$825 Billion Stimulus Plan

NEW -> Contingent Buyer Assistance Program
[quote author="BlackVault CM" date=1234321260]Well I was going to just say "Greed" and "Corruption". But I didn't want to use those words.</blockquote>


"Stupidity" and "arrogance" are suitable replacements.
 
[quote author="skek" date=1234322019]To oversimplify things, cheap debt and easy credit resulted in an epic bubble economy causing asset prices (notably residential RE, but not solely) to divorce themselves from fundamental values and fueling irresponsible consumer spending at the expense of savings and investment. That banks leveraged themselves was a symptom of the problem, not the cause -- they leveraged themselves because the cheap credit underpriced risk and the returns seemed "to good to be true." And to preempt your next question, lax regulation and greed certainly fueled the problem.



BTW, as I type this, Ron Paul is smacking Bernanke around in the House financial services committee meeting.</blockquote>


Doesn't the leveraging of derivative products massively amplify the problem?
 
[quote author="skek" date=1234322019]BTW, as I type this, Ron Paul is smacking Bernanke around in the House financial services committee meeting.</blockquote>


Did you notice Rep. Kanjorski go after Bernanke for not stating the problem simply enough, only to have Barney Frank shut down any answer by saying "the answer will have to be provided in writing" and moving to the next question? My wife and I were both pretty shocked, considering that this was pretty relevant to everything the government is asking us to pay for in the future.



For those who don't know who Rep. Kanjorski is I suggest you take the time to watch this video... it's enlightening.

<object width="325" height="250"><embed src="http://www.youtube.com/v/youtube" type="application/x-shockwave-flash" width="325" height="250"></embed></object>
 
[quote author="green_cactus" date=1234323222][quote author="skek" date=1234322019]To oversimplify things, cheap debt and easy credit resulted in an epic bubble economy causing asset prices (notably residential RE, but not solely) to divorce themselves from fundamental values and fueling irresponsible consumer spending at the expense of savings and investment. That banks leveraged themselves was a symptom of the problem, not the cause -- they leveraged themselves because the cheap credit underpriced risk and the returns seemed "to good to be true." And to preempt your next question, lax regulation and greed certainly fueled the problem.



BTW, as I type this, Ron Paul is smacking Bernanke around in the House financial services committee meeting.</blockquote>


Doesn't the leveraging of derivative products massively amplify the problem?</blockquote>


Yes.
 
[quote author="green_cactus" date=1234323222][quote author="skek" date=1234322019]To oversimplify things, cheap debt and easy credit resulted in an epic bubble economy causing asset prices (notably residential RE, but not solely) to divorce themselves from fundamental values and fueling irresponsible consumer spending at the expense of savings and investment. That banks leveraged themselves was a symptom of the problem, not the cause -- they leveraged themselves because the cheap credit underpriced risk and the returns seemed "to good to be true." And to preempt your next question, lax regulation and greed certainly fueled the problem.



BTW, as I type this, Ron Paul is smacking Bernanke around in the House financial services committee meeting.</blockquote>


Doesn't the leveraging of derivative products massively amplify the problem?</blockquote>
Sure, but in order to leverage, you have to be able to get cheap money and you have to actually be able to buy something with it. By the time synthetic derivatives were being traded, the die was already cast as sub-prime lenders were running out of customers. When that happened, the party was over. Even had the banks not been trading in derivatives, the fall in home prices would have occured and we would be in the exact same place, albeit without the additional worry of "toxic assets" keeping the banks from being nationalized.
 
[quote author="skek" date=1234324363]Umm, so consumer spending is not the problem, but Chuck is right and it's not sustainable, but we want to loosen credit and put more money in people's pocket to, presumably spend, but we need to reconsider irresponsible lending practices. Which is it, Mr. President?</blockquote>


Clearly, you fail to appreciate the <a href="http://www.johnkerry.com/">nuances</a> in his answers.
 
[quote author="BlackVault CM" date=1234320993][quote author="green_cactus" date=1234319900][quote author="skek" date=1234316629]Forgive me for getting the name wrong, but I think it was Chuck Todd who asked him how we can solve a problem caused by consumer spending by encouraging more consumer spending. It was an awkwardly worded question, and I think he meant "how can we solve a problem caused by consumer spending fueled by cheap debt and easy credit by providing more cheap debt and easy credit." Nevertheless, Pres. Obama's response was to tell him he was wrong, that the problem was caused by "bank leverage" and proceeded to ramble about nothing coherent for several minutes. It was painfully obvious to me at that time that Pres. Obama does not understand the economic crisis well enough to either explain the problem or lie convincingly about it.



