Yesterday the latest unemployment figures for the US came out, with the rate now being at 7.2%. While that is not that threatening high yet, the pace in which it got there certainly is.
The Fed expects that unemployment will rise further throughout 2009

"Fed staff last month cut projections for gross domestic product and the job market, stating the unemployment rate was “likely to rise significantly into 2010,” according to minutes of policy makers’ December meeting. "
http://www.bloomberg.com/apps/news?p...601087&sid=aP0yWU4Juf8o&refer=home

So what are your thoughts, how high will the numbers go? When will we see a turnaround to a stronger economy?

Also this article got me a little worried:
"The report from the War College’s Strategic Studies Institute warns that the U.S. military must prepare for a “violent, strategic dislocation inside the United States” that could be provoked by “unforeseen economic collapse” or “loss of functioning political and legal order.”
http://www.newsmax.com/newsfront/mil...8/12/23/164765.html?utm_medium=RSS

Anyone have further info on this?

Lets put everything in perspective. During the 1930 depression the unemployment rate peaked at 24.75% in 1933. So even a 8-10% rate today would not come close to those scales.

Ultimately I dont see anything happening in the current economic crisis as being even close to a trigger point for national riots or a social meltdown.

Quoting Flexo (Thread starter): Also this article got me a little worried: "The report from the War College’s Strategic Studies Institute warns that the U.S. military must prepare for a “violent, strategic dislocation inside the United States” that could be provoked by “unforeseen economic collapse” or “loss of functioning political and legal order.” http://www.newsmax.com/newsfront/mil...m=RSS

I think you need to consider the source.

High taxation will spur civil unrest before high unemployment.

As much as I love conservative values, I look twice before I take NewsMax seriously. They come off w/some pretty far-fetched theories, somewhat akin to AFP. Would people start going nuts? Yeah, I think progressively they would. Let's see what his Obamaness can do, though, once he takes the reins and has his own Democratic Congress. Could be good - could be terrible. We'll see.

Quoting Mham001 (Reply 2): High taxation will spur civil unrest before high unemployment.

I think the revolt will come more from the fact that these taxes are going not to actually help the average person but are being used to bail out corporations that made stupid decisions or are just plain greedy.

People will accept high taxes if they feel that they are getting a return on them.

Quoting LAXintl (Reply 1): Lets put everything in perspective. During the 1930 depression the unemployment rate peaked at 24.75% in 1933. So even a 8-10% rate today would not come close to those scales. Ultimately I dont see anything happening in the current economic crisis as being even close to a trigger point for national riots or a social meltdown

Good point, CNN and Obama have been in overdrive mode to scare the hell out of the public. It's funny how they are using the unemployment rate to sound the alarm as nothing more than a way to try to sell Obama's huge spending plan.

Quoting Mham001 (Reply 2): High taxation will spur civil unrest before high unemployment.

Exactly, Obama realized that as a campaign slogan it was gold but in practice it would destroy us faster than what is going on now. You can't tax the death out of higher earners or business. They will just leave the country and go to cheaper lands thus killing more jobs. Keep the course Bush laid with lower taxes for everyone. It will work. Which behold is the course he is adopting now.

Quoting Allstarflyer (Reply 3): Could be good - could be terrible. We'll see.

I think the fact some of his own party balked at his original plan gives us some hope. Time will tell.

Quoting StarAC17 (Reply 4): I think the revolt will come more from the fact that these taxes are going not to actually help the average person but are being used to bail out corporations that made stupid decisions or are just plain greedy.

Untrue, you keep forgetting that the bigger earners and big business pay a majority of the taxes. These taxes do nothing but help the average person and help businesses.

Quoting StarAC17 (Reply 4): People will accept high taxes if they feel that they are getting a return on them

May work up in your neck of the woods but in the US we don't need that. If we raised taxes it would be a disaster. Hence why Obama is running away from his campaign promise. Thankfully so.

Quoting Allstarflyer (Reply 3): I look twice before I take NewsMax seriously

The Huffington Post of the right.

Quoting StarAC17 (Reply 4): People will accept high taxes if they feel that they are getting a return on them.

Boy I hope they never do. If it happens then individual freedom is on the way out the door and Marx has won.

As stated in 1930 the unemployment rate was in the 20% range. In 1982 it was in the 10-11% range and there weren't any "job" riots so I doubt there will be anytime soon. If democrats succeed in passing the check card legislation which basically gives unions free reign wherever and whenever they want I could see trouble, especially in the south in the right to work states but that is a different matter.

Quoting Flexo (Thread starter):

Was there "civil unrest" 16 years ago?

Quoting Flexo (Thread starter): So what are your thoughts, how high will the numbers go? When will we see a turnaround to a stronger economy?

Historically, if the government stays out of it, recessions last between 12 and 24 months. But with all the bailouts and "stimulus" spending going on, I expect this recession to last a lot longer.

