gilbert Martin||

    Has anything FDR tried ever worked ...?

    No.

  • economist||

    Actually, I would say that our elderly are wealthier because: 1. Everyone is generally wealthier than they were 80 years ago and 2.They had fewer kids, so they saved more for retirement.

  • ||

    Joe,

    I was agreeing with you...you implied we might need to limit freedom to stop hunger and suffering. I think it great that you made this connection that it is too much freedom which causes hungering and sufferring a brilliant insight. I'll quote it again in case anyone missed it:

    Joe says
    "It is not a question of the freedom you mention not having value, but of how much to weigh that autonomy you mention against things like hunger and other human suffering."

    to make it clear...the anrachist we are arguing agaisnt probably think that "lack of individual freedom" has a better track record of causing mass starvation and misery than "too much freedom". So you argument isn't going to make much sense to most anarcho liebrtarians...however, amongst the really really really sophisticated libertarians we will win the day as we have provided plenty of evidence to convince them that FDR was truly a great intellectual hero.

  • economist||

    "There's still plenty of room for selfishness in my philosophy".
    I'm fairly certain that if you lend someone money, with the condition that if they don't pay on schedule you can take whatever they spent it on (a house, a car, etc.), you would feel cheated if the government decided they would let him out of the obligation. You might even say that you are being forced to sacrifice yourself for his benefit.

  • ||

    Of course not, bookworm.

    It's just another of those astounding coincidences that keep happening, and make it so much harder for supply-siders and laissez-faire advocates to enlighten the masses.

    Doesn't it just drive you batty that such astounding, confounding coincidences keep cropping up? First the United States goes through its greatest period of growth under the New Deal and post New Deal; then the deficit explodes immediately after Ronald Reagan's tax cuts, such that even he has to come back and raise them again because the assumed revenue never appeared; and then the United States goes through its longest peacetime period of economic expansion in the immediate aftermath of Bill Clinton's economic program; and then Bush's tax cuts fail to make the economy bounce back any faster than it had in the early 90s (after a tax increase).

    I mean, it must drive you batty. It's like God planting those fake fossils to make everyone think the world is a billion years old. How is anyone supposed to know how economic policies actually work, with all of these coincidences coming one after the other after the other?

  • ||

    I'll point you to the vastly superior economic performance our economy has turned in since the New Deal.

    Does that mean we can credit Reaganomics for the even-more-vastly-superior performance we've had since the early 80s?

    http://www.measuringworth.com/datasets/usgdp/graph.php

  • ||

    economist,

    1. The rate of poverty decline among the elderly has dropped precipitously more than among "everyone."

    2. This was true even in the 50s, when the "fewer kids" effect hadn't kicked in yet.

  • ||

    "Hoover's policies turned a what would have been a short term correction into a full blown depression and FDR's policies prolonged the depression all the way to World War II. A very large majority of economist and economic historians disagree with this eccentric position, you know."

    I don't see how any economist can claim that FDR got us out of the Depression when unemployment stayed above 10% all the way to World War II

  • ||

    Graphite,

    I'd say that the taming of inflation under Volker and the reduction of the top income tax rate under Reagan have certainly improved economic performance.

  • ||

    c.o.,

    Anarcho-capitalists can think whatever they want. The wonderful thing about ahistorical utopianism is that it has no record whatsoever to judge it by.

  • Elemenope||

    No jackass, a longer winded version of your opinion is still just your opinion - period.

    You don't read well. An opinion ceases to be *merely* an opinion when it drives a person to act, or fail to act. Actions have objective consequences, and real harms can proceed from them. An "opinion" that isn't acted upon is merely an "idea"; actions make things real.

    Since people have different opinions about what is right, they act differently, and those different actions objectively are either more or less harmful to themselves and the people around them (many of whom took no part in forming or holding the actor's opinion).

    My contention, which seems fairly far from radical, is that all the spectrum of human behaviors that follow from the moral opinions of individual persons tend to converge into a fairly narrow band of acceptable behaviors, and it is this convergence that allows people with differing opinions to live together.

    Most of the these convergences take the form of basic positive duties (save a life if it can be reasonably helped) and negative duties (to not kill, steal, or rape), and there is very little disagreement, except for from "Gilbert the ethical infant", about the existence of the universe of widely held positive duties, in particular.

    This is an un-radical contention precisely because society exists. That is a fucking large data set. If one was to be pedantically technical, the idea that the universe wasn't created five minutes ago is ultimately just an "opinion"...but everyone still reserves the right to call you an idiot for holding it. Not all ideas are created equal: some ideas are unproductive and some are very productive. Some moral ideas (like it's OK to let the fucker drown) are destructive to the continued survival of communal humanity and some moral ideas (throw the guy a rope) are constructive.

    So, sure, it's just my opinion...but every sane man on Earth prefers to live in the world where saving the drowning guy is right, and letting him drown is wrong.

  • ||

    I don't see how any economist can claim that FDR got us out of the Depression when unemployment stayed above 10% all the way to World War II

    OK, now I get to savagely mock you, because once again, a libertarian managed to take my statement rebutting an argument about a theoretical causation and somehow manage to read it as if I put forward an affirmative theory about causation.

    *points at bookworm*

    Some have suggested that your mother is not wholly unaware of the physical act of love.

    *ha ha*

    (You actually seem like a nice, polite, thoughtful person, so despite my irritation at this constant misreading, I just can't work myself up for a truly savage mocking. Sorry.)

  • economist||

    joe,
    "ahistorical utopianism is that it has no record to judge by."
    You're right, it can be a pain in the ass when people talk about what happened when your ideas were applied. You're probably pissed off whenever somebody mentions the Soviet Union in relation to Marxist ideas.

  • atrevete||

    Jesus Christ, doesn't anybody buy houses to LIVE in anymore? Or is it supposed to be some kind of savings account? It's not the stupidity of the buyers, it's their sense of entitlement. Why should people be guaranteed a profit on their purchase of a house? Yet that's what most were actually counting on.

  • ||

    Actually, some of Obama's stuff will be a disaster too:

    1) Obama seems to think that this crisis was caused by fraud on the part of the banks. That's why his proposals focus so much on what banks do and not a whit on what borrowers do.

    2) Obama wants to allow bankruptcy judges to modify mortgages. Right now that's prohibited, but if banks and bondholders can be screwed after the fact by a failing borrower I guarantee only the most perfect borrowers will get a mortgage. If this idea becomes law the financial incentive for borrowers to file a basically fraudulent bankruptcy just to get a permanent reduction in interest rate or to demand a variable-rate mortgage become fixed will be much, much too high. If you do continue to lend to B-C borrowers, charging higher interest rates to offset this risk might not be enough, because that will give bankruptcy judges even more reason to burn lenders.

  • ||

    Me and Joe are the grownups,
    That is why we can come to this forum full of libertarians who have presumably read some economic history and truly act as if FDR was a great economic hero.

    Only grownups can act as if FDR didn't round up asians in a way that was even more racist than Ron Paul would have done it with Executive Order 9066.

    Only grownups can feel good and humanitarian about themselves for supporting a program that robs poor black minimum wage workers with life expectancies of 63 and gives the money to old rich white folks.