Oscar's other criticisms are of course, dead on correct.</blockquote>


What is your take on why the financial collapse happened?</blockquote>


Easing restrictions on home mortgage loans and low interest rates. Housing bubble wouldn't have happened if banks didn't give money out to everybody that breathes air. Home values soared, people used homes as ATM machines to buy toys. That gave profits to companies and the DOW went to 14K. All it did was create a "fake" economy. After the 2001 crash, we should have never went to 14K DOW. We created a bubble within a much bigger bubble.</blockquote>


If it didn't go to the housing market, it would have gone someplace. As long as the fed thinks it can control the economy through interest rate, the business cycle will be too extreme.
 
[quote author="WINEX" date=1234321684][quote author="BlackVault CM" date=1234321260]Well I was going to just say "Greed" and "Corruption". But I didn't want to use those words.</blockquote>


"Stupidity" and "arrogance" are suitable replacements.</blockquote>


I prefer the phrase, "government intervention in the marketplace". But, that is synonomous with stupidity and arrogance.
 
[quote author="green_cactus" date=1234323222][quote author="skek" date=1234322019]To oversimplify things, cheap debt and easy credit resulted in an epic bubble economy causing asset prices (notably residential RE, but not solely) to divorce themselves from fundamental values and fueling irresponsible consumer spending at the expense of savings and investment. That banks leveraged themselves was a symptom of the problem, not the cause -- they leveraged themselves because the cheap credit underpriced risk and the returns seemed "to good to be true." And to preempt your next question, lax regulation and greed certainly fueled the problem.



BTW, as I type this, Ron Paul is smacking Bernanke around in the House financial services committee meeting.</blockquote>


Doesn't the leveraging of derivative products massively amplify the problem?</blockquote>


Of course, but there has to be leverage before there is deleverage. And the leveraging is the result of fractional reserve banking and fiat currency. Fractional reserve banking, fiat currency, and a central bank is the problem, bottom line.
 
[quote author="skek" date=1234323545][quote author="green_cactus" date=1234323222][quote author="skek" date=1234322019]To oversimplify things, cheap debt and easy credit resulted in an epic bubble economy causing asset prices (notably residential RE, but not solely) to divorce themselves from fundamental values and fueling irresponsible consumer spending at the expense of savings and investment. That banks leveraged themselves was a symptom of the problem, not the cause -- they leveraged themselves because the cheap credit underpriced risk and the returns seemed "to good to be true." And to preempt your next question, lax regulation and greed certainly fueled the problem.



BTW, as I type this, Ron Paul is smacking Bernanke around in the House financial services committee meeting.</blockquote>


Doesn't the leveraging of derivative products massively amplify the problem?</blockquote>


Sure, but it's not the problem. The problem is what Chuck Todd implied it is, and what Obama admitted he wants more of. <em>That</em> will also amplify things.</blockquote>


And why, no matter how well intentioned, the "stimulus" plan will make matters worse.
 
[quote author="awgee" date=1234342525]<a href="http://anonymousmonetarist.blogspot.com/2009/02/its-d-thang.html">This one is for you, Green Cactus</a></blockquote>
Great article Awgee, what it sounds like we need to do is re-structure debt instead of try to boost consumer spending. I guess when it's all said and done there will be a de-valuation of the US dollar till then the musical chairs game keeps going.
 
I'm thinking of purchasing a condo sometime before the end of 2009 and was looking into the details of the new tax credit. According to this faq (http://www.federalhousingtaxcredit.com/2009/faq.php) at the bottom it says you can actually claim the credit on your 08 tax return!



My issue is... I would receive a larger credit in 08 since I anticipate making more in 09 (I'm within the "phase-out" segment of eligibility.) So could I claim the credit on my 08 tax return prior to purchasing a condo with the intention of purchasing before the end of 2009?



Thanks.
 
For those keeping score at home:



Jobs created or saved by Obama's stimulus bill: <a href="http://www.politico.com/news/stories/0209/18951.html">California 31k, Colorado 396k</a>



No wonder he signed it in Denver.



Anyone want to calculate the amount Californians will pay in taxes per job created or "saved" by the stimulus plan?
 
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