Is This a Replay of 1929?

Q. Aren't saving for retirement, insurance and pension systems old phenomena? Why did they bring down Wall Street this time?

A. Yes, pension and insurance systems were already well-developed in the industrial economies of 19th century Europe. There are two major differences this time around. Demographically, the senior citizens of 19th century Europe retained close ties to the younger generations because of ethnic and racial homogeneity. As a result, the pension amounts received by the retired people were substantially supplemented by contributions from inter-generational and intra-family transfers of wealth. If we go back a hundred or more years, old people lived with their families and helped to bring up their grandchildren. Moreover, hereditary transfer of wealth was still as important as creation of new wealth in the industrial economies of the 19th century. These factors served as economic incentives for the working adult population to provide old-age care for their parents, which supplemented the parents' income from pension. The second difference is that the dichotomy between an empire and a democracy was far more prominent among the nations of 19th century Europe. People felt assured that the social infrastructure provided by an empire would safeguard their standard of living through their old age. Examples of the social infrastructure of an empire during 19th century Europe are the establishment of universal heath care, the administration of the pension and life insurance systems, and subsidized public transport and postal systems. As an aside, it may also be mentioned here that the development of the modern university was pioneered in Germany during the 19th century.

Q. If Wall Street has been achieving all these great feats, where did it go wrong?

A. When concerns about the mortgage securities surfaced last year, many Wall Street investment firms claimed to be safe because they had not invested in sub-prime mortgages. This created a fear psychosis where people began to consider these sub-prime mortgages as 'toxic'. The prime mortgage is one which meets the eligibility criterion for purchase by Fannie Mae and Freddie Mac. This includes a 20% down payment and good credit score. Those mortgages that don't meet this criterion were called sub-prime. Gradually, Fannie Mae and Freddie Mac also began to deal with these sub-prime mortgages. So, it didn't make sense to be demonizing sub-prime mortgages. Wall Street wasted a lot of time in late 2007 and early 2008 trying to discredit the sub-prime mortgages. In the modern economy, every single participant is best with economic insecurity. So, the distinction between the prime and the sub-prime borrower, while it exists, is not really that great. Moreover, it is the sub-prime borrower who stands to gain the most by way of the development of human capital that Professor Lucas discusses in his "Lectures on Economic Growth". So, the sub-prime borrower would be the most willing, in the long-term, to highly value the inter-generational trade of wealth to support the senior citizens. Thus to discredit the sub-prime borrower has been the single major mistake that led to the financial crisis on Wall Street.

Q. What exactly is this great innovation of directing accumulated capital towards solving demographic problems that Wall Street has achieved?

A. Throughout history poor people have lived in subsistence conditions. Due to shorter life expectations than exist today, a poor man would have had to work for a living all his life. As mentioned above, the industrial economies of the 19th century Europe enabled the rise of a broad middle class with the means of hereditary wealth transfer and of supporting retired lifestyles. Contemporary times have raised the possibility that this access to wealth of a middle class standard could be further broadened to the whole of the population. During the 20th century, home-ownership has come to be a fundamental middle class aspiration throughout the world. In his "Lectures on Economic Growth", Professor Robert Lucas cites the travails of the characters in Sir V. S. Naipaul's "A House for Mr. Biswas" as the model for growth and development. Of course, I should also mention that Professor Lucas is more directly concerned with developing human capital rather than with home-ownership in his lectures.

Historically, massive accumulations of capital that are unrequited, have always been problematic. In addition, accumulation of capital has also resulted in the military-industrial complex. Professor Jeffry Frieden's "Global Capitalism: Its Fall and Rise in the Twentieth Century" is an excellent narration of how promises of global capitalism at the beginning of the 20th century quickly unraveled into the two World Wars. Thus matching the culturally and racially homogeneous retirement age population with the more diverse and younger home-owner population finds a gainful investment for the accumulated capital.