Quoting LAXintl (Reply 1): During the 1930 depression the unemployment rate peaked at 24.75% in 1933

And while liberal historians have successfully painted FDR and his big-government "New Deal" as the man who led us out of the Depression, the don't like to mention that in 1939, 10 years after the great crash of '29, unemployment was still at 20%.

If government would just butt out, the economy would take a dive, unemployment rises, and the 90% of the people who are still employed save their money (as they are doing now - the US savings rate has jumped to its highest point in years in the past 6 months). While they save, they do not buy new cars, or refurbish their kitchens.

But after a year or two, when things are more stable, that pent-up demand starts to come out and spend again, and the economy starts going again.

Unless the government messes things up. Trillion dollar deficits are going to bear on people's minds, and in the expectation of higher taxes, they might not relax their spending habits, like what happened in the 30s.

In a recession, government should tighten its belt just like everyone else. Completely alien concept nowadays.

Quoting Flexo (Thread starter): "The report from the War College’s Strategic Studies Institute warns that the U.S. military must prepare for a “violent, strategic dislocation inside the United States” that could be provoked by “unforeseen economic collapse” or “loss of functioning political and legal order.”

Sounds just a teeny weeny alarmist to me. But I do expect that rational Americans are soon going to revolt against the insane spending in DC.

In the darkest days of the Depression we had food riots in Arkansas and other places and short lived groups like the Farmers' Holiday Association that blocked the roads into town and kept other farmers from hauling produce into town that couldn't be sold for the cost of production.. The nearest we came to civil unrest was taking a judge out to tar and feather him in Primghar, but it was reconsidered when he said he was just doing his job. It's going to be a long way before things get that bad again because in the main we are a remarkably law abiding people.



So no. Flexo, the demise of Festung Amerika in a Gazalike cloud of smoke is unlikely.
As my mother famously observed once,don't believe anything you hear and only half of what you see. Had she known of the internet she would have added "and only 5 per cent of what you see on the internet."

Quoting Mham001 (Reply 2): I think you need to consider the source.

Quoting Allstarflyer (Reply 3): I look twice before I take NewsMax seriously. They come off w/some pretty far-fetched theories, somewhat akin to AFP

Quoting DXing (Reply 6): The Huffington Post of the right.

Ok, got it, I didn't know they were that kind of a source...

Quoting NIKV69 (Reply 5): You can't tax the death out of higher earners or business. They will just leave the country and go to cheaper lands thus killing more jobs

While I agree basically, you folks in the US have no idea what "high taxation" even means. Work in Europe for a while and you'll start crying  

Quoting Dreadnought (Reply 8): Historically, if the government stays out of it, recessions last between 12 and 24 months. But with all the bailouts and "stimulus" spending going on, I expect this recession to last a lot longer.

  That's funny, it'll be interesting what's going to happen with the bailouts. They are the "big unknown" here I think. Personally I believe without government intervention we'd be looking at scenario like the twenties though.

Quoting Dougloid (Reply 9): So no. Flexo, the demise of Festung Amerika in a Gazalike cloud of smoke is unlikely. As my mother famously observed once,don't believe anything you hear and only half of what you see. Had she known of the internet she would have added "and only 5 per cent of what you see on the internet."

You're probably right Dougloid!
Although I have to say I do remain pessimistic about the near term future of the economy. Not a good time to be looking for a job.

Quoting NIKV69 (Reply 5): You can't tax the death out of higher earners or business. They will just leave the country and go to cheaper lands thus killing more jobs.

This statement is true to a point. Wealthier individuals and entities have kept the economy rolling, but they don't necessarily help American workers. They use savings from tax breaks to open factories and offices in developing nations where overhead and labour costs are low. Certainly American companies need a tax break in these tough economic times... but only if they invest in America. I'm appalled that Republicans are still staunch advocates of the laissez-faire economic policies that caused us to get into this mess in the first place. Clinton's liberalized homeownership policies only exacerbated the situation... making it easier for low-income people to become homeowners was not a good idea. That policy probably opened the door wide for housing speculators to buy numerous houses with no down payment whatsoever in the hopes of quick profits with inflated equity. But seeing as how Wall Street with its Ivy League economists bought that dog and pony show for quick profits and big bonuses is stomach turning. What this economic downturn has shown is that Corporate America (and to some extent government) can only be trusted as far as us taxpayers can reach.

Quoting Dreadnought (Reply 8): And while liberal historians have successfully painted FDR and his big-government "New Deal" as the man who led us out of the Depression, the don't like to mention that in 1939, 10 years after the great crash of '29, unemployment was still at 20%.

People say (mistakenly) that Hoover did nothing, thus the Depression came about. What about the Depression in other countries? Did they all also not do anything?

Hoover kicked hundreds of thousands of Mexicans out, raised tariffs on thousands of products (some people want this now), started the RFC, started the Federal Home Loan Bank Act in response to the "Hoovervilles" (did nothing, eh?), and increased income taxes to over 70% for top income brackets, raised estate taxes and corporate taxes.

