how soon before the US in same state as Greece?

[gendao]

Accurate forecasting from 8 years before the housing bubble bust:

The Community Reinvestment Act funnels billions to left-wing activists, while threatening to destabilize lower-middle-class neighborhoods.

Under its provisions, U.S. banks have committed nearly $1 trillion for inner-city and low-income mortgages and real estate development projects, most of it funneled through a nationwide network of left-wing community groups, intent, in some cases, on teaching their low-income clients that the financial system is their enemy and, implicitly, that government, rather than their own striving, is the key to their well-being.

The Act, which Jimmy Carter signed in 1977, grew out of the complaint that urban banks were "redlining" inner-city neighborhoods, refusing to lend to their residents while using their deposits to finance suburban expansion. CRA decreed that banks have "an affirmative obligation" to meet the credit needs of the communities

A down-payment requirement, based on concern as to whether a borrower can make payments, is—when applied to low-income minority buyers—"patronizing and almost racist," Marks says.

A no-down-payment policy reflects a belief that poor families should qualify for home ownership because they are poor, in contrast to the reality that some poor families are prepared to make the sacrifices necessary to own property, and some are not.

Guilt enabling victimhood for votes has its price...and it's a very steep one. There's a reason why Fannie Mae & Freddie Mac were the first big dominoes to fall - and then drag the rest of the country down along with them:

The Community Reinvestment Act, or CRA, regulations caused the failure of the two government-sponsored mortgage investment giants, Fannie Mae and Freddie Mac, and their failure is at the heart of the housing market meltdown. In September 2008, the federal government injected $200 billion to cover the investment losses of Fannie Mae and Freddie Mac. But it soon found that the amount was not enough. Shortly after, in February 2009, the government doubled its commitment to $400 billion for the two agencies to cover their losses. And it is still not enough either.

The Community Reinvestment Act was signed into law in 1977 by President Carter. The Act requires banking institutions insured by the Federal Deposit Insurance Corporation, or FDIC, to be evaluated by their federal regulators for the loans made to low and moderate income borrowers and to poor communities. The act forced banks to make these loans, which the banks would have rejected otherwise as financially unsound.

In 1989, the CRA ratings were first made publicly available. And in 1995, President Clinton made the CRA ratings available on a public website. With better public access to CRA ratings, community activist groups started pressurizing banks to make more of these unsafe loans.

Contrary to my initial conclusion, the evidence is overwhelming that the CRA played a significant role in creating lax lending standards that fueled the housing bubble. Once I realized this, I had to abandon my suspicion that the anti-CRA case was a figment of the rhetoric of Republicans attempting to distract attention from their own role in the mortgage mess.

government policy over many years--particularly the use of the Community Reinvestment Act and Fannie Mae and Freddie Mac to distort the housing credit system-- underlies the current crisis

The Times itself reported in 1999 that Fannie Mae and Freddie Mac were under pressure from the Clinton administration to increase lending to minorities and low-income home buyers--a policy that necessarily entailed higher risks.

Thus, a law that was originally intended to encourage banks to use safe and sound practices in lending now required them to be “innovative” and “flexible.” In other words, it called for the relaxation of lending standards, and it was the bank regulators who were expected to enforce these relaxed standards.The effort to reduce mortgage lending standards was led by the Department of Housing and Urban Development through the 1994 National Homeownership Strategy, published at the request of President Clinton. Among other things, it called for “financing strategies, fueled by the creativity and resources of the private and public sectors, to help homeowners that lack cash to buy a home or to make the payments.” Once the standards were relaxed for low-income borrowers, it would seem impossible to deny these benefits to the prime market. Indeed, bank regulators, who were in charge of enforcing CRA standards, could hardly disapprove of similar loans made to better-qualified borrowers.

