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#18 Cedars

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Posted 25 January 2008 - 06:28 PM

Actually, the problem is really one of loans, more then credit cards. The government passed some laws that allowed for "creative loans" and more lax loan restrictions. The reasoning was that it would create more home owners, and home ownership=economic stability. These "creative loans" were partially responsible for the housing boom through the early 2000s.

Banks gave out these subprime loans under the theory that (since the housing market was booming) if they were forced to foreclose on a home loan, even while they lost the loan money, they could sell the home at profit (again, due to the housing market boom). In a sense, these subprime loans allowed banks to speculate on the housing market.

Normally, banks would never speculate on something so risky, but to encourage these type of home-ownership loans, the government put in a safety net. The banks could fund loans through fanny-mae and other (essentially government funded) lending houses. So, with controlled risks, banks speculated with these loans. The housing bubble burst, and the banks started really hurting.
-Will


Yeah, its all credit that turns into red-ink when it flows to easily.

#19 InfiniteNow

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Posted 25 January 2008 - 11:39 PM

Why? Are ALL our leaders (bipartisan Congress included) lost?

That was not my intent. Basically, how the world perceives those in control of the money directly impacts what they do with their own money, and whether or not they will let you hold it. If they don't have confidence in you, they will put their money elsewhere.



My brother would gasp at that. If people put their money into banking accounts and it is the banks that are hurting most right now, then how will that not help?


The bigger point was people paying off bills. If bills get paid off, then the financial industry loses funds generated from interest. If they lose funds generated from interest, then they have even less money than they do already.

The economy is like an enormous ecosystem. Right now, the base of the food chain is dying, and it's causing domino/ripple effects elsewhere. Sub-prime debtors are not paying mortages, banks are not receiving payments and hence cannot make their own payments to other banks, and people are puckering the proverbial bungholes of their savings and wallets in anticipation of a huge drop in the value of the dollar.

That is why the government feels a stimulus package will help. They sense it will "unpucker" those bungholes and allow more spending. What they're missing is:

1) Only a small fraction of the funds will ever be spent on goods and services, as most would use it to pay bills or save for later,

2) It is a treatment of the symptoms, not the cause. It's like using a bandaid on the chest to treat a punctured lung,

3) The US economy has been negatively impacting world markets for several months, and seeing the US spend EVEN MORE money is not quite a confidence builder for those who are currently capable of investing in the US.


It's a giant ecosystem, and this stimulus package is akin to using creationism to decide how to manage our dollars instead of the tenets of natural selection. :)

#20 CraigD

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Posted 26 January 2008 - 02:37 AM

Until I’m able to read AMERICAN JOBS CREATION AND ECONOMIC STIMULUS ACT OF 2008 (HR 5101) (its thomas publication has not yet been published), it’s difficult to comment on the bill. However, based on many public statement made by people who have read it, I think we can address fundamental principles, and make some reasonable guesses about the bill.

Like the 2001 Economic Stimulus bill, this one is said to be based on the idea that the US economy is suffering from a lack of cash “liquidity”. In short, too many people and businesses are unable to purchase goods and services because they have no cash, and are unable or unwilling to borrow cash. The bill aims to allow these people and businesses to again, for a short time, be able to purchase goods and services. It is assumed that manufacturing and services currently have excess capacity, so will be able to sell these additional goods and services at about the same cost to themselves as if they were not selling them. In short, factories, restaurants, etc. are paying salaries to people who are standing idle for lack of business.

For such a plan to work, it must give money to people who will spend it quickly, and who would not if not given the money – in short, to the poor. They must spend it on US, not import, goods and services.

The bill’s primarily Democratic authors are said to have intended the bill to be limited to low income people, and welfare recipients, but due to pressure from Republicans who feel that this in unfair on ideological grounds, the bill has been expanded to provide rebates for individuals earning up to $65,000/year, or families earning up to $130,000/year, and exclude people who paid no income tax in 2007. About 1/3 of the $180 billion bill is not a cash gift, but a one-time tax reduction for businesses, the idea being that businesses will take advantage of this reduction by buying more goods and services.