Raising taxes during an economic slump is bad economic policy, whether you're a supply-sider or demand-sider like FDR and Keynes.

Quoting Flexo (Reply 10): That's funny, it'll be interesting what's going to happen with the bailouts. They are the "big unknown" here I think. Personally I believe without government intervention we'd be looking at scenario like the twenties though.

That's the problem. A sharp recession or depression cleans out the trash, as it were, and people can be confident that those companies that survive are well managed, and that it is safe to spend your money with them. It's a form of economic darwinism. These bailouts short-circuit the system, and in a year or two, when people should feel a bit more comfortable buying a new car or a house, they will know that many of the companies vying for their business are still badly managed, and only there because they got a bailout - who's to say if they are really viable? I think this will reduce consumer confidence and thus slow down the recovery process.

As far as the 20's scenario is concerned, yes, it would have been bad. But government intervention is what caused the meltdown in the first place, and I just cannot see how adding more government involvement is going to do anything except put a band-aid on a sucking chest wound. The free market is wonderful at fixing itself, and usually can do it within a relatively short time - 1 or 2 years.

The problem is that politicians have gotten it into their heads (helped by a gulible public and an idealistic media), that they have to be seen as doing SOMETHING, no matter how useless or counterproductive it may be in the long term - acting concerned and flailing about mindlessly is seen as politically better than letting nature take its course.

Quoting Flexo (Reply 10): Work in Europe for a while and you'll start crying

The top Swedish tennis stars of the 70s and 80s became residents of Monaco to avoid paying 50-60% of their tournament purse to the parasitic Swedish tax collector.

Quoting Dreadnought (Reply 13):

Good post, Dreadnought and I agree with most of what you said, but:

Quoting Dreadnought (Reply 13): But government intervention is what caused the meltdown in the first place,

How so?

Quoting IgneousRocks (Reply 14): The top Swedish tennis stars of the 70s and 80s became residents of Monaco to avoid paying 50-60% of their tournament purse to the parasitic Swedish tax collector.

Lots of German "celebrities" did that too and not too few got busted for tax fraud as they didn't spend the necessary time in Monaco (I believe at least 50% of the year)

More likely the greater problems will be increases in crime, drug dealing and other illegal behaviors as people look for ways to survive. Many others will find other ways to vent their frustration in constructive ways.
Early in the Great Depression, you had a large number of WW I solders who wanted now delayed payments for their service due to paid in the 1940's who marched and occupied Washington DC to pass a law to get that money paid out. They failed to get that payment to be made early and Hoover had to call out the Army - led by MacArthur (yes the one of WW II - Korean War fame and infamy) to remove them forcibly. It was the closest to violent protest during the Great Depression.
During the Great Depression, there were several socialist movements, some with racist, anti-Catholic, anti-Jewish and pro-Facist/Nazi views. Others took direct action to prevent property foreclosures with violence or threats of it. Others pressured governments (local, state and national level) to pass laws to help them or protect their property and better regulation of the financial services and banking - many of those policies still exist today.
That we do have a functioning democracy, and politicians that will do what it takes to deal with this crises or face losing in their next election, has a lot of affect on a hopeful resolution of this crises and minimse the risks of violent civil unrest.

Quoting Flexo (Reply 15): Lots of German "celebrities" did that too and not too few got busted for tax fraud as they didn't spend the necessary time in Monaco (I believe at least 50% of the year)

Well. Why do you think John Lennon lived in New York instead of London or Liverpool?

It's the taxes.

Quoting Flexo (Reply 15): How so?

We've gone through this before. Government programs intended to make loans cheaper instead populated the financial markets with mortgages with abnormal default rates. Without these programs (notably the Community Investment Act of 1977) these "bad mortgages" that blew up nver would have existed in the first place. The only reason banks sold them was because they were told that the government (Fannie and Freddie) would be willing to buy them. Otherwise they would not have sold them.

Quoting Dougloid (Reply 17): Well. Why do you think John Lennon lived in New York instead of London or Liverpool? It's the taxes.

That was during the high-tax environment of Britain in the 70's. Maggie Thatcher put a stop to that.

Quoting Dreadnought (Reply 13): The problem is that politicians have gotten it into their heads (helped by a gulible public and an idealistic media), that they have to be seen as doing SOMETHING, no matter how useless or counterproductive it may be in the long term - acting concerned and flailing about mindlessly is seen as politically better than letting nature take its course.

   -- good post Dreadnought.. What was President Bush thinking with these bailouts ...just devastating.


PE Obama is just trying to lower expectations and prepare for the unknown. I don't blame him ..its not suprising to me at all. I once worked at a well run profitable company , the owners hired a new CEO . In the first meeting with the owners this guy simply pointed out to the owner how bad things were in the company . The owner bought into the idea , this CEO simply let the company run like it was and faked it the rest of time ... he ended up being the hero . PE Obama is so over his head its boggling , but if he handles it correctly he can be successful.. I hope he does.

