drbuzz0 said:

It comes down to class warfare and the entitlement mentality.

There has been the battle cry that “Everyone should have the opportunity to own their own home.”

And that means that there has been a movement to make sure everyone can get a mortgage with favorable terms – even if they don’t really qualify for one.

The race card gets into this because, lets face it, minorities like blacks and hispanics are more likely to be in the lower class economically.

So along they come and say “These big greedy banks descriminate on the poor and the miniorities. They’ll give the rich white guys loans but a poor black person can’t start their own buisiness because they can’t get as favorable a loan. They can’t buy their own home because they can’t get as generous a mortgage.”

Of course, it has nothing to do with race. The banks assess loan risk and credit qualifications based on a person’s finances and history of credit. A person with a good high paying job and an education is a lower risk for defaulting on a loan.

In the United States, blacks and Hispanics really WOULD have been able to afford to buy their own homes, were it not for restrictive zoning laws (specifically those involving minimum lot sizes). Of course such laws were probably the result of racist middle-class homeowners who didn’t want any ****s in THEIR suburbs.

Zoning laws are also responsible for the near-total car dependency of many neighborhoods, and should be abolished (except for ones needed to protect residents from noise or industrial pollution).

Wonderful discussion. The ideas generated here appear vital to me. While I agree with everyone who says no one can predict the future, I also believe we can likely agree that if the human community keep doing precisely what we are doing now, we will keep getting what we are getting now.

One indication of faulty reasoning and extreme foolishness, I suppose, would be for us to believe that we can keep overconsuming, overproducing and overpopulating as we are doing now and somehow achieve different results from the ones in existence now.

If, for example, by doing “more of the same business-as-usual activities” that we are doing now, we could be leading our children down a “primrose path” to a recognizably horrendous fate of some unknowable kind, would reason and common sense not suggest a change in behavior?

We have self-proclaimed Masters of the Universe among us who are recommending to the children that all of us can live large and long; that we can conspicuously consume limited resources, pollute the frangible environment, overpopulate the finite planet and ravage the Earth……just the way they are insisting all of us do now. These arrogant and avaricious leaders are living examples of patently unsustainable lives and, yes, they take pride in their gigantic ecological ‘footprints’ and lifestyles based upon excessive consumption and unbridled hoarding. If our children were to keep doing what my not-so-great generation of elders are adamantly advocating and doing now, what is likely to become of them?

My growing sense of frustration results from a realization that remarkably clear, intellectually honest and morally courageous reports from so many responsible and duty-bound scientists show us that the Masters of the Universe are determined to deny what could somehow be real and not to speak publicly about what they believe to be true regarding the predicament in which the family of humanity finds itself in these early years of Century XXI. Even worse, their minions with leadership responsibilities and duties in environmental organizations have collusively been enjoined from speaking about whatsoever they believe to be true. As a consequence, a conspiracy of silence has been established among all these leaders and the absurdly enriched talking heads in the mass media who eschew intellectual honesty and moral courage in favor of reporting repetitively about whatsoever is politically convenient, economically expedient, socially agreeable and religiously tolerated.

The silence of so many leaders is deafening, while the duplicitous, disinformational chatter of the talking heads is morally outrageous. What is much worse, sad to say, is that the determination of these leaders and the talking heads to live large and long in such stupendously unsustainable ways — come what may for the children — is not only grossly irresponsible, it is a profound dereliction of their duty to warn, I believe.

Perhaps change is in the offing.

        WoodEngineer said:

DV82XL I did attempt to rebuff your issues and I don’t intend on spelling it out anymore than the posts above.

As far as consuming goes, yes everyone likes to consume..the world right now needs the USA to consume..the problem is the USA no longer makes that much we’ve become a service economy…and even the services are moving out. Per person other countries consume far far less and don’t strive for lots and lots of worthless crap. I’m no tree hugger…I cut them down and turn them into your floors, houses, furniture, pharmacuticals, and most recently fuel. I like to consume as much as the next person but no one in the USA seems to live within their means…no one should have thousands of dollars of credit card debt..it’s INSANE…fiscal responsibility of the average American is appalling. The world needs Americans to consume right now…someone has to buy all the crap thats being made..which we actually finance through other countries, such as japan, china and the UK…in fact freaking Luxembourg owns over 87 BILLION dollars of our debt..nice. Theres no way that this level of spending can continue it’s completely unfinanceable..other countries don’t have this problem..you can keep touting success of capitalism if you must but America doesn’t belong to it’s citizens..it belongs to Americas allies and it’s enemies.

