Let it crash

Total mortgage debt, according to the one number I could quickly find, is $10.7 Trillion. I could source that, but you can do it by googling in "U.S. home mortgage debt" or something like that.

Good idea!

(BTW the news coverage of all this in Oz has been incredible. Blow by blow accounts - minute by minute. Well, almost. I'm starting to feel I live in the US! )

"Let it crash!". Easy to say, very hard to deal with in real life.
I gather none of you have ever lived -at least as adults- a deep recession or a serious national financial crisis.
I have.
It's not fun. Not fun at all, I tell you.

If economics were ethical, then alright, Americans -both Wall Street and the public- need their commuppance. But it's not a matter of ethics, it's a matter of making, or letting a system work.
You want the system to work? Then the only way is to save the institutions and the very con-men that have screwed you -with your consensus-. Socialize the debt, after the speculative earnings were heavily privatized.
You don't want the system to work? Let it plunge into chaos. Let the whole world plunge into chaos, and start pronouncing the feared word: Socialism.

FB is a sharp guy, and worthy opponent.

Ethics has Zero to do with where we are now...

(great post, Zap)

Yep.

And I'm thinking of no jobs, a disappearing IRA, and other savings that FDIC couldn't possibly make good on in a general collapse.

Now, just a damn minute, feller. You mean, I'd get to help pay for it after deciding that the market were way over priced for my income? Yes, I could have qualified for one of those mortgages. It's easy to blame irresponsible lenders, but there's such a thing as irresponsible borrowers, too. Make 'em pay.

If i kill my parents and appeal to the insitutions( Legal/commerical/ government) to help my hapless predicament will the compassionate cellphone connected comrades in arms hug me?
No
in texas( bushes resident) I will get a quick justice and without toruture get executed.

But if I were a barbaric banker or banal tax evader
and due to my ignorant decision trillion or billion dollors gone astry,
then the same criminals( whether Dems or repubs) will break their election campaighn and sign a document to save the capitalistic Gandhis and MLK.
Laugh a lot.
China is a better country which had only polluted milk but Usa is a country which follows the holy unchecked barbaric market economy

Yeah. A number of pages ago, in response to a statement about "Letting it Crash" in order to punish Wall Street etc, Thomas (from Germany) wrote "I'm out" on that idea and talked about his country after the war. I echoed his opinion. "I'm out." This situation sucks but we can not allow the banking system to seize up. One of the next posts made mention of "cutting off your nose to spite your face."
In my mind, what Fbaezer says is dead on. We may not like the medicine; it tastes bad. But we need to take it.
(BTW, if I were a betting man, I don't think the Asian markets will regard this as particularly good. But I have been known to be really, really wrong about the stock market).

Sure. All true. This isnt about comeuppance, though, its about not postponing the consequences for future generations to deal with. If we get it right, fine. But if we dont, it will be our children living through the deep recession or depression.

rjb, The problem is that congress has not looked at other options. Current mortgages and property values cannot be estimated with any accuracy; the biggest weakness of the plan.

That's exactly the point.
Do you honestly think that "letting it crash" will lead to a better regulated market, and a healthier and ever saner economy?
If it were the case, I'd be with you. Like a good Marxist-idealist (excuse me for the oxymoron), I'd be willing to some personal and family sacrifice to get the Wheel of History rolling to the side of the People. It's not the case.

It would lead to a worldwide industrial massacre, job scarsity, inflation... and to unknown political solutions (which may me good, may be bad, may be very very bad... ask Thomas).

My older children are just starting in the job market. I don't want for them the harsh times I had to go through, or even harsher ones, in a context of a worldwide recession.

Thanks for your sincere words which i adore.
As a communist ( communism is state controlled system) I had quoted in this thread who oppose communism written by American non-communists.
If you preach a sermon you should stick to the rules you had stipulated.
As a cultured capitalitic oriented country why the hell this financial debackle disturb a young immatured lawyer and his counter contestant with war experience( both are still not presidents but aspirants to sleep in WH) stop their expensive drama and make a flying visit to get the blessings of the still powerful person?
If these two guys will make a common ground to put COUNTRY FIRST AND we/all should help the economy to work i beg one of these candidates should give up their aspirations and should shed a drop of tear for those who had lost their whole savings.
No It is not communism Not even consevatism but a pure unadultered barbaric criminalis( Capitalism)

I will say this one more time. I (the person who started this thread) am not talking about punishing Wall Street. I know that some people feel that way, but that is not what this is about. Not for me, anyway. I urge you to re-read the post that started this thread if you are still under that impression.