As far as the civil unrest , it will happen. We have plenty of people who even during good times cant make a living .. they will create trouble.

Quoting AGM100 (Reply 20): PE Obama is just trying to lower expectations and prepare for the unknown. I don't blame him

Yea but at the same time he is just driving the country deeper into despair and scaring people with his doom and gloom rhetoric which CNN is also running with. Plenty of economists do not agree with him but he won't bring them up. It was also a way to try to sell his plan which didn't work and also resulted in Pelosi even saying he isn't getting a rubber stamp which floored me. Truth be known recessions and economic downturns happen in cycles. It has been proven for the last 50 years. Happened in 99-00' and will happen aggain in 8-10 years. Will people lose their jobs? Of course, will businesses close? Of course. Yet we always come out of it with saving our acorns and riding it out. Instead of splashing the latest unemplyment figures in our face and scaring us into thinking it will reach 25% and spending way too much money to try to jump start things how about just slashing taxes and get on the banks to start lending. We gave them more than enough money to do so and Paulson has control. That will bring us slowly out of this.

Quoting AGM100 (Reply 20): We have plenty of people who even during good times cant make a living .. they will create trouble.

You forget it was these people that basically helped him get elected? Now he is alluding to the fact they won't get much of anything he promised. Should go over well.

Quoting PPVRA (Reply 12): Hoover kicked hundreds of thousands of Mexicans out, raised tariffs on thousands of products (some people want this now), started the RFC, started the Federal Home Loan Bank Act in response to the "Hoovervilles" (did nothing, eh?), and increased income taxes to over 70% for top income brackets, raised estate taxes and corporate taxes.

Just a few of the programs that FDR picked up on, changed their name, and continued to run with.

Quoting IgneousRocks (Reply 14): The top Swedish tennis stars of the 70s and 80s became residents of Monaco to avoid paying 50-60% of their tournament purse to the parasitic Swedish tax collector.

More than that I say. Some people ended up with +100% tax, ridicilous and it brought down
the Swedish socialdemocrats from power during a period of the 1970ies.
As for comparing the 1930ies USA with today USA, the population was around 130 million towards 305 million today. Also take into account the %age of the working age population in prison and you get a picture how many are outside the legal economy, I say that it won´t lead to riots, but rise in crime.

Quoting Dreadnought (Reply 8): But with all the bailouts and "stimulus" spending going on, I expect this recession to last a lot longer.

I M O, the terms "bailout" and "stimulus program" are not applicable. The news media uses these phrases to simplify a complex issue. Correct me if I'm wrong but hasn't most or all of the "bailout" money been disseminated to financial institutions and now automakers to prevent their collapse due to lack of cash flow. Our economy was/is over inflated from excessive consumer credit spending. Even the banks were over extended.

And, this recession will definately last longer however not due to any "bailout" influence, more likely due to....

Quoting Dreadnought (Reply 13): A sharp recession or depression cleans out the trash, as it were, and people can be confident that those companies that survive are well managed,

THIS is why the recession will last longer. New industries need to be created that are necessary and profitable. Clean energy research, waste handling and disposal, water management programs and systems. We don't need another department store, chain resturant or new line of automobiles. It's going to take a huge shift in industry and our lifestyles to get better. Try to imagine life without a credit card. Imagine having to live off of what you earn. Then you might see a stable economy.

Quoting Dreadnought (Reply 8): And while liberal historians

You mean the TV news?  

Quoting Flexo (Reply 10): That's funny, it'll be interesting what's going to happen with the bailouts. They are the "big unknown" here I think. Personally I believe without government intervention we'd be looking at scenario like the twenties though.

It had to be done. There was a "run on the banks" and on the stock market. Without these cash flow loans or "bailouts", it would have been, as you say, like the '20's again.

Quoting LTBEWR (Reply 16): More likely the greater problems will be increases in crime, drug dealing and other illegal behaviors

Exactly! I wouldn't go as far to say anarchy however in some communities there will be problems with the unemployed and homeless. It'd be interesting to check the current trend in firearm sales.

Quoting Dougloid (Reply 17): Why do you think John Lennon lived in New York instead of London or Liverpool?

Yeah, but he'd still be alive had he lived in the UK.

Quoting KevinL1011 (Reply 24): It'd be interesting to check the current trend in firearm sales.

I happen to know personally they are skyrocketing, like 3 or 4 times normal rates, as people are worried the Obama administration is going to lauch a full assault on the 2nd amendment.

Quoting Mham001 (Reply 2): High taxation will spur civil unrest before high unemployment.

People with high taxes complain, organize, vote, hide their money or leave the country. People with kids crying and dying from hunger take despirate action - sometimes violent.