Assuming, as seems likely, that the bill passes the Senate, how well it will work will, I think, be difficult to predict, even with its final text and the detailed text of enacting regulations to review. The similar but smaller 2001 bill had, in the opinions of most objective analysts, limited effectiveness, in large part because about 1/3 of it was not spent, but saved, while the largest single category of goods or services on which it was spent was clothing, which is predominantly imported, and thus benefited mostly non-US economies.

On a cynical note, I believe that politicians of all parties feel that publicly supporting the bill is politically necessary, because many US voters simply favor leaders who they believe will give them money gifts. Compared to the complicated work of trying to determine the policies favored by various leaders and the impact of these policies, a voting strategy of “I will vote for whoever gives me the most money” is far from the least rational I’ve heard.

#21 Michaelangelica

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Posted 26 January 2008 - 05:05 AM

I haven't listened to it yet but it might thow some light on the issue
Commentary

Tax 'Rebate' Is Borrowed Money in Disguise

Listen Now [3 min 22 sec] add to playlist


All Things Considered, January 25, 2008 · Commentator Marc Acito says the proper response when receiving a gift is to simply say "thank you," whether or not you wanted it. But, he says, it's hard to be grateful for this latest gift from our government. Acito says this "rebate" isn't a gift at all. It's borrowed money, and it's time we started paying it back.

NPR: Tax 'Rebate' Is Borrowed Money in Disguise

#22 Racoon

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Posted 26 January 2008 - 06:56 PM

I haven't listened to it yet but it might thow some light on the issue
Commentary

NPR: Tax 'Rebate' Is Borrowed Money in Disguise


No offense micheal, but you seem to relish in the problems America is facing.

Perhaps I can't blame you. But maybe you ought to consider those in Australia as linked to the United States in one fashion or another.. Whether they be a common English language or familiar political ties...
We beat the Germans in WWII. We forged a great world now ripe with scientific understanding.

If we could sandbag many of the politicians who support all this non-sense going on, then we can agree everyone would be better off....

What would you suggest be the best for all parties concerned?
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#23 DFINITLYDISTRUBD

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Posted 26 January 2008 - 07:07 PM

No offense micheal, but you seem to relish in the problems America is facing.

Perhaps I can't blame you. But maybe you ought to consider those in Australia as linked to the United States in one fashion or another.. Whether they be a common English language or familiar political ties...
We beat the Germans in WWII. We forged a great world now ripe with scientific understanding.

If we could sandbag many of the politicians who support all this non-sense going on, then we can agree everyone would be better off....

What would you suggest be the best for all parties concerned?

He has the right he didn't make this mess nor is he really involved in any way other than as a spectator and concerned global neighbor.

We put these idiots into office....We fail to assemble in protest against their actions...We fail to put in the effort to petition against their actions...In short we made this mess...And We've done nothing to rectify it other than sit on our collective @sses and birch about it! <Why is America a mess refer to the list you've just read.-----------

We have the power to fix and prevent messes like the one we're in.
but we seem to lack the initiative.
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#24 freeztar

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Posted 26 January 2008 - 07:53 PM

We have the power to fix and prevent messes like the one we're in.
but we seem to lack the initiative.


Well, the mess we're in (as relevant to this thread topic) is not a direct result of the government. Hence it's not a matter of "our" initiative to change gov't.

The economy here, and abroad, is feeling the crunch from the sub-prime mortgage disaster. Something has to be done to avert total disaster. Have we made the right choices?

The fiscal plan is supported by both Congress and the President. They have been simply debating details of the plan. I find it strange that no other alternatives were presented, to my knowledge. It's very possible that I missed any news related to alternatives, so if anyone knows of any news related to the economic talks that led up to the initiative, that might shed some light on the subject.

Otherwise, without delving into economic modeling (which is not something I'm particularly inclined to do), I must rely on analysis provided by respectable Economists. Unfortunately, I've seen a variety of professional opines on the internets. :doh:

#25 Turtle

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Posted 26 January 2008 - 08:04 PM

Well, the mess we're in (as relevant to this thread topic) is not a direct result of the government. Hence it's not a matter of "our" initiative to change gov't. ...


Unless we consider the trillions spent in Iraq rooting out those weapons of mass destruction:eek_big:. I agree with Mr. Disturbd:

We have the power to fix and prevent messes like the one we're in, but we seem to lack the initiative.