Chinas socialist/capitalist hybrid owns 750Billion dollars of our debt..they’ll probably get a very nice return on that investment.

You make some good points, but first on US national debt: the debt the US has held by forign countries is actually a pretty small portion of the debt. Most of it is held by the fed itself, which is a confusing situation. Of course the US holds a great deal of forign debt too. The national debt is not necessarily a bad thing in itself, assuming its of reasonable size and properly used. Debt is a tool of monitary policy and the issuance of bonds is a necessary way to allow the monitary supply to shrink and grow without impacting inflation too badly.

However, I will be the first to say that the debt of the US has become extremely excessive – far beyond what it should be. It’s got to be cut back badly. It is beyond the point of being higher than it should, it has mushroomed massively.

Now as far as consumer level debt and issuing of too much credit: In my opinion the market has a way of dealing with this. There is a natural system that helps keep over lending in check. If creditors offer a large amount of unsecured loans to high risk recipients, then many will end up not being able to pay them. They default on the payment and the bank gets burned, hit with a loss on each account.

That, in and of itself is incentive for banks to hold loans to higher standards, both in the form of credit cards, mortgages and other lending. If they don’t, they will suffer. Also, when credit is lent to high risk groups it is legitimate to expect high interest rates in order to compensate for the large proportion that will default.

As for consumers: If you take out too much in the way of loans and can’t pay them back, then you hurt yourself. You could lose your house, your car and any savings you have. You may be able to get things back together with bankruptcy and debt management plans, but it hurts. And it should hurt. If being in too much debt didn’t come back to bite you then there’d be no incentive to avoid it.

Now why this isn’t working
One of the big issues that stops this natural incentive toward reasonable lending is the government and the belief in entitlement. One thing is the “affordable housing tax credit” and other programs that go along with it. The government has been subsidizing subprime lending, creating laws that are designed to make subprime lending more acceptable or even hide it in securities and to encourage overlending. The government, in the form of the Fed has been doing the same thing. In order to encourage more high risk lending, the Fed itself has made money avaliable to institutions which have bad balance sheets and have risk loans. Fannie May and Freddie Mac are quasi-government programs, created by legislation to provide more lending.

Why on earth would the government do this?

It comes down to class warfare and the entitlement mentality. There has been the battle cry that “Everyone should have the opportunity to own their own home.” And that means that there has been a movement to make sure everyone can get a mortgage with favorable terms – even if they don’t really qualify for one.

The race card gets into this because, lets face it, minorities like blacks and hispanics are more likely to be in the lower class economically. So along they come and say “These big greedy banks descriminate on the poor and the miniorities. They’ll give the rich white guys loans but a poor black person can’t start their own buisiness because they can’t get as favorable a loan. They can’t buy their own home because they can’t get as generous a mortgage.”

Of course, it has nothing to do with race. The banks assess loan risk and credit qualifications based on a person’s finances and history of credit. A person with a good high paying job and an education is a lower risk for defaulting on a loan.

But this is where policies that encourage and subsidize subprime lending, overlending and bad credit practices come in. They demand that everyone be trusted to take out debt and say it’s wrong to assume that some people or groups won’t be able to handle it.

Well, guess what: When you entrust people with bad credit or no credit with large amounts of money they often don’t pay it back.

        Steven Earl Salmony said:

The effective restoration of the global economy {and forward movement toward the preservation of the environment} could be initiated so simply, sensibly and responsibly………………. by following ‘Ten Commandments’ for Economic Revitalization.

While these are good points I doubt strongly that their implementation will be that simple. What we are going to see is yet another round of the endless ‘Hard Money’ vs ‘Soft Money’ debate that free market economies have struggled with of and on for several hundred years now. It’s been played out in several forms like the silver/gold bimetallism fight in the late 1800’s for example.

The issue is always going to be the same: hard money means stable economies that have slow growth – especially at the bottom – and governments don’t get (re)elected without the support of the lower income voters. Soft money economies mean job growth and more apparent wealth for the masses, at the risk of crashing if the growth stops for whatever other reason.

Finding a good balance has never been easy.

http://www.ft.com/cms/s/0/5d5aa24e-23a4-11de-996a-00144feabdc0.html

Ten principles for a Black Swan-proof world
By Nassim Nicholas Taleb

Published: April 7 2009 20:02 | Last updated: April 7 2009 20:02

1. What is fragile should break early while it is still small. Nothing should ever become too big to fail. Evolution in economic life helps those with the maximum amount of hidden risks – and hence the most fragile – become the biggest.

