HOUSING BUBBLE & BANKRUPTCY BILL

[unlawflcombatnt]

BANKRUPTCY BILL, HOUSING BUBBLE & THE ECONOMY

The new bankruptcy bill will hurt the economy in several different ways. Not only will it reduce consumer spending by reducing credit card expenditures, but it may burst the housing bubble as well.

The new bankruptcy bill will make consumers less willing to spend money and less willing to use their credit cards to make large purchases. Those who would have otherwise been able to declare bankruptcy, will have to spend more of their money paying off their debts. They'll have less money to spend on consumer goods, especially homes.

Consumer spending and demand in this country are approximately 80-85% from income, and 15-20% from borrowed money. Inflation-adjusted hourly wages have decreased over the last year. They've decreased 0.5% over the last 2 months, and 1% from April 2004 to April 2005. With consumer income decreasing, the reduced ability of consumers to borrow is going to have a much greater effect. Consumers are going to have MUCH less spendable money.

Less spendable money, and higher mortgage rates, may also burst the housing bubble. The super rich, who buy 30% of the homes sold in this country as investment, are not going to keep buying. They won't be able to profiteer by selling them at their current overvalued prices. Less people will be able to afford them. The market supply of homes will skyrocket from sellers trying to dump their homes before prices bottom out. When this happens, the Greenspan-created housing bubble will burst. And the real estate speculators are going to wish they'd invested in solid gold, instead of the hot air in the housing bubble balloon.

Bush's bankruptcy bill slant, is just like his tax-cut slant. Preserve the wealth of the most affluent, at the expense of the less affluent. The alleged theory behind such high-end giveaways, is to increase capital and investment. Even if that WERE the real reason for this slant, it is illogical with our current economy. The markets are "glutted with capital" according to the Wall Street Journal. There is an abundance of investment capital. There is NOT an abundance of investment OPPORTUNITIES.

Why aren't there more investment opportunities? Because there is NOT an "abundance" of spendable consumer dollars. Investment opportunities are the result of consumer DEMAND for products. That demand is created by consumer spending. Aggregate spendable consumer dollars limit aggregate consumer spending. As such, aggregate spendable consumer dollars limit investment opportunities. In order to increase investment opportunities, and the utility of investment capital, spendable consumer dollars need to increase. With declining incomes, this had been maintained by credit card spending and borrowing. The new bankruptcy legislation will reduce the addition to consumer spending that comes from credit cards and borrowing. Combined with rising interest rates, this contribution will be further reduced.

The new bankruptcy legislation will amount to a further maldistribution of wealth. Many people clearly see this. At least some people understand that the "means-of-consumption' and the "means-of-production" must be balanced. (Unfortunately, none of them work for the Bush Administration.) Business profits are NOT made by producing goods. They're made by SELLING goods. Someone needs to buy the goods, for any profit to be made. Reducing spendable consumer dollars reduces this ability. No amount of investment capital changes this increases that ability. At the current time, economic growth will NOT occur by increasing available investment capital. It would occur from the investment of that capital in productive investment opportunities. Again, those investment opportunities are scarce. Those investment opportunities are created by consumer spending, and the demand it creates. Thus, consumer demand needs to receive more emphasis. Consumer demand is what limits our economic growth at present. Unfortunately, acknowledgment of this reality does not fit into Bush's "No-Corporation-Left-Behind" policies.

Bush policies clearly favor "means-of-production" over "means of consumption." The bankruptcy bill unbalances this even further. In so doing, it further reduces the utility of investment capital, further increasing the investment capital excess over investment opportunities. We can't "grow" our economy this way. Building new production facilities with this capital has NO benefit whatsoever. Our current industrial capacity is underutilized. Current utilization rate is 79%. It was 85% at the end of Clinton's presidency. Further "growth" will only occur with increased utilization. Increased consumer demand increases that utilization. It will increase the demand for production by those facilities. Increased demand for production also increases demand for workers to create that production. Increased labor demand increases both the numbers of those working, and the wages of those already working. (increased demand ALWAYS increases price. In this case, that price is American wages.)

We don't need to assist the rich, and increase their investment capital. We need to help consumers, and increase their purchasing power. This would create more investment OPPORTUNITIES. This helps business, as well as consumers. Some might describe these wealth-redistribution ideas as "share-the-wealth" concepts. But I call them "increase-the-wealth" concepts. I think many would agree.

unlawflcombatnt

EconomicPopulistCommentary

http://www.unlawflcombatnt.blogspot.com/
_____________________
Investment does NOT create jobs. It only "allows" for their creation. Increased Demand for goods creates jobs, because it necessitates hiring of workers to produce more goods. Investment "permits" job growth. Demand necessitates it.

Building a factory does NOT create jobs. Demand for production DOES create jobs. Goods are not produced if there is no demand for them. Without demand for goods, there is no demand for workers to produce them. Without demand, no amount of investment creates jobs.

[PsycheCC]

1. WOW! Great post on the REAL motivation behind the Bankruptcy Bill.

Thanks for this interesting look at how the Bankruptcy Legislation fits into the overall Bush agenda to further the redistribution of wealth to the already wealthy!

I also looked over your blog. As one whose higher education runs more to Shakespeare than Krugman, it is refreshing to be able to understand discussion of economics. Thanks!

[OKthatsIT]

126. snip

[Ready2Snap]

140. A great article

on the coming economic disaster is in the July/August 2005 Atlantic Monthly--
"Countdown to a Meltdown" by James Fallows
(the same guy who wrote "Blind into Baghdad" detailing how Bushco blew it in Iraq.)
It's a pretty easy read, but mind blowing in it's scope.

[unlawflcombatnt]

141. Is there a link to that article?

Thanks for the posting. Is there any chance of getting a link to that?

[Ready2Snap]

142. Here ya go

http://www.theatlantic.com/doc/prem/200507/fallows

[unlawflcombatnt]

143. Thanks for the link

I appreciate the link, but I'm not going to be able to read it since it appears to be a pay site.

[Jacobin]

2. Another 'nice' thing about the new Bankruptcy Act

If you owe in excess of approximately $1.3 million (you are relatively wealthy), you can still file a Chapter 7 and won't have to pay all of your 'disposable income' to a trustee in a Chapter 13 for five years.

If you owe less than that amount, and make more than the state's mean income, you will have to give a Chapter 13 trustee all of your income above a subsistence level for five years.

Convenient for the wealthy, no?

[PsycheCC]

3. Where is Robin Hood When we Need Him??? :cry:

Jocobin, you said: "If you owe in excess of approximately $1.3 million (you are relatively wealthy), you can still file a Chapter 7 and won't have to pay all of your 'disposable income' to a trustee in a Chapter 13 for five years.

If you owe less than that amount, and make more than the state's mean income, you will have to give a Chapter 13 trustee all of your income above a subsistence level for five years.

Convenient for the wealthy, no?"

Everyday I feel a little more beaten-up by the Bush Admin.'s malevolence toward average Americans. Just when I think I'm numb to it all, someone gives me another glimpse of the dark underbelly of the good "Christian," election stealers running the White House, Congress, and packing the Courts! No offense to REAL Christians; I am one, and I'm bothered by politicians who seem to me positively EVIL, calling themselves Christians.

Clearly, this Bankruptcy Legislation was written by the credit card companies in anticipation of a spike in the number of middle class Americans driven into poverty by Bush's "ownership" society. That's where the rich own the poor, isn't it? And while we're at it, let's privatize Social Security so the new poor will have NO GUARANTEED SAFETY NET in the their old age. But hey, Wall Street will love us.

Lastly Jacobin, PLEASE say it ain't so! Antonin Scalia really said it's fine to execute someone on death row even if the facts show the person to be innocent? And this is because the verdict was properly arrived at, even if incorrect? Given all the people on death row recently proven innocent by DNA evidence, I am amazed that even Scalia would support such injustice! Am I missing something here?

Thanks for pointing out these sad truths Jacobin. We need to know them; perhaps they will motivate us to find a way to keep them from stealing yet another election.

PsycheCC

[unlawflcombatnt]

7. Well Put

PsycheCC,

You're right on the money. Makes you wonder what the next "reverse Robin Hood" move will be. A flat tax? A national sales tax? The return of poll taxes. Maybe we shouldn't even tax income over $90,000, like we do with the payroll tax. When it comes to ways to make the rich richer, the Bush plutocracy is at no loss for new ideas.

unlawflcombatnt

EconomicPopulistCommentary
http://www.unlawflcombatnt.blogspot.com/
_________________________
As Corporate America reduces labor costs, it reduces America's ability to purchase its own production.

[Jacobin]

19. Hi Psyche and welcome to DU

:hi:

I'm a bankruptcy attorney and so I see people day in and day out (1.6 million filings per year nationally) who are in desperate financial trouble. More than half of the people I see have a significant medical expense component to their debt load which pushes them over the edge. The other biggie is divorce: i.e. young couple, two kids, both working, can make house and car notes and pay credit card minimums and BOOM, they get a divorce, husband has to pay almost everything he makes to wife, he can't/won't pay, now two houses, two unitility bills (you get the picture) and it all tilts. Kaboom, they go bankrupt and under current law they get a fresh start.

Under the new law, if they are middle class with middle class debts (or a small business owner with a several hundred thousand dollar business loan) and things go haywire, for any number of reasons, they are chained to live on a subsistence income level that is not realistic and pay the remainder of their income to a trustee for FIVE YEARS.

In other words, it won't work. People will go 'off the books' start lawn mowing services for cash and the like, not pay taxes, rent a place to live, not open a bank account that can be garnished, and otherwise live 'underground'

GREAT for the economy, doncha know?

Anyway, on that other thing. Scalia envisions the court system as something that should be 'as from heaven' immutable, unchangeable and MOST IMPORTANTLY INFALLIBLE. Soooo, as long as all the 'procedures' have been followed in a capital case, and all the little appeals are done saying all the little procedures were done correctly, then he doesn't give a damn if someone is innocent or not. FRY THEM to keep the 'infallibility' of the court dream alive.

He is truly completely and utterly insane.

Anyway, like your post and look forward to more.

[PsycheCC]

30. You must see a lot of suffering.

Hi Jacobin, thanks for the welcome! :hi:

Interesting thing about Republicans. They always seem to be trotting out some poor soul whom they've helped into a better life, yet they also always seem to hurt the poor and middle class with their legislation.

I picture them having dinner with the credit card companies (also known as bankruptcy bill writers), and saying "Now, we're going to need to deploy our standard diversionary tactics when the Democrats start screaming about the injustices of this legislation. Where can we find some poor soul to 'help'?"

Thank you, Jacobin, for REALLY helping the people who are suffering under this administration's policies.

[wli]

56. under the table

This is already the case as things stand. Not everyone can afford a bankruptcy attorney, and there are already some serious obstacles to personal bankruptcy.

My take on this is that it's intended to drive large numbers of such debtors into such "under the table" arrangements in order to herd even more poor people into prison on the grounds of tax and/or garnishment evasion (the "newly poor" as it were).

This will, of course, manipulate unemployment figures, disenfranchise hordes of left-leaning minority voters with felony convictions, and vastly enrich the sadistic prison industry.

[PsycheCC]

65. Wow, hadn't thought of this, but I wouldn't put it past them.

Wli said, "This will, of course, manipulate unemployment figures, disenfranchise hordes of left-leaning minority voters with felony convictions, and vastly enrich the sadistic prison industry."

They've already shown GREAT INTEREST in manipulating unemployment figures, chiefly by revising the labor force participation rate each month to keep the unemployment rate where they want it.

Obviously they want to disenfranchise voters, so creating a whole lot of new "criminals" among the new poor seems a likely desire. (Once again, I'm thinking of France before their revolution. "Create" enough poor, and eventually they will do what they must to survive.)

As far as the "prison industry" goes, I plead ignorance. Has this been privatized to a large degree? I'm afraid I thought prisons were still run for the most part by the government.

Interesting thoughts, and based on the lies and manipulation we've seen to date from Bush and company, you may be right. Never hurts to ponder the possibilities.

[MountainLaurel]

91. Prison industry

The poster may have been talking about a couple different things.

#1 Yes, many prisons are now operated by private corporations, the central one being CCA (Corrections Corporation of America, or something like that). Some have been involved in litigation for abuse against prisoners, not following the law in terms of required medical treatment, etc.

#2 In some areas, the economy has been so bad for so long -- this is especially true of areas where factories, mines, etc., have closed, leaving no job opportunities for a 54-year-old with a high school education -- that communities are competing to have a prison built in their area because it might provide 30 full-time jobs as correctional officers.

#3 Perhaps the poster is talking about actual industries that use prisoners as workers, paying them perhaps 35 cents an hour, and allowing the operators of those companies to underbid regular companies quite easily. Among the jobs you'll find prison workers doing: manufacturing clothing, furniture, or any other good and customer service call centers (e.g., taking phone orders for a catalog company). These programs started out legitimately enough -- as a conduit for teaching prisoners a useful skill so they can find employment after release -- but corporate interests have basically transformed them into a money-making venture that causes a great deal of harm.

[PsycheCC]

152. So, in effect, some businesses use prisoners as the same kind

of "slave labor" that they find in foreign countries? They get the benefits of outsourcing without the problems?

[unlawflcombatnt]

5. Protecting the Wealthy

It sounds like if you want to go bankrupt, you want to make sure it's for a really large amount. That sounds like the ultimate effect here. It sounds like the law will not penalize large and reckless investments, but it will discourage consumers from spending, using their credit cards. Just what we need. Less consumer spending, and more investment capital. More overinvestment in Wall Street and overcapitalized industries, and less consumer spending to make that investment profitable. It sounds like this bill's sponsors are concerned only with the short-term welfare of the super-rich, at the expense of the long-term well being of our economy.

[Jacobin]

69. It will also discourage small entrepreneurs

Because they will be screwed if their small business goes under.

[PsycheCC]

70. And didn't I hear that one reason we have had more innovation

in business than, say Europe, is simply because people had the protection of bankruptcy?

I think this picture is really going to get ugly a few months or maybe years down the road when the housing bubble bursts and people can't make their house payments because they had such "creative financing."

I don't like the idea of abusing the option to bankrupt, but this legislation strikes me as a very large fist squeezing blood from a turnip.

Thanks again for the welcome Jacobin. :hi:

[theoldgeezer]

115. Been there.

You're screwed if your business fails, whether you declare bankruptcy or not.

[PsycheCC]

132. Welcome Geezer!

Sounds like there might be a good story here. Do you have insight into business you'd like to share? I'm interested, unless it's too personal.

Welcome to DU! :hi:

[Deja Q]

90. By, of, and for the wealthy.

Society as the people must surely want it.

[Vinca]

4. I heard on some news broadcast today that consumer spending

is way down and people are generally making do with what they've got and scrimping. Maybe enough people have figured out who the bankruptcy bill benefits and it will impact the bucks flowing to the credit card companies. Do I smell new legislation in the air? Maybe not yet, but when the cash flow stops the Republicans come alive.

[unlawflcombatnt]

6. Retail Sales Decreased 0.5% in May

On June 14th, the Economic Calendars' stated that retail sales DECREASED 0.5% in May. That definitely indicates reduced consumer spending. I think it also indicates we're circling the drain.

unlawflcombatnt
EconomicPopulistCommentary
http://www.unlawflcombatnt.blogspot.com/
________________________________
Investment does NOT create jobs. It only "allows" for their creation. Only DEMAND for goods creates jobs, because it requires workers to produce goods. Investment may "permit" job growth, but only DEMAND necessitates it.