from 2001 through 2006, the share of all mortgage originations that were made up of conventional mortgages (that is, the 30-year fixed-rate mortgage that had always been the mainstay of the U.S. mortgage market) fell from 57.1 percent in 2001 to 33.1 percent in the fourth quarter of 2006. Correspondingly, sub-prime loans (those made to borrowers with blemished credit) rose from 7.2 percent to 18.8 percent, and Alt-A loans (those made to speculative buyers or without the usual underwriting standards) rose from 2.5 percent to 13.9 percent. Although it is difficult to prove cause and effect, it is highly likely that the lower lending standards required by the CRA influenced what banks and other lenders were willing to offer to borrowers in prime markets. Needless to say, most borrowers would prefer a mortgage with a low down payment requirement, allowing them to buy a larger home for the same initial investment.

it was the regulators who relaxed these standards--at the behest of community groups and "progressive" political forces.… For years, rising house prices hid the default problems since quick refinances were possible. But now that house prices have stopped rising, we can clearly see the damage done by relaxed loan standards.

spreading of these looser standards to the prime loan market that vastly increased the availability of credit for mortgages, the speculation in housing, and ultimately the bubble in housing prices.

Credit Default swaps are insurance for bonds. I buy insurance on most of my assets. Insurance is available for equity investments through the options market. The end result is that it can make the investment much more sound.

The problem developed when CDS written on the pools of home loans were found to be badly mispriced. Why? The borrowers did not meet the historic standards of the homeowner of the past. It was not the CDS market that caused the problem, it was the terrible result of the low underwriting standards and the high default rates that brought on.

But again, this is just another long-term result of the relentless anti-Patriarchal cultural battle in the West. Where a complete teenage rejection of fatherly values (order, stern discipline, responsibility, self-control, tough love, delayed gratification, etc) actually becomes far worse than overly-strict ones. Edited July 8, 2015 by gendao

[thelerner]

Accurate forecasting from 8 years before the housing bubble bust:

Guilt enabling victimhood for votes has its price...and it's a very steep one. There's a reason why Fannie Mae & Freddie Mac were the first big dominoes to fall - and then drag the rest of the country down along with them:

But again, this is just another long-term result of the relentless anti-Patriarchal cultural battle in the West. Where a complete teenage rejection of fatherly values (order, stern discipline, responsibility, self-control, tough love, delayed gratification, etc) actually becomes far worse then overly-strict ones.

I'd put it a different, less psychological way.  The road to hell (& financial ruin) is built on good intentions. 

 

ie 'it was the regulators who relaxed these standards--at the behest of community groups and "progressive" political forces.… For years, rising house prices hid the default problems since quick refinances were possible. But now that house prices have stopped rising, we can clearly see the damage done by relaxed loan standards..  spreading of these looser standards to the prime loan market that vastly increased the availability of credit for mortgages..' <Yup>

 

It seemed win/win at the time.  Easier loans to maginalized groups, giving more money (thru refinance) and home ownership to more people, what could go wrong??  answer: A bubble.  Once it started growing, easy money spigots should have been turned off, but weren't.  A housing bubble formed, a nasty one, since it allowed huge margins on assets in long term loans.  Real Estate is one of the legs of the economy and once thats kicked out the whole damn thing collapses.   When the bubble broke it effected nearly everyone and devasted the economy for years. 

Edited July 8, 2015 by thelerner

[gendao]

ie 'it was the regulators who relaxed these standards--at the behest of community groups and "progressive" political forces.…

Right, and this agenda was forced upon industry by government REGULATION, not deregulation.

 

Had the CRA never passed, there would have been no ensuing snowball effect. Reflecting its own society, America itself is becoming a single teenage mom, "liberated" from her Father in favor of absent baby daddies instead.

 

And the results of this rejection are very predictable. Just tour Detroit or any other inner-city ghetto...

Edited July 13, 2015 by gendao

[zerostao]

 

i find it hilarious that mccain introduces any banking legislation (mccain of the 80s savings and loan scandal--where he saved his own hide only by ratting out keating and john glenn, uncle dick cheney was in that mix as well) but it is good that a bipartisan image is presented, i think the gop could have found a better politician than mccain, but, oh well,,but from my pov, no confidence can be found with mccains name attached.

wall street has just called a "time out" trading stopped...we americans are pretty resilient bunch,, how many frackings can we take  and keep on keeping on?  