2. No socialisation of losses and privatisation of gains. Whatever may need to be bailed out should be nationalised; whatever does not need a bail-out should be free, small and risk-bearing. We have managed to combine the worst of capitalism and socialism. In France in the 1980s, the socialists took over the banks. In the US in the 2000s, the banks took over the government. This is surreal.

3. People who were driving a school bus blindfolded (and crashed it) should never be given a new bus. The economics establishment (universities, regulators, central bankers, government officials, various organisations staffed with economists) lost its legitimacy with the failure of the system. It is irresponsible and foolish to put our trust in the ability of such experts to get us out of this mess. Instead, find the smart people whose hands are clean.

4. Do not let someone making an “incentive” bonus manage a nuclear plant – or your financial risks. Odds are he would cut every corner on safety to show “profits” while claiming to be “conservative”. Bonuses do not accommodate the hidden risks of blow-ups. It is the asymmetry of the bonus system that got us here. No incentives without disincentives: capitalism is about rewards and punishments, not just rewards.

5. Counter-balance complexity with simplicity. Complexity from globalisation and highly networked economic life needs to be countered by simplicity in financial products. The complex economy is already a form of leverage: the leverage of efficiency. Such systems survive thanks to slack and redundancy; adding debt produces wild and dangerous gyrations and leaves no room for error. Capitalism cannot avoid fads and bubbles: equity bubbles (as in 2000) have proved to be mild; debt bubbles are vicious.

6. Do not give children sticks of dynamite, even if they come with a warning . Complex derivatives need to be banned because nobody understands them and few are rational enough to know it. Citizens must be protected from themselves, from bankers selling them “hedging” products, and from gullible regulators who listen to economic theorists.

7. Only Ponzi schemes should depend on confidence. Governments should never need to “restore confidence”. Cascading rumours are a product of complex systems. Governments cannot stop the rumours. Simply, we need to be in a position to shrug off rumours, be robust in the face of them.

8. Do not give an addict more drugs if he has withdrawal pains. Using leverage to cure the problems of too much leverage is not homeopathy, it is denial. The debt crisis is not a temporary problem, it is a structural one. We need rehab.

9. Citizens should not depend on financial assets or fallible “expert” advice for their retirement. Economic life should be definancialised. We should learn not to use markets as storehouses of value: they do not harbour the certainties that normal citizens require. Citizens should experience anxiety about their own businesses (which they control), not their investments (which they do not control).

10. Make an omelette with the broken eggs. Finally, this crisis cannot be fixed with makeshift repairs, no more than a boat with a rotten hull can be fixed with ad-hoc patches. We need to rebuild the hull with new (stronger) materials; we will have to remake the system before it does so itself. Let us move voluntarily into Capitalism 2.0 by helping what needs to be broken break on its own, converting debt into equity, marginalising the economics and business school establishments, shutting down the “Nobel” in economics, banning leveraged buyouts, putting bankers where they belong, clawing back the bonuses of those who got us here, and teaching people to navigate a world with fewer certainties.

Then we will see an economic life closer to our biological environment: smaller companies, richer ecology, no leverage. A world in which entrepreneurs, not bankers, take the risks and companies are born and die every day without making the news.

In other words, a place more resistant to black swans.

The writer is a veteran trader, a distinguished professor at New York University’s Polytechnic Institute and the author of The Black Swan: The Impact of the Highly Improbable

Steven Earl Salmony
AWAREness Campaign on The Human Population,
established 2001
http://sustainabilityscience.org/content.html?contentid=1176
http://sustainabilitysoutheast.org/index.php

As far as consuming goes, yes everyone likes to consume..the world right now needs the USA to consume..the problem is the USA no longer makes that much we’ve become a service economy…and even the services are moving out. Per person other countries consume far far less and don’t strive for lots and lots of worthless crap. I’m no tree hugger…I cut them down and turn them into your floors, houses, furniture, pharmacuticals, and most recently fuel. I like to consume as much as the next person but no one in the USA seems to live within their means…no one should have thousands of dollars of credit card debt..it’s INSANE…fiscal responsibility of the average American is appalling. The world needs Americans to consume right now…someone has to buy all the crap thats being made..which we actually finance through other countries, such as japan, china and the UK…in fact freaking Luxembourg owns over 87 BILLION dollars of our debt..nice. Theres no way that this level of spending can continue it’s completely unfinanceable..other countries don’t have this problem..you can keep touting success of capitalism if you must but America doesn’t belong to it’s citizens..it belongs to Americas allies and it’s enemies.