Q. Why have the markets for mortgage securities continued to remain illiquid?

A. The main reason that the markets for mortgage securities have been illiquid for a prolonged period of time is that the home-owner who is the only party with a credible and serious interest as a buyer of the mortgage securities has been shut out of the market. Instead of directly involving the home-owner, Wall Street has been peddling bizarre theories of risk management that has resulted in this huge mis-allocation of this $700 billion recently. By providing the information for a direct match-up of the home-owners on Main Street and the security-owners on Wall Street, the government could implement a low-cost eBay-type bidding system that would enable the home-owners to bid for the various tranches in the mortgage securities issued on their homes. This way the home-owners stand to benefit from a reduction in their debt obligations. The security-owners gets a floor on the prices of the mortgage securities and because of the decent prices, their capital gets replenished. Moreover, the home-owners' debt reduction can be structured in a way that encourages good behavior, and timely re-payment of the rest of the mortgage loan. This process would cost less than $1 billion for the government and achieves the objectives of liquidity and re-capitalization stated in the $700 billion bill. In addition, this direct match-up plan reduces foreclosures by reducing the home-owner's debt. Professor Martin Feldstein has also proposed a plan to reduce foreclosures. In his plan the government re-negotiates the home-owners' loans to provide debt reduction through low-interest loans, in return for enhanced claims on the home-owner. In my plan, the government's role is solely to provide reliable information.

n a few weeks we will make a choice that will decide our future.
I follow an economist named Bob Proctor. He has called the top and bottom of every market crash since the 70s correctly.
Also, he perfectly predicted the current real estate market meltdown and the picture he paints about what will happen in the next couple years
is terrifying.He thinks it will be worse then the great depression.
The banks in the U.S. are going under one after the other. Countrywide the largest morgage bank in the world,Bear Stearns, Lehman Brothers and Merrill Lynch which are 3 out of the top 5 wall street firms. Also, Fanny and Freddy Mae which hold 50 percent of the home loans in the United States.
The government took them over because they are essentially bankrupt.If they didn't the entire financially system would virtually shut down, the stock market would crash and we would suffer beyond what any of us have seen before.

McCain just like Bush " doesn't understand the economy".
That not just my opinion its his own words. Not only does he not understand how to fix it but he does not understand exactly what is broken.
It is no surprise that he doesn't. The people that make up these securities use complex mathematical models very few people understand.
Bush and McCain both can take the credit for this mess since they helped deregulate the laws that were protecting us.

Bush's economic advisor Phil Graham wrote the deregulation bill that allowed banks to take huge risks with all of our future.
Now, Phil Graham is the head of McCain's economic policy.He is also McCain's choice for the next secretary of the treasury.
No one in this country can afford for that to happen. The last time Bush met with his economic advisors was in March. He either didn't care or didn't realize that anything was wrong. Phil Graham had the guts to say that we are in a mental recession after he helped create the worst economy meltdown in our lifetime.
It will take the best and brightest minds in the world to get us out of this nightmare. As bad as Bush has done, McCain would be
even more destructive because things are in much worse shape. The next president will not inherit a surplus like Bush did but a tanking economy and a 11,600,000,000,000 (trillion) dollars deficit. Most of it Bush created and it will take decades to pay it back.
If you do what you have always done then you will get what you have always got.
When it comes to policy Bush and McCain are the same 90 percent of the time.
So why are the polls even close then ?





The chairman of McCains campaign recently said that people don't vote on issues they vote on a personality composite. Which means he is trying to sell you personality instead of results.

Let's teach him we are smarter than that .