[thelerner]

Numbers:

 

The financial position of the United States includes assets of at least $269.6 trillion (1576% of GDP) and debts of $145.8 trillion (852% of GDP) to produce a net worth of at least $123.8 trillion (723% of GDP,) ^[a] as of Q1 2014 (https://en.wikipedia.org/wiki/Financial_position_of_the_United_States).  Note GDP is about 17.71 Trillion up from 16.77 Trillion in 2013.   (*note I'm all numbers here are contestible but found on internet)

 

How much does the US earn/tax a year?   (http://www.usgovernmentrevenue.com/total)

 

Total Government Revenue in the United States
1yr   Fiscal Year 2015

Federal Direct Revenue     $3.2 trillion   

State Direct Revenue        $1.6 trillion   

Local Direct Reveue          $1.2 trillion   

Total Revenue                    $6.0 trillion 

 

Speaking of debt and perspective, here are 2 charts from Heritage Foundation a very conservative organization

What If a Typical Family Spent Money Like the Federal Government?

If a median-income family spent and borrowed like the federal government does, it would spend $61,000 despite earning only $52,000. It would pile $9,000 on top of an already massive debt of more than $311,000 like having a mortgage, only without the house.

 

Sonofabitch, the charts won't show up.  

What they show is in 2013 If a Typical Family Spent Money Like the Federal Government

 

             Median Income   Spent Like Govmnt   On Credit Card   Total Debt

 

2013           $52,000           64,000                     12,000           $ 312,000 http://www.heritage.org/multimedia/infographic/2013/08/federalspendingbynumbers2013/page-10-chart-2

2014           $52,000           61,000                       9,000            $ 311,000 http://www.heritage.org/federalbudget/typical-family-spent-like-government

 

What's interesting is from 2013 to 2014 debt should be up to 324,000, right.  Another $12,000 added on due to overspending.  But its not, its lower, by a $1,000 to $311,000.  Not great but improvement, and 2015 should be better still, I assume. 

 

Why?  Because things change.   Sometimes they get better.  Hard to believe, particularly if one has political bias's.  The chart implies federal spending is down from 64k to 61k, about a 5% reduction.  It doesn't show it but more people are employed thus paying into the pot. 

 

This is shaky math and the metaphor breaks down a bit but if the US has 269 trillion in net assets divided by 340 million people then each person has about $790,000 thus each family has a million or 3 in asset or the Gov family does. 

 

Still, is a family with millions in assets, making $52,000 (probably more now) spending $61,000 (not good) with $9,000 of credit card debt and owing another $311,000 in a horrible position?   Its not great or even good but its not terrible.  Especially the fact the total debt is going down.  If they can get the income up, they'll be in good shape.  Also let remember inevitable inflation makes long term debt cheaper.  Thus $311,000 paid over 30 years is really 200ish thousand because it'll be paid in dollars worth 60 or 70 cents of what our current dollar is. 

Edited July 8, 2015 by thelerner

[Brian]

What if that family is using a copier to "print money," depositing that "money" in the bank and then writing rubber checks to pay the credit card company while applying for more cards and buying even more on credit. Temporarily, the debt load does appear to go down -- until the family's bank realizes the deposited money was bogus and the credit card companies learn the checks have bounced.

 

In the US's case, the money isn't exactly "bogus" but it is being fabricated out of thin air. This practice is called monetizing the debt -- the government borrows and then prints money to "pay off" the debt. As long as the rest of the world is willing to play along and rely upon money "backed by the faith and credit of the US government" then the checks aren't technically rubber, right?

 

So, why doesn't the Federal Reserve simply print $340000000000000000 and give everyone in the nation a million bucks for Christmas? I mean, that would solve the poverty problem, right? Of course, we should print an extra $200000000000000 or so while we are at it to cover our outstanding current balances and unfunded liabilities. If you are going to do quantitative easing, why do it half-heartedly?

[Marblehead]

Reflecting its own society, America itself is becoming a single teenage mom, "liberated" from her Father in favor of absent baby daddies instead.

 

And the results of this rejection are very predictable.  Just tour Detroit or any other inner-city ghetto...