    Only grownups can take a generational wealth transfer ponzi scheme that particullarly victimize the poor with low life expectancies and make it sound like a good thing.

    Only a grownup like me can ignore the data on economic growth between 1870-1910 and act as if the period since 1932 has shown greater real growth and then credit all of that growth to FDR.

    Only us grownups can ignore a case like Argentina and Peron which implemented similar FDR programs and went from 5th richest country to way down the list.

    Only grownups can ignore the lessons of Hong Kong's economic growth.

  • ||


    Now you know that a basic tenet of conservatism is affirming that people all have economics degrees and millions of dollars, and if they have problems it's CLEARLY their own fault.


    When it comes to mortgages, it is their own fault. The bank discloses up front what your payment will be. It doesn't take an economics degree to figure out if that payment is something you can afford.

  • Gilbert Martin||

    You don't read well. An opinion ceases to be *merely* an opinion when it drives a person to act, or fail to act"

    You can keep stacking more of your personal opinions on top of your original one all you want - it doesn't change anything.

    If a person fails to act - it is STILL just your opinion that he should act and STILL just your opinion that he bears any responsibility for whatever ill happens to befall somebody else that he fails to assist.

  • ||

    joe, your have a completely different reading of history than I do. How can you call the New Deal a period of growth when the unemployment rate stayed over 10% until the war? The boom during the 40's was due to the post war building boom. The 50's were stagnant until JFK's supply side tax cut stimulated the economy in the 60's. In the 70's we had stagflation, a correction from the booming 60's and the high cost we paid for the Great Society programs and the Viet Nam War. Reagans tax cuts stimulated the economy and they did create increased government revenue and set the stage for the high tech growth of the 90's. I fail to see what Clinton did to bring that about. In addition to the supply cuts of the 80's, the Fed should get partial credit for their easy money policy. This ofcourse created a manufacturing bubble that burst in 2000 which Bush's tax cuts helped bring us out of.

  • ||

    Once upon a time, economist, it might have bothered me when someone called me a communist as they were losing an argument over liberalism. But at this point, I just laugh at you.

  • ||

    Joe,

    At first I thought you were being sarcastic. FDR didn't prevent bank runs. The removal of Unit Banking laws has prevented bank runs throughout the rural communities. It was the inflationary boom and bust cycle of the Fed that initiated the roaring economic growth and the huge correction that followed in the 20s. FDR, just like Adolf Hitler both came into office in 1933 after the deepest parts of the recession were over. It took till after WW2 before the US recovered, Germany took much quicker:
    Unemploymet
    Nazi US
    33 20% 24.9%
    34 12.5
    35 9.6
    36 5.7
    37 2.5% 14.3%
    38 less than 1 19%
    15% at beginning of war

    CPI
    4% increase 10% increase

    Public Debt was increased by public works but Hitler did atleast pay more of these works were paid for by forced savings in Nazi Germany as opposed to Credit in the US.

    FDR raised taxes

    -Hitler lowered taxes on property, construction and automobiles
    -FDR strengthened unions preventing price in wages
    -Hitler broke the power of unions and there was a fall in wages
    -FDR believed that lower prices were the cause of the crises rather than a secondary effect. He destroyed the supply of large quantities of agricultural products.
    -Hitler aimed at keeping prices down and increasing production.
    GNP per Capita
    US- reaches level of 1929 at 1940, personal consumption expenditures were still 8% below that of 1929
    Germany-1933-38 GNP grew 9% each year. 32-38 real wages by 22%. 1928 income levels were reached again in 1936.

  • ||

    How can you call the New Deal a period of growth when the unemployment rate stayed over 10% until the war?

    I didn't. I wrote "under the New Deal and post-New Deal." New Deal policies like Social Security, the SEC, and other stabilizing forces that were implemented under the New Deal have remained in place since then, including the high-growh period from 1945-1970.

    I fail to see what Clinton did to bring that about. HA HA! Neener Neener Neener! Is that your head, or did your neck throw up?

    (See above, about attributing causative arguments to me that I never made.)

  • robc||

    You certainly can't claim that the market produces perfect outcomes in all cases.

    I think I could. I dont, but I easily could. In fact, a claim could be made that the current mortgage crisis is a result of the market producing a perfect result. People who made poor decisions get punished, people who make good decisions benefit (Where "good decision" is defined as shorting the housing market).

    I dont think that is what you (or me, even) mean by perfect.

  • ||

    John Q.,

    The majority of practicing economist would disagree that the banking laws of the New Deal did nothing to prevent bank runs.

    Do you seriously wish to argue that the FDIC didn't reassure people that their savings could be safely left in the bank even during bad times? I mean, seriously, are you arguing that?

    As for the rest, I can't even theorize what you think it has to do with anything I wrote.

  • ||

    Oddly enough, if you will notice that Fascist Italy and Nazi Germany implimented programs in the planned economy that guaranteed investment into the state. Much like Social Security, for in which with the mandatory investment into the state, the state is able to expend it. Our difference was that we promised you an I. O. U at the end. Congrats, now we require 58 Trillion dollars in the bank collecting interest right now to pay off our unfunded liabilities.

    FDR was a brilliant man and his brain trust, copying socialist countries, has really come a long way. It's not like marxist ideas have led to the collapse of countries and the starvation of millions. It's not like we're coming to an end of our insane monetary policy, entitlement policy. Not like the average household owes 400k and each single adult owes 175k and growing. It's not like by 2040 all the federal gov will be able to do is collect taxes and pay out to medicare, medicaid and social security. Yep those are brilliant ideas....

  • robc||

    judging from a utilitarian standard.

    Who, other than utilitarians (who should be ground into soylent green and fed to the poor on the irony principle) judges on utilitarian standards?

  • ||

    You're babbling. Most of that is completely off-topic, and the rest is misleading.

    Social Security collected money for the state. You know who else collected money for the state? HITLER!!!

    Is that about it?

  • ||

    Obviously you don't know what Unit Banking laws were. FYI the FDIC has enough assets to ensure .5% of the all the assets in the Banking System. With the promise that if there were ever "Bank Runs" the FED would just print enough money to cover the liabilities and further devalue the dollar. It's because as stated long ago, as the lender of last resort, the Fed was not just used for cheap credit. It has been used to prevent the liquidation of banks who are mired in bad banking practices. WHy did FDR steal everybody's Gold?

  • ||

    Who, other than utilitarians (who should be ground into soylent green and fed to the poor on the irony principle) judges on utilitarian standards?

    Just about everyone judges on some utilitarian standard, robc. Just not that one.

    See the little digression above about abosolutes and considering multiple values rather than ruthless pursuit of just one.

  • economist||

    joe,
    Considering that FDIC contributed to the S&L crisis in the '80s, I'd say John Q has a point.

  • Elemenope||

    Actually, Gilbert, I imagine the dispositive opinion will be the one that pimp slaps you for your callous disregard for the intrinsic value of human life, right off the boat. (At which point I imagine your views on whether it is right and proper for someone to take the time to throw you a rope will take a convenient turn.)

    It is my opinion that not throwing the rope is wrong. That opinion is correct. Yours is not.

    Yeah, that's right, some opinions are better than others. It is not by virtue of me being in any way "better" than you; opinions are better or worse due to the consequences they evoke outside the person who holds them.