[ebayfool]

8. Keep 'em coming, unlawflcombatnt. You have a talent for explaining

the economic stuff in a way people like me can 'get'! And even better - helps us to explain to others that aren't aware & haven't the access to the brain power at DU. Thanks, both for the clear info & laying it all out w/out talking down or over our (or at least, mine) heads. It is a talent!

[unlawflcombatnt]

9. Thanks

Thank you for the compliment. :) Laying this out so other people can understand economics is exactly what I hoped to accomplish. If enough people understand economics, it will "change the course" of our economic policy. Voters will stop voting for legislators whose policies make no sense, or who are concerned only with the welfare of the rich.

unlawflcombatnt

EconomicPopulistCommentary
http://www.unlawflcombatnt.blogspot.com/
_________________________
As Corporate America reduces labor costs, it reduces America's ability to purchase its own production.

[DuaneBidoux]

11. Excessive investment in capital is also why jobs aren't being created

We now have a de facto tax on labor (ss taxes (but just of course on the segment, i.e., <$90,000 where all the jobs are created) and horrendous health care costs) and a de facto subsidy on capital in the form of the reduction of dividend taxes and all kinds of breaks for money that makes money instead of working to make money.

We are now likely developing a housing bubble. The very essence of a bubble however is in the unequal distribution of wealth. Fewer and fewer people with more and more cash chasing fewer and fewer valid investment opportunities (because in fact there aren't the consumers there to purchase and drive a return on capital). We've been squeezing capital formed bubbles around from one part of the economy to another part for the last 20 if not more years as the wealthy have become wealthier and the only real question is can we survive another bursting bubble by simply forming another one somewhere else in the economy.

I think this also partially explains the "conundrum" of long rates staying low even as the fed tries to push up short term rates: there simply aren't good investment opportunities. I always remember, former GE CEO Jack Welch (sp?) telling Larry (yuk!) Kudlow "I don't care how many tax breaks you give me, if there's no end market I'm not building a factory!"

[unlawflcombatnt]

13. Excellent!

Duane,

Excellent post. There's little I can add to your statement. I especially agree with you about the uneven distribution of wealth causing this. There is simply too much investment capital in relation to consumer income. Just like you said, creating excess capital just leads to bubbles, and when one bursts, another one forms somewhere else.

Like you, I think the bond rates are staying low because of lack of better investment opportunities. If excess capital continues to be created by corporate giveaways and high end tax cuts, there will continue to be excess capital looking for investment opportunity. Since those opportunities are created by consumer demand for goods, those opportunities are dwindling. As a result, the only place to invest that excess capital is the treasury and bond market. At least some return on that investment is guaranteed. Since so many investors are doing the same thing, it's kept bond rates low.

Since bond investment by banks competes with money loaned out for home mortgages, the interest rates are linked. The banks try to put their money where they get the best returns. Since bond returns are low, due to the increased demand for bonds, the banks favor mortgage loans. As a result, the low interest rates banks receive for their bond investments keep home mortgage rates down. (They get a higher interest rate and return on their investment.) The banks are dis- favoring bonds because of the current low returns. They'd rather make mortgage loans instead, because they get a higher return (the interest rate) on mortgages. However, they have to keep the interest rate low enough to entice borrowers. Since the returns banks receive are lower due to lowered bond interest rates, banks still keep mortgage rates lower. As long as their rate is higher than the bond interest rate, they'd rather make mortgage loans. If they raise their rates too high, they won't be able to loan out all their money. If bond interest rates are 4.0%, then loaning out money for mortgages is more profitable only if the mortgage rate is above 4.0%. However, banks will charge a much higher interest rate if they think they can get it. But they won't charge less than the long-term rate, or the bond rate, because they would make less on their investment. (They wouldn't drop mortgage rates, to say 3.90%, because it is more profitable to buy bonds and receive a 4.0% return on their investment)

unlawflcombatnt

[cascadiance]

10. It will also discourage entrepeneurial investment!

At least for those trying to start small businesses or other people that aren't "well heeled" with investment money that will be less apt to take risks on start up businesses with no bankruptcy protection if they make mistakes.

I've heard it discussed that this was one big reason why the U.S. has had the lead over Europe in getting newer businesses started, since we had bankruptcy protection where they didn't, which allowed more experimentation that gave us winning business formulas. Now, not only do we not have protection for bankruptcy that they don't have, but we *also* don't have universal health care coverage as well, and businesses *here* are expected to offer that to get any kind of decent business started here, whereas in Europe, most places, the government takes on that responsibility, so that is one less expense they have in starting up new ventures that we have.

So businesses (at least the more innovative smaller ones without as much capital) suddenly have gone from being in front of European businesses strategically to being behind them now. All for the sake of rewarding the rich companies in being more stodgy. We're going to be sinking lower!

[unlawflcombatnt]

12. Good Point

You've made a very good point. When people are investing their own money to start up a business, they could lose everything. Without the bankruptcy protection they previously had, they'll be much less likely to take a risk. In contrast, the large corporations will be hindered little by the new legislation. The bill simply favors the largest businesses over small businesses. Just what we need -- more mega-corporations and less small businesses. What a way to encourage free enterprise. Only let the most affluent start businesses.

[fortyfeetunder]

103. Smells like serfdom to me

The end looks like megacorporations running the economy while the serfs, folks like you and me, are at their mercy.

How this can be undone is the loaded question....

[unlawflcombatnt]

123. Rallying the Troops

We can take back this country if we make the effort, and direct that effort in the right direction.

First, we need to make sure that there is a clear paper trail in EVERY election. Even in California, there was a lot of election chicanery. When my wife and I went to vote, all we saw were electronic voting machines. We were mytified because we thought our area used paper ballots.

Fortunately for us, a Democratic voter was outside and told us that we could use paper ballots, but we specifically had to ask for them, and poll workers were forbidden to inform us that we had this option.

This is the kind of stuff that needs to get fixed ASAP. Multiply this California action by 1,000 and you get Ohio.

In theory we can undo this mess by registering more voters and bringing more to the polls, but we have to make sure those votes are counted. If we can assure that, we can undo this.

The economic message of the populist element of the Democratic party would appeal to 98% of voters. But we need to get that message out. And we can't let the right-wingers shout us down.

Whenever a right-winger opposes you with nothing but a meaningless personal attack, point it out to him. Tell him he's just proving he has no other argument.

My arguments are completely consistent with what many economists are saying -- most notably Ravi Batra. I have run many of my posts by several economists, and they've said I was right on the money. So the "You don't know what you're talking about" argument doesn't work anymore. It does imply, however, that the arguer is unable to articulate an argument against what I've said.

That's the attitude we should take when stating our positions. It's the attitude we should take when writing Congress. We need to be heard loud and clear. We are the majority of the electorate. Let's not let an angry, noisy, unenlighted, minority opposition shout us down.

[Warren DeMontague]

158. Was this before, or after the orchestrated smear & take-down of Shelley?

Because he was pretty outspoken on trying to get information on absentee and paper-trail voting out to the voters in the last election.

Which is why my tin-foil hat (and I'm really not an aficianado of them) went on bigtime when he got drummed out of office not too long after his anti-Diebold activities.

Absentee is one way to be sure there's a paper trail. For Ahhh-nold's "Special" election this fall, (which is conveniently scheduled before the 2006 mandate for voter verified paper trails on all CA machines) if you think you might get one of these magic electronic voting machines this time, I would highly recommend going that route.

[unlawflcombatnt]

159. California Elections

ImpeachDubya,

It sounds like you are a fellow Californian. Do you know much of California does not have a paper trail requirement at present?

During the last election in my area I had to specifically ask a poll worker for a paper ballot. Poll workers were not allowed to even tell me that I had the option of using a paper ballot. Before I walked in to the polling location, a person not affiliated with the poll workers told me I'd have to ask for a paper ballot if I wanted one. (The fact I was wearing a Kerry badge might have helped my cause.) She said poll workers were forbidden to volunteer the information that paper ballots were available. If she hadn't caught me outside, I would have walked into the polling station and seen nothing but electronic voting machines, and then assumed I could only vote electronically. However, since she had forwarned me, I requested a paper ballot and received one.

I wonder how many California voters used electronic voting machines, unaware that they had the option of requesting paper ballots. I live in Orange County. Was it like this in your area?

[Warren DeMontague]

160. No, every time I vote it's on those scannable paper ballots

you know, like we used to take standardized tests on, back in the day.

Probably because I live out in the sticks, heh heh.

I do know that Shelley was trying to get information out about absentee voting, as one way around the EV machines. I was not aware of what you said about paper ballots. Interesting.

I also believe that, supposedly, Shelley's mandate that all EV machines produce a paper trail by 2006 still applies. We'll see.

[unlawflcombatnt]

161. Scannable Paper Ballots

I probably voted on a scannable paper ballot as well. But that seemed better than a fully electronic voting machine with no paper. Hopefully we'll get our mandated paper trail before the 2006 elections. There's no telling how many votes were miscounted or lost in the last election by fully electronic voting machines. It probably didn't make much difference, though at least one Congressional race was somewhat close, and was won by the Republican candidate.

[Warren DeMontague]

162. Well, here's the rub...

some machine, somewhere, is going to count all the ballots. Scannable, punchcard, what-have-you. Presumably the security in having an actual paper ballot comes in the fact that they are physically there to be examined again in the case of a recount. With Diebold and other Electronic voting machines, if there's no printed receipt, the vote- and all evidence of it one way or another- is gone. You have to trust the machine and the people in charge of the data that it was recorded accurately and honestly.

[unlawflcombatnt]

165. Ballot Receipts

ImpeachDubya,

Is California supposed to be giving out printed receipts for the 2006 election? You may have answered this already, but I don't remember.

Also, do you have any idea what progress has been made nationwide in this respect? It seems as if nothing yet has been done to prevent another Ohio debacle.

You've pretty much convinced me to use an absentee ballot in the next election. (However, Florida election boards even managed to create a problem with absentee ballots.)

[Warren DeMontague]

168. I'm not entirely sure about California.

As far as I know, by 2006 all EV machines are supposed to be equipped with printers here. That was by Shelley's order but "supposedly" Macpherson or whatever-his-name-is has promised to uphold that. Again, I'm not sure. I believe the mandate still stands, but doesn't apply to the upcoming "special" election.

As for where everything is at, nationally... that's another good question, I was wondering the same thing myself. I stumbled across this site yesterday when trying to find out more- I'd never seen them before, but they certainly sound legit and Kos was linking to them about a month ago, which is a solid enough endorsement for me.

http://www.verifiedvoting.org/

[1932]

14. Joe Stiglitz makes same argument in Globalization and its Discontents

It's interesting how the way the financial interests (the multinational banks) treat developing countries and middle class Americans exactly the same way.

Stiglitz says that the IMF bailouts which are designed to stave off bankruptcy (they give money to private firms which use it to pay back big bank western creditors) actually makes the future more bleak.

Two arguments he makes:

(1) knowing that you're going to get bailed out if you're a creditor makes you do less due dilligence before lending, which means you make riskier, bad loans, which is a very bad allocation of resources and

(2) bankruptcy moves society forwards -- it lets you cut your losses and try again without the huge overhang of debt. However, the IMF always gets paid back on their loans, and they never let their debtors completely off the hook, which means their debtors (the governments) end up taxing their citizans in some cases 25%-50% the value of their exports to pay back loans.

To make it clear what that means, he says that's the equivalent of a 50% on everything you produce. He says that's what sharecroppers pay on their harvests (half to the "bank"). And no sharecropper every got rich with a tax rate like that.

He says that developing countries should have accelarated bankruptcy proceedings -- when a firm is not going to meet its expenses, settle the mattter quickly to prevent asset stripping and to avoid the slow down when nobody is sure who will own the company, and when the company starts again, let it start without the burden of loans that a dilligent lender never should have made.

[unlawflcombatnt]

15. Stiglitz

Thanks for that post. I have Stiglitz's book. I haven't read all of it yet. Could you tell me what pages that part is on?

unlawflcombatnt:)

[1932]

23. I lent my copy to a friend.

But, from memory, the comments on bankruptcy are in the last third of the book and then again, briefly, in the last chapter.

[unlawflcombatnt]

33. Stiglitz's book

Thanks for the tip on the location in Stiglitz's book. I'll have to look for it a little later, however. I just received my copy of "Greenspan's Fraud" by Ravi Batra. It sounds like it'll be very interesting.

[ProudDad]

16. They'll pay for this

Ha ha ha ha Ha ha ha ha Ha ha ha ha Ha ha ha ha Ha ha ha ha Ha ha ha ha Ha ha ha ha Ha ha ha ha Ha ha ha ha Ha ha ha ha Ha ha ha ha Ha ha ha ha Ha ha ha ha Ha ha ha ha Ha ha ha ha Ha ha ha ha Ha ha ha ha Ha ha ha ha Ha ha ha ha Ha ha ha ha Ha ha ha ha Ha ha ha ha Ha ha ha ha Ha ha ha ha Ha ha ha ha Ha ha ha ha Ha ha ha ha Ha ha ha ha Ha ha ha ha Ha ha ha ha

The repukes will pay for this and other deprivations...

Wait'll the "housing bubble" bursts and all of those poor bastards who bought a house for $1,000,000 on an interest only loan get creamed. The bushista's days are numbered and the number is small....

[Nikki Stone 1]

18. The upper middle and middle classes will pay. The rich will get off rich

You gotta understand, the people who are buying these high priced homes on interest-only loans are not the super rich. They are the middle and upper middle classes who are being forced into buying very expensive homes above their means on interest-only loans in order to get a place of any size at all in a "safe" area. When this all comes crashing down, it will be the middle managers, the teachers, the computer analysts who will be left with "upside down" houses, which will then be foreclosed on.

The super rich (the 1% we keep harping about) will be just fine.

And, if capital investment is being stressed by the Bush administation, it is because the corporations are making products for other markets. Like China, like India. Like the EU.

The bankruptcy bill indicates that they are no longer concerned about the US market or the amount people spend here. This bill may spell the end of a comfortable homeowning middle class.

[Jacobin]

21. I have a surprise for you

If their debts are over approximately $1.3 million, they can still get a Chapter 7 discharge and not have to pay back in a Chapter 13.

See how convenient it is when you are rich under a republican government? Even if you go broke, ITS OK!! (Just don't go broke if you are middle class)

[Nikki Stone 1]

32. Lord! But the middle class person in debt under a million dollars

is totally screwed.

[ProudDad]

17. Don't buy from big corporations

I'm not sure anyone remembers but during the 80's, when ronnie ray-gun was "in power", the percentage of job growth attributable to the Fortune 500 corporations was 0%. That's Z-E-R-O percent.

Those assholes aren't in business to create jobs. They just are in the business of generating profits.

You will cause more jobs to be created by buying your food at a local market, your car used from a local merchant, your household goods from your locally owned stores or thrift shops that forking over your hard-earned money to Safeway, Wal-Mart or GM!!

Starve the beast that created bush folks!!!

[PsycheCC]

20. Absolutely Proud Dad!

This is exactly what I try to do, and I feel great every time I walk out of my neighborhood, family owned grocery store, which by the way, has MUCH better produce and meat than the chain stores. Great Advice! :applause:

[leanin_green]

85. Here, here

I do the same thing. I've been touting this strategy for years. I won't support chains, only local businesses. If I am forced to use the chains, then I am selective about what and who I buy from. This is the only real power I have. Who get's my money and business.

[PsycheCC]

88. You Bet Leanin_green

Everyday we speak volumes about who we are and what we want by how we spend our money. It really is the only power the average person has. I know Wal-mart is cheaper, but I wish more people could see how much harm they do themselves by shopping there. Wal-mart demands such low prices from their suppliers that the businesses are forced to outsource jobs if they want to sell to Wal-mart. How can anyone still be debating whether Wal-mart is bad for America?