Not in the short term, no. But I really do not know what would happen if we fail to bail out the market, and apparently no-one else does either. What I think is that, knowing my government, attempts to fix this will in fact, not fix it, but prolong the problems for my children and future generations to deal with. If I thought, for a second, that they could get this right I would feel differently.

You said, FreeDuck, just to make it clear: "if we take it on the chin now we can save our kids and grandkids from having to take it in the gut later."

You'll excuse the capital letters, you know I'm not prone to use them.

You'll take it on the chin WITH the bail-out, anyway. The markets WILL be more regulated afterwards, anyway. Only, instead of an all-out purgue, it will be done little by little, to make it less painful, but mostly, politically MANAGEABLE. In the other scenario, things are terribly unpredictable: there's no way to do business in such an atmosphere.
In any case, a new ruling business class will emerge, as the other collapses. It will take several years, perhaps decades for this to happen. Capitalism is a great animal, who has this metamorphosis every now and then.

It is a matter of how not terribly wrong can they do it within reason...



(I do love my country, but this is getting ridiculous)

How 'bout this evening, rjb?

http://money.cnn.com/2008/09/25/news/companies/JPM_WaMu/index.htm?postversion=2008092519

No problem, I take your meaning.


You think so? Because in my mind I can see them plugging the market with tax payer money without requiring anything in return. Maybe I am just a cynic. I see the fear of socialism requiring that the tax payers get no stake in what the companies we are bailing out. The only path to economic growth we seem to understand is through spending. Maybe you are right and this will be corrected incrementally and less painfully. Maybe we take 10 small jabs to the chin instead of a knockout punch. But I think we might just be too stupid to do that.


I cant really argue with that.

I'll write briefly on my personal -and country- experience.

We had a financial crisis in 1982, when the foreign-debt interest exploded against us. IMF forced Mexico to very tight policies. The economy was sick with debt, but the hard part of the illness was iatrogenic (caused by the "doctor").
Inflation soared -to a 100% in 1982, to over 160% in 1987-. My real wage as a University professor was cut by half in the first year; then bit by bit until it was a third of the original one. During the first years, credit cards were a nightmare, until we finally controlled them, by tightening our belts very tight. I remember buying wholesale defective diapers (we'd use brown-tape to make them fit into our sons). Bleak times.
One day, a cartoonist drew the solution to our crisis: a world map, a passport, a plane ticket. I managed to go with my family to Italy for the worst year. When I came back, I gathered as many jobs as I could -7 jobs at one moment- until thing became better, under president Salinas.

The Big crisis came later, on december 1994. And it was just like the one the US is facing now.
President Clinton was key for the Mexican bailout, a scheme very much like the one proposed to the US Congress. Fobaproa was created (Banking Fund for Assetts Protection), and it was popularly known as Robaproa (Stealing Fund). Just like the proposed one, it was the socialization of debt after a huge privatization of speculative profit, and the price punishment for the selling of useless portfolios was not equal nor fair, protecting some banks more than others.
We plunged into a deep but short-lasting recession, during which my wage fell from about $7,000 a month to about $1,500, my wife lost her part-time job and the house we were paying became unpayable, because of the mortgage.
Luckily, the house on mortgage was the second house (outside Mexico City, next to a golf course). So we rented it, and used the rent to pay the mortgage (I will not abound about the crazy American from Michigan who rented and almost destroyed it, but later we had a priest tenant)... until the rent was less than the interest, let alone the capital. They had loaned us 256,000 pesos and after 4 years of payments, we owed 880,000 pesos. By the time, the quantity of unpaid mortgages had grown so much, and the banks had so many unsellable homes, it was obvious we could negociate. We stopped paying, negociated, paid 320,000 and saved the house.
In the end, the banking system changed a lot (international banks took over most of Mexican banks), we shall pay for the Fobaproa until 2016, but -in general terms- the true economic depression lasted hardly over a year.
Oh, and the crisis was enough to oust the ruling party from power... after 71 years of ruling.

sorry for my side remarks.
After the barbaric criminal dastarly terror attack in the early morning of 11th september. the present occupier of white house came very late to new your to mouth some rubbish english.
One is this. USA will protect you and go and engage yourself shopping.
11th september some 100 Germans and120 or so indians were killed..
Is shopping is such a vital business during this tragic days?
Here comes a jew whose name is karl marx or a nasty half nake fakir Gandhi or a bloody idiot MLK or a pathetic Nelson mandela or a lady( Not a lady di) who had uphold christianity.
The guy says after 11th september and do your shopping..
Accept my drop of tears for those victims anduse your critical eyes before the world get still worse.