Quoting Dreadnought (Reply 8): If government would just butt out, the economy would take a dive, unemployment rises, and the 90% of the people who are still employed save their money (as they are doing now - the US savings rate has jumped to its highest point in years in the past 6 months). While they save, they do not buy new cars, or refurbish their kitchens. But after a year or two, when things are more stable, that pent-up demand starts to come out and spend again, and the economy starts going again.

Unfortunately in the year or two you mention, another 10-15% of the workers will be put out of a job because no one is buying their products. A stagnate economy with no purchasing is a fiscal conservative's worst nightmare.

When demand stops, the supply and demand economic model fails.

Quoting Flexo (Thread starter): Also this article got me a little worried: "The report from the War College’s Strategic Studies Institute warns that the U.S. military must prepare for a “violent, strategic dislocation inside the United States” that could be provoked by “unforeseen economic collapse” or “loss of functioning political and legal order.”

It is their job to prepare contengencies and plans for all kinds of weird and highly improbable scenarios.

Quoting RFields5421 (Reply 26): When demand stops, the supply and demand economic model fails.

That's stupid. When demand slows (it never stops), supply must slow. That is the way it works. It's not a failure.

Quoting RFields5421 (Reply 26): Unfortunately in the year or two you mention, another 10-15% of the workers will be put out of a job because no one is buying their products.

10%, maybe. 15%, I doubt it.

But remember, the longer the economy slows, the more demand is pent up. Just like the post-war economy resulted in the greatest economic expansion in history after 15 years of hardship, this recession will give way to a period of high growth. The sharper the recession, the bigger the recovery.

Quoting Flexo (Thread starter): Unemployment At 16 Year High -Civil Unrest Likely?

You answered your own question.
Was there any civil unrest 16 years ago when unemployment was at the same rate?

Quoting Dreadnought (Reply 18): We've gone through this before. Government programs intended to make loans cheaper instead populated the financial markets with mortgages with abnormal default rates. Without these programs (notably the Community Investment Act of 1977) these "bad mortgages" that blew up nver would have existed in the first place. The only reason banks sold them was because they were told that the government (Fannie and Freddie) would be willing to buy them. Otherwise they would not have sold them.

The claim that the Community Reinvestment Act led to the current mortgage crisis has been thoroughly debunked. A few good articles to read, from a variety of authors and sources:

http://www.slate.com/id/2201641/
http://www.businessweek.com/investin...hives/2008/09/community_reinv.html
http://www.prospect.org/cs/articles?...liberals_cause_the_subprime_crisis
http://www.americanprogress.org/issues/2008/09/cra.html

Key points made by the articles:
- Half of all subprime loans were made by independent mortgage companies not governed by the CRA, and another 30% were made by companies only partly regulated by the CRA.
- CRA-governed loans had lower interest rates (reducing the risk of the debtor failing to meet their obligations) and were less likely to be resold in the form of mortgage-backed securities.
- The CRA was passed in 1977 and was enforced much more strongly under Clinton than under Bush, yet the subprime market only collapsed recently.
- Default rates for CRA-governed loans have been similar to those for non-CRA-governed loans for the past thirty years.

It is true that the government's policy of encouraging Fannie and Freddie to buy up mortgages, including subprime mortgages, gave the market an artificially high sense of the security of those investments. But this policy was not part of the CRA.

The fundamental point to remember - the government never legislated that lending companies had to issue bad loans. What led to those loans was greed, both on the part of buyers wanting more house than they could afford, and on the part of lenders who issued high-interest loans to questionable clients in the hope of making a quick buck. Then you have the greed of financiers who securitized the mortgages and claimed they were high-grade investments, and who sold trillions of dollars of credit default swaps on those securities--which, thanks to Phil "Nation of Whiners" Gramm's Commodity Futures Modernization Act of 2000, are illegal to regulate! (Is it any surprise this was the same law that brought us the Enron Loophole?) It's also worth mentioning that CDSs, in that they theoretically mitigated risk, also encouraged risky loans. Why worry about making a bad loan when you can just by a CDS from someone and have them pay you off if it defaults? They don't actually have the assets to cover that? Oh well, it's not like the government can check.

To conclude - yes, government policy helped shape an environment that was conducive to the creation of risky loans and other questionable financial instruments, but this arose at least as much from lack of regulation as from regulation itself. In the end, it was the economic actors themselves who chose to take a risk and tried to make a quick buck, and wound up getting burned. And the Community Reinvestment Act had nothing to do with it.

Quoting KevinL1011 (Reply 24): Quoting Dougloid (Reply 17): Why do you think John Lennon lived in New York instead of London or Liverpool? Yeah, but he'd still be alive had he lived in the UK.

Mere speculation, m'good fellow. He might have died of old age.

Lennon dinosaured out. He was not paying any attention to the kind of world that existed right outside the Dakota. He thought you could be this multi millionaire celebrity and wander around the streets like a regular fellow. Fact is, I saw him in traffic one time on the New Jersey Turnpike driving a Chevrolet station wagon. I'm quite sure that's who it was because I mouthed "Hi John" and he waved. Coulda been his doppelganger I suppose.