[leanin_green]

92. Just a caveat. . .

I worked at one of the Wallie World dirstribution centers here in my area for about ten months loading trucks. I soon began to see just how Wallie does it. Offer what appears to be great wages for the local area, give a medical, dental, retirement package that in the end you really are paying for, then make it difficult to get forty hours in a work week. And all the time denounce the labor movement and unions. Why do you think they build those distribution centers in largely Red Zone areas where there is a high concentration of conservative voters? The Evil Empire is alive and well!

[PsycheCC]

108. Leanin_green, Thanks for the insight! A Question...

You mention that "Wallie World" (funny-hadn't heard that one) makes it difficult to get forty hours in a work week. In my former life I was a teacher, so my business experience is somewhat limited. But in teaching, where the union sometimes sleeps with the boss, at least hey couldn't string you along indefinitely as a part-time employee. After one year in most cases, they had to offer full-time, continuing contracts with benefits.

So does Wal-mart get away with this part-time, no benefits work because they bust unions? And aren't there labor laws about this practice? Pardon my ignorance, but how do they get away with this?

Glad you were able to get away from Wal-mart! :woohoo:

[leanin_green]

111. No, I was full-time, but. . .

it was difficult to get forty hours. It was due to work load and orders. Things they don't really tell you about. Then when it's busy, they work you into the ground. They only have catastrophic health insurance that ended up costing me around $225.00 a month for my wife and I. And so this is why many people with kids that work for ole Wallie end up having to go on government programs to assist. If I paid what I did for insurance with them for two people, how much do think it cost a family of four?

[PsycheCC]

129. Pretty Expensive, for Catastrophic Insurance! Covering a family

would be awfully hard, at that rate. Did Wal-mart pay you over-time when you worked over forty hours in a week? Did you ever have to attend those rally type,"go Wal-mart!" meetings I've seen on the documentaries? Sorry, if I'm prying.

[leanin_green]

133. Yes to all you asked.

[zoeb]

135. A repuke family member is anti-union and shops at

Wal-mart,and they call it Wally World too, said that unions have screwed everything up and that's why prices are so high. So I say to this disowned family member ;) that the alternative to good wages and health care/unions is Wal-Mart, low, low wages, unaffordable health care and your tax dollars are subsidizing Medicaid for some of the Wal-Mart workers. So that's your answer to unions? He just shook his head and went home. I don't know if he had to think about it or he thought I was just another liberal smartass!!!

[PsycheCC]

138. Unions aren't Perfect, but I'd Hate to See the World Without Them

Zoeb said, "So I say to this disowned family member ;) that the alternative to good wages and health care/unions is Wal-Mart, low, low wages, unaffordable health care and your tax dollars are subsidizing Medicaid for some of the Wal-Mart workers. So that's your answer to unions? He just shook his head and went home. I don't know if he had to think about it or he thought I was just another liberal smartass!!!"

Maybe both? He was probably wishing he didn't have such an articulate, assertive relative! Funny how some republican men respond to logic from democrat women with that, "I'm oh so much more worldly than you," superior look. I think they just can't keep up with our exceptional, witty intellects! ;-)

[unlawflcombatnt]

139. Unions, Prices, & Consumer Spending

Prices are "so high" because people are willing to buy things at those prices. The idea that cost-of-production is a major determinant of price is wrong. The cost of production simply limits how low the price can go. And you better believe that costs are very low when products are made by Chinese slave laborers who are literally working in the dark at times.

Walmart has achieved tremendous "cost" savings and has passed on very little of that savings to consumers. If worker wages in China increased 5-fold, companies using Chinese labor could still sell the same products in this country for exactly the same price. They'd simply make less profit.

The implied 'unprofitable level of American wages' is not driving jobs out of this country. It is the greedy desire of Corporate America to make even larger profits than what they could have made using American workers. That greed will be their ultimate undoing. Eventually American workers won't be able to buy their products.

I certainly don't agree with your family member's blame of unions for high prices. I do, however, understand why he thinks that. I once believed the very same un-truth. That's only because I hadn't spent any time applying what I already knew about economics. When I finally did, I realized my mistake.

Prices are determined almost exclusively by what consumers are willing to pay. If the cost of production is greater than the selling price of the production, the item won't be produced for long. Sellers charge as high a price as they can to maximize their profits, regardless of the "cost" of production. If they can sell an item for $10, and it costs them $1 to make, they sell it for $10. If they can sell it at $10, and it costs them $7 to make, they sell it for $10. How much it costs to make the item has a very limited effect on the price. Consumers won't place higher value on an item simply because it costs more to make. Some consumers will pay more, some will not. Usually the optimal market price has already been set. Increasing the price due to costs results in less sales. And the increased price per unit usually does not make up for the decrease in quantity of items sold.

The concept that producers must "make up" for increased costs by raising prices in the long run is exaggerated. They may try to charge more, but it has a limited effect on the price consumers are willing to pay. They may raise the price, but it will result in less profits if the original price is the true market price, because the increased profit per item will not offset the reduced number of items sold. Thus, the manufacturer/seller will eventually drop the price back to that which maximizes his profits. If it costs $15 to make, and dollar-value of sales is greatest at $10, producers will probably stop making the item.

Unions are not responsible for the "price" of items. They are only responsible for the "cost." In contrast, however, unions are responsible for making sure consumer-workers have enough income to buy American production. At present, unions would help our economy, because they would force employers to pay higher wages, allowing workers to buy more American production.

There is another point worth mentioning here as well. If aggregate consumer income increases, so does aggregate consumer spending. So does the aggregate market value of American production. Since increased income increases consumer spending, it increases the dollar value of consumer demand. This increases the aggregate dollar-value of all American sales. This would ultimately increase profits for American industry.

It's worth pointing out again that consumer spending is 2/3 of economic activity. Reduced worker income reduces the ability to finance the most important aspect of economic activity. This consumer spending creates the demand for production, and increases the profits for Corporate America. Currently, worker wages are insufficient to maintain the necessary demand for production.

Demand for production has been maintained, however, through huge amounts of consumer borrowing. Much of this borrowing has come from home equity loans. This huge contribution to consumer spending has been the result of skyrocketing home equities, created by extremely low long-term interest rates and mortgage rates. This source of funding for consumer spending cannot be maintained indefinitely. When the housing bubble finally deflates (or bursts), this source of consumer spending will dry up. Consumer spending, and the production demand it creates, will also decline. As such, so will that 2/3rds of economic activity attributed to consumer spending.

Even though long-term rates have not risen yet, short-term rates have already put a strain on home equity loan spending. If short-term rates continue to rise, spending will decline. When long-term rates also start rising, spending will decline even more. When the bankruptcy bill goes into effect, even more money will be lost from consumer spending, to pay for old debts.

All indicators point to an economic decline. The real questions are regarding when and how much. The longer the housing bubble lasts, the harder the fall will be. The longer the housing bubble props up the debt-financed consumer spending bubble, the harder the fall will be.

[PsycheCC]

144. Interesting! How does this Relate to Today's Lower Deficit Projection?

Thanks for another great post. I found these paragraphs particularly interesting:

"Unions are not responsible for the "price" of items. They are only responsible for the "cost." In contrast, however, unions are responsible for making sure consumer-workers have enough income to buy American production. At present, unions would help our economy, because they would force employers to pay higher wages, allowing workers to buy more American production.

There is another point worth mentioning here as well. If aggregate consumer income increases, so does aggregate consumer spending. So does the aggregate market value of American production. Since increased income increases consumer spending, it increases the dollar value of consumer demand. This increases the aggregate dollar-value of all American sales. This would ultimately increase profits for American industry."

First, this makes excellent sense to me. Let me try to pose my question clearly. Today Joshua Bolten, White House Budget Director, announced an about $93 billion expected decrease in the deficit. He said several times that it would take perhaps years to fully understand the sources of the huge increases in tax revenue, but a recurring theme was the tremendous rise in corporate profits (due of course, in his opinion, to the tax cuts to the top 2%). He also took this opportunity to plug the need for continuing those same tax cuts. Several of the questions he fielded also focused on corporate profits as a large source of this increased revenue.

So my question is, How would you relate these soring corporate profits to your points about it being healthy for corporations to share their profits more with their workers? This deficit number, on the surface, might seem to say Wal-mart,etc., union busting, and outsourcing are good for corporate profits, and corporate profits are good for America because we can tax them. Doesn't this ignore the plight of the AVERAGE AMERICAN? Are we now going to say that the economy is great because corporate profits are up, but we don't care how those profits were achieved? Is our government now saying that the SOURCE of the economic growth is irrelevant, even though it is obviously VERY relevant to the American middle class?

I hope my question is clear. Let me say again that what you said about unions, prices, and consumer spending makes better sense to me. Wouldn't it be better to increase corporate profits through a path that also increases American worker wages??? Just outsourcing to reduce labor costs seems a path to only short-term corporate profits and a betrayal of the American worker, who after all, built this country. :patriot:

[unlawflcombatnt]

145. Deficit Projections

PsycheCC,

From watching CSPAN, and from a New York Times article by Edmund L. Andrews, it appears most of the increased tax revenue resulted from largely from one-time events, and from increased revenue from HUGE corporate profits.

Corporate tax revenue has increased 40%, due to huge increases in corporate profits.

The expiration of some tax breaks provided a one-time increase in revenue. One of these was the expiration of a temporary tax break that allowed companies to write off investment in new equipment more rapidly than in the past. That particular tax break alone, reduced 2004 revenue by $61 billion. So the expiration obviously made a huge difference.

Also, much of the increase in revenues came from higher stock market gains and the business income increase of wealthy taxpayers. Very little of the increase came from payroll withholding from employees. So the "increased" income has been almost exclusively in the highest tax brackets.

Furthermore, Social Security surpluses were also used to fill some of the deficit's gap. The $150 billion current social security surplus was added in as part of the revenue. Thus, whatever the final budget defict actually is, it will actually be $150 billion higher than the adiministration states. In other words, without the addition of the Social Security surplus, the projected deficit would actually be $483 billion. They have simply borrowed from money set aside for Social Security.

The assessment by the Democrats on the Budget Committee, as well as the assessment by analysts at Goldman Sachs, is that this revenue increase is a one-time event.



Now I'd like to address your question. I'll quote one important part of your statement:

"This deficit number, on the surface, might seem to say Wal-mart,etc., union busting, and outsourcing are good for corporate profits, and corporate profits are good for America because we can tax them. Doesn't this ignore the plight of the AVERAGE AMERICAN? Are we now going to say that the economy is great because corporate profits are up, but we don't care how those profits were achieved? Is our government now saying that the SOURCE of the economic growth is irrelevant, even though it is obviously VERY relevant to the American middle class?"

You're making an excellent point in this statement. Corporate profits cannot continue unless consumer spending is maintained. If inflation-adjusted American wages continue to decline, corporate profits will not be maintained. Consumer spending is absolutely essential to corporate profits. Corporate America has achieved most of its recent profit increase through reduction in labor cost. This reduction in labor cost has come at the expense of decreased American labor-consumer income. Much of the so-called increased "productivity" has been through reduction in manpower, not by an increase in actual production.

Outsourcing has definitely played a big part in this. Corporate America has simply eliminated American labor income by sending jobs overseas. Thus, the "cost" to produce the same amount of goods has declined. This increases short-term profits only. Eventually, the continual reduction in American labor costs, and the resulting reduction in American labor income, will reduce corporate profits. It will reduce the money available to buy their products.

You are absolutely right in your implication that the "source" of the economic growth is important. It is extremely important. Profits can't be made without selling products. Eventually Corporate America will reduce American labor-consumer income enough to reduce profits. Current levels of consumer spending have been propped up by record levels of consumer "deficit" spending. This debt-financed spending cannot continue to fill the gap created by reduced "income-financed" consumer spending. Eventually consumer spending will decline. It's only a matter of time.

[PsycheCC]

147. Thanks Unlawful

I appreciate your detailed reply. I guess I AM learning something from reading your posts! :)

I sure wish more of our congressional reps. would focus on the plight of the American worker. I think they pay lip service when issues like CAFTA arise, but unfortunately both Democrats and Republicans get re-elected largely with donations from big corporations who want only to exploit labor. It is depressing.

[unlawflcombatnt]

148. Corporate Contributions

It still amazes me that Senators and Congressional representatives seem much more worried about offending their big campaign contributors, than the voters who elected them. Apparently it really is possible to buy elections. We need real serious campaign financing reform.

[PsycheCC]

149. Campaign Finance Reform--How Do You Ever Achieve It?

So how does one protect the chickens when the foxes are guarding the hen house? Not sure how to remove the foxes from this equation.... Any ideas?

[MaraJade]

188. I did income tax preparation for two years at one of the

nationally advertised income tax preparation service companies, and I noticed that nearly all of the people who worked at Mal-Wart also qualified for help from the federal government in the form of the
earned income credit.

These people make so little money that not only are they subsidized by state and local Medicaid programs (taxpayer-financed healthcare--which usually pays for far more than standard employer-provided health
policies), but they also get an EIC payment from the feds which far
exceeds the amount of the taxes they pay; essentially, these workers
also receive taxpayer-financed welfare that may total (in most cases, DID total) $3000 to $5000 a year.

No union=we all pay. Mal-Wart is laughing all the way to the bank.

Do we really save by supporting this business? I don't think so.
We are all being taken for a sucker ride on this one.

[unlawflcombatnt]

189. Thanks for that Information

Brenssgrl,

Thanks for that information. Basically, Walmart workers are making so little that their wages cannot contribute very much to consumer spending and consumer demand. The lowness of their wages reduces their contribution to aggregate consumer spending. To add insult to injury, taxpayers have to supplement their income through welfare.

Walmart is hurting everyone. Given their size, their low-wage minimum benefit jobs are hurting our economy. Walmart is raking in profits while it buys its products from China, and pays it's American workers so little that they can't contribue much to America's aggregate consumer spending.

Everyone here should boycott Walmart. They pay their workers so little that they force the rest of us to pick up the tab for their workers' low wages and absent healthcare.

unlawflcombatnt

[unlawflcombatnt]

22. Starve the Bush Beast

ProudDad,

Great Advice. I try to buy everything I can locally. If at all possible, I try to make sure I buy American as well. :patriot: Which brings me to a question. Does anyone know a place to buy a computer that's NOT made in China? I can't seem to find any. :dilemma:

unlawflcombatnt

[bliss_eternal]

26. Wasn't it in the 80's that there was a HUGE housing mkt. crash?

I know of many people that had previously been blocked from the housing market then (because everything in Socal was so over-priced), that got homes in nice areas that sadly were foreclosed on...

[ProudDad]

28. Yep, I have personal experience

I bought in to the housing market here in the S.F. Bay Area in '81.

We had to sit on that house for over 2 years to get nearly what we paid for it.

I'm sure that if I were to try to buy again here the bubble will burst.

Anybody want me to do that?

[BlueStateBlue]

29. Wouldja mind?

I've been sitting this thing out for four years now. I'm living in a shoe box and would really like to buy a place AND sleep at night! :crazy:

[TheWatcher]

24. We are lucky to have you here my friend.

You definitely are on top of things, and your information regarding the economy is spot on.

PLEASE keep posting here. There are a lot of people who need to know this stuff, and I for one am aleays glad to see one of your posts.

[unlawflcombatnt]

25. Thanks for the support

TheWatcher,

Thank you for your comments.

I just had another one of my threads closed down because of a poster's wild claims about "stalking." It was the thread titled the "HOUSING BUBBLE & WILLIAM PITT REAL ESTATE AGENCY." Apparently my comments hit a little too close to home for one dissentor, and he reported it to the DU administrators. It's unfortunate that one individual can close a thread by making false charges. This individual was able to successfully censor what I had written.