This little rebate scam is just what the Doctor ordered to mollify the masses. Can't be no problem, I bought a new I-pod with my rebate on the way to McDonalds to buy a Happy Meal®! :doh:

The price of Freedom is constant vigilance. T.J.

#26 Racoon

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Posted 26 January 2008 - 08:10 PM

We put these idiots into office....We fail to assemble in protest against their actions...We fail to put in the effort to petition against their actions....



When you say We, do you mean the Majority of Vote who elected Al Gore?
Or by 'We' as in 'We' accepted the lawyers desicions?.. the same lawyers who accepted Enron and Worldcom decisions..

By 'WE', do you mean those who believe Ohio in 2004 was fixed and voted for Kerry?

Maybe all the politicians are crooked.

We should accept some of the blame. But we should also be pissed off that we let all our forefathers sacrifice themselves so a few corrupt a*holes could manipulate the system!.

#27 DFINITLYDISTRUBD

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Posted 26 January 2008 - 08:16 PM

When you say We, do you mean the Majority of Vote who elected Al Gore?
Or by 'We' as in 'We' accepted the lawyers desicions?.. the same lawyers who accepted Enron and Worldcom decisions..

By 'WE', do you mean those who believe Ohio in 2004 was fixed and voted for Kerry?

Maybe all the politicians are crooked.

We should accept some of the blame. But we should also be pissed off that we let all our forefathers sacrifice themselves so a few corrupt a*holes could manipulate the system!.

"WE" as in all of the above what have WE done to rectify any of it? And yes we should be pissed off that this type of $#!+ goes on in the first place! Not only pissed off but motivated and determined not to let them get away with it!


Wow!!!!!! Turtle lost the turtle!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!:doh: wusupwitdat?!?!?!?!?!??!?!?!?!?

#28 DFINITLYDISTRUBD

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Posted 26 January 2008 - 08:23 PM

The price of Freedom is constant vigilance. T.J.

So true....I like it!....who the heck is T.J.?

#29 Turtle

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Posted 26 January 2008 - 08:45 PM

So true....I like it!....who the heck is T.J.?


Thomas Jefferson ...............:eek2:

#30 C1ay

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Posted 26 January 2008 - 09:39 PM

His argument was that gov't should not be giving money to people who do not pay income tax. If we do that, the economy will not grow as much.



Consider the fact that the government makes no profits to disseminate. The only money it can give away to anyone is money it took from the people in the first place. If it is giving money to people that don't pay income tax to begin with then it is taking money away from people that do in order to afford this. In the middle you have people that will get back $600 of the money they paid in. At the low end people will get back $600 dollars of someone else's money. In actuality, since there are far more low income people than high income you will effectively be paying multiple low income people for each higher income person. Paying people back money they never paid in the first place is nothing less than a redistribution of the money earned by the very people that employ these lower income people in the first place. I don't personally consider that an economic stimulus.

Imagine that you just simply raised everyone's wages. This would cost those that provide jobs more money for the products they produce. To maintain profit margins these job providers will have to raise the prices of their products defeating the increasing buying power people would get from higher wages. This is why minimum wage laws don't do anything for the economy. Double the wages at McDonalds and you double the price of a Big Mac at the same time. In the end the McDonalds worker can't afford any more Big Macs than they could before their raise.

#31 DFINITLYDISTRUBD

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Posted 26 January 2008 - 09:57 PM

Consider the fact that the government makes no profits to disseminate. The only money it can give away to anyone is money it took from the people in the first place. If it is giving money to people that don't pay income tax to begin with then it is taking money away from people that do in order to afford this. In the middle you have people that will get back $600 of the money they paid in. At the low end people will get back $600 dollars of someone else's money. In actuality, since there are far more low income people than high income you will effectively be paying multiple low income people for each higher income person. Paying people back money they never paid in the first place is nothing less than a redistribution of the money earned by the very people that employ these lower income people in the first place. I don't personally consider that an economic stimulus.

Imagine that you just simply raised everyone's wages. This would cost those that provide jobs more money for the products they produce. To maintain profit margins these job providers will have to raise the prices of their products defeating the increasing buying power people would get from higher wages. This is why minimum wage laws don't do anything for the economy. Double the wages at McDonalds and you double the price of a Big Mac at the same time. In the end the McDonalds worker can't afford any more Big Macs than they could before their raise.