    I know that living in a place that has celebrated utter moral equivalence has warped your sense of right and wrong, but it's true: not all moralities are created equal. And while I may be an insufferably arrogant prick, at least I'll help a guy out, which is infinitely better from any reasonable metric than the guy who smugly dooms the less fortunate but feels good because he isn't imposing himself on them or some such stupidity.

  • ||

    You're babbling. Most of that is completely off-topic, and the rest is misleading.

    Social Security collected money for the state. You know who else collected money for the state? HITLER!!!

    Is that about it?

    Allow me to swim through the sea of estrogen here and point to point out the obvious: that's my point Genius(If Hitler jumped off a bridge would you roll FDR off one too?)..

  • ||

    FYI the FDIC has enough assets to ensure .5% of the all the assets in the Banking System.

    That's because it is incredibly unlikely that more than .5% of the assets in the banking system would disappear.

    Do you know that the auto insurance industry has assets to cover even a smaller % of the value of all of the cars and people it insures? OOOhhhh, scary!

    WHy did FDR steal everybody's Gold?

  • ||

    WHy did FDR steal everybody's Gold?

    Ooh, ooh, I know this one! Pick me!

    Cuz he's like HITLER!!!!!!

  • ||

    ya that whole 58 Trillion dollars required now... lets not even address that. Thanks FDR...

  • economist||

    Wow, we've really drifted off topic here, and I'm not sure who's responsible. Anybody got an opinion on debtor bailouts?

  • ||

    So now you don't know much about the FDIC... that's okay... it's an exercise in futility to try and 'reason' with you when you're all emotional..

  • robc||

    Just about everyone judges on some utilitarian standard

    Okay, fair enough. But they shouldnt.

  • ||

    economist,

    Given the relatively puny effect the S&L crisis had, vs. the damage done by bank runs when they occured, I'd say that John Q. is pickinig a bit of link out of a pile of gold.

    Allow me to swim through the sea of estrogen here...

    Ohnoes, Tuff Gai of Teh Internetz (hi-yah!)doesn't think I'm manly enough!

  • economist||

    joe,
    Would you like to comment on FDR's precedent-setting fetish for deficit spending? That's been a real help to economic growth.

  • ||

    economist,

    Liquidate the malinvestment as quickly as possible so those resources can come back into the market and be used for production.

  • ||

    required now...

    Oh, I see. You're both ignorant AND a liar.

    Required now? You sure about that? Because I'm pretty sure that's the figure for the infinite time horizon, and isn't required now.

  • Gilbert Martin||

    "Actually, Gilbert, I imagine the dispositive opinion will be the one that pimp slaps you for your callous disregard for the intrinsic value of human life, right off the boat."

    Nope. As I already stated - there's nobody on the boat tough enough to do it.


    "It is my opinion that not throwing the rope is wrong. That opinion is correct. Yours is not."

    No it isn't and you are't the least bit capable of proving the case is otherwise.


    "It is not by virtue of me being in any way "better" than you; opinions are better or worse due to the consequences they evoke outside the person who holds them."

    Nothing but more of your circular logic. The value of and/or blame for any consequences is also merely a matter of personal opinion.

  • economist||

    I don't know, S & L crisis was at least as bad as the current financial crisis.

  • robc||

    See the little digression above about abosolutes and considering multiple values rather than ruthless pursuit of just one.

    As a digression to that digression, I like to mock people who use the phrase "moderation in all things" because I find being an absolutist on moderation to be funny.

    I rarely hold moderate views on anything I even remotely care about. No fun going thru life that way.

  • ||

    economist,

    FDR never endorsed the levels of structural, permanent deficit spending that characterized the Reagan and second Bush regimes, which created something like 7/8 of the total national debt.

    Deficit levels from 1932 through 1980 did very little to harm our economy. If you want to look for the precendent for the deficit spending that HAS become a problem, fill in the blank from this Dick Cheney quote: "___________ proved that deficits don't matter."

  • robc||

    Was the S&L crisis a problem with FDIC or FSLIC or both?
    I remember something in the 80s (maybe snigglets) drawing a distinction between FSlickery and FDickery.

  • economist||

    Elemenope reminds me of Kyle's mom.

  • ||


    But if you, like robc, only care about "freedom" - defined strictly as a lack of regulation - and put a great deal of weight on that, than one can find the "harm" of lenders not being allowed to give a $250,000 ARM to people who earn $55,000/year to be very weighty.


    Please explain how giving a borrower a loan they (at some future point) will default on hurts the borrower, especially if the borrower put little or no money down to buy the house. Yes, they have to move out of the house because of the foreclosure, but they wouldn't have had the benefit of living in that house without the loan. It's rather like a woman who marries a multi-millionaire and then divorces him arguing that being restored to her pre-marriage economic circumstances harms her. Such arguments should be rejected as the self-serving, greedy things they are. The only person losing here is the lender.

  • ||

    economist, there was nothing like the levels of foreclosures and defaults we're seeing now, and the S & L crisis didn't send us into recession. It certainly didn't help things, but we were going into a cyclical recession at that time anyway, and it proved to be fairly short an shallow.

    Now, on the other hand, we are supposed to be at the top of the business cycle, and even given that, the mortgage crises is sending us into recession. That's a much greater effect.

  • robc||

    FSLIC

    Lets blame the correct New Deal organizations.

  • ||

    Damn that Comptroller General David Walker from the General Accounting Office. How dare the nation's account lie to the the world and say we need to 58 trillion collecting interest right now to pay off our future promises. I'm so glad FDR has already found a magical way to solve all this from the grave..


    ..Now I just need to figure out how make up my own facts like Joe and my plan to be a better person will be complete!

  • ||

    Bob Smith,

    Have you read any newspapers lately? Maybe turned on the news?

    Because it's become pretty obvious that people other than the lenders and borrowers have been hurt by all of these failed loans.

  • economist||

    I know the name "Reagan" goes in, but then again, I've never put much stock in what Cheney says. However, it doesn't change the fact that deficit spending is a legacy of Roosevelt and, until Reagan, chiefly Democratic administrations. And anyone who remembers stagflation would probably disagree that Rooseveltian/Keynesian economic policy didn't harm the economy. You also didn't address the Social Security Ponzi Scheme breakdown.

  • ||

    Deal with it, John Q.

    You wrote that a cost that extends from now to the infinite time horizon is "needed right now."

    You misstated the facts, because you're getting worked up. Be a man about it - it happens to lots of people.

  • Elemenope||

    Elemenope reminds me of Kyle's mom.

    Economist reminds me of Ben Stein.

    Gilbert Martin, on the other hand, is that kid that keeps on saying "nyah, nyah, no you DIDN'T" until he gets slapped. Then, he cries and asks for [analogue of Kyle's Mom] to punish the transgressor.

    Nope. As I already stated - there's nobody on the boat tough enough to do it.

    LOL! OK, fine. Pistol-whipped, then. Or are you actually Bruce Banner in disguise?

  • robc||

    joe,

    You seem really convinced that we absolutely are going into a recession? It may be the way to bet, but you seem to be way too sure. Care to put a friendly, low cost wager on it?