Though I'm not certain why the thread was closed, the postings had become personal attacks on me. Apparently my attempts to defend my position caused even more problems. Apparently the board had been infiltrated by a clandestine Right-Wing extremist, whose mission was to discredit, and even censor remarks made. Unfortunately, this person succeeded. It will be interesting to see if he (or she) can get the remainder of my threads banned. Only time will tell.

Apparently I did enclose an Email address. This may be what closed it down. However, the email address was one that had been publicly posted on another site. Admittedly, the thread had degenerated into nothing buy a feud, and had drifted away from a discussion of the housing bubble.

I felt it was necessary to respond to the personal attacks made on me. One thing just lead to another, with the other poster making some very personal comments, as well as taking a "creative" approach to stating the facts. It was probably best that the thread was closed.

I think it is important to note that there ARE trolls who look for Democratic and Progressive blogs to invade. They might claim their mission is to set us "dangerous liberals" straight. My position is that they're trying to prevent truth dissemination.

I've run into quite a few such trolls already, so I know they're out there. Fortunately, they rarely make any sense, so they are easy to discredit. In this most recent case, my antagonizer had nothing substantive to say. He(or she) simply attacked me personally. This poster did successfully hijack the discussion.

unlawflcombatnt

[ProudDad]

27. Screw 'em

If I need to go Chapter 7 again, and they won't let me, I'll just move and change my name.

Or better than that, I'll move out of this bogus country...

[unlawflcombatnt]

34. A Suggestion

ProudDad,

I have a suggestion on how to hide your money. I hate to make this suggestion, because readers will think it's eccentric. If you put your money in gold bullion, it is almost impossible for the government to track. If you buy any gold coins other than Canadian Maple Leafs, or South African Krugerrands, sellers aren't required to report the purchase of the gold. When you sell the coins back to the dealers, they are not required to report it to ANYONE. And they don't, because it would hurt their business. Thus, you can hide your savings/wealth in gold. You can hide any "capital gains" you make from the gold. The IRS does NOT require you to report it, unless you're selling Canadian Maple Leafs or South African Krugerrands. It's not taxable and it's not tracked. No one will know how much you have unless you tell them.

There's an outstanding discussion board regarding gold investment at Kitco.com. Most of the posters are EXTREMELY well informed. And most of them hate Bush. There are a lot of trolls who post there, and some of the more knowledgeable posters are somewhat arrogant. But a lot of these guys are very knowledgeable about the Federal Reserve and global financing. I've found it very informative. The link is

http://www.kitcomm.com/index.php

unlawflcombatnt

EconomicPopulistCommentary

http://www.unlawflcombatnt.blogspot.com/

______________________
Capitalism cannot function without consumer income. The benefits of capital investment are limited by consumers' ability to buy the products of capital investment. There must be balance between the "means of consumption" and the "means of production."

[Tinoire]

31. Damn. Too late to recommend. Welcome to DU

Keep those posts coming! :toast:

[unlawflcombatnt]

41. Thanks for the support

It's the thought that counts. I'll keep the posts coming. Thanks again.
:)

[unlawflcombatnt]

35. HOUSING LIES

HOUSING LIES

Again, the government has downwardly revised previously posted statistics. For the 2nd month in a row, they have downwardly revised the previously posted "New Home Sales " numbers. Both times, this allowed them to claim that new home sales increased for the current month, despite the current number actually being lower than that posted the preceeding month. This was accomplished by simple "revisionist history."

The new home sales for March were initially reported to have increased to an annual sales rate of 1.431 million/year. This was gleefully reported as "the highest rate ever." Following this, the April new home sales were reported to have INCREASED to 1.316 million/year. Increased?? Yes, because they downwardly revised the previously reported March home sales to 1.313 million/year.

Now the May new home sales figures are in. Again, they have INCREASED to 1.298 million/year, "the second highest level in history." Increased?? Yes, again they downwardly revised the previous numbers given for April, from 1.316 million to 1.271 million/year.

Apparently, the Bush administration has some serious "counting" problems. They couldn't just be deliberately altering the numbers, could they? They've never altered the facts to fit their agenda, have they?

They did begrudgingly admit, however, that "the median price of the homes sold did fall sharply...." The real estate speculators must be choking over that revelation. Sometimes the truth accidentally slips out. Maybe they can revise it later. Creating facts, not simply reporting them, is this administration's forte.

The link for the AP news story, posted on Yahoo, is as follows:

http://news.yahoo.com/s/ap/20050624/ap_on_bi_go_ec_fi/economy;_ylt=AuUqgACfPpHb94NvkmVF2FGs0NUE;_ylu=X3oDMTA3bGI2aDNqBHNlYwM3NDk-

The following are links to the respective Economic Calendars that show the revisions made:
for this week: http://biz.yahoo.com/c/e.html

for the week of 5/21: http://biz.yahoo.com/c/ec/200521.html

unlawflcombatnt

EconomicPopulistCommentary

http://www.unlawflcombatnt.blogspot.com/

______________________
Capitalism cannot function without consumer income. The benefits of capital investment are limited by consumers' ability to buy the products of capital investment.

There must be balance between the "means of consumption" and the "means of production."

[unlawflcombatnt]

36. Housing Bubble Article

I found the following article "WHAT COULD MAKE A HOUSING BUBBLE POP?" It was interesting to note that housing related industries had accounted for 43% of the increase in private-sector payrolls. Thus, the bursting of the housing bubble may have even greated damage.

http://www.pulsejournal.com/business/content/shared/news/nation/stories/06/05_HOUSING_BUBBLE.html

unlawflcombatnt

[tamtam]

59. I hope it pops

Don't get me wrong. I would hate to see people lose their homes. If the bubble does pop I hope to god that people find a way to keep their homes. What gets me about this housing craze(especially in San Diego) is this http://www.realtor.com/Prop/1044899265

This house is ridiculously overpriced. This is an example of what 200 to 300K will buy you in San Diego. A good friend told me I would be stupid to buy a home right now. I will take his word for it but throwing my money down the drain for rent is killing me. I would love to invest but I keep hearing about the housing bubble and that it is going to pop soon. I've been waiting five years for it to pop. I know I'm not the only one waiting and and watching the housing prices go up.

[PsycheCC]

66. Me Too!

I completely agree Tamtam. I'm in the LA area, and you get shacks for 300K. Seriously. It would be nuts to buy now, but waiting means throwing away rent.

Then someone says, "Well, the rate of rise might slow, but prices in this area will never actually drop." History shows this isn't true, but to look at the market today, you'd never believe it could be anything but on fire. I'm just hoping that those who say this situation isn't sustainable are right, and when the POP comes I'll be able to buy.

[unlawflcombatnt]

67. Bubble Bursting

I certainly do hope prices decline. Most residential homeowners won't lose their homes if prices decrease, but they may lose their ability to borrow off of the equity. Those with adjustable rate mortgages will have bigger problems, however, if interest rates rise.

I'll have to admit to having little sympathy for those who have driven home prices up by buying more home than they can afford. Wild, reckless home buying has priced most Californians out of the market.

Again, much of the increased demand is being created by home speculators. I certainly do hope they lose their shirts. I hope it doesn't hurt too many residential home owners. I hope they will take heed of the impending decline, and not borrow excessively off their home equity. That seems very ill-advised at present.

unlawflcombatnt
EconomicPopulistCommentary

___________
The economy needs balance between the "means of production" & "means of consumption."

[tamtam]

104. Interesting news

From Southern California.

http://www.signonsandiego.com/news/metro/20050710-9999-lz1n10signs.html

[unlawflcombatnt]

109. Great Articles

Thank you for posting that article. It was very interesting. Also, it allowed me to link to another article titled "Previous bubble burst may provide clues." The link for that article is
http://www.signonsandiego.com/news/metro/20050710-9999-lz1n10bubble.html

In this 2nd article is information showing the price declines in the San Diego market when the last housing bubble burst in the early 90's. Five San Diego zip code areas showed price declines in excess of 30%. If the current bubble bursts, many think it will be much worse. Here's the graph:

[tamtam]

113. Thanks

I will check out the second article. Those zip codes that lost the most value are considered inland. It looks like the properties near the beaches kept their value.

[unlawflcombatnt]

121. San Diego Real Estate

It sounds like you must live in the San Diego area. When you say the zip codes near the beach, are you referring to the zipcodes on the chart that are in the -10% range, or are those zipcodes still inland?

There was a lot of good information in both of those articles. Thanks again for posting that link. I live in the LA/Orange County area, so San Diego is pretty close by.

[tamtam]

154. I'm sorry unlawflocombatnt

I misread that chart. Actually there are only three zip codes on that chart that are near the beaches. That would be 92107,92054,92106 and it looks like they are on the "lost the most value" part of the chart. Yes, I live in San Diego.

[unlawflcombatnt]

155. San Diego property value

Tamtam,

Thank you for your response. So would you say a majority of the homes in the San Diego area lost value between 1991 and 1997 ? That might be useful information in predicting what will happen when the current housing market loses steam.

I certainly wouldn't want to hold on to a home right now if I had it for investment purposes only. I have one friend who recently sold his 2nd home, and now owns only his residence. (This is in the L.A. area.) I don't know whether this is the beginning of a trend or not. Mortgage rates are also starting to increase slightly here in the L.A. area. The storm may be approaching.

[zoeb]

136. You know what you could build for $300k in KY???

that would be a 3500sqft mansion-albiet a small mansion. A home like that costs around 65-70k here and that's over priced for this rural community. I've been waiting for the bubble to burst for two years...it will but it may be another year of fed rate hikes for that to happen.

[unlawflcombatnt]

137. Rural Communities

Home prices appear to be much higher in larger cities with more jobs. Residents in rural communities often don't have the financial resources to overvalue homes in their area, due to a lesser number of jobs and lower paying jobs.

Unfortunately, we do have the ability to overvalue homes here in California. We're so fortunate in that respect.
:sarcasm:

[Warren DeMontague]

156. Self delete

[Warren DeMontague]

157. Yeah, and when you consider how many other would-be buyers are waiting

lined up around the block for the prices to come down...

Not to be the bearer of bad news, but California is always going to be a very desirable place to live. I don't think the level of real estate price increases is sustainable- I suspect it will plateau, in some places it may drop slightly.

But if you're waiting for the entire market to tank so heavily that you can get the kind of house you would get in Nebraska for the exact same price in San Diego, I fear you will be waiting a very long time.

[unlawflcombatnt]

163. California Prices

The problem with those buyers waiting for prices to come down is that they must wait. Only 17% of Californians can afford a median priced home. They really don't have much choice. There are a limited number of people who can afford homes in California. That number will go down if prices continue to increase. Rents are extremely low in comparison, so it's not that unreasonable for potential buyers to wait. Mortgage interest rates have risen since the beginning of July, and are now higher than they were at any time in June. With the anticipated increases in the prime rate by Greenspan, mortgage rates should eventually increase even more. With worker income trailing housing prices significantly, housing prices will have to come down eventually. Add to all of this the effect of the new bankruptcy bill going into effect in October, which will cause a further reduction in some people's ability to afford a home.

Here is a link to a graph of recent mortgage rates. It apprears they are beginning to increase.

http://www.bankrate.com/brm/graphs/graph_trend.asp

[Warren DeMontague]

164. I'm not saying it's fair, I'm just saying it's supply & demand. nt

[PsycheCC]

170. At some point these high prices will depress demand; throw traffic

and crowding into the mix, and people start looking elsewhere. The situation is certainly complex, and no one expects to get comparable value in California to that in Nebraska.

[annabanana]

37. let me add my "welcome"

to the others on this thread.

Economics is one of those things that should be taught in the High Schools as a mandatory course. The Dismal Science,101.00 would help so many people understand how the movement of money effects everyday lives.

Never having had such an education, and finding even the most basic writings on the subject dense and hard to follow, I rely on people like you who can "translate" into layman's terms some of the basic precepts.

Thanks, keep posting, and
:toast: ...welcome.

[unlawflcombatnt]

39. Thank you for your support

Annabanana,

Thanks for the support. I hope I'm making this understandable. An overwhelming amount of current economic commentary focuses only on investment-related topics. Most economic commentators prefer to focus on the more complicated aspects of high finance, such as the stock market, bond purchases, etc. A lot of very simple, basic, and extremely important concepts are simply ignored. I'm trying to make sure those simple, important concepts get the attention they warrant.

To listen to current economic commentary, you almost get the impression that there is no need for CONSUMER SPENDING or CONSUMER DEMAND. I'm trying to change that. Given the consensus that consumer spending is 2/3 of all economic activity, you'd think this would warrant more attention. Unfortunately, it does not get much attention.

I know of several reasons why. It's more glamorous and exciting to talk about big money transactions, than it is to talk about the necessity of maintaining consumer spending. It's also not convenient for Republican policy makers. Appropriate attention to consumer spending and demand would discredit the benefits of tax cuts for the top 2%. If the fragility of current consumer spending was acknowledged, Bush's "no corporation left behind" policies would lose credibility.

We are NOT suffering major economic damage from "onerous regulatory burdens" or "frivolous lawsuits." Corporate America is making huge profits at present. Reducing their costs will do little for our economy. In contrast, increasing consumer spending would help. The increased demand for production provided would increase demand for labor to provide that production. Increased labor demand increases the number of those employed and the wages of those employed. The resultant increase in American demand for production would help our economy.

Anything that increases labor demand will result in INCREASED CONSUMER INCOME. Again, the increased demand for production increases labor wages and the number of those working. This increases AGGREGATE CONSUMER INCOME. Increased consumer income will increase consumer spending. In addition, it should also DECREASE that part of consumer spending that is financed by borrowing. (Again, consumer spending cannot be maintained indefinitely by increased borrowing.) If interest rates continue to rise, spending financed by borrowing will definitely decrease. If there isn't a compensating increase in consumer income, aggregate consumer spending will fall as well. This will not be good for the economy. In order to maintain employment and production, there must be sufficient consumer spending to maintain demand for production.

Again, discussion of DEMAND is not glamorous or exciting stuff for financial experts to talk about. The subject doesn't fit into the discussion of many of the get-rich-quick schemes, or the "get-richer-quick" schemes. But aggregate consumer spending, and the production demand it creates, are THE most important factors affecting our economy. Don't let anyone tell you otherwise.

Capitalism is absolutely dependent on consumer spending. Without it, capital would have no value. Capital investment, and the production it ultimately creates, is worthless unless someone buys the production. At present, we need to worry more about whether consumers can BUY production, rather than whether manufacturers can produce it.

Investment capital is abundant. Consumer income is not. Which should we being worrying about more?

unlawflcombatnt

EconomicPopulistCommentary

http://www.unlawflcombatnt.blogspot.com/

______________________
Capitalism cannot function without consumer income. The benefits of capital investment are limited by consumers' ability to buy the products of capital investment.

There must be balance between the "means of consumption" and the "means of production."

[salin]

38. I challenge one presumption - that the bankruptcy bill will slow

down credit spending.

Frankly I don't think many people are paying close enough attention to realize the potential impact of the bankruptcy bill. Thus no slow down due to the passage of the bankruptcy bill.

Nor do I think people enter into such purchases with the thought that "well if it is too much debt, and I can't keep up, I can always file bankruptcy." Just as I don't believe people enter into marriage thinking "well there is always the default of divorce, if it doesn't work out."

Though it doesn't change much else in your post - as I agree with the next statement that due to the bankruptcy bill more folks will be stuck spending more income paying off debt than on consumption.

Add the amount additional sucked out of the economy due to the excessive rates on penalty (late) fees (which are more likely to be accrued when one is in a downward cycle of barely being able to pay) - which congress refused to cap (35% fees, iirc).