Ain't it amazin how GREAT minds think alike!:eek2:

It's simple math raise the you lowest wage you increase the cost of goods and services...hike the price of fuel...the cost of everything else rises correspondingly...Why? (Somebodies bound to ask) Farmers need fuel to power their equipment to grow food...The cost of food goes up...truckers and railroads need fuel to deliver it...the cost increases further...everybody needs to eat so minimum wage is adjusted to compensate...the cost of everything
else follows suit...now what rarley follows suit are the wages of those above minimum wage therefore they lose spending power...focus less on nonesentials...spend less...causing recession and if things proceed further depression.
-D.d.-



#32 Michaelangelica

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Posted 26 January 2008 - 10:45 PM

No offense micheal, but you seem to relish in the problems America is facing.

I was invited to come to this thread.
I am offended.
No I don't "relish" them. That is so far from the truth. I am upset that I have given you that opinion. They worry and/or sadden me. GB used to anger me now I just feel sad about it.

I am only one Aussie voice. You could easily find 50% of the Oz population disagrees with me.

I am quite happy not to say anything on any USA thread, not involving Australia, if you prefer.

What you seem NOT to realise is that Australia and the USA are joined at the hip.
You create terrorists- they kill your people and ours.
You go to war- Korea, Vietnam, Iraq, Afghanistan - we come too.
(BTW do you help out with our many "peacekeeping" missions in the Pacific such as Timor ? If we went into Papua to stop the genocide would you come too?-no; you sell us planes that haven't flown yet)

You sell subsidised beef or corn to the Japanese -our farmers can't compete.

You go into recession, stop buying from us and/or from China, China stops buying our minerals, gas and coal. So we have a recession too.

I have said a couple of times in recent posts "America sneezes and the world catches a cold" What I meant by that is we need USA to to be a healthy, robust democracy -economically and politically; otherwise we (Australia) are in trouble too.

A lot of our companies are US owned and vice versa eg Fox (How come Murdock had to become a USA citizen? How did he get a green card?)

Apart from all that, anyone interested in world affairs and economics (I topped my school in economics but never followed it up) these days, needs to be interested in what the world's biggest economy and mightiest military power is up to. (California, alone, is the world's sixth biggest economy!) I am even trying to follow your convoluted, painfully long, voting system.
Apart from the societal influence you have via research, money, culture and Hollywood.

Because of the sub-prime crisis our banks put up interest rates on their own last week with no increase in rates from the Reserve (read 'Federal') Bank. The Reserve has put up rates 6 times in a row now. That is hurting a lot of working people who have large ($500,000-or so average) mortgages and farmers with overdrafts (most of them after years of drought). We are a nation of house owners (Our biggest industry?).

Unfortunately the Australian Reserve Bank is completely independent of Government -unlike your Fed. All the Reserve Bank cares about is keeping inflation low. They (arguably-mistakenly) think they can reduce inflation by putting interest rates up.

The only reason I became interested in Guantanamo Bay was you banged up a couple of our citizens without charge. One for five years. When he pleaded guilty to get out of the place you gave him a six month sentence! What would you be saying to me if we had banged up an American citizen, without charge or trial for five years? Having become interested in GB I now realise the whole concept is wrong, illegal, corrupt and demeaning and destructive of your -and our -democratic principles. (See GB thread for more)

Perhaps I can't blame you. But maybe you ought to consider those in Australia as linked to the United States in one fashion or another.. Whether they be a common English language or familiar political ties...
We beat the Germans in WWII. We forged a great world now ripe with scientific understanding.

So again do we have "We saved the world for democracy and the ingrates don't thank us"- or is it " continually Kow Tow to us." (If you want Kow Tow-ing go to your so called "friends" like Saudi Arabia, Columbia, Pakistan or Israel)
Friends like us even let you screw us with "Free Trade Agreements", lousy, expensive, military hardware and undercutting us in world markets and insisting we follow your crazy "War on Drugs" policy.
But, we still love you although a little less slavishly these days.
Most older Australians believe (incorrectly) that you saved our bacon in WW2 at the battle of the Coral Sea.
Then we couldn't get our troops out of Europe and Africa because Churchill didn't give a stuff about the Japanese invading Australia -But lets save that all for a history thread

Most yong Australians are more 'Yankee-fied' than you. they have a continual diet of USA computer games,fast food, videos, comics, and rock culture. They even dress like you and take the same drugs. They sing with a bloody American accent!:eek2:
(BTW Australia had virtually no drug problem until your Vietnam soldiers started coming here for R&R)

If we could sandbag many of the politicians who support all this non-sense going on, then we can agree everyone would be better off....