I don't need to go to Detroit to see this.  I can just look next door.  Luckily the owners of the house are financially secure but they have been some very busy parents, grandparent and now great-grandparents.  The kids are popping babies and have no means of supporting them.

[Marblehead]

 

             Median Income   Spent Like Govmnt   On Credit Card   Total Debt

 

2013           $52,000           64,000                     12,000           $ 312,000

 

2014           $52,000           61,000                       9,000            $ 311,000

Those figures for Medium Income would be higher if it wasn't for me bringing them down.

 

But then, the Spent Like Government figures would be higher if it wasn't for me holding them down.

[Marblehead]

I haven't heard anyone recently talking about "balanced budget" in any governments lately.

[thelerner]

 

So, why doesn't the Federal Reserve simply print $340000000000000000 and give everyone in the nation a million bucks for Christmas? I mean, that would solve the poverty problem, right? Of course, we should print an extra $200000000000000 or so while we are at it to cover our outstanding current balances and unfunded liabilities. If you are going to do quantitative easing, why do it half-heartedly?

Course that would devalue money, making it lose value.   Dump that much money on people and it'd be rapidly worth nothing.  Its done in a slower more roundabout fashion.  And its done when the velocity of money is decreasing.  What that means is when a bank loans someone money it has the same action as magically increasing the money supply. 

 

You borrow a $100,000 from a bank to make a mortgage and you've sort of created that much of that money, poof!, ie the bank has $100,000 and loans that same 100k to a dozen people.  Money is created out of nothing.

 

In a recession that loan effect phenomena is greatly reduced.  The money supply shrinks so the government is freer to pump new money into the system.  When people are borrowing again they can't.  In a recession you can hand out money, I think Bush did it that way, not millions but a few thousand and it didn't create mad inflation cause it was done during a recession.

[Marblehead]

Its done in a slower more roundabout fashion.   

That's sometimes called trickle-down economics.  Problem is, it doesn't trickle down.  It stays in the hands of those who get it, the wealthy.  Those folks are wealthy because they were and are greedy.  No way are most of them going to let anything trickle down.

[thelerner]

That's sometimes called trickle-down economics.  Problem is, it doesn't trickle down.  It stays in the hands of those who get it, the wealthy.  Those folks are wealthy because they were and are greedy.  No way are most of them going to let anything trickle down.

Not really.  Trickle down economics was done by Reagan and followed by a few other Republicans.  It was about lowering the top tax rates and creating other tax breaks for the wealthy and hoping there new found wealth would in end up trickling down to the whole economy.  Wasn't that wild an idea when top tax rates were over 94%, but these days with a shrinking middle class and wider disparities it makes no sense, imo. 

 

I'd also say, don't kid yourself, everyone is greedy.  The rich have no monopoly on it. 

 

In his first term Obama dropped 100's of billions into the economy with make shift jobs programs.  Didn't seem to accomplish a whole lot but got money on the street and into peoples pockets, it never had as much kick starting effect as it could have. 

 

Perspective:  Keep in mind $3 for each citizen is a billion dollars ish.  $30 each is $10 billion, $300 each =  $100 billion.  Giving each person a million dollars would cost 320 million million or 320,000,000,000,000,000, 320 quadrillion? doesn't matter, it'd create Zimbabwean wall paper.

 

Quantitative Easing 1,2 and 3 (which has ended) bought up Government bonds.  Which had the effect of pumping money into the system, probably inflated some commodity prices for a short while, pumped up stock prices too (in truth I don't fully understand it).  Made money cheaper for banks.   Its helped a bit but like adding paper to start a fire its a short term kind of approach.  It generates heat, but you can end up with choking ash.  Economists were amazed that Obama's acts didn't trigger more inflation, but much of that is due to timing, ie the lower velocity of money I mentioned above.  Timing is everything. 

 

Five or six years ago we could have been heading for Greek style monetary apocalypse (& in truth our money debacle triggered a world wide recesion).  Instead of austerity we went Keynsian, expanded the money supply and launched 100's of billions of dollars into the economy.  Its worked out okay, not great but a whole lot better then many countries. 