[unlawflcombatnt]

40. We Agree

I think we actually agree on all points. I don't think the bankruptcy bill has slowed anything down yet, but I think it will in the future. I think you stated all of the reasons why this will happen. I don't think we'll see any difference until the bill actually goes into effect, and people start suffering the consequences because of the bill. Then I think it will slow consumer spending at least some. Added to the continuing downward trend in inflation-adjusted wages, the bill's effects will drag our economy down even further.

unlawflcombatnt

EconomicPopulistCommentary

http://www.unlawflcombatnt.blogspot.com/

______________________
Capitalism cannot function without consumer income. The benefits of capital investment are limited by consumers' ability to buy the products of capital investment.

There must be balance between the "means of consumption" and the "means of production."

[unlawflcombatnt]

42. Housing Market Update

Median home prices were $237,000 in February 2005. So May's median home price is almost 10% lower at $217,000. Of course, maybe these numbers will be revised as well.

May's decline to $217,000 is a drop from $232,000 in April is a HUGE monthly decrease. This is a 6% price decline in 1 month. In addition there was a HUGE drop in the Mortgage Bankers' Association purchase index. That index dropped from 529.3 for the week of June 10th, to 479.4 for the week of June 17th. That's a 9% decrease in one week.

This comes from the BusinessWeek/Yahoo News story from 6/27/05 at:
http://news.yahoo.com/s/bw/20050627...HNlYwMlJVRPUCUl

I'd say the housing bubble is on the verge of bursting, if it isn't a bursting already.

If long-term interest rates ever start rising, the housing bubble isn't just going to pop, it's going to explode.


unlawflcombatnt

EconomicPopulistCommentary

http://www.unlawflcombatnt.blogspot.com/

_____________________
Capitalism cannot function without consumer income. The benefits of capital investment are limited by consumers' ability to buy the products of capital investment.

There must be balance between the "means of consumption" and the "means of production."

[CWebster]

43. Here we go again.

The excesses of capitalism are a predictable pattern.

[unlawflcombatnt]

44. Excesses of Capitalism

CWebster,

Unfortunately, you are absolutely right. For those of us who really want capitalism to survive, we must curb the excesses. As I've previously stated, there must be a balance between the means of production and the means of consumption. The benefits of capital investment cannot be obtained without sufficient consumer spending. Someone needs to buy the production created by that capital. If capital is created in excess of that needed to meet consumer demand, it is absolutely worthless. If it is created in excess by the reduction of labor costs (and labor income), it will SHRINK our economy.

Goods are manufactured to be sold, not sit in warehouses. Once the warehouses are full, there is no need to employ workers to fill them further. There is no profit in employing workers to produce unsellable goods. If workers aren't needed, they aren't hired. Since they lose income as a result, goods produced can't be sold to them. Consumer spending declines and our economy SHRINKS.

We need to dispel the myth that "investment creates jobs." It most certainly does not. Demand for production creates jobs, and ONLY demand for production. All of the capital investment in the world won't keep a factory running unless there is demand for its production. Cut the labor costs to run factories, and you cut the income necessary to buy the production. This is not complicated economic theory, it's just common sense. The Republicans hope to prevent Americans from using common sense. Are we going to let them?

unlawflcombatnt

EconomicPopulistCommentary

http://www.unlawflcombatnt.blogspot.com/

______________________
Capitalism cannot function without consumer income. The benefits of capital investment are limited by consumers' ability to buy the products of capital investment.

There must be balance between the "means of consumption" and the "means of production."

[CWebster]

45. China

Then you could close the factories, open them overseas for pennies, not worry about labor or environmental restrictions, hold down wages at "home" and offer them (at home) cheap affordable merchandise from China as the bone to keep the pack quiet. Meanwhile, China props up US economy in exchange for the market to sell their goods.

[unlawflcombatnt]

46. LOW WAGES = LOW CONSUMER SPENDING

CWebster,

Corporate America would like to convince us that this is a good thing. They certainly would like to deceive us into thinking that price reductions would make up for job and wage loss. Of course, that's absolutely impossible. They'd hate for us to realize that.

The truth is that outsourcing is actually a way to transfer wealth from American workers into the pockets of US multinationals. It's the epitome of a "get-richer" scheme for the already rich. Outsourcing to China reduces aggregate American labor income tremendously, while reducing prices on imported goods much less. Though this does result in lower-priced goods here, it doesn't compensate for the wage loss. And it certainly DOES result in increased corporate profits.

The problem with this scheme is that the math doesn't work out. A 50% reduction in prices will not compensate for a 90% decrease in consumer income. However, as long as the degree of outsourcing is small enough, few will notice the difference. But as outsourcing increases, the problem will become more obvious.

If 20 million American workers making $100/day lose their jobs, that results in a $521 billion (or $.521 trillion) annual loss in consumer income. The aggregate reduction in imported good prices would have to be greater than that to offset that loss. Obviously, it's nothing near that. If it was, Chinese workers would have to work for free, and the Benedict Arnold corporations employing them would have to make NO profits.

The truth is that the aggregate reduction in goods prices would be only a small fraction of that $521 Billion. The rest goes into corporate profits. A small amount goes to paying Chinese slave laborers.

In addition, the direct loss of 20 million jobs would put a TREMENDOUS downward pressure on the wages of those still employed. If you reduce the demand for labor, you reduce the cost of labor. That cost is American wages. Thus, the wages of those still working would also be driven downward. A lot. It's not inconceivable that this could cause another $500 billion reduction in aggregate American labor income. Added to the direct loss from 20 million lost jobs, this totals over $ 1 TRILLION in lost consumer income. With aggregate American wages in the $5-6 trillion range, this would be a HUGE loss. Does anyone honestly believe this would help our economy? Is outsourcing really good for America? Or are Bush's economic advisors simply insane?

unlawflcombatnt

EconomicPopulistCommentary

http://www.unlawflcombatnt.blogspot.com/

______________________
Capitalism cannot function without consumer income. The benefits of capital investment are limited by consumers' ability to buy the products of capital investment.

There must be balance between the "means of consumption" and the "means of production."

[Bryn]

47. Middle Class Americans will probably be a repeat of "Highland Clearances"

My Scottish ancestors were forced off their homes, their homeland, Scotland, by rich, greedy English and Scottish Barons. I can see it happening here again in USA via a different method by the Bush Administration by passing this bad bankruptcy law reform and plus now it's legal to force you off your home if a corporation like Super Wal-Mart is interested in your land. The People no longer have any rights?? Why are we allowing it?

Re: Highland Clearances - www.electricscotland.com

But when one reads the other side, MacLeod's "Gloomy Memories." General Stewart of Garth's "Sketches of the Highlanders," and other contemporary publications, one wonders that such iniquities could ever have been permitted in any Christian country, much more so in Great Britain, which has done so much for the amelioration of subject races and the oppressed in every part of the world, while her own brave sons have been persecuted, oppressed and banished without compensation by greedy and cold-blooded proprietors, who owed their position and their lands to the ancestors of the very men they were now treating so cruelly.

The motives of the landlords, generally led by southern factors worse than themselves, were, in most cases, pure self-interest. They pursued their policy of extermination with a recklessness and remorselessness unparalleled anywhere else where the Gospel of peace and charity was preached -- except, perhaps, unhappy Ireland. Generally, law and justice, religion and humanity, were either totally disregarded, or what was worse, in many cases converted into and applied as instruments of oppression.

Every conceivable means, short of the musket and the sword, were used to drive the natives from the land they loved, and to force them to exchange their crofts and homes -- brought originally into cultivation and built by themselves, or by their forefathers -- for wretched patches along the barren rocks on the sea-shore. They had to depend, after losing their cattle and their sheep, and after having their houses burnt about their ears or razed to the ground, on the uncertain produce of the sea for subsistence. The people, in many instances, and especially in Sutherlandshire, were totally unacquainted with a seafaring life, and quite unfitted to contend with its perils.

<snip>

Hundreds, stripped their all, emigrated to the Canadas and other parts of America. <snip> The aged and infirm, the widows and orphans, with those of their families who could not think of leaving them alone in their helplessness, and a number, whose attachment to the soil which contained the ashes of their ancestors, were induced to accept of the wretched allotments ordered them on the wild moors and barren rocks.

[unlawflcombatnt]

48. Thanks

Thanks for the historical perspective. What time period was that? I think I have some Scottish ancestors as well.

[Bryn]

51. Here You Go!

Most Americans have Scottish Ancestors with last names like Lewis, McDonald, Morris, Morrison, Graham, MacMurray, McDougall, Ross, Douglas, MacDouglas, Campbell, Cowan, Andrews, McClure, etc. Most of our USA Presidents were Scottish or had Scottish Ancestors. I wouldn't be surprised if you did also. I learned the truth about why so many Scots arrived in America especially in the South when doing genealogy for my family. It blew my mind and I was very surprised that we weren't told about this. I went to your blog and noticed that one of your fave movies - Braveheart so I believe you'd enjoy this. You will learn about dates here, etc. here. This link is the best and more clear on Highland Clearances. Also go to www.thebloodisstrong.com ... very good forum there as well as www.tartans.com (you have to register to access to their history forum)

http://www.tartans.com/articles/highclearmemmain.html

15 Part Series With Appendices Ð Written and published by the Highland Clearances Memorial Fund

"To this day it is not fully explained or taught even in Scotland where the people surely have the right to know their own history. One dreadful episode in the history of the Scottish people is known simply as "The Clearances". "

"The very new "United" Kingdom, which had been formed in 1707 under the "Treaty of Union", was in a fragile state with many Scots being anti-union and wishing to maintain their independence especially in the Highlands where the clan society was in danger of being lost forever. <snip> In 1715 there had been an unsuccessful uprising of Highlanders against the English."

The third verse of the British National Anthem contains the following words,

God grant that General Wade
May by thy mighty aid
Victory bring
May he sedition hush
And like a torrent rush
Rebellious Scots to crush
God save the Queen

"The Act of Proscription" was passed in 1747 which banned the wearing of tartan, the playing of bagpipes (which were regarded as instruments of war), the right to bear arms, the gathering of Highland people and the teaching of the Gaelic language.

Eyewitness account:

"I saw a man who was caught and tied and knocked down by a kick despite the fact he was trying to bury his four dead children before being sent to America."

<snip> People were called to meetings in the village halls by their landlords, Gordon of Cluny, on the pretext of discussing fair rents. The people were threatened with a two pound Sterling fine (a huge sum of money for subsistence crofters) if they did not attend the "meetings". When they got to the meeting places they were tied hand and foot, literally thrown into ships and sent to America with nothing at all other than the clothes they were wearing at the time. It is difficult for us today to image such a thing being possible <snip>

[unlawflcombatnt]

52. Thanks for the information

Though it's off the subject here, I couldn't help noticing the part about "banning...the teaching of the Gaelic language." That's something I'd never heard before. If I do have Scottish ancestors, I'm glad they got out of there when they did. The only solid ancestoral link I have is a Lucian Anntisdale from Wales, who arrived in the U.S. in 1820. My mother stated she had Scottish and Irish ancestors, but I've never been able to verify that.

[CWebster]

50. Not so far off as you may think with that recent court ruling

"Message: It is no longer unconstitutional to have the government engage private contractors, paying them royally, to build parking lots, hotels and shopping malls by condemning your property and leaving you to your own fate."

http://news.yahoo.com/s/ucgg/20050628/cm_ucgg/supremecourtrulingunderminescherishedamericandream/nc:742

Where is the outrage over this??? Granted I am not on the web 24\7 but I see little discussion about this travesty.

[PsycheCC]

53. Let's Build A Mall on Justice Souter's Home!

There has been some outrage, though not nearly enough. There has been some talk in congress of legislation to address the recent ruling, but I like the california developer's idea to develop the land under David Souter's home. I believe he has already filed the appropriate paperwork to get started; he's had something like 400,000 hits on his web site and one offer of a million dollars to contribute to the project. Maybe that will get some attention.

Still it seems that the rich get what they want and the poor get screwed. It's like Unlawful says: it's no longer one person, one vote. Now it's more like one dollar, one vote. I guess David Souter's vote counts for a lot; I bet he has a lot of dollars too.

[wli]

57. but where will the Americans be sent?

There's no undiscovered country like America or Canada anymore. So where will they send these people after the "New Highland Clearances"?

[OKthatsIT]

127. Even worse..The English King sent Scots off to fight Napoleon

drafted the Scot men to fight his war against Napoleon. It was the Clan Chief's who made the deals with the King...but the Highland Scots thought they were doing the bidding of their Chieftains, the new Nobles of the English King.

The Scots were gone from their homelands when their families were forced out(clan territories). Imagine what those boys felt when they came back home after the Napoleonic Wars to find their families gone or dead. All that remained were the sheep...pasture grounds for the sheep is what they wanted...sheep for military food, clothing and blankets.

Such betrayal, only the present day US soldier in Iraq can compare to such a betrayal.

[unlawflcombatnt]

49. Mortgage Applications Declined

Home mortgage applications fell for the 2nd week in a row. This occurred in spite of a 15-month low in 30-year mortgage rates.

The Mortgage Bankers Association has stated a decrease in mortgage application activity of 1.1% for the week of June 24th. This follows the previous week's decline of a whopping 11.3%.

The above information comes from a 6/29/05 Reuters-Yahoo News article at:

http://today.reuters.com/investing/financeArticle.aspx?type=economicNews&storyID=2005-06-29T113340Z_01_N10103329_RTRIDST_0_ECONOMY-MORTGAGES-UPDATE-1.XML

unlawflcombatnt

EconomicPopulistCommentary

http://www.unlawflcombatnt.blogspot.com /

______________________
Capitalism cannot function without consumer income. The benefits of capital investment are limited by consumers' ability to buy the products of capital investment.

There must be balance between the "means of consumption" and the "means of production."

[Roland99]

54. Why do you think mortgage rates just hit new 15-month lows?

The rates are being kept artificially low to keep the only positive aspect of the economy going beyond all normal capabilities.

I know some mortgage companies are now pushing 10-year, interest-only ARMs. Poor suckers are buying them up.

[unlawflcombatnt]

55. Why are Mortgage Rates Low

The financial experts say that mortgage rates are closely related to long-term interest rates, especially on bonds. If a lot of people purchase bonds, it reduces the interest rate the government must pay buyers to buy the bonds. So following this theory, mortgage interest rates will move in the same direction as bonds. There's more to this, but I'll take a stab at it later.

[1932]

60. Doesn't it also suggest people are making long-term bets that economy...

...is not going to go gangbusters, and might even tank?

[unlawflcombatnt]

61. Yes, indeed

I'm glad you made that suggestion. That's EXACTLY the way I'm reading it. People are NOT optimistic about the economy, so they are putting their money in less risky long-term bonds, instead of investing in stocks and industry. In my opinion it suggests exactly what you implied. It makes perfect sense to doubt our economy. The stock market is overvalued. Price to earnings ratios are high. I assume that earnings are strongly related to consumer spending, while stock prices are related to investment. If consumer spending can't keep up with investment, then the Price(investment) to Earnings(consumer spending) ratio should increase. Given that inflation-adjusted wages are declining, it seems this trend should continue.

The increased investment in bonds is keeping the long-term rates lower, which also keeps mortgage rates low. Thus, the lack of investment potential, caused by reduced consumer income, is helping maintain low long-term interest rates. In turn, the low interest rates are helping maintain the housing bubble.

Thus, the decline in wages is contributing to the housing bubble. This might seem like a stretch, but this is how I see it.

unlawflcombatnt

EconomicPopulistCommentary

http://www.unlawflcombatnt.blogspot.com/

______________________
Capitalism cannot function without consumer income. The benefits of capital investment are limited by consumers' ability to buy the products of capital investment.