Quoting Yellowstone (Reply 29): Half of all subprime loans were made by independent mortgage companies not governed by the CRA, and another 30% were made by companies only partly regulated by the CRA.

CRA created a market for these mortgages.

Quoting Yellowstone (Reply 29): - CRA-governed loans had lower interest rates (reducing the risk of the debtor failing to meet their obligations) and were less likely to be resold in the form of mortgage-backed securities.

But they were. And the interest is a minor issue. CRA still encouraged people to go deeper into debt than they otherwise could have.

Quoting Yellowstone (Reply 29): - The CRA was passed in 1977 and was enforced much more strongly under Clinton than under Bush, yet the subprime market only collapsed recently.

It's a cumulative effect, and in typical government function, once you make a social program available, you can't kill it, which is why the Bush Administration did not do much against it, apart from calling for better regulation through Congress.

Quoting Yellowstone (Reply 29): - Default rates for CRA-governed loans have been similar to those for non-CRA-governed loans for the past thirty years.

You have stats for that?

Quoting Yellowstone (Reply 29): It is true that the government's policy of encouraging Fannie and Freddie to buy up mortgages, including subprime mortgages, gave the market an artificially high sense of the security of those investments. But this policy was not part of the CRA.

It was an unintended consequence - the Achilles' Heel of all government programs.

Quoting Yellowstone (Reply 29): The fundamental point to remember - the government never legislated that lending companies had to issue bad loans.

But by creating a market, the banks sold them. If mortgages were purely held by banks and financial firms, with no government involvement, do you really think a bank would give a mortgage with no money down, no full credit check, job histories, etc.? If the bank had to keep the mortgage on their books, or sell it to other responsible banks, they would never have sold such mortgages.

Quoting Yellowstone (Reply 29): To conclude - yes, government policy helped shape an environment that was conducive to the creation of risky loans and other questionable financial instruments, but this arose at least as much from lack of regulation as from regulation itself.

So your argument is that the government created the problem, and did not regulate it enough. So where do we disagree?

Quoting Yellowstone (Reply 29):

Considering that the FMs held about half of all mortgages, and that they went bust in a spetacular way, it's a tough argument to say they had no role.

Quoting Yellowstone (Reply 29): It is true that the government's policy of encouraging Fannie and Freddie to buy up mortgages, including subprime mortgages, gave the market an artificially high sense of the security of those investments. But this policy was not part of the CRA.

Of course not, it was an un-intended consequence. But they still bought them. They shouldn't have. Home ownership was going higher and higher and there's evidence that many in congress were thinking "Why spoil the party?". This kind of behavior was encouraged by government. Home ownership is highly political.

Quoting Yellowstone (Reply 29): but this arose at least as much from lack of regulation as from regulation itself.

Disagree, I blame it on the Fed's cheap money policy. I don't think the CRA (and other fiscal incentives) or CDSs alone could cause this. They made it worse, but they aren't the root cause IMO.

[Edited 2009-01-10 20:59:59]

Quoting Dreadnought (Reply 25): I happen to know personally they are skyrocketing, like 3 or 4 times normal rates, as people are worried the Obama administration is going to lauch a full assault on the 2nd amendment.

This Morning we went out to the gun show here in Tucson,. I have gone many many times over the years. Got there this morning ... I was shocked ! The parking lot was packed .. Their was at least 300 people waiting just to get in the gate and many many inside. I could not believe it . Usually , there may be 300 people at the show the whole day on a Saturday.

There was people dragging cases of ammo out of the place .. . I turned around and left. People are definitely freaking out ...

Quoting Dougloid (Reply 30): Mere speculation, m'good fellow. He might have died of old age.

Also mere speculation.
Most Rock and Rollers from my generation hope to die before they get old.   

Quoting Flexo (Thread starter): Unemployment At 16 Year High -Civil Unrest Likely?

In a word, no. Generally speaking, people are lazy. Complaining will increase, so too will "the sky is falling" claims. Things will have to get a lot worst before actual "civil unrest" actually happens.

Quoting AGM100 (Reply 20): What was President Bush thinking with these bailouts ...just devastating.

He was paying his Ivy League Old Boys' Club dues, I thought everybody knew that by now??

Quoting KevinL1011 (Reply 34): Quoting Dougloid (Reply 30): Mere speculation, m'good fellow. He might have died of old age. Also mere speculation. Most Rock and Rollers from my generation hope to die before they get old.

True. But idle speculation is what people DO on a.net, don't you see? Because it beats shoveling out the driveway, don't you know?

Wasn't Keef sixty this year?


     

Quoting RFields5421 (Reply 26): People with kids crying and dying from hunger take despirate action - sometimes violent.

Which is quite different from simple high unemployment. We had 10% unemployment in 1982. Did you read about food riots then?