    Something like: We will have 2 consecutive quarters of declining GDP by the end of Q2 2009.

  • robc||

    joe,

    Terms of wager: Loser cannot post in Venezuela threads for the final 2 quarters of 2009.

  • economist||

    Elemenope,
    Ben Stein? Where'd that come from?

  • ||


    If a libertarian looks at a problem and can find one drop of government involvement, the problem shall be cast entirely as the fault of government, and any role that market forces and the private sector played in that problems creation is to be ignored.


    You mischaracterize the libertarian position. The role of the market is not being ignored. What the libertarian is denying is the idea that if there is a problem, it must necessarily be solved, and if it must be solved it must be solved by government action. Markets do not ignore their problems. Markets are exquisitely responsive to problems once those problems become apparent.

  • Gibert Martin||

    FDR's legacy is dreaming up the concept of an "entitlement" from the government.

    And that is the very epitome of fiscal irresponsibility to begin with.

  • ||

    *shrugs* David Walker's Reports are self-actualized, you should try reading them someday. When your hurt feelings recover that is...

  • ||

    economist,

    The levels of deficit spending that characterized the administrations from Truman through Carter weren't harmful. It was the out-of-control, structural deficits since then that have been an problem.

    You're like a prohibitionist, blaming the brewer becasue two drunks had 15 beers each and caused a car accident.

    And anyone who remembers stagflation would probably disagree that Rooseveltian/Keynesian economic policy didn't harm the economy. It's a bit of a stretch to blame Roosevelt for Nixon's wage and price controls. Roosevelt abandoned such Early New Deal central planning before 1936, as it was clearly not helping.

  • Fluffy||

    First the United States goes through its greatest period of growth under the New Deal and post New Deal

    This just isn't statistically true.

    Rates of rea growth were higher in the 19th century [and the 18th century, although that's harder to measure] than from 1933 to the present.

    Growth from 33 to 42 was actually pretty shitty.

    And growth from 42 to now was not bad, but the growth rates of earlier periods were higher.

    Our society has assumed a duty to aid the poor for the entirety of its existence, and has never gotten within 1000 miles of levelling.

    This is because the principle has been articulated, but then ignored. And the fact that people have ignored and will continue to ignore a principle is not a sound theoretical defense of the principle.

    As with everything else in human experience, we try to do the best we can, and come up with something that is "good enough." If it turns out not to be good enough, or something changes so that it stops being effective, we make changes to the system, and once again, our democratic, consensus-driven system will lead us to design another effort to the level of "good enough."

    Joe, this still doesn't answer the question.

    Say you're about to go to the very first meeting where we're going to collectively decide what to do. How do you know what your position should be? How do you know what your contribution to the discussion will be? You need to have a moral theory that describes how you, you, are going to reach a moral judgment about what your obligations are to the poor. And anything that isn't "From each according to his ability, to each according to his need" and/or "Sell what you have, give it to the poor, and follow me" ultimately boils down to "Maybe I'll help, and maybe I won't, based on how I feel" - and that's pretty much my position, too, you know?

    You can't have the collective decision of the polity be your delimiter for what your obligation is, because each individual member of that collective needs a moral basis for their vote that exists outside the system of political decision-making, or their vote is baseless and worthless. If there's no basis for determining our obligations that is in place before any vote is taken, why should I care about the outcome of the vote? It's just an aggregate of positions that are all equally baseless.

  • ||

    robc,

    I don't know if we're going to go into an academic-defintion recession, just that the economy is going to significantly underperform what it would have done absent the mortgage crisis.

    I predict that both 2008 and 2009 will have lower real growth than 2007.

  • ||

    Markets are exquisitely responsive to problems once those problems become apparent.

    nuh uh

  • robc||

    joe,

    The word recession in its casual form means the exact same thing as the "academic definition". If you mean something different, use a different word. Or I will fall into Princess Bride mode.

  • Gilbert Martin||

    "Gilbert Martin, on the other hand, is that kid that keeps on saying "nyah, nyah, no you DIDN'T" until he gets slapped. Then, he cries and asks for [analogue of Kyle's Mom] to punish the transgressor."

    You haven't slapped me. All you've done it blow a lot of hot air.

  • economist||

    joe,
    You compared me to a prohibitionist, but don't you see the irony there? You defend borrowers who make bad decisions and suffer for them and blame the lenders. Still, maybe this shows your thinking is starting to go in the right direction. As for your comment on deficit spending, I would say the first person to make it national policy to have a large debt that never gets paid off should get the blame for its consequences. So we should both be taking shots at Alexander Hamilton. I mean in the figurative sense, not the Aaron Burr sense.

  • ||

    Fluffy,

    1933 to present isn't the time period I was talking about. As I already wrote, I was referring to the period from WW2 to about 1960 - a period during which the economy grew dramatically under New Deal policies.

    This is because the principle has been articulated, but then ignored. There were poor farms in Massachusetts as far back as the 1700s, the Progressive Period, the New Deal, not to mention all the private charity. The principle most certainly has not been ignored.

    You need to have a moral theory that describes how you, you, are going to reach a moral judgment about what your obligations are to the poor. No you don't. All you need is a sense that you need to help the poor, and needn't delimit it precisely at all. I certainly don't jump through all of those hoops when I give my quarters to Jerry's Kids, or argue for liberal positions on these threads.

  • economist||

    So you ignore the period between 1960 and 1980, when quite a few things went wrong under New Deal policies?

  • ||

    economist, no, I don't see the slightest bit of irony there. None zero zip zilch nada.

    That's becasue I think forward, from facts to practices to ideology, and you think backwards, from ideology to policies to facts.

    That there is a superficial similarity between banning the sale of alcohol entirely and putting terms on mortgages tells us nothing about the two policies except that libertarians don't like them. It certainly tells us nothing whatsoever about the effect of different levels of deficit spending on the economy.

    And no, we should not be blaming Alexender Hamilton for the economic problems caused by Reagan and Bush the Lesser's deficits. Alexander Hamilton never advocated for such policies. Once again, like a prohibitionist, you are making the "one puff and you're addicted for life" argument.

  • Elemenope||

    economist-

    Stuffy, verbose, conservative, and, um, "economist". Ben Stein.

    Why, where did Kyle's Mom come from? The idea that all opinions are not equal? Or me being cranky about defending it?

  • economist||

    "All you need is a sense that you need to help the poor."
    Once again, joe, you've avoided the question. You haven't actually given a convincing argument for why anyone who's able has an a priorii obligation to the poor. And if you don't delimit these obligations, there is nothing stopping your position from becoming full-fledged communism.

  • ||

    So you ignore the period between 1960 and 1980, when quite a few things went wrong under New Deal policies?

    Actually, things were pretty good ecnomically between 1960 and 1968 or so.

    The problems of the 70s were largely the consequence of the Vietnam War, rising fuel prices, and Nixon's wage and price controls, none of which were New Deal policies.

  • Fluffy||

    There were poor farms in Massachusetts as far back as the 1700s, the Progressive Period, the New Deal, not to mention all the private charity. The principle most certainly has not been ignored.

    Well, this puts us right back the beginning then. Since you apparently claim no obligation to articulate a consistent moral principle, I guess I don't have to either.