There must be balance between the "means of consumption" and the "means of production."

[BlueStateBlue]

71. I'm getting the feeling that Greenspan is a bit perplexed

by the stubbornness of mortgage rates staying low as he raises rates.

[unlawflcombatnt]

72. Mortgage Rates

Greenspan is definitely perplexed. The part he's not publicizing much is that a narrowing in the gap between short-term rates and long-term interest rates is a sign of an economic slowdown. Greenspan has simply dismissed this as a "false" indicator, because our economy is "obviously" very strong.

Maybe he should take a tour through Ohio, Michigan, or Wisconsin, and see how "strong" our economy is. Maybe he should talk to the unemployed software engineers in northern California, who are now being "re-trained" following their previous re-training.

It's certainly interesting to see how Greenspan and other economists say their own indicators are giving us a false impression of the economy. Obviously, we are doing much better. But "obviously" to whom?

unlawflcombatnt
EconomicPopulistCommentary

___________
The economy needs balance between the "means of production" & "means of consumption."

[CWebster]

73. Well, we don't count

in Ayn Rand worshipper Greenspan's world view. It is quite a show to witness Bernie Sanders go for Greenspan's jugular on issues of economic fairness.

[unlawflcombatnt]

74. Bernie Sanders

I haven't had a chance to listen to or read what Bernie Sanders has said in that regard. Do you have some links I could go to?

I try to avoid use of the word "fairness," due to its subjective nature. At present, however, these "fairness" positions are also better for economic growth. In my opinion, if we are going to save capitalism, and all of its "unfairness," we need a downward redistribution of wealth to the non-affluent.

Capitalism requires some uneven distribution of wealth to create capital. But it also requires consumers with enough wealth to purchase the products of that capital. This concept seems to be completely ignored by Greenspan and his fellow "economic terrorists." What good is capital if no one has the means to purchase production? This is the idea I'm trying to convey with my statement: there must be balance between the "means of consumption" and the "means of production." It doesn't take a Ph.D in economics to understand this. But it may take a Ph.D to concoct a convoluted theory to contest it.

I'm a firm believer in capitalism. But at the rate we're going, we're going to destroy it. Consumers must have sufficient means to purchase production. John Maynard Keynes understood this. So do many of the rest of us. Many feel that Keynes saved capitalism as a result of this understanding. I'm one of them.


unlawflcombatnt
EconomicPopulistCommentary
___________
The economy needs balance between the "means of production" & "means of consumption."

[Cats Against Frist]

130. Can you tell me if this relates to ISI

(like the programs that have bailed out some Latin American countries), and if that's what's going to happen, or would be part of a wealth re-distribution plan? How close would we be to something like that?

[unlawflcombatnt]

131. ISI?

Could you tell me what "ISI" stands for?

[Muddy Waters Guitar]

58. Perceptive analysis

I've given this some thought myself, since consumer spending esp. in the form of the real estate spree is the *one* factor that is propping up the US bubble economy, which is poor in savings, relatively poor in productivity, and increasingly gutting itself with outsourcing and other practices that impede the growth of native talent.

The bankruptcy bill, as you say, will probably cut the legs out of consumer spending and thus bring down the last leg on which our shaky economy is standing.

[PsycheCC]

62. Who Will be the Beneficiaries of all This?

When consumers finally stop spending money they don't have, and the housing bubble bursts in Southern California (where I live), who will be the "winners"?

[wli]

63. the prison industry

Hordes of broke former middle class people will be forced to work under the table to subsist, then selectively herded into prisons on the grounds of tax and wage garnishment evasion as a result. Clearly, the usual race biases will apply.

[unlawflcombatnt]

64. Inability to pay = Refusal to pay?

wli,

You posted an interesting and disturbing possibilty. Though Americans are not supposed to be incarcerated for debt, they certainly can be incarcerated for evading income taxes and violating a court order. With the Bush corporatocracy, I can easily envision someone's actual "inability to pay" turned into "refusal to pay." Since the Right-Wingers own the court system, any debtors "inability to pay" could be interpreted as a "refusal to pay." Could this actually happen?
Will "inability to pay" = "refusal to pay" in the future?
This is certainly a scarey, yet realistic possibilty.

unlawflcombatnt

EconomicPopulistCommentary

http://www.unlawflcombatnt.blogspot.com/

______________________
Capitalism cannot function without consumer income. The benefits of capital investment are limited by consumers' ability to buy the products of capital investment.

There must be balance between the "means of consumption" and the "means of production."

[rman]

190. "inability to pay" sure won't mean that you won't have to pay

I suspect that either way, you'll be forced to pay.

Don't have money because you don't have a job and/or your expenses are higher then you can pay for? I'm sure the government will figure out a way to 'help' you reduce expenses and help you 'find' a job.

[SoCalDem]

105. The winners will be the ones who always "win".

If a person has to unload a house they can no longer afford, they will sell for a loss if necessary.. Guess who has basketfuls of cash, just waiting to "help" them out?? NOT the ordinary middle class folks..that's for sure..

The recently acquired for chump-change homes will be converted into "investment properties" and rented out for killer rents.. Once people have lost their homes, they have to live somewhere...and there will be lots of foreclosed or 'fire-sold' properties that are 'available' for rent..

Housing sales are parabolic , and after a time (when the upper class decides) housing will spring back, and a new round of 'gentrification' will start, and push the middle classes back into the market, and at ratcheted up prices..

We are very predictable.. we fall off the merry-go-round, and as soon as we can catch the rail, we climb back on...We just do not control the speed of the thing:(

[PsycheCC]

107. SoCalDem, what you say makes good sense,

but boy is it depressing. Do average Americans really control very many aspects of our lives? Or do the rich just allow us the illusion of control to keep us docile? What a downer. Makes me want to go picket somewhere.:yoiks:

[PsycheCC]

68. One Last Kick for a Good Thread

:kick:

[BlueStateBlue]

75. kick

One good kick deserves another!

[ProudDad]

76. One more nail in Capitalism's coffin

There are alternatives to the robber barons...

For a (somewhat long) discussion of the bankrupt capitalist system:

http://www.monthlyreview.org/0705jbf.htm

"With the demise of the rival system represented by the Soviet bloc this process of neoliberal restructuring, which had been taking place throughout the 1980s, became if anything more intense and came to be known as economic globalization. It was given new institutional bases through the creation of free trade agreements, such as the North American Free Trade Agreement, and through the formation of the World Trade Organization, which joined the International Monetary Fund and the World Bank as institutional machinery for enforcing the capitalist rules of the game at the international level.

The result has been a growing polarization between rich and poor in every country of the capitalist world and between rich and poor countries generally. None of this has served to increase the rate of economic growth within the world system as a whole, which has continued to stagnate. Yet wealth and profits at the top of capitalist society have skyrocketed, with a few hundred individuals at the apex of the world system now enjoying a combined wealth that exceeds the aggregate annual income of billions of people at the bottom. "

[unlawflcombatnt]

78. Polarization of Wealth

ProudDad,

I think the polarization of wealth has reduced global production and economic growth. It has reduced the labor income that creates the demand for production. While global wages have declined, potential investment capital has increased. I say "potential" because that extra money is not invested if there are no investment opportunities. That's the situation at present.

The goal of capital investment is to make money from sale of products. If the wealth of the lower 98% of the world population goes down, so does the availablity of spendable consumer income. It is consumer income and spending that create demand for production.

It is the "demand for production" that creates investment opportunities. If there is insufficient money to buy the products of capital investment, then that "potential" capital investment won't be invested. Since there are limited productive investment opportunities, excess wealth is put into savings and bonds/treasuries. This might help explain why long-term rates have remained low, in spite of increases in the prime rate. There is simply an excess of investment capital, in relation to the available investment opportunities.

Thus, that potential capital is socked away in bonds and treasuries. Since money from that potential capital is not in circulation, it won't be used to purchase goods. As this maldistribution of wealth worsens, the money in circulation to buy goods will decrease. This reduces demand for production. If demand for production decreases, so does the demand for labor, and the aggregate wages those workers would make. Aggregate wage decrease further decreases aggregate consumer spending and demand. This vicious cycle just goes on and on, as the world maldistribution of wealth worsens even more.

I agree with your concern about the "polarization" of wealth. Capitalism will destroy itself if this trend continues.

[PsycheCC]

79. I Think I'm beginning to get the Picture

"If demand for production decreases, so does the demand for labor, and the aggregate wages those workers would make. Aggregate wage decrease further decreases aggregate consumer spending and demand. This vicious cycle just goes on and on, as the world maldistribution of wealth worsens even more.

I agree with your concern about the "polarization" of wealth. Capitalism will destroy itself if this trend continues."

This is really interesting, and it bears out my experience of daily life. It seems as the rich get richer, workers DON'T benefit, despite all that hype about investment creating jobs. In the end, capitalism couldn't survive without enough money in the hands of consumers to buy product.

The rich will lose their market and also end up losing money. This is only right since they are too greedy to share the wealth enough to allow the rest of us to buy their stuff. Thanks Unlawful and Proud Dad. Keep writing! I'm really staring to get this economics stuff! Anytime you need a Shakespeare lesson, let me know. ;-)

[newportdadde]

82. I'm also a big believer in a transaction driven economy.

My theory for what has been going on now is that we are having a lowering of living standards for US and simultanious rising of living standards for countries such as India. Eventually we meet somewhere in the middle.

So is that the goal of the corporations.. to string us out long enough that China can come online to purchase and attempt to make up the differece? I'm not sure.

My dad has been talking about this since the 80s when the unions were beginning their cycle of busting, that you cannot take out good paying jobs and keep replacing them with garbage and not have it show. I think we got a reprieve in the 90s with the internet boom, but of course that has brought in a whole new set of outsourcing issues, this time against the white collar market.

At this point I cannot see a scenario that does not end with a lot of pain for us as a nation. Perhaps it will just continue to happen slowly the water getting hotter to were we never really notice or perhaps it will all come to a head with a crash. But at least at this point I just don't see it ending positively if we stay on our current course.

[WhiteTara]

77. kick

[NVMojo]

80. I live in a boom and bust mining town in Nevada and bankruptcy

has saved the futures of more than one miner in the west. What bothers me about Harry Reid supporting the bankruptcy bill is that his own dad was a miner, lived in a boom and bust mining town, went belly up and eventually committed suicide in Searchlight, Nevada ...I would think he would understand that there will be circumstances in life where unfortunate things happen and we forgive debts. It's even in the freaking Bible! I want to ask Reid about his decision to his face and debate that issue with him.

[unlawflcombatnt]

81. Me Too

NVMojo,

I'd like to ask him that as well. I know who pulled Joseph Biden's strings on this one. He lives in the home state of credit cards. He was certainly a disappointment, but not a surprise. But I don't understand what got into Harry Reid. And I'd also like to know what got into Mary Landrieu of Louisiana, who also voted in favor of the Bankruptcy Bill.

[AzDar]

83. Although I've been shouting it to the rooftops, since I first heard of

it (and nearly fainted!)...I don't think most people REALIZE what horrible consequences this bankruptcy "reform" bill is REALLY going to have on the average American. It has not been widely publicized that I'm aware of; I mentioned it to my usually politically "aware", (and unfortunately, Republican) former college roommate some weeks ago, and she flat out did not believe that such Draconian and sweeping reform had been enacted. She later called and apologized, after researching a bit.
However, I think her initial reaction pretty much exemplifies how disconnected (thanks in no small part to the media) much of the country is regarding what this legislation actually means to one's financial future.
When October rolls around, maybe, just maybe...It will be torch and pitchfork time.

[unlawflcombatnt]

84. Bankruptcy Bill

AzDar,

You are so right. There has been relatively little publicity about the bill, as a result of the irresponsible reporting of insignificant events, such as the Michael Jackson trial, Paris Hilton's engagement, etc.

The mainstream media needs to do a public information series on this bill so that everyone knows what it will entail. At present, all that's available is the distorted reporting by a number of sources that are serving certain special interests.

When the bill goes into effect, it's going to cause an economic decline. A BIG one.

[unlawflcombatnt]

86. Housing Bubble Link

I found a great new link to informative article on the housing bubble. It is a pdf file and it was written by economist Dean Baker. It gives some excellent statistics on the housing bubble.

Among them are the following:

The housing bubble has created $5 trillion of artifical wealth.

Loss of this wealth would reduce our GDP 1.5% to 2.5%

The deflation of the housing bubble, combined with the loss of demand for housing construction, would cost us 5-6 million jobs.

The link is:
http://www.cepr.net/publications/housing_fact_2005_07.pdf

[PsycheCC]

87. Bursting bubble could cost 5-6 million jobs??? Thanks for the link.

I'll check it out. Those are some serious numbers.

[WCGreen]

89. Why do you think MBNA went on the market....

They couldn't make it profitable anymore with the new bankruptcy law coming on line. So they sold out to a more reasonable and staid financial institution to mask the billions they will loose in future income once their careless lending policy's are curtailed....

MBNA lobbying for the bankruptcy bill is like a helpless alcoholic lobbying to outlaw liquor....

Stop me before I lend again...

Their loose credit requirements drove many people into the bankruptcy court. Instead of fixing their lending policies, they lobbied long and hard to protect their way of doing business....

Fuckers. And that snot nosed kid now owns the Cleveland Browns....

And we paid for his fucking stadium.......

The rich get filthy rich while the ret of us just get filthy.....

[unlawflcombatnt]

93. MBNA & Bankruptcy

I think MBNA acted like a housing speculator trying to get out of the housing market before it collapsed. The management sold out to Bank of America before their credit card business took a nosedive.

Bank of America picked up a larger share of the market as a result, so they have less competition. With one less competitor, they can charge higher interest rates as a result.

It will be interesting to see what happens in October, when the "Bankruptcy-Sharecropper" bill goes into effect. I'd recommend to anyone who is considering bankruptcy to complete the process real soon.

Most consumers aren't going to cut back on their credit card spending right away. But those who bankrupt after the bill goes into effect will be immediately forced to spend less money, because they'll be spending more to pay off their bankruptcy. This is going to cut into consumer spending, and it will cut in even more as time passes.

This is not going to help our economy. With consumer spending tenuous at present, the bill is going to create problems very quickly. If Greenspan is still raising interest rates by that time, it will make the problem even worse.

Greenspan will continue to raise interest rates long after he should have stopped. Raising interest rates is a signal that Greeenspan, in his infinite wisdom, thinks the economy is doing well enough to tolerate increases. If he stops, it signals to the financial world that the economy is slowing down. So he won't stop until the economy has slowed down a lot, because he doesn't want to send that signal.

Sometime after October we face the prospect of consumer spending dropping from several sources. The 1st one, the bankruptcy-sharecropper bill, is a guaranteed source of decline. The bursting of the housing bubble is another possible source, the likelihood of which grows daily. Further interest rate increases will probably increase credit card interest rates, subtracting interest payments from consumers' spendable income.

I'd strongly recommend to anyone considering a home purchase to wait. Home prices are almost guaranteed to decrease in the future, given the financial situation we're heading for. Fasten your seatbelts folks, the road ahead looks perilous.

[BlueStateBlue]

112. Re: Home prices are almost guaranteed to decrease

Do you promise? I've been waiting this stupid thing out for three years now. I'm living in a shoebox (but socking away 50% of my net income). Please tell me it's going to be over soon...

[WCGreen]

118. Yea they will....

But not in the average home market...

But look for an uptick in forclosures in areas that fueled speculation....

Like if your in a big city, the place the media thinks is hot,,

In Cleveland it;s the Warehouse district or Treamont.....