Quoting Yellowstone (Reply 29): To conclude - yes, government policy helped shape an environment that was conducive to the creation of risky loans and other questionable financial instruments, but this arose at least as much from lack of regulation as from regulation itself. In the end, it was the economic actors themselves who chose to take a risk and tried to make a quick buck, and wound up getting burned. And the Community Reinvestment Act had nothing to do with it.

No one is saying that the CRA is soley responsible, no one did. It is the cornerstone of the problem. Without CRA you don't necessarily have the current financial market, but with it you have a much better chance of ending up where we are. The Clinton policies of the 90's didn't create this market either, but without them we wouldn't end up where we are either. Without Barney Frank and Chris Dodd the same is true. Taken all together they do set the stage for where we are today. Saying that mortgage companies that weren't subject to CRA regulation and reporting were making loans is just white washing. Had those companies not been making loans, that the lendees never had to accept, there would be criticism that they weren't loaning to those types of peoples. But to make the claim that the CRA wasn't the cornerstone of this problem is really turning a blind eye. BTW a the first, third, and fourth links are columnists which is nothing more than opinion, the second is a blog which is even worse.

Quoting AGM100 (Reply 33): Their was at least 300 people waiting just to get in the gate and many many inside.

There is a back order of assault weapons nowdays. One of my co-workers tried to buy one from a local gun store and was told he would have to wait for delivery and then only cash would be accepted.

Quoting Dougloid (Reply 37): True. But idle speculation is what people DO on a.net, don't you see? Because it beats shoveling out the driveway, don't you know?

No shoveling here in the desert.    Though the wind can keep you in sometimes.

Quoting DXing (Reply 38): Which is quite different from simple high unemployment. We had 10% unemployment in 1982. Did you read about food riots then?

Of course but you have to realize the age we live in and the fact the media has too much vested in Obama. So they have to exploit the notion that we are in dire times that nobody has ever seen so when the economy corrects on it's own they can parade Obama as the greatest thing since sliced bread. That is why they are treating 7.2% out of work as the bread lines.

Quoting NIKV69 (Reply 39): Quoting Dougloid (Reply 37): True. But idle speculation is what people DO on a.net, don't you see? Because it beats shoveling out the driveway, don't you know? No shoveling here in the desert.

Your time is coming. When I worked at Douglas the fellows in Lancaster got sixteen inches of snow one fine day.

After reading quite a bit about the history of the Great Depression there seem to be some parallels to what is happening today. People seem to think that the Great Depression started automatically in October of 1929 when the market crashed. What they forget is that between November of 1929 and early May of 1930 there was a bear market rally that seemed to bring back confidence to the markets. The stock market rally continued hitting to 73% of its Sept 1929 value on April 10, 1930 and it was obviously a fools rally if ever there was one because stocks had lost around 90% of their value by 1933.

The Federal Reserve banks as well as foreign central banks slashed interest rates and tried to get consumption going again. Despite the holiday season retail sales for 1929 being better than expected, consumption began to fall off a cliff. Consumption of raw materials and industrial goods as well as exports started to slump. In the last quarter of 1929 500,000 manufacturing jobs were lost. The price of wheat, steel and other commodities began to fall rapidly as demand dried up. By the spring of 1930 the commodities index was the lowest it had been since 1916. Exports fell by 46% in the first quarter of the year. Construction spending which has peaked in 1926 had fallen nearly 50% by 1930.

Despite this, unemployment would not hit 25% until 1933. Many people foolishly assume that the unemployment plunged overnight. By March of 1933 the economy was growing again, but would experience another major downturn in 1937-1938. Unemployment would not be as low as it had been in 1929 until 1943. Below are the annual unemployment statistics:

1929: 3.2%
1930: 8.7%
1931: 15.9%
1932: 23.6%
1933: 24.9%
1934: 21.7%
1935: 20.1%
1936: 14.1%
1937: 14.3%
1938: 19.0%
1939: 17.2%
1940: 14.6%
1941: 9.9%
1942: 4.7%

Here is GDP growth
1930 -9.4%
1931 -8.5%
1932 -13.4%
1933 -2.1%
1934 +7.7%
1935 +8.1%
1936 +14.1%
1937 +5.0%
1938 -4.5%
1939 +7.9%

Quoting Dougloid (Reply 40): Your time is coming

So is global warming.   

Quoting Dougloid (Reply 37): Wasn't Keef sixty this year?

It'll soon be his time to rent a cottage on the isle of Wight. (If it's not too dear)

Quoting Dougloid (Reply 37): But idle speculation is what people DO on a.net,

Link please!   

Quoting NIKV69 (Reply 39): So they have to exploit the notion that we are in dire times that nobody has ever seen so when the economy corrects on it's own they can parade Obama as the greatest thing since sliced bread.

Not only the media but the PE himself. In his stump speech on the economy the other day he said the "we are quite frankly living in economic times that nobody has ever seen before". Since I personally know of 6 people who lived through the depression who are still alive and kicking that statement is false as everyone of them will tell you it was much worse during the depression.