Hold them accountable NOW!
Elect Obama Biden 2008




Check out this video of sarah palins interview it will blow you away


http://www.youtube.com/watch?v=r36Xc0GG4iQ

he ACORN does not fall from the tree:
http://justsaynodeal.com/acorn.html

Obama is getting a bump out of this because people are not being reminded of the whole history where the economy is concerned, and who did what when. Call it bias by omission. The media simply says that the economy is Obamas strong issue, but never discusses the facts in detail. Further, who had a majority when is rarely relevant. If the simplistic Party In Power model were true, then the Democrats would not have needed the House Republicans when they tried to pass the bailout bill, as Democrats have the majority in both houses and there is no threat of a veto. In theory, they do not need the Republicans to vote at all. In fact, something like twelve (12) Democrats from Barney Franks own banking committee voted against the bill. Obviously, it is not so simple and the media does the voter a disservice by doing little more than reinforcing the error. A similar argument would be to say that the economy appeared to be doing fine until the Democrats took over control of Congress and the power of the purse, then it tanked. As an aside, the media also misleads regarding the Clinton economy when they fail to mention that it also ended in a recession, requiring the first round of Bush stimulus checks immediately after he took office..

Do Obama and the Democrats deserve a lift in the polls as a result of the financial and mortgage problems? The answer from history is a clear NO. Here's the lead of a New York Times story on September 30, 1999: Fannie Mae Eases Credit To Aid Mortgage Lending [link below]. That's 1999 folks. Clinton Administration, I believe.

Here's the lead of a New York Times story on Sept. 11, 2003: The Bush administration today recommended the most significant regulatory overhaul in the housing finance industry since the savings and loan crisis a decade ago. [see link below] The Democrats killed it.

McCain said in co-sponsoring the Federal Housing Enterprise Regulatory Reform Act of 2005, S. 190: If Congress does not act, American taxpayers will continue to be exposed to the enormous risk that Fannie Mae and Freddie Mac pose to the housing market, the overall financial system and the economy as a whole. The Democrats killed it.

What was Barney Frank and fellow Democrats saying at the time of these attempted reforms? According to reports, Representative Barney Frank(D-MA) claimed of the thrifts "These two entities -- Fannie Mae and Freddie Mac -- are not facing any kind of financial crisis, the more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing." Representative Mel Watt (D-NC) added of the reforms "I don't see much other than a shell game going on here, moving something from one agency to another and in the process weakening the bargaining power of poorer families and their ability to get affordable housing." [ See Community Reinvestment Act, link below w/ history]

The link below contains a purported list of the top 25 in Congress who got contributions from the folks at Fannie and Freddie. Obama is listed third, after Dodd and Kerry, even though Obama is just a junior Senator. Obama is followed next by Clinton. Barney Frank and Nancy Pelosi are on the list as well.

http://www.investors.com/editorial/IBDArticles.asp?artsec=16&artnum=1&issue=20080918

For an interesting article purporting to detail the House Financial Services Committee Chairs long history with Fannie Mae, See http://www.businessandmedia.org/printer/2008/20080924145932.aspx

???House Financial Services Committee Chair promoted GSEs while former 'spouse' was Fannie Mae executive.???

The last link below describes how some in Congress tried to use the original version of the bailout bill to divert money eventually recovered to groups like ACORN. See:

http://www.investors.com/editorial/IBDArticles.asp?artsec=16&artnum=1&issue=20080918

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

http://article.nationalreview.com/print/?q=M2QwNDhkZTg2OGYzZjkzM2E2NDEwM2U5OGVkNTc0YzU=

http://query.nytimes.com/gst/fullpage.html?res=9E06E3D6123BF932A2575AC0A9659C8B63

http://query.nytimes.com/gst/fullpage.html?res=9C0DE7DB153EF933A0575AC0A96F958260

http://www.businessandmedia.org/printer/2008/20080924145932.aspx
http://www.investors.com/editorial/IBDArticles.asp?artsec=16&artnum=1&issue=20080926

http://online.wsj.com/article/SB122247015469280723.html?mod=googlenews_wsj

"USA's balance of payments deficits is so strong and irreversible, that we must accept that at some future date there will be a run against the dollar. Probably the kind of disorderly run that precipitates a global financial crisis." - Dr. Paul A. Samuelson (Nobel prize winner in Economics) - this is a quote from elsewhere.. wouldn't be this the moment to interview the few wise men in economics, instead of obviously trying to poor oil onto the water, which creates even more uncertainty.