What would you suggest be the best for all parties concerned?

Because of the "War on terror" we have lost a lot of our personal freedoms too. We have just got rid of our "little bush", but I worry that once a government has a power they are always reluctant to give it back. Certainly the new Rudd Government has been in no hurry to give any "freedoms" back.
A political story
A have an academic friend ( a professor) most of whose friends are Republican or we call them "Liberals" (sic-mostly). He came here as a refugee when the USSR invaded Hungry in '56. His father was a General. His dad worked as a labourer here but got his kids a "good education."
My friend takes an interest in politics and current affairs but is not really a political beast ( I am -a bit- as you may have noticed:))
I was stunned to find that he gave out "how to, votes" for the Labor party on election day. (He was in the PMs electorate ) You can imagine he is VERY anti-communist as you can imagine and the Labor Party is mildly pink ( not so you would notice any more)
Why? because he knows how precious freedom and democracy is and could see it slipping away from us (Also he was pi**ed about the paltry education budgets for 10 years). This reaction was a common one among my friends but not at all reported in the press.
At the "Victory' Party" that night he had to sit though all the other people in the room saying "How terrible!" and "Labor's winning, we'll all be doomed" while inside he was jumping for joy!

As for tax cuts that IS the topic is it not?, You (USA) need(s) to give money to the poorest to make sure they will work. I have made my suggestion- double food stamps- also you desperately need a uniform national unemployment social security system. If you had one you could just increase benefits. This would quickly get you out of the hole your poor-government-regulation of the banking industry has dug for you.
Don't go all "undeserving, lazy poor on me" It doesn't matter how undeserving they are. All you want is for them to spend money fast-forget the moral issues.
The present cuts, I agree with the NYT writer-they will not work quickly or effectively enough for any of us.
Then again the Saudis and others buying up the USA cheap might just do the trick.
I just pray that China keeps Australia going with her, now large, domestic demand.

#33 Freddy

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Posted 27 January 2008 - 02:23 PM

I think those who have pointed out that tax rebates will not stimulate the economy are correct. Most will pay bills as those polled have said as much. This bill is not law as the Senate will likely add changes to it. Some want extended unemployment benefits.

I think that creating new jobs and lowering unemployment could lead to increased consumer spending that will help to stimulate the US consumer driven economy.

I think raising the national debt, $9 trillion and rising, is not a good idea, but maybe the lesser of two evils.

I think lowering the Fed's discount and funds rates will help but not for 6 months or longer.

I think the only way out of the sub-prime disaster is to require lenders to renegotiate loans so that foreclosures decrease to a more manageable figure.

I live in a small six unit condominium complex. Three of the owners have sub-prime loans. One owner has already stopped paying condo dues. This is a problem that has spread across the US. Financial institutions used to be the gate keepers and did not allow high risk loans which protected condominiums from excessive foreclosures that could hurt the financial stability of condo associations. Not so today, where people who had no business financing and getting zero down payment, sub-prime loans put others in jeopardy. There are people who did not contribute to this mess who are being hurt by it.

#34 freeztar

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Posted 31 January 2008 - 04:14 PM

Good points Freddy.

Has anyone seen the new version of the bill?
It looks a lot better imo.

It also goes further than the House package in efforts to bar illegal immigrants from receiving rebates. Under the Senate measure, recipients and their spouses and children would have to have valid Social Security numbers to qualify. The House bill omits that requirement, although it expressly disqualifies nonresident aliens.

The Senate plan would restore a business tax break dropped during the House negotiations that would permit corporations suffering losses now to reclaim taxes previously paid.

Both packages include roughly $50 billion worth of tax incentives for businesses to invest in new plants and equipment. Baucus' measure also adds $5.5 billion in renewable energy tax incentives.

The Associated Press: House, Senate at Odds on Stimulus