[unlawflcombatnt]

122. Home Price Decrease

BlueStateBlue,

I think it's almost guaranteed. What is far from certain is when. However, the bubble is near bursting now, in spite of the fact that mortgage rates have continued to decline over the last year. Eventually those rates are going to go up. When that happens, home prices will decline. Again, however, when the mortgage rates will go up is not at all clear. Last week's average mortgage rates in southern Calfironia increased from 5.194% on June 29th to 5.236% on July 5th.

If you haven't gotten a chance to read economist Dean Baker's article on the "Housing Bubble," you should read it. It's very encouraging to those of us who want prices to decline. (Unfortunalely, it's not very encouraging about the economy.) Again, here is the link:
http://www.cepr.net/publications/housing_fact_2005_07.pdf

[BlueStateBlue]

125. Thanks for the link to the report

It makes a lot of sense to me, and gives me hope that I'm doing the right thing in refusing to buy now. Thanks again.

[Heewack]

94. Unbelievable

"The new bankruptcy bill will make consumers less willing to spend money and less willing to use their credit cards to make large purchases. Those who would have otherwise been able to declare bankruptcy, will have to spend more of their money paying off their debts. They'll have less money to spend on consumer goods, especially homes."

So, you are saying because consumer's can't declare bankruptcy as easily they will be less likely to spend money they never intended to pay back in the first place?????

Spending money is spending money, whether it gos to buying stuff or going to paying off debts it's all part of the same economy. The percentage of people that actually declare bankruptcy is so small compared to the overall number that their hypothetical decrease in consumer spending would have ZERO effect on the consumer goods economy.

To the last part about less money to spend on homes. If a person is in that much trouble economically the last thing they need to be spending money on are homes.


I was staunchly against the bankruptcy bill, but the claims you are making here are beyond ridiculous.

[unlawflcombatnt]

95. Bankruptcy & Consumer Spending

Heewack,

"So, you are saying because consumer's can't declare bankruptcy as easily they will be less likely to spend money they never intended to pay back in the first place?????"

That's EXACTLY what I'm saying. Because now they will have to pay back that money "they never intended to pay back in the first place".

Consumers will be paying off bills that they could have bankrupted in the past. Instead of making new purchases, they will spend their current "consumption" money paying off old debts. This will reduce consumer spending and reduce economic growth.

There is nothing "ridiculous" about this. In fact, there's no question whatsoever whether this will happen. It will happen. The "new" bankruptees will have less money to spend than they did in the past following a bankruptcy. Plenty of people have declared bankruptcy in the past, but their ability to make future purchases with cash was minimally affected.

Now that ability will be drastically reduced because they'll be paying off much of their bankrupted debt during the next 5 years. At some point, non-bankrupted consumers will reduce their credit spending because of fears of bankruptcy, and the possibility of long-term financial ruin.

[Heewack]

96. Your thinking is inherently flawed.

"Consumers will be paying off bills that they could have bankrupted in the past. Instead of making new purchases, they will spend their current "consumption" money paying off old debts. This will reduce consumer spending and reduce economic growth."

Spending is spending. Whether it goes to buy new goods or paying off old goods the money still flows into the economy. If one is defaulting(bankruptcy) on goods previously purchased, or new goods that they are buying on credit, taking your analogy, it makes no difference, IT'S A COMPLETE WASH. If someone is spending money on credit then it matters not whether their actual cash dollars are paying off old debt or new debt. You're theory is lacking in any substance.

[unlawflcombatnt]

98. "You're theory is lacking in any substance."

Heewack,

"You're theory is lacking in any substance."

You're wrong again. And again you've finished with another of your subjective personal comments. You've simply run out of any other arguments.

It makes all the difference in the world whether the consumer is paying off past debts, or spending the same money on current purchases. Paying off past debt contributes nothing to current consumer spending and demand for production. In fact, it subtracts from it. In contrast, using the same money to make current and future purchases maintains aggregate consumer spending and aggregate consumer demand for production. Allowing consumers to bankrupt and keep more of their wealth allows for more current and future consumer spending. Preventing bankruptcy reduces future consumer spending.

The same parallel can be made with businesses that bankrupt. Bankrupting and wiping the slate clean allows the owners to keep more of their wealth. This allows them to return and invest another day, which would have been impossible without bankruptcy filing.

In the case of consumers, bankrupting and wiping the slate clean allows them to return and "consume" another day. The ability to consume another day will be greatly reduced with the new bankruptcy legislation. Given that consumer spending is 2/3 of economic activity, this will reduce economic activity and economic growth.

[damnthetorpedoes]

97. Creative destruction is essential

to capitalist development. And yes, it eats homes, jobs, lives, etc. A liberal (democratic socialist, welfare) state tries to absorb these dislocations. America has been that kind of state for 70 years. We are definitely dismantling the apparatus now.

Somewhat intemperate and technically lightweight analysis. This won't be the first crisis of excess production, or the first housing bubble to pop. We'll survive, but it will take a real bite out of the ass of the American middle class.

And that, ironically, is the best hope liberals have of regaining power again in this country, if the electoral process can be salvaged from this mess and we remain a democracy. Of course, mob violence might ensue (you have a future as a polemicist -- clearly you rouse the DU rabble).

Read the work of David Harvey or Lash and Urry sometime. It's more through-the-looking-class than you seem to think.

[unlawflcombatnt]

99. Ravi Batra

Damnthetorpedoes,

Feel free to offer a more temperate and more heavyweight analysis.

As for reading, I'm sticking with Ravi Batra's "Greenspan's Fraud." You might also find Batra interesting.

[damnthetorpedoes]

100. ROFLMAO

eom

[PsycheCC]

101. ROFLMAO....

Now that's a "more temperate, more heavyweight analysis." Very impressive!

[damnthetorpedoes]

102. I don't waste complex analysis

on people who don't read serious work.

[Name removed]

106. Deleted message

Message removed by moderator. Click here to review the message board rules.

[Name removed]

116. Deleted message

Message removed by moderator. Click here to review the message board rules.

[PsycheCC]

117. You're right. I don't know much about economics. That's clear

from my posts. I'm obviously reading here to learn. I do recognize someone who enjoys poking holes in others, claiming they are just too stupid to understand his far more intellectual view.

Interesting that "creative destruction" is a commonly used argument to justify lost jobs due to outsourcing. It strikes me as a betrayal of American workers. I am aware that there certainly are Democrat "free-traders" who don't despise outsourcing, but far more Republicans than Democrats support it.

Whatever your position is, since you are above bothering to explain it to an "ignoramus," you must know that your tone of superiority will alienate anyone who might otherwise try to dialog with you. Of course, you aren't interested in dialog with someone who is simply a waste of your valuable time.

I like Unlawful's posts. They make sense to me and, clearly, to many others here. You might have made sense to me too, if you had bothered to try. Now, I've wasted enough of my time.

[damnthetorpedoes]

119. if you ignore what i do explain

what point is there in explaining? i did not invoke "creative destruction" to "justify" job losses, but to explain an inherent part of the business cycle. unlawfulcombat acts like he is inventing marxist political economy every time he posts. his writing is very derivative and urgent and shrill, and very short on any sort of context. anyone who bothers to read actual scholarly economists and to take a somewhat longer historical view can see things in a more nuanced way, which is not to excuse or justify the current kleptocracy or minimize the effects of globalization, free trade, screwy tax policy, speculative bubbles, or anything else. it's just that the shrillness of his analyses is more about his own need to be taken seriously as an angry pundit.

among other things, the current crisis provides some real opportunities both on a political and an economic level. imagine if you had sold the nasdaq short in January of 2000?

if you are truly interested in Schumpeter's "creative destruction" theory, here's a good place to start:

http://www.minotstateu.edu/econ/drhuenneke/schumbiz.html

I'm not a republican. I'm a flaming radical Marxist. I actually think I find unlawful's posts so annoying because unlike him I *root* for the big crash. it's the only way we can take back this country for the left. look at what the depression did -- 70 years of a liberal welfare state followed, and that's what we are losing now. bring on the crash. batten down the hatches. and go short on mortgage-backed equities.

[PsycheCC]

128. Now This is Something I Can Communicate About

Yes, I really am interested in learning. Thank you for the link to the article on Schumpeter’s Creative Destruction Theory. It is certainly interesting, and I don’t claim to have the background to fully understand it, but it raises a few questions for me. These “gales of creative destruction” would appear to hurt mostly the workers who find themselves trained for outdated jobs. Quoting the article, “Why is the whole economy not growing? Because the process of creative destruction is happening. Resources are being diverted from dying industries and output in those industries is being reduced.” This obviously focuses on drop in product, but of course workers will also lose their jobs. It would seem that entrepreneurs could just go on and try a new innovation with barrels of investment money. I understand that government tries to help the workers by making retraining available, but this sort of job loss is still a traumatic event in any life.

So I guess my first question is--Is there no other way to achieve a healthy economy? I agree that innovation is good, and it must certainly stimulate the economy. But the idea of entrepreneurs stirring things up, trying to achieve a monopoly and then using that monopoly to earn obscene levels of profit seems wrong. I think of pharmaceutical companies who justify the high price of drugs by saying research is expensive. Yet their profits are sky rocketing. Something about this elbowing out the completion and then raising prices just because you can seems wrong. Doesn’t government exist to keep such things from happening? And yet, the article mentions Microsoft using Schumpeter’s ideas to defend itself in maintaining its monopoly. It seems like unfair competition. I know life isn’t fair, but I’m just asking--Is Creative Destruction the only way to have a healthy economy? It seems barbaric to me in that the rich get richer and the rest of us are pulled along in the storm of the gale.

Second, I’m having trouble following demand in this theory. I read it carefully a few times, and still it seems to me that demand sort of magically appears, or at least appears in greater quantity than I would expect given the relatively few people who would be earning more money and buying more product. I note that this theory runs somewhat against Keynes (as I understand him). The article speaks of Keynes not realizing that innovation created long periods of expansion followed by shorter periods of contraction. So am I right to assume that Schumpeter didn’t share Keynes’s interest in demand? What I understand about supply side economics is that supply is supposed to create demand. If one creates the right product at the right price, demand will follow. Well, this seems illogical to me. If real wages are dropping, and people have less money, where will they get money to buy even the most wonderful innovation? To me, demand is important. So, how does demand fit with Creative Destruction?

Since I’m still not sure whether you desire to take time on this, I’ll leave my questions there for now. Regarding Unlawful, I think you may have a misunderstanding about his motivations. He can certainly speak for himself, but if you haven’t visited his blog, you might find some interesting background there.

Since you are Marxist, I wonder if you can say what Marx might have thought about Creative Destruction? Feel free to offer further links if you are so inclined.

[NashVegas]

196. Discordian Theory in Economics? Interesting

I have no credit cards. I have no loans or mortgage or any other outstanding debt, thank goodness. I know people who have up to 20k on their credit cards and it's freaking nuts!

I don't make a lot of money. Although I'm now in the upper 51%, for the first 10 years of my post-collegiate career I never made more than $16k. Never had first-hand purchased furniture until about six or seven years ago. Most of my furniture still comes from consignment shops.

It is amazing how many things Americans get soaked into buying - into borrowing money to purchasing - that we don't freaking need! Over-extending credit has made virtual slaves of so many in our country - afraid to make a peep of discontent for fear of losing their nice entertainment systems and SUVs and cell phones and cable TV. These slaves hold us all back from Democracy.

If this bill forces people to rethink their spending habits, it can't be an *entirely* bad thing. The rich who skate off and do well from it will only do so for a limited time, unless they put all of their investment capitol into collection agencies.

Economics, according to Crisco: the art in which the few who must have more and more and more, are able to convince the majority, who are content with enough, to contribute the excess products of their labor to the first guy's bank account. One person can only create so much wealth. The person who demands 'more' needs such chumps to accomplish their goals.

[CWebster]

120. Nice. Thanks for casting yourself as an elitist snob

with little or no substance to offer. Who needs the Right to marginalize the Left when you do an admirable job of it yourself with no assistance.

[AX10]

110. kick

[theoldgeezer]

114. I have to take some issue with you

If the economy is driven by spending on credit that will be discharged in bankruptcy, then it is spending that SHOULD be quenched, because it is creating a bubble that has to burst. The less it is allowed to happen, the less damage it can cause.

I don't think that it is a bad thing to discourage excessive or risky debt, or debt that is unable to be serviced. This isn't a defense or criticism of the bankruptcy bill, just a commentary on your analysis of discouraging credit spending.

[unlawflcombatnt]

124. Credit and Consumer Spending

In general I agree with you. We need to replace consumer "deficit" spending with income financed spending. However, due to wages lagging behind productivity, we can't purchase all that we produce through wages. Without borrowing, we would have a severe consumer spending and demand deficiency. This was a big part of the Great Depression. So industry and the government facilitate borrowing to maintain demand and consumer spending. If they did not, we'd be in the middle of depression right now. Workers simply aren't making enough money to maintain the necessary demand.

What really needs to happen is for wages to rise so that our country's production can be purchased through income, rather than borrowing.

I certainly think we'll get in trouble by supplementing the needed consumer spending with borrowed money..

The big problem with the bankruptcy bill is that is going to reduce current and future spending of those involved. Instead of money being spent on new purchases and stimulating production demand, they'll be spending that money to pay off old debts to banks and creditors. That money will contribute nothing to the consumer spending and demand necessar to stimulate further production. As a result of this bill, consumer spending, which drives our economy, will be reduced. Considering that consumer spending is 2/3 of economic activity, this loss of spending will hurt our economy.

[unlawflcombatnt]

134. Graph: Home Equity Extraction

Here is an interesting graph showing the dramatic increase in home equity extraction. In other words, the increased amount of money going into the economy that's been borrowed off home equity.



This graph helps explain why consumer demand has not decreased while wages have decreased. Consumers have supplemented their spending with money borrowed off their home equity. Again, this is not a sustainable source for maintaining consumer spending.

[PsycheCC]

167. Now That's a Powerful Picture. Don't they worry about losing their

homes if they have unexpected expenses? I wonder how this extracted money is being spent. More for leisure/entertainment or just to pay the basic expenses each month? Do you have any info. on this Unlawful, oh man of many statistics? :think:

[unlawflcombatnt]

169. Home Equity Extraction

PsycheCC,

I don't have any exact numbers on how the money's being spent. At least some of it is being spent to buy more homes, however. And this helps keep homes unaffordable for many people, because the increased demand and reduced supply increases the prices even further.

[unlawflcombatnt]

146. Missing Link

I was finally able to re-locate the missing housing link I had tried to post on another housing-related thread.

This is the link to the article where California Association of Realtors President, Jim Hamiltion, states that 3/4 homes in San Diego are purchased by repeat buyers. In other words, they're being bought for investment purposes, not as a place for the buyer to live.

The link for this artilce is:

http://en.ce.cn/World/Americas/200505/07/t20050507_3768478.shtml

[unlawflcombatnt]

150. Mortgage Rates Increase for 2nd Week in a Row

Mortgage rates nationwide have increased for the 2nd straight week. According to Freddie Mac, rates on 30-year fixed-rate mortgages increased to 5.66% from last week's 5.62%.

15-year fixed rate mortgages also increased to 5.25% from the previous week's 5.20%.

A rise in interest rates will definitely slow home appreciation. It will be interesting to see if this trend continues.

The link for this article can be found at:
http://news.yahoo.com/news?tmpl=story&cid=509&ncid=509&e=15&u=/ap/20050714/ap_on_bi_ge/mortgage_rates_1

[AX10]

151. It's going to be just horrific when the economy comes down.

[unlawflcombatnt]

153. Bubble Bursting

AX10,

You're so right about that. One article I read stated that 43% of our GDP growth is related to housing. When that collapses it's going to be a much bigger mess than the stock market bubble bursting, due to the fact it affects far more of the middle class than the stock market does.