    Because in my book, saying, "We have a moral duty to help the poor," and then helping some of the poor and calling it a day to go party constitutes "articulating and then ignoring" the principle. Your counter is nothing more than saying if you genuflect to the principle and then give 25 cents, you're done. That to me is like saying you believe in the principle that you shouldn't murder people, it's OK if you live by that principle for half of the people and then murder the other half.

    We apparently define the concept differently. You want the principle around whenever you want to accuse someone of being mean to the poor, but you don't actually want to live by it yourself. And that's cool, that's how it's always been, I suppose.

    No you don't. All you need is a sense that you need to help the poor, and needn't delimit it precisely at all.

    This means you don't have a principle at all, but just a vague feeling. That feeling of course could come from anything at all, and have no intellectual basis whatsoever, for all you know. Since you're not willing to explore its basis theoretically, don't ask me to accept it in an argument. My feelings tell me something different.

  • economist||

    Elemenope,
    Actually, it's the fact that you like to declare your opinion superior without giving a reason, other than it's closer the opinion the majority of people hold. And am I really that stuffy? Probably more conservative than leftist, but stuffy? Also, I have to confess that I'm actually an engineer.

  • economist||

    Price and Wage controls weren't a New Deal policy? Maybe you should look up the NIRA.

  • ||

    Once again, joe, you've avoided the question. You haven't actually given a convincing argument for why anyone who's able has an a priorii obligation to the poor.

    Yes, I have. I gave it to Gil Martin.

    joe | February 18, 2008, 2:01pm | #

    It has been established to precisely the same degree as the proposition "We have a duty to respect others' rights and liberty."

    That is, it has not been established at all; it is a statement of faith and values.


    We're at First Things here. You either get why you should help other people, or you don't. It's a fundamental value that you cannot be reasoned into our out of.

    And if you don't delimit these obligations, there is nothing stopping your position from becoming full-fledged communism.

    Yes, there is. There is the incorporation of other, competing values, such as liberty, the avoidance of violence, human rights, and whatnot.

  • ||

    Fluffy,

    I've already answered you. Twice, at least, counting my last comment. If you don't like my argument, debate it, but I'm just going to ignore you if you keep pretending I've offered no argument.

    economist,

    I was the first one to bring up wage and price controls in the New Deal, thank you very much. The New Deal abandoned them. How about you read what I write before commenting on my ignorance, and you can avoid these embarrssing spectacles.

  • ||

    It's a bit of a stretch to blame Roosevelt for Nixon's wage and price controls. Roosevelt abandoned such Early New Deal central planning before 1936, as it was clearly not helping.?

    Did your browser print this in cyrillic letters, economist?

    Srsly, if you think you've seen me state something obviously at odds with the historical record, you should probably assume that you missed something, or my point didn't come across clearly.

  • economist||

    The main reason Roosevelt had to give up wage and price controls was the Supreme Court decision nullifying the NIRA, for which he tried to pack the court with his own supporters. And farm price supports (possibly the worst economic policy of all time) are still with us today. Plus, Nixon's strongest support on the price control issue came from Dems, except they thought he wasn't doing enough.

  • economist||

    joe,
    No, I actually didn't see your post on New Deal price controls. If it's here, sorry for missing it, but it doesn't change the point of my above post.

  • Jennifer||

    Personally, the thought "I have a duty to help the poor" is a lot less odious than our current policy, which is "I have a duty to hand over a good chunk of my income to a bureaucrat who claims to help the poor, yet my enforced donation does not help any actual poor people though it DOES help pay the bureaucrat's $65,000 yearly salary and fully funded pension."

  • Elemenope||

    You haven't slapped me. All you've done it blow a lot of hot air.

    Never said I did. I just imagine, extrapolating from the jock-"nobody could push me off the boat, I'm to manly"-douchebag routine, coupled with "nyah, nyah, it's just an OPINION", to you being whiny when you skin a knee. What, am I wrong?

    Actually, it's the fact that you like to declare your opinion superior without giving a reason, other than it's closer the opinion the majority of people hold. And am I really that stuffy? Probably more conservative than leftist, but stuffy? Also, I have to confess that I'm actually an engineer.

    Well, I honestly thought I wouldn't have to explain to a bunch of grown-ups the value of human life, nor point out that it is not merely the "majority" opinion but the one than nearly all of historical record has converged to.

    Won't make those mistakes again.

    Honestly, I don't think you are that stuffy. It was the best insult I could come up with off-the-cuff to respond to the insulting comparison to Kyle's Mom (who is a big bitch--perhaps the biggest in the whole, wide world--and wouldn't throw the life preserver if it interfered with a cause of her's, I'm fairly sure).

  • Gilbert Martin||

    "We're at First Things here. You either get why you should help other people, or you don't. It's a fundamental value that you cannot be reasoned into our out of."

    And one of those First Things is that there is a big difference between deciding what your fundamental value is and claiming to have some moral authority to decided it for anyone or everyone else.

  • economist||

    joe and Elemonope haven't responded, so that must mean I won the thread. All hail the economist!

  • Elemenope||

    Personally, the thought "I have a duty to help the poor" is a lot less odious than our current policy, which is "I have a duty to hand over a good chunk of my income to a bureaucrat who claims to help the poor, yet my enforced donation does not help any actual poor people though it DOES help pay the bureaucrat's $65,000 yearly salary and fully funded pension."

    And Jennifer winds the thread, and the distinction. Yes, folks, a duty to help people is only socialism if you do it wrong. Otherwise, it's just good practice.

  • Gilb ert Martin||

    "Never said I did. I just imagine, extrapolating from the jock-"nobody could push me off the boat, I'm to manly"-douchebag routine, coupled with "nyah, nyah, it's just an OPINION", to you being whiny when you skin a knee. What, am I wrong?"

    You're the one who started mouthing off about slappling people around, punk. When you start that shit, then that's what you get.

  • economist||

    Shit, that was a premature declaration of victory. Fine, let the battle continue. Also, it is a mistake to say that "all of human history" supports your opinion. Actually, most of human history supported killing the other guy who was drowning so you could take his life preserver until a shark came along ate you. Extreme altruism isn't much different, except it says you should let others latch onto you until they drag you under.

  • ||

    economist,

    The main reason Roosevelt had to give up wage and price controls was the Supreme Court decision nullifying the NIRA, for which he tried to pack the court with his own supporters. That was one reason, but he didn't work very hard to find ways to bring them back in an acceptable form, which suggests that, like so many other of "his" early, central-planning programs, he found them to be ineffective.

    And farm price supports (possibly the worst economic policy of all time) are still with us today. Yes, that's true, but they has nothing to do with the economic slump of the 70s, or the wage and price controls that precipitated them.

    Plus, Nixon's strongest support on the price control issue came from Dems, except they thought he wasn't doing enough. Even granting this, it seems a bit irrelevant.

    And I'm sorry I was bitchy as you about not seeing my point earier. You've been thoughtful and polite, and I shouldn't take out my frustration with the thugs on you.

  • ||


    That there is a superficial similarity between banning the sale of alcohol entirely and putting terms on mortgages tells us nothing about the two policies except that libertarians don't like them.