Ah, c'mon, Medge -- it's becoming increasingly clear that, in our de facto one-party system, the President of the United States is to the people who really run this country as the Presidential press secretary is to the President himself: a talking head to take the heat and lie just convincingly enough to avoid lynching. That's it. And all we're voting on is who we would rather have informing us of the latest governmental usurpation of power. "Cause what the Fat Cats say is gonna go down is what's gonna go down, be it Obama or McCain who holds the job.

This is one of the few Democrats that I am proud of!:
http://www.youtube.com/watch?v=ZR5ekEuGyvk

The notion that we are moving toward a socialist form of government is preposterous. Websters dictionary provides four definitions of socialism: a). A political and economic theory advocating collective or government ownership and administration of the means of production and distribution of goods. b). A system of society or group living in which there is no private property. c). A system or condition of society in which the means of production are owned and controlled by the state. d). A stage in Marxist theory transitional between capitalism and communism and distinguished by unequal distribution of goods.
By the process of elimination, number one is out There is no such thing as ownership and administration of the means of production and distribution of goods in our society. Option number two is out, nowhere in the U.S.A. is there "no private property." Number three is out of the question, nowhere in our country are the means of production owned and controlled by the state. Number four is a very intersting definition of socialism.. The first part, "the transition between capitalism and communism is out of the question", but the second part "unequal distribution of goods and pay according to work done," seems to ring a bell. The CEOs in Wall street get obscene salaries and bonuses, while traveling to exotic resorts around the world in their private jets. Now this is unequal distribution of goods, but pay according to work done, noway!!
The original bailout by the Bush White House, of the Wall street debacle was first and foremost to rescue the banks and restore the CEO's lucrative way of life. We must remember that Main Street was in no way part of the bailout, this was included by congress after it failed to pass the first time around.
So according to the various definitions of socialism, it is not what we have. What we have is closer to fascism that socialism. This is how Websters define fascism: a) A political philosophy, movement or regime that exalsts nation and often race above the individual and stands for centralized autocratic government headed by a dictatorial leader, severe economic and social regimentaion, and forcible suppression of opposition. b). A tendency toward or actual exercise of strong autocratic or dictatorial control (early instances of police suppression and brutatlity.) Examples of this are Guantanamo, and the crackdown of the protesters in the recent Republican Convention in St. Paul, Minnesota. It appears that "...the centralized autocratic government, headed by a dictatorial leader," is closer to what we have presently, and it is what will continue under John McCain, if we allow him to replace Bush on November 4.

If you want big corporations to stop controling your life then stop producing for them.The government had to print more money because all of the illegal alliens who are the only ones in this country who want to work have taken all of the money out of our country.America is a broke country and the baby boomers are the most worthless immoral generation in world history.A shout out to all you baby boomers.You will be the next ones drooling on yourselves.Since you decided to whore the world,sell out your country,teach your kids to be lazy pieces of sh..insted of using a warm wash cloth to clean up your drule with the tazers you all think needs to be used.

Let's not forget that Warren Buffet, who's doing so much to bolster America's economy, is planning to vote for Barack Obama. Buffet says that Obama's economic plan is good for all Americans. He's also said that McCain's economic policies would further bankrupt our country.

If you vote for McCain, you're voting for more of the same pandering to corporations that ship jobs overseas and wreak havoc on the economy.

Vote for a strong economy that's regulated by fair principals. Vote for Obama.

To answer the question (because all that high gosh darn it talk lost me); no this is not a repeat of 1929. True the economy is not fundamentally sound, but with God's help (shout out to all the praying people!), we'll make it through this crisis, however long it may take.