Chinas socialist/capitalist hybrid owns 750Billion dollars of our debt..they’ll probably get a very nice return on that investment.

        WoodEngineer said:

The American government DID spring forth from the ideologies of a select few…in fact capitalism by definition is planned based on a central ideology. The American system is actually a market economy..it stopped being capitalist when the government began intervening heavily. The US and everyone else is heading towards market socialism and if they aren’t heading there then they are already there.
If capitalism is going to be viable for the long term it needs to be heavily regulated and then it is no longer capitalism.

I’ve said before that although I consider myself very pro-capitalism, I am not a purist in so far as a belief that there must be zero government intervention, zero social programs, zero regulation etc etc.

There are circumstances where there are necessities or where it is important to limit certain activities or encourage others. In this case there a need for regulation. Above all else, regulation should be tasked with assuring no deceptive or unfair practices are used to defraud others.

In general I think it’s an issue of how the problem is approached. The first question that should be asked is “Do we really need regulation here?” It should be realized that regulations or intervention is not something you use unless you have to. The second question is “How do we accomplish what is necessary while using as little intervention as possible?”

Subsidies should always be used sparingly and only when absolutely necessary to accomplish something that can’t be done otherwise. There may be a few examples of this, like maintaining an industry that is normally not always competitive but would be a necessity in some circumstances. For example, one could make a good case that it would be appropriate to subsidize munition manufacturing if failure to do so would leave the US dependent on forign countries for munitions. That would represent an unacceptable stratigic loss.

When it comes to the system as a whole, the government’s job is to maintain an enviornment conducive to doing buisiness. What this comes down to is good national security, a stable monetary system, enforcement of contracts, prosecution of fraud, providing independent confirmation of product quality and safety claims etc.

Another important thing to bare in mind is that the simpler and more straight forward regulations and laws are the more difficult it is to find loopholes and technicalities in them. We should not be looking to impose more regulations on companies but better regulations. This is absolutely critical.

The ironic thing is that despite ignorant people blaming “capitalism” and “greed” for the current economic problems the government is ultimately the one who got much of this started. The affordable housing tax credit caused massive damage. It’s a direct subsidy that encourages companies to buy up sub prime loans. There has been horrible overissuance of bonds, bad regulation of markets that explicitly has allowed desceptive securities trading etc etc.

The Oil Drum? That’s a joke right?

It doesn’t matter whether oil is unlimited or not. Of course it’s not unlimited, but so what? It’s not like we haven’t been here before. We used to get oil from whales. We started running out of them. Did humanity fall apart? Mass dieoff? No, we found alternate energy sources which turned out to be better. Petrolium might seem bad, but it beats whale oil any day.

most of it we didn’t make. But I think a lot of people at SASOL would disagree with the statement overall….

How do you figure that? Petroleum is NOT used to make fertilizer, despite this claim being made frequently.

No.. you’re confusing the individual with the collective. Lets say that we have a group of people and most of them are always doing what they believe will benefit society. Then there are a few who do what they think will benefit themselves. Who gets furthest ahead? Obviously those acting for their own needs will.

Now I’m not saying that we shouldn’t be concerned about the greater good, and I certainly do try to do things to help out the community, but you can’t found a society on the principle that all people will work toward the betterment of the collective. It’s been tried. MANY MANY times.

There are plenty of tree huggers who hate me for what I stand for and that’s never stopped me.
However the idea of a society in which doing something as evil as liking stuff or wanting more will get you judged mentally ill (clearly it’s not a mental illness) and then contained and rehabilitated.. That’s not even worth me arguing.. that is the kind of thing that episodes of “The Twilight Zone” are based on. It’s sickening anyone would even consider that tolerable, much less desirable.

What’s your point? When Einstein wanted to send a text message he used Western Union and when he wanted to hear music he used a Victrola. Technology progresses, people still like to communicate and have entertainment, just as they did in Einstein’s times and just as they always have.

        WoodEngineer said:

Not one country that has actually moved to socialism has gone there with good intentions. Most of them have arisen through military coups and haven’t been democratic in any way shape or form…in fact most of them were actually communist, even though they referred to themselves as socialists. The socialist/capitalist hybrid governments are doing fine (essentially all of Europe) and Europe has had a long time for it’s governments to evolve forward.