    I'm not sure what you mean here by "putting terms". I assume you mean "mandatory disclosure". Which libertarians have objected to that? What libertarians object to is modifying loans by government fiat after they're been made, or prohibiting certain types of loans on the basis that they're "bad for consumers". The idea that consumers are too stupid to decide for themselves what is good or bad for them, and thus government must decide for them, is what libertarians object to. Such paternalism is insulting.

  • economist||

    "The duty to help the poor is only socialism if you do it wrong"
    Here we go again. Okay, if you believe that the existence of a poor person in the world, coupled with your ability to help them even if it severely impairs your own happiness, means that the poor person has a moral claim on your wealth and time, it's socialism.

  • ||

    You're the one who started mouthing off about slappling people around, punk. When you start that shit, then that's what you get.

    Hi-yah!!!

  • Fluffy||

    Joe,

    I listened to your argument, and then asked you questions about it which you refuse to answer and raised objections you refuse to account for.

    But I am willing to concede that maybe I'm just not understanding you. When I hit the reset button on our discussion about subprime, it helped to clarify that discussion a lot, so I'll try it again.

    I apologize in advance if any of the positions I ascribe to you here are incorrect. Actually, it's precisely to attempt to get your real position [if I have misunderstood you] that I want to try to summarize the argument so far, so if any of my "joe" points are wrong just let me know:

    1. General question - "Why should we help the poor?"

    2. joe - Because the poor are suffering, and we have the resources to stop that suffering.

    3. Fluffy - But those points would seem to be valid until there is no more suffering or until we have no more spare resources. That being the case, why aren't you sending your spare resources to Africa?

    4. joe - Three responses:
    A: Because you don't have to make an infinite effort, you only have to make a reasonable effort.
    B: Because we collectively have decided as a society to help "X" amount, but beyond that you don't have to.
    C: Because the value of helping people has to be balanced against other values.

    Is this a fair summary of the discussion to date, or did I miss some important point or points on your side?

  • ||

    Bob Smith,

    R C Dean objects to mandatory disclosures upthread.

    Seriously.

    They've "lulled us to sleep."

    Dude, don't ask me.

    The idea that consumers are too stupid to decide for themselves what is good or bad for them... it's not a question of stupidity, but of asymmetrical information. As has been mentioned. Several times already.

    ...and thus government must decide for them... is being pretty effectively proven as our housing industry, lending industry, stock market, and economy swirl about the toilet.

    Does it hurt your feelings when I observe that people make unwise decisions which can harm others? I'll, er, take that under advisement.

    But you know what's funny? This thread is chock full of people calling borrowers stupid. Look through the thread, again and a again and again you'll find people - all on the right, all libertarians - saying that people who got bad mortgages are all stupid. You didn't object to a single one of those statements, so don't give me this "insulting crap." You don't give a damn about insulting people by saying they're too stupid to make good decisions, hypotcrite.

  • ||

    Fluffy,

    I never raised Point B.

    Otherwise, that's about it.

  • Fluffy||

    Personally, the thought "I have a duty to help the poor" is a lot less odious than our current policy, which is "I have a duty to hand over a good chunk of my income to a bureaucrat who claims to help the poor, yet my enforced donation does not help any actual poor people though it DOES help pay the bureaucrat's $65,000 yearly salary and fully funded pension."

    To me, the question boils down to whether helping the poor [or a drowning man, or a man stuck in a building that's on fire, or whatever] is a duty at all, or a praiseworthy act.

    Personally, I think that you have no duty to help in any of these situations, but that it's praiseworthy to help in each of them.

    I don't praise anyone for paying their bills or for settling a civil judgment or for refraining from robbing their neighbor's house. Simple justice requires each of these from everyone. Performing them is your "duty", and you shouldn't expect any praise.

    But precisely because you have no duty to run into a burning building to save someone, or to give your money away to help the poor, or swim out after a drowning man, if you do any of these you should be slapped on the back and praised.

    I also think that if you did, in fact, have a duty to help, the state would be entitled to require you to help and to punish you if you failed to help. So as soon as you call one of them a duty, you have conjured up the bureaucrat by your words.

    So from my perspective the only way to allow us to hail those who do laudable things, without leaving the theoretical barn door open for onerous state compulsions to do these things, is to be careful and precise about not calling them duties.

  • Fluffy||

    A: Because you don't have to make an infinite effort, you only have to make a reasonable effort.
    C: Because the value of helping people has to be balanced against other values.


    OK. Now we're getting somewhere.

    How do we know what a reasonable effort is?

    Do we each get to balance this value among other values using our own weighting, or is there some broader framework in which that is done?

  • economist||

    joe,
    There is not much "asymnetric information" in the lending industry. What you're getting is pretty much spelled out in the contract, in black and white. Also, in talking about the housing crisis, you haven't addressed my point about fed interest rate cuts distorted incentives to encourage the housing bubble. That would seem to suggest the government shouldn't interfere in the economy. I really don't think that the economy is in the toilet because some people didn't read the damn mortgage before signing it.

  • Elemenope||

    You're the one who started mouthing off about slappling [sic] people around, punk. When you start that shit, then that's what you get.

    Whoa. It's, like, oozing testosterone. You a cop, by any chance?

    And, just for clarity, what do I get? Someone whining about how an opinion is just an opinion? Cause that's all I have gotten so far, from you. Well, that and an occasionally hilarious comment about how nobody can push you off boats.

    And to think, I *agreed* with you at 10:38.

  • ||

    Because if we send out money to everyone then it will help spur more inflation and the smart people in this coutnry who have been investing in commidities the last 7 years will continue to get richer while those who don't understand economics will continue to get poorer. Hopefully, when the people who understand things get rich enough, things will start to change for the better. However, knowing how things work I expect to be targeted as "the rich" just as a I have climbed comfortably out of debt and get soaked with extreme taxation "to help the poor" while the really rich use lawyers/friendly politicos and tax free foundationas to avoid taxes and I'll be sent back to my rightful place in the slave class.

  • economist||

    Cosmopolitan overlord,
    While much of what you say is true, I like to avoid populist rambling.

  • Fluffy||

    R C Dean objects to mandatory disclosures upthread.

    Seriously.

    They've "lulled us to sleep."


    That wasn't Dean, that was me.

    And I continue to stand by that assertion.

    Mandating the form and content of disclosure, in the context of a fairly heavily licensed and regulated industry overall, tells people they don't have to be careful - and because the disclosures are "sticky", it also creates blind spots and vulnerabilities in the consumer's mind when products are altered in ways not anticipated at the time of the promulgation of the disclosures.

    I watched the Option ARM get invented. I watched the people at World Savings and Loan and Indy Mac popularize it. And then I watched everyone else pick it up when it became clear it was "working". And I said, "Damn, that's one way to get around the APR reporting requirements of the Truth in Lending Act." The loans were traps that the disclosure system helped to set.

    In addition - You know why people can claim that their closing paperwork was too cumbersome to understand? Because in addition to the two or three documents that actually mean something, there's 40 pages of boilerplate garbage about ECOA and the Fair Lending Act and the Patriot Act and the Fair Credit Reporting Act and transfers of servicing and half a dozen other things. The presence of that regulatory clutter plumping out the closing docs discourages consumers from viewing their closing document package as something it's possible to understand, so they don't try. They sign where the escrow agent or closing attorney tells them to sign and they go home.