The housing bubble is built exclusively on debt. Buyers have borrowed money to purchase homes at ridiculously low interest rates, allowing more people to buy homes, more people to buy more than 1 home, and for people to buy more expensive homes. Furthermore, many speculative buyers have borrowed off their previous home's equity to buy multiple homes. This artificially increases the demand and artificially decreases the supply, both of which increase home prices. Thus, those 2nd homes are paid for by borrowing off the artificial appreciation in equity of their 1st home . They're borrowing off money that doesn't really exist. In so doing, they're further increasing already overinflated home equity values. This simply will not continue indefinitely, and most people know it.

Added to this, much current consumer spending is being financed by borrowing off overvalued home equity. This is a time bomb waiting to explode. The only question is when.

[unlawflcombatnt]

166. Housing Bubble Deflation ?

June's "Housing Starts" number was unchanged from May's 2.004 million annual rate. Again, May's number was downwardly revised from the previously posted number of 2.009 million to 2.004, which makes it look as though housing starts didn't decline over the previous month. The housing starts number came in well below Briefing.com's estimate of 2.075 million. Growth in housing starts has completely stopped. The number of housing starts is now below the level it started at this year, and is well below its February peak of 2.228 million per year. This marks a -10% change since the February 2005 peak. This slowdown implies builders are anticipating a slowdown in new home sales. The following graph depicts this decline:



Building permits for June were 2.111 million. This was an increase over May's 2.062 million, but a decline over April's 2.148 million. June's building permits have dropped down to the peak levels they achieved during the last half of 2004. This is depicted by the blue line in the above graph.

The growth in new home prices has also declined. May's 2.5% increase is less than April's 4.5%, March's 7.5%, and Feruary's 8.1% price increase. If this downward trend in price increases continues it will be in the negative category within a few months. The following is a graph of new home price increases:


The entire Briefing.com section on home sales can be found at:
http://www.briefing.com/Silver/Calendars/EconomicReleases/newhom.htm


Given that mortgage rates have been increasing since the beginning of July, and that more prime rate increases are likely, it appears slowing in the rate of home price appreciation is almost guaranteed. The following is a link to a graph of mortgage interest rates:
http://www.bankrate.com/usergraph/WebForm1.aspx?tf=31&ct=Line&prods=1&gs=400,220&st=zz&c3d=False&web=brm&cc=1&web=brm


It appears the Housing Bubble may be starting to deflate. If Greenspan continues to raise interest rates, it's even more likely that some "deflation" will occur.

[PsycheCC]

171. Interesting Home Price Graph. Thanks for the links!

[unlawflcombatnt]

172. Further Evidence of Slowing

There is further evidence of slowing from today's news. I'm posting this letter here. I have also posted in the thread "Housing Bubble Deflation?" (I want to make sure everyone can find it.)

The Mortgage Bankers Association reported a decline in home purchasing for the week ending July 15th. The MBA's purchase index, which is a measure of loan applications for homes, declined 0.1% to 488.7, after dropping 6.1% the previous week.

Fixed 30-year mortgage rates increased 10 points from the previous week to 5.72%, from the previous week's 5.62%.

Optimism by U.S. home builders also declined in July. The National Associatin of Home Builders/Wells fargo Housing Market index dropped 2 points to 70 in July, from June's 72.

The link for this Yahoo News article is:

http://news.yahoo.com/s/nm/20050720/bs_nm/economy_mortgages_dc;_ylt=Ag58nfwMo0TO9dEP99awszyyBhIF;_ylu=X3oDMTBiMW04NW9mBHNlYwMlJVRPUCUl

Nationwide construction of new homes has declined in the Northeast, Midwest, and West. The Northeast showed 0.5% decrease in June. The Midwest was down 12.1%. New home construction in the West declined a whopping 10.4% in June.

Single family home construction declined 2.5% in June.

The link for this article can be found at:
http://www.nahb.org/news_details.aspx?newsID=1546

Though housing "permits" increased, they are poorly representative of future housing demand, More are obtained currently due to increase in local regulations, causing builders to obtain more in advance than in the past. In addition, "permits" require little financial commitment, unlike actual housing "starts."

Today's releases, combined with yesterday's reporting of 0.0% increase in Housing Starts, indicates further slow-down in housing market growth. The housing bubble appears to be losing some steam. With further prime rate increases on the horizon, and the implementation of the new bankruptcy bill in October, further deflation appears likely.

[PsycheCC]

175. Interesting Point about Housing Permits

You wrote: "Though housing 'permits' increased, they are poorly representative of future housing demand, More are obtained currently due to increase in local regulations, causing builders to obtain more in advance than in the past. In addition, 'permits' require little financial commitment, unlike actual housing 'starts.'" So when they give increased permits as evidence that the housing boom continues, it doesn't really mean much since a permit is not necessarily a future house.

[unlawflcombatnt]

176. Housing Permits vs. Housing Starts

PsycheCC,

That's it exactly. There is no hard commitment to build a home, just because you've obtained a housing permit. It just means you've taken care of the legalities necessary to start construction. In contrast, a housing "start" means you've actually invested some money to begin construction.

[PsycheCC]

177. So it's just more fodder for the spin machine. Thanks, Unlawful

[unlawflcombatnt]

173. Housing Price Graph - West

Below is a graph of homes actually sold in the West. Home prices are far outstripping income and inflation. Eventually this increase will end. There is simply insufficient income to continue to finance this.

[unlawflcombatnt]

174. Compare with This Graph

The graph below shows the relative change in wages from 2000-2004. There has been a decrease in median family income of 0.9% In contrast, there has been approximately a 50% increase in housing prices. This violates the basic "fundamentals" of home price increases -- that they be tied to an increase in family income. However, housing prices have far outstripped family incomes. This is not a sustainable increase. (Notice the difference in housing price increases vs. median family income increases since 2000.)





The most comprehensive assessment of the bubble that I've read was written by economist Dean Baker. He estimates the spending alone from home equity loans has been $300 billion/year, or about 2.5% of our GDP. Some put the home equity "extraction" and spending at $400 billion/year, or about 3.3% of our GDP. This doesn't even include the income from home construction employment, which is thought to involve as many as 5 million jobs. It appears from these numbers, that most of the growth in our GDP is attributable to the housing bubble.

Dean Baker's article can be found at:
http://www.cepr.net/publications/housing_fact_2005_07.pdf

unlawflcombatnt

[yourout]

178. Class warfare and we the middle class are ........

losing our ass. Add this on top of CAFTA and NAFTA and everyday
we become closer to a caste society like the Englands of Old.

[PsycheCC]

179. Even Greenspan admitted as much yesterday in his briefing of

a congressional committee (I don't remember which one). He said that with such high corporate profits, and wages remaining low, we are becoming too "bi-variate," I think it was. He would never say the wealth is poorly distributed; even that benign phrase would be too negative for him. Anyway, the point was that he admitted that it's "concerning" that workers have shared so little in the huge corporate profits which have resulted in MUCH greater wealth for the already rich. Before long, the owners in the "ownership society" will own the workers too.

[unlawflcombatnt]

181. I heard the same speech from Greenspan

PyscheCC,

I think I heard the same speech. This was the hearing by the House Financial Services Committee. Thanks for helping fill in some of the blanks on Greenspan's speech. Greenspan acknowledged that wage growth had been slow. As you you stated, Greenspan said there was a concentration of income in the "higher-skilled" workers. This may well be interpreted to mean in the higher income bracket.

During the same hearing, Mr. Bradbury of the Boston Federal Reserve stated that most of the productiviy increases have gone into corporate profits, not wages.

It was surprising to see that the most challenging questions to Greenspan came from Republican Ron Paul of Texas. He referred to John Maynard Keynes and his book on "General Theory." He also appeared critical of our fiscally irresponsible monetary policy, as well as suggesting a return to the gold standard.

It was all very interesting. And I taped it. I'll have to comment further when I review the tape.

unlawflcombatnt

[CWebster]

182. Notice how he frames it "higher skilled"

though a CEO can get a golden parachute even when they run a company into the ground and politicians can vote themselves obscene pay hikes even when budgets are breaking.

But still there is Greenspan's pandering to the "higher" upper class ruling class.

[unlawflcombatnt]

183. "Higher Skilled"

CWebster,

Yes, I certainly did notice that. Initially, I didn't catch on to what he was trying to pull. He was referring to higher "income," not higer "skilled." Furthermore, he was making a subtle suggestion that worker wages are low because they don't have the "skills" to compete.

The only "skill" American workers lack is the ability to live on $2/day. Until they learn this "skill," they'll continue to lose jobs to foreign workers that have more of this "skill."

unlawflcombatnt

[unlawflcombatnt]

180. Class Warfare

Yourout,

I agree with you. The most confounding part of current economic policies is that they are not best for economic growth. The consensus among most economists, prior to last November's election, was that our economy would "grow" more if there was a downward re-distribution of wealth. This is still true today, and it's very simple to understand. Someone has to be able to buy production.

If consumer income is insufficient to maintain the necessary demand, one of 2 things will happen. We will either suffer a catastrophic drop in demand leading to a depression, or consumers will maintain current their spending by borrowing money to supplement their incomes. This latter option is what has happened. It's how we've kept afloat during Bush's Economic Reign-of-Terror. Much of that borrowing has been from home equity loans. This has provided $300-400 billion per year in consumer spending. With a national GDP of $12 trillion, this has provided 2.5% to 3.3% of the consumer spending included in our GDP calculation. This is simply imaginary money, due exclusively to over-valued home equity. And in case it isn't obvious, that 2.5% to 3.3% makes up most of our GDP and economic "growth" over the last 5 years.

The housing bubble is on the edge of deflation. Mortgage interest rates have increased over the last 6 weeks. So have 10-yr. bond rates, which are believed to be tied to mortgage rates. Greenspan is still planning on raising interest rates further. This all puts the housing market in a very precarious position. Only time will tell how this plays out.

unlawflcombatnt

[DuaneBidoux]

184. And for those teetering under the weight of credit card debt you have a

little more than one month to declare bankruptcy before you join the ranks of the permanently poor and indebted.

In the meantime QUIT USING CREDIT CARDS. Give no more succor and comfort to these thieves and criminals. If you can't pay cash do not buy it!! Fuck the economy, save yourself first.

[PsycheCC]

185. Well said!!! Rah! Rah! Rah!

:bounce: :woohoo: :applause:

[unlawflcombatnt]

195. I've gone one step further

Most of my savings are in gold. I have about $500 in stocks, the rest is in Gold bullion. Corporate America can't spend my Gold coins, or loan them out. It the stock market crashes, or the housing bubble bursts, the Gold won't lose value. If the dollar crashes, the gold will increase in value.

This is my small step in not contributing to Corporate America.

unlawflcombatnt

[unlawflcombatnt]

186. NEW HOME PRICES DECLINE FOR 2nd STRAIGHT MONTH

NEW HOME PRICES DECLINE

New home prices declined 5.5% to $214,800 during the month of June. New home prices have declined 7.7% over the last 2 months, from April's high of $232,600.

New home prices have declined 0.4% over the last year.

30-year mortgage rates have increased over the last 3 weeks and now stand at 5.73%. In southern California, mortgage rates have been increasing for the past 6 weeks. The link for this is:

http://news.yahoo.com/s/ap/20050727/ap_on_bi_go_ec_fi/economy;_ylt=AgmPxLeg3IiV42f9f.D9OU6yBhIF;_ylu=X3oDMTBiMW04NW9mBHNlYwMlJVRPUCUl

10-year Treasury notes are now at 4.26%. This represents a significant increase from 3.97% on July 3rd of 2005. This is consistent with mortgage rate increases, and suggests this is a continuous, ongoing trend in rising mortgage rates.

unlawflcombatnt

[socalover]

187. Risky Housing Markets Becoming Riskier

Risky Housing Markets Becoming Riskier, According to PMI Mortgage Insurance Co.'s Summer Market Risk Index

Wednesday July 27, 8:00 am ET

http://biz.yahoo.com/bw/050727/275257.html?.v=1

"Boston, MA and Long Island (Nassau-Suffolk), NY continue to top the list with scores of 553 and 540, respectively, up from 534 and 511 last quarter.
San Diego has jumped to third place, with a score of 528, up 61 points from last quarter's score of 467.

PMI US Market Risk Index by MSA
Risk
MSA Index
--- -----
Boston-Quincy, MA 553
Nassau-Suffolk, NY 540
San Diego-Carlsbad-San Marcos, CA 528
San Jose-Sunnyvale-Santa Clara, CA 513
Santa Ana-Anaheim-Irvine, CA 512
Oakland-Fremont-Hayward, CA 509
Cambridge-Newton-Framingham, MA 469
San Francisco-San Mateo-Redwood, CA 459
Providence-New Bedford-Fall River, RI-MA 432
Riverside-San Bernardino-Ontario, CA 422
Los Angeles-Long Beach-Glendale, CA 421
Sacramento-Arden-Arcade-Roseville, CA 419
Edison, NJ 364
New York-Wayne-White Plains, NY-NJ 326
Detroit-Livonia, Dearborn MI 295
Newark-Union, NJ-PA 251
Minneapolis-St Paul-Bloomington, MN-WI 249
Fort Lauderdale-Pompano Beach- Deerfield Beach, FL 219
Average 213
Washington-Arlington-Alexandria, DC-MD-VA-WV 209
Denver-Aurora, CO 169
Warren-Farmington Hills-Troy, MI 168
Miami-Miami Beach-Kendall, FL 166
Tampa-St Petersburg-Clearwater, FL 166
Las Vegas-Paradise, NV 130
Baltimore-Towson, MD 124
Austin-Round Rock, TX 116
Virginia Beach-Norfolk-Newport News, VA-NC 109
Atlanta-Sandy Springs-Marietta, GA 106
Dallas-Plano-Irving, TX 99
Portland-Vancouver-Beaverton, OR-WA 95
Orlando, FL 94"


<snip>

[unlawflcombatnt]

194. Thanks for the link

Socalover,

Thanks for posting that link. This is completely consistent with New Home prices declining over 5% in the last month. Average hourly and weekly income has been declining since December. Prices cannot continue to climb while the average American's inflation-adjusted income falls. A housing price decline is inevitable.

unlawflcombatnt

[unlawflcombatnt]

191. Profits Graph

I just thought I'd add this graph of "manufacturer's profits" here. This graph if from the U.S. Census bureau. It shows the amount of profit per $ of sales. It seems like "profits" are the main thing that has "grown" in our economy.

Here's the graph:


unlawflcombatnt

[aion]

192. It is probably a bit unfair to start this graph at 2001

Surely Clinton gave more than 1% profit margins to the corporos. Starting this graph in a recession year is distortive, in my opinion.

[unlawflcombatnt]

193. Graph & Fairness

I think the graph is completely fair. It shows how profits per dollar of sales have increased steadily since 2001. There is little evidence of recession when one looks at the steady increase in the fraction of sales devoted to profits.

Though I don't have a graph of Clinton's years, I have seen the Dept. of Commerce's figures on relative profits vs. national income during Clinton's years. And it appears that the percentageof national income going to profits was less than it has been under Bush. But total profits were just as high, if not higher.

Again, this graph indicates what fraction of sales dollar goes to profits, not total profits. Total profits were as high, if not higher under Clinton, because total sales were higher. So businesses definitely did well under Clinton, but it was due to increased sales, not increased percentage of profit going to sales.

I'll try to find a graph of Clinton's years. If anyone beats me to it, feel free to post it here.

unlawflcombatnt