Is the Gov't To Blame ? short answer - yes !
(snip)"More complicated answer: Yes Yes Yes Yes Yes Yes.
Let's list 'em, since CNBS decided to play the entire "CRA game" once again, which is not only journalistically bankrupt it is a raw attempt to dodge their own complicity.
Gramm-Leach-Bliley. Step one of "how to make the mess", and the direct responsibility of government. Dismantled the separation of investment and commercial banking that was put in place after The Depression precisely to prevent the interconnections that led to overuse of leverage and stupidity in lending that resulted in the crash of the economy of '29 and into the 1930s!
Removal of leverage limits system-wide. Fannie and Freddie, when they blew up, were running at 80:1 leverage. Goldman Sachs CEO Henry Paulson, now Treasury Secretary, personally appeared in front of the SEC and Congress to ask that leverage limits on investment banks be removed. He was turned down in 2000 under Clinton's SEC and came back under Bush's in 2004 and got what he asked for. Every one of the institutions that has failed in this debacle was running leverage in excess of the previously-mandated limits by a factor of two or more and the last, terminal phase of the housing bubble could not have happened without this change in the law. For this Henry Paulson is DIRECTLY AND PERSONALLY RESPONSIBLE.
Deregulation of derivatives. Greenspan's Fed (along with the CFTC, also under government control) permitted the writing of unregulated derivatives over-the-counter with absolutely no capital or margin supervision. Essentially-unlimited leverage was thus permitted, and AIG's explosion (along with Lehman and Bear) was the result. Congress allowed this outrage, praising it as "financial innovation", when in fact it was nothing other than bank robbery (literally) by deceit.
Federal government intervention in mortgage markets preventing state law enforcement of predatory lending regulations. Undertaken specifically by the OCC during George Bush's Presidency. Several states tried to stop the debacle in 2004 and 2005 (New York in particular) and were preempted by Federal Government action.
Intentional obfuscation and lying by instrumentalities of the government so both government and private interests can pick the public's pocket, including but not limited to The Federal Reserve and Treasury. Prime among examples of this behavior are permitting firms to operate with "off balance sheet" exposures, "23A" exemptions, refusal to disclose the character and valuation of collateral against which "loans" have been made and outright false statements of intent, fact and action made to Congress and The American People as have been chronicled in The Market Ticker and elsewhere for years. The government is equally to blame here - if a public company did its accounting the way the government does the executives would all be serving 20 years in prison with Bubba. Pick your "government statistic", from the public debt to inflation to employment - all are intentionally cooked. Why should we expect different from so-called "private business" when our government lies to us every day?
Bankruptcy "reform", which prevents many consumers from discharging their debts, thereby making it more profitable to loan to someone who can't pay as you can then (in many instances) garnish their wages. This shift made possible predation in lending without the usual market consequence of bankruptcy of the lender who makes imprudent loans, and was (and is) an outrage.
The facts are that for the last thirty years government has cooked the books, lied, and claimed that debt is in fact economic growth and the media has cooperated through both acts of intentional blindness and direct false statements.
It has all been a lie.
Debt is debt; it is not growth of anything except a millstone around the neck of the nation and its citizens.
There are no honest politicians in this regard nor are there any honest reporters and "news" agencies.
CNBS is nothing other than a den of mendacious liars in that they continue to present people who claim advanced education in these matters (e.g. Kudblow) but flatly refuse to acknowledge and state that which is mathematical fact.
Government and the media are BOTH counting on the fact that "we the people" are either too stupid, too drugged up on Prozac or too drunk to "storm the Bastille" and demand that the lying and robbery stop.
So far they have been, with few exceptions (e.g. Republic Window) been spot-on in that evaluation.
Again, we will only exit this economic mess when we recognize that:
Debt is not "economic growth." It is in fact the inverse of economic growth as debt not only requires the payment of principal it also requires payment of interest, and therefore, the more debt you take on, the less growth can be accomplished, all other things being equal.
Debt beyond short-term trade credit is not a sign of success; it is a sign of desperation and imminent economic failure. You are not "successful" if you can borrow $50,000 to buy a Lexus; only if you can pay cash can you claim "success." Using debt out of necessity is, in short, a desperate act and to be shunned and avoided whenever and wherever possible, not applauded.
Leverage limits must be restored to where they were prior to Gramm-Leach-Bliley and applied to all financial institutions that claim or enjoy any form of federal or state protection. No exceptions, no off-balance-sheet games, no "sweep accounts", nothing of the kind. Period. Oh, this means that reserve levels must be restored (instead of stripped from the law, as the EESA/TARP provided) and enforced - to be held in cash.
Unservicable debt must be defaulted, and those who both took and wrote said debt must be bankrupted. There is no means other than market discipline - that is, business and personal economic failure - that serves to prevent bad lending decisions. In addition, true growth cannot return until excessive debt is cleared from the system; this can only happen by defaulting that debt, not shuffling it around.
Overheated asset prices must fall to sustainable levels. Specifically, houses. They are not affordable until the median home price is 2.5-3x median income in a given region, and in fact an overshoot should be expected, perhaps to as low as 2x incomes. Attempting to prevent valuations from returning to normal and sustainable levels will simply prolong our economic misery.
Consumption must fall to levels that can be supported by incomes without expansion of debt load. This is true both for the government and private sector. This correction, which represents a decrease of about twenty to thirty percent from 2007 GDP levels in the United States, is the definition of A Depression. If we attempt to avoid this adjustment (as we have for the last ten years) we will simply make the inevitable contraction worse as we further "pump" GDP beyond equilibrium and layer interest cost upon principal! The contraction in GDP required to bring the economy back into balance in 2000 was about 10%. Our government's intentional interference with that correction has now led to the adjustment being two to three times as large, taking what was a recession and turning it into a technical depression! We can only make this worse through further meddling.
The lying must end both in government and private enterprise. No off-balance sheet exposures for anyone, including government. No "mark to model." No "sweeps", no games, no redactions, no obfuscation. 100% transparency - across the board - when it comes to financial matters, under penalty of a 20 year date with Bubba that is evenly and strictly enforced both against government agencies, employees, and private concerns.
WHERE and WHEN will we see HONEST reporting of the facts by our so-called "media"?"(snip)
from
Re: Is the Gov't To Blame ? short answer - yes !
There is a LOT of important truths in this article.
What is CNBS?
Debt, beyond what can be recovered by population increase and future economic growth, I believe is not what John Maynard Keynes was talking about; it is now completely out of whack with his theories. Debt, beyond that for working capital and depreciable assets, is a dangerous business liability.
Re: Is the Gov't To Blame ? short answer - yes !
Comisión Nacional de Béisbol Superior ?
Comisión Nacional de Bancos y Seguros ?
some cable channel ?
a brokerage ?