  • Elemenope||

    Fluffy--

    You are much better at this than dear Gilbert.

    So from my perspective the only way to allow us to hail those who do laudable things, without leaving the theoretical barn door open for onerous state compulsions to do these things, is to be careful and precise about not calling them duties.

    A good point. However, compensation (praise, or otherwise) is not the best dividing line for separating duties from supererogatory acts, as many of us are compensated for doing our jobs (both in praise and remuneration); doing one's job falls I think much more squarely upon the side of duty than anywhere beyond.

    I think the hangup for me is here:

    ...without leaving the theoretical barn door open for onerous state compulsions to do these things...

    Because it makes sense that there are many moral duties that are not compelled by the state. One might say that in most situations you have a duty to be truthful, even though in most situations there is no law compelling veracity.

    I'd say rather that there are two classes of duties. Negative duties, which can be enforced with the imprimatur of law, and positive duties, which for the most part cannot and should not be. That they cannot be enforced by a monopoly of force does not mean they do not exist, however.

  • Gilbert Martin||

    "And, just for clarity, what do I get? Someone whining about how an opinion is just an opinion? Cause that's all I have gotten so far, from you."

    Nothing is "whining" on your say so. In fact nothing at all is so on your say so.

    All I've gotten from you is grandiose attempts to pass off your personal opinion as fact by stacking more personal opinions on top of the original and trying to pass that off as clarification.

  • Fluffy||

    However, compensation (praise, or otherwise) is not the best dividing line for separating duties from supererogatory acts, as many of us are compensated for doing our jobs (both in praise and remuneration); doing one's job falls I think much more squarely upon the side of duty than anywhere beyond.

    I would disagree, because the performance of a job for pay is an exchange. The employer handing over pay is merely rendering what is owed - fulfilling their own obligation or duty. Acknowledgement that an act of charity / mercy / heroism / assistance is laudable isn't the same, particularly since the acknowledgement would typically come from parties other than the "rescued".

    Because it makes sense that there are many moral duties that are not compelled by the state. One might say that in most situations you have a duty to be truthful, even though in most situations there is no law compelling veracity.

    This is a good point. I will have to think about this.

  • ||

    Fluffy,

    I don't slap people on the back for paying their taxes, either, so I think I get where you're coming from.

    This is why "forced charity isn't charity" is such a lousy argument. No is claiming that we should have a Social Security system or a Workman's Comp system so that we can save taxpayers' souls.

  • ||

    Fluffy,

    How do we know what a reasonable effort is? We take our best guess. We try to be reasonable as we do so. A 90% tax rate? Unreasonable. A 25% tax rate on people earning $19k a year? Unreasonable. A 25% tax rate on people earning 150k a year? Seems reasonable.

    Do we each get to balance this value among other values using our own weighting, or is there some broader framework in which that is done?
    I imagine there's a little of both.

  • ||

    economist,

    What you're getting is pretty much spelled out in the contract, in black and white. You mean the three-inch thick stack of papers of legalese? That people see for the first time at their closing? Often after they've already sold their own house? Have you ever read the first chapter of The Hitchhiker's Guide to the Galaxy?

    That would seem to suggest the government shouldn't interfere in the economy. Or, that one particular rate cut (or decision not raise rates) was ill-advised. Stll, we've had rates that low before, without causing this problem.

  • ||


    The idea that consumers are too stupid to decide for themselves what is good or bad for them... it's not a question of stupidity, but of asymmetrical information. As has been mentioned. Several times already.


    Repetition doesn't make you right. Your mortgage payment is right there in front of you. It's not a secret. Neither are the prepayment penalties, or (if an ARM) reset periods, interest rate adjustments, or interest rate caps. It's all there. If you can't afford that payment, or if you were too stupid to figure out "what can my payment increase to, and when", something your banker will happily figure out for you before making the loan, you deserve your fate. If your banker refused to tell you that, and you still signed, you deserve your fate. What asymmetry are you talking about?


    ...and thus government must decide for them... is being pretty effectively proven as our housing industry, lending industry, stock market, and economy swirl about the toilet.


    No, it proves no such thing. "Bad" never implies "government must fix it".


    You don't give a damn about insulting people by saying they're too stupid to make good decisions, hypotcrite.


    No I don't, because the insult isn't "you're stupid", but "you're so stupid we won't let you make choices we disapprove of".

  • ||

    Elemenope,

    That's pretty much what Gil does. And it's pretty much all he does.

    He offers an opinion without any basis, and when someone provides a rejoinder, he is helpful enough to point out that what you've offered is just an opinion.

    Thread after thread.

  • economist||

    joe,
    I've all read the entire Hitchhiker's Guide to the Galaxy. I'm not sure how it relates to the issue at hand, though.

  • ||

    Bob Smith,

    All of that stuff is right there in front of you for the first time, usually, at the closing. I'm not going to walk you through the sorts of things lenders pull, or the real-world process that people trying to get into a home go through, that makes you la-tee-dah answers insufficient, as you'd just hang your hat on "but it's physically possible" anyway, as if it demonstrates that it will actually work that way in some meaningful proportion of cases.

    And, you big snob, calling someone stupid is just an expression of contempt if you chuckle as their suffering as wish to help them. Hypocrite and snob. You should be so proud.

  • economist||

    joe,
    I think you misinterpret Fluffy's argument. His argument is that while things like saving lives and helping the poor are meritorious, they are not moral imperatives, so while we should praise people who do those things, they should not be requirements. How this relates to people paying taxes is a little unclear. Though I guess that cravenly handing over a chunk of your income to a bloated monster that is run by people seeking to take away your liberties and making you provide the tools of your own destruction is not praiseworthy, now that I think of it. Nonetheless, I do it every year anyway, since I don't like the idea of having my life ruined by the IRS.

  • ||

    economist,

    You and Bob Smith = Demolition crew.

    "They should have and easily could have" known that their lender would give them a loan they can't afford, and backtracked through all the P&S agreements, and known what bs "prequalified" is, and acted like perfect little "Rational Economic Man" = "It's been on display at the local council building."

  • ||

    Anyway, I don't feel like I have to prove that people meet your moral and intellectual standards in order to get help when they've been ripped off.

  • Fluffy||

    Joe -

    Here's one problem with your "reasonableness" argument:

    It boils down to saying that you are obligated to help the poor if it doesn't intefere with the maintenance of your comfortable lifestyle.

    The problem with that is that 1000 years ago, there were maybe 150 people on Earth whose lifestyles were remotely close to yours and mine. That would imply that other than those 150 people, no one else 1000 years ago had any obligation to help the poor.

    It also would imply that people occupying the upper strata of poor contemporary societies who have fewer resources or less comfort than you or I have no obligation to help the poor, either.

    And it would imply that if my income is X, and I am done giving to the poor for the year, no one whose income is X-$1 or less has to help either.

    Once we link the obligation to the comfort of the giver, and not to the distance between them and the poor or to the giver's position above the subsistence level, we end up with absurdities like these.

  • ||


    This is why "forced charity isn't charity" is such a lousy argument.