The American government DID spring forth from the ideologies of a select few…in fact capitalism by definition is planned based on a central ideology. The American system is actually a market economy..it stopped being capitalist when the government began intervening heavily. The US and everyone else is heading towards market socialism and if they aren’t heading there then they are already there.
If capitalism is going to be viable for the long term it needs to be heavily regulated and then it is no longer capitalism.

I had forgoten that when faced with any historical facts they did not like the Left defaults to revisionism in an attempt to dodge criticism. I see the method is still in use today.

You have said nothing here to counter the points I made above. If socialism can only succeed if the culture has the right values, then the same hold true for any other sociopolitical system making the point a tautology. Its like saying a Benign Dictatorship would be the perfect system if only sufficiently benign people would become dictators – true but trivial.

BTW Capitalism long predates the rise of the American System or the U.S. itself and the fact that it can incorporate new ideas and structural changes is what I meant by evolving. That’s why we don’t have laissez-faire capitalism anymore. Nevertheless we still have a system in which wealth, and the means of producing wealth, are privately owned.

The American government DID spring forth from the ideologies of a select few…in fact capitalism by definition is planned based on a central ideology. The American system is actually a market economy..it stopped being capitalist when the government began intervening heavily. The US and everyone else is heading towards market socialism and if they aren’t heading there then they are already there.
If capitalism is going to be viable for the long term it needs to be heavily regulated and then it is no longer capitalism.

        WoodEngineer said:

I think your quite deluded to be comparing a cry for social reform to the quack anti-vaccination people and the others you’ve listed

[snip]

You are very quick to dismiss everything we say and we aren’t asking you to get in line behind us. We simply ask that you think it over. However, I can see that it falls on deaf ears. You seem to want everything to stay the same…may I ask why? Don’t you want society to evolve? And even though you disagree, most nations seem to agree with us and are moving in our direction. So the argument seems to be moot.

[snip]

As for the fact that some of the countries that attempted to construct the types of governments we would like to see have failed, they were almost always held by the corrupt and taken by force. They never wanted the real socialist style of government all they wanted was a way to control their people and stay in power none of them have been democratic in any way shape or form. They used socialism as religion before it has been used for thousands of years to control the masses.

Doctrinaire Socialism is equivalent to these other delusions (and to religion I might add) and for the same reasons: they all fail to accept the fact that their initial premises are wrong. It’s just that simple.

The excuse that the system is fine, it was just corrupted by those in charge fails to see that a system that permits that to happen is in no way a good replacement for one that you are condemning. If I recall, one of the central criticisms of capitalism by the Left is that it allows the concentration of power in the hands of a few – if its replacement does the same thing, (because of what is obviously a systemic failure to prevent it) why is it superior? Not only is it not an improvement, it is substantially worse, as illistrated by its spectacular failures in the last century.

So I dismiss these ideas because they have been proven in practice not to work.

As for society evolving, one of the things that distinguishes capitalism, from other constructed, artificial sociopolitical systems, is that it is a result of social evolution. It did not spring whole from the mind of some individual or group of individuals attempting to design a society from the ground up base on their ideas of what is just and fair without any real appreciation of the nuances of individual or group psychology. Capitalism has grown and changed over time, and has certainly demonstrated more of the ability to learn from its mistakes, and recover from them than any other of the pretenders to its place.

As for asking me to think it over – what can I say – I come from a time where almost every young person had at least some sympathy for the tenets of socialism, and it was routinely deconstructed and endlessly discussed in coffee shops and pubs, where its apologists were required reading, and its eventual victory a given. I need no more thought on the matter – it was tried and it failed because in the end it was worse than what we have. The issue has been settled in the field by experimentation – it needs no further consideration.

It is not the solution now anymore than it was at the beginning of the last century, and if it is tried again, it will fail again.

Nor I might add while I am on the subject, is any effort to change human nature going to be effective. Those that blithely suggest that this is the road to utopia conveniently forget that Christianity has been trying to get humans to at the very least, live by the Great Commandment, of do unto others as you would be done by, for the past two thousand years with little real success, even when they could scare people into believing that they would suffer in Hell for eternity.

All efforts to mold people into some ideal state have failed. Why should I pay any attention to yet another cry that this is what must be done, when history shows real solutions come from those unfettered by the chains of some fixed ideology?