Edited July 8, 2015 by thelerner

[Marblehead]

Not really.  Trickle down economics was done by Reagan and followed by a few other Republicans.

We have different ideas, understandings, and opinions regarding our economy.  Trickle down is still alive and well.  Obama is applying it very efficiently.  

 

Check the state of wealth since he went to office.  Every year the wealthy have become more wealthy and the poor have become poorer.  His policies aren't any different than Bush's were.

 

I pay a higher tax rate than Romney does and I am considered by the state of Florida to be below poverty level.

 

And all the talk about new jobs being created is whitewash because most of those jobs pay at or close to minimum wage and many of them are temporary/part time jobs so the employer doesn't have to offer benefits.

 

I am a true fiscal conservative and that was lost in America in the mid-1960s.  A balanced budget is very important to fiscal conservatives.

[zerostao]

runaway inflation will balance the budget, no worries there.

trickle down economics goes back to taft (at least) 

read will rogers commentary from the 1920's

not much has changed, sadly

 

http://archive.democrats.com/view.cfm?id=3512

[Geof Nanto]

Its worked out okay, not great but a whole lot better then many countries. 

 

Yes, that's true. But America is far more ruthlessly free market than other Western countries. (Not that any country is free market; all modern economies are composites of socialism and capitalism.) In Australia, for instance, there are more comprehensive welfare safety nets and these are politically untouchable. Hence there is less freedom here for an individual both to succeed economically and to fail economically.  The same applies to many European countries. 

 

My main comment though, is to question the sustainability of these policies applied since 2007. I'd suggest recessions are actually healthy and necessary phases of the economy. Nature evolves in cycles, and so too will a healthy economy. What we're doing with these excessively counter-cyclical policies is killing the economy. Sure, it's not dead, but it's not particularly alive either. We've trying to make the economy machine-like and predictable. Instead, to my observation, we're damming up a massive force of inevitable destructive consequences.   

 

The economic growth of the last few decades has been underpinned by rapidly expanding debt worldwide. Hence the expression 'Ponzi Capitalism'. Nothing has changed since 2007. The debt stimulation prior to 2007 could be likened to excessive coffee drinking, leading to overwork and collapse. The response of government and central bankers worldwide: "No problem, here's some cocaine to keep you going."

Edited July 9, 2015 by Yueya

[zerostao]

" In Australia, for instance, there are more comprehensive welfare safety nets and these are politically untouchable."

in usa it was thought at one time that our safety nets were politically untouchable too

 

http://www.snopes.com/POLITICS/QUOTES/ikesocial.asp

 

to answer the OP 

how long? well, if greek civilization peaked 700 bce and they are just now in this shape

usa would have another 2000 + years right?

yeah right

[3bob]

I've noticed there are several groups offering "free" what to do books and related plans to contend with economic madness for around $50.00 a pop...  

Edited July 9, 2015 by 3bob

[3bob]

comparisons between US debt and Greece debt via msn link:

 

http://www.msn.com/en-us/money/savingandinvesting/3-reasons-the-average-american-may-be-worse-off-than-greece/ar-AAcL0KX#page=1

[Vanir Thunder Dojo Tan]

Debt is fictional.   more people are waking up to that fact every day.

Soon:  No one will ever pay any debts and anyone who wants you to pay them a debt will get shafted.  eternally so.

[Apech]

Debt is fictional.   more people are waking up to that fact every day.

 

Soon:  No one will ever pay any debts and anyone who wants you to pay them a debt will get shafted.  eternally so.

 

 

Could you lend me some money then?

[Vanir Thunder Dojo Tan]

no, but if i have it, i can GIVE it to you.

[3bob]

VTDT,  That is like saying karma is fiction or gravity is fiction etc...

[Apech]

VTDT,  That is like saying karma is fiction or gravity is fiction etc...

 

 

... abrasion is friction.

[Brian]

Does that mean friction is fiction?

 

I'm confused...

[3bob]

Doesn't it mean the squeaky wheel gets the Grease?

 

(no offense to the many Greeks who are suffering)

Edited July 11, 2015 by 3bob