    Er, why? If I force you at the point of a gun to donate a million dollars to the Muscular Dystrophy Association, should you be praised for that? Does your donation have or demonstrate moral virtue? Heck no, it wasn't voluntary. That's why forced charity, or indeed any government "charity", is neither virtuous nor praiseworthy.


    No is claiming that we should have a Social Security system or a Workman's Comp system so that we can save taxpayers' souls.


    What does that have to do with the alleged virtual of government "charity"?

    The purpose of Workman's Comp was to stop lawsuits by forcing employers to insure against workplace injuries. It's essentially an argument that insurance was more efficient than litigation, so litigation was outlawed. Unfortunately, in most states the bar against lawsuits for workplace injuries has been eliminated, destroying the gain in efficiency, but employers still have to waste money on WC. The worst of all worlds.

  • Michael Ejercito||

    I used to work in the home loan industry.

    There were a variety of disclosure regulations. The most important were regulations requiring the disclosure of the APR- that is all costs of the loan expressed as the interest rate.

  • economist||

    Uh, no. I'm not the demolition crew. That would imply that mortgages are imposed on people, without their knowledge or against their will. When you make any sort of agreement, it's usually best to read the terms of said agreement. You're implying that expecting people to find out what they are agreeing to before they agree to it is the same as expecting people to know that the government is planning to seize their property against their will and treating as their fault when they don't. I don't see why I even have to explain it.

  • Fluffy||

    His argument is that while things like saving lives and helping the poor are meritorious, they are not moral imperatives, so while we should praise people who do those things, they should not be requirements.

    Pretty much.

    The way I would phrase it would be to say that it has always fascinated me that justice and charity/mercy are both virtues, but are also opposites.

    How do you build a political system to facilitate two opposites at the same time? I'm not sure you can.

    That being the case, the political system should focus on justice. Charity/mercy should be the prerogative of individuals.

  • Michael Ejercito||


    I'm supposed to believe that the past 700 years of market signals, including bursting bubles, bank runs, and foreclosure crises, haven't done the job of getting lenders to stop making, and homebuyers to stop taking, stupid loans, but that THIS TIME, it's really going to work, so we don't have to worry about anything but market signals to keep it from happening again?


    Why do we need to stop it from happening again?

    Lenders who continually make bad loans go out of business.

    People who take out bad loans lose their homes.

    What is the problem?

  • ||

    R C Dean,

    I failed to see you drawing any longrun/short run distinction in your "boo fuckity hoo."


    Try a little harder, joe. As I described, the whole point of "moral hazard" is that, in trying to alleviate short-term pain, you build flaws into the system that will inflict even more pain in the long run.

    "Boo-fuckity-hoo" is my way of summarizing that "feeling somebody's pain" is a delusional way to build economic policy. A government with a history of alleviating short-term pain is a government that distorts risk in the marketplace, creating a market that takes on too much risk and suffers crashes therefor.

  • ||

    That being the case, the political system should focus on justice. Charity/mercy should be the prerogative of individuals.

    Dang, Fluffster, another bulls-eye. Well-played, sir!

  • ||


    All of that stuff is right there in front of you for the first time, usually, at the closing. I'm not going to walk you through the sorts of things lenders pull, or the real-world process that people trying to get into a home go through, that makes you la-tee-dah answers insufficient


    You didn't know your interest rate and payment, and whether you got an ARM or fixed-rate loan, before you got to the closing table? Really? Lenders who change the agreed-upon terms at the closing table are committing fraud.

  • ||


    You and Bob Smith = Demolition crew.

    "They should have and easily could have" known that their lender would give them a loan they can't afford


    This is seriously amusing. Are you really saying that borrowers can't figure out whether or not a payment of $X, which must by law be disclosed, is affordable or not?

  • ||

    " You either get why you should help other people, or you don't."

    You either get why it's wrong to compel people to do something, or you don't. Whether the thing you want to force someone to do is good or not is beside the point.

    -jcr

  • economist||

    It has been 15 minutes since anybody posted, so that mean's I win!

  • Elemenope||

    You either get why it's wrong to compel people to do something, or you don't. Whether the thing you want to force someone to do is good or not is beside the point.

    Now, here's the money question:

    How much is absolute, inviolate freedom worth? I mean this in practical transactional terms. Let's say someone *forced* you to spend five minutes of your life saving someone else's life. Is that person's life worth more or less than your five minutes of bondage?

  • Luke Johnson||

    I'm liking the Rational Responders Cop Girl. She can no-knock raid me anytime.

    I'd like to have an isolated incident with her, if you know what I mean.

  • economist||

    Elemenope,
    What is that last comment about? How much should the rescued person pay the rescuer?

  • ||


    Let's say someone *forced* you to spend five minutes of your life saving someone else's life. Is that person's life worth more or less than your five minutes of bondage?


    Less. Slavery is evil no matter how short the time or noble the goal. You cannot do good by evil means.

  • ||

    You mean the three-inch thick stack of papers of legalese?

    I read mine. I mean, call me CRAZY, but ...
    And also, I noticed that 80 percent of that stack of papers was devoted to federal lending laws, many of them telling me of my rights as a borrower.
    Joe, you think people are stupid. Plain and simple.

  • ||

    And joe, some of them ARE very stupid. Especially if they sign away until they develop a bad case of carpal tunnel without knowing what the fuck they're doing.
    Screw 'em into bankruptcy. I don't give a shit. If you can't afford a home and you buy it, eat a dick sandwich and let the mortgage company pay, too.
    Next case.

  • ||

    How much is absolute, inviolate freedom worth?

    I don't know. How much does a deserted island go for these days?

  • jimmy||

    OMFG...joe...joe...joe...joe...joe...joe...over and over again.

    hey joe, did you hear what president clinton said at that rally today? "this isn't your rally...we heard you." take it to heart.

  • Gilbert Martin||

    "That's pretty much what Gil does. And it's pretty much all he does.

    He offers an opinion without any basis, and when someone provides a rejoinder, he is helpful enough to point out that what you've offered is just an opinion."

    Same old joe - trying to set himself up as the judge.

    No joe that is what you and the other liberals are doing - offering an opinion without any basis.

    You are the ones presuming to tell others what to do and what their responsibilities in life are.

    None of you are the least bit capable of proving any of your opinions as to why you should be able to tell anyone else what do is valid in any way.

  • Elemenope||

    You cannot do good by evil means.

    Stop me if I'm wrong, but you just basically proved otherwise. If slavery is evil, and saving lives is good, then if five minutes of slavery equals one saved life, you've just done good by evil means.

    Am I missing something here?

    No joe that is what you and the other liberals are doing - offering an opinion without any basis.

    Neato, I'm a liberal now. Haven't been one of those in a decade, but Gil Martin "the decider" has passed jugdment, so here I go...

    Go, FDR! Whoo-hoo! You *show* those farmers how much corn they can grow!

    Nah, just doesn't feel right.

  • Gilbert Martin||

    On the contrary, YOU are the one trying to be the "decider" - deciding what everyone else's duties in life are.

    Just like everyone else who has ever lived on this earth in the entire span of human history, you have never accomplished anything in your entire life that proves you are any wiser than me as to what those should be.

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  • Nike Dunk Low||

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