Quoting DETA737 (Reply 41): Exports fell by 46% in the first quarter of the year.

Perhaps the Smoot-Hawley tariff act had something to do with that? There should be a lesson threre about tampering with international trade but it will probably be ignored.

As to the Great Depression. One thing that ordinary people could do then, and many did, was buy stocks on margin or "credit". When the stocks went to zero and the broker came looking for the rest of the cash that the person owed, obviously that person was in much larger financial trouble than the homeowner who has known for months that they couldn't afford their mortgage once the arm adjusted and still refused to sell.

Quoting DXing (Reply 43): the homeowner who has known for months that they couldn't afford their mortgage once the arm adjusted and still refused to sell.

Unfortunately much of the US has been well past that stage for near a year, at least several months.

What is happening now with foreclosures is homes the owner has been trying to sell at a loss for many months, but due to foreclosure homes selling for 60-70% of market value - no one is buying. That is in good markets like Dallas where a few homes are actually selling.

Lost two on my block in the past month that way.

My home for which I paid 20% down with a fixed rate mortage 3 years ago is now about 22% upside down on saleable value - yes sales in the past three months have been for only about 58% of the amount I paid.

Since I lose my job in early Feb and my severance runs out in June - I really hope the real estate market stabilizes and foreclosures slow down or I could be in the same situation.

Quoting DETA737 (Reply 41): By March of 1933 the economy was growing again, but would experience another major downturn in 1937-1938.

The 1937-38 downturn is often used by the conservatives (and their friends at FOX News and the like) to say the 'New Deal' failed by then. Reasons for that downturn include several Supreme Court decisions against some of the New Deal programs, pressure from Republicans and some conservative Democrats who got overly scared about the deficit spending of the Government, the growth of government including the work programs (WPA) and new regulatory agencies as well as the introduction of Social Security. Still, it wasn't really until we started to supply the UK in late 1939 and early 1940 with the weapons and goods to prepare for and the early battles of what would become WW II that we really started to get out of the Great Depression.

The Great Depression also had other factors in it's being as bad it was. This included long term drought conditions combined with overfarming causing the 'dust bowl' conditions in the middle of the USA, especially Oklahoma, parts of Texas, Kansas, Nebraska and adjacent areas. This caused one of the greatest mass migrations of people in the USA from that region mainly to California and deep affects on the economy of the affected region until after WWII.

As to those that want to blame the CRA programs created in the late 1970's and expanded since then, it is a bit more compliated. The WWII government subsidised mortgage programs until the mid-1960's largely didn't allow for mortages to blacks and other minorities in many parts of the country and until the CRA was created, didn't allow for loan subsidies for inner city and adjacent older communites. The CRA was to end the continuing discrimiation of qualified borrowers and to redevelop lower income and urban areas with moderate income housing by private investors. Then banks and other mortgage lenders had to make loans to such areas or face limits on how much they could borrow to lend or limits on new branches or buy out other banks.

Quoting RFields5421 (Reply 44): Unfortunately much of the US has been well past that stage for near a year, at least several months.

And many of the high risk mortgages defaulted long before a year ago. It was those mortgages, sold as "securities" that led to the financial troubles of the larger investment and banking houses. You can't say it just happened because its been building for quite sometime and hit critical mass last spring and summer.

Quoting RFields5421 (Reply 44): I really hope the real estate market stabilizes and foreclosures slow down or I could be in the same situation.

No, you won't be in the same situation technically since you put down a fair amount and took out a fixed rate loan that at the time you could afford. That is quite something else from the borrower that took out a loan at almost 100% with an adjustable rate mortgage that gauranteed lower payments for 2-5 years and then ballooned upward.

Quoting LTBEWR (Reply 45): The CRA was to end the continuing discrimiation of qualified borrowers and to redevelop lower income and urban areas with moderate income housing by private investors. Then banks and other mortgage lenders had to make loans to such areas or face limits on how much they could borrow to lend or limits on new branches or buy out other banks.

As I stated you cannot blame just the CRA but it is at the conerstone of the financial messes of today.

Quoting LAXintl (Reply 1): Lets put everything in perspective. During the 1930 depression the unemployment rate peaked at 24.75% in 1933. So even a 8-10% rate today would not come close to those scales. Ultimately I dont see anything happening in the current economic crisis as being even close to a trigger point for national riots or a social meltdown.

Exactly. Our people are far too well fed, too lazy and too wealthy to go around rioting. We are still the richest people with the highest living standards in the world. OH WHAAA.... life is so hard... get real, we are doing fine.

In economic growth there are ups and downs. The overall trend is up. We actually are fabulously wealthy, rich enough to withstand a slight decline. Schoolteachers in some parts of the USA are known to make over $70,000. This is a king's ransom, an absolute fortune in most of the world. People who earn $60k can easily accumulate over $1m over their career. These are normal Americans. It is normal to have over $1m in America. We are a totally rich country. Times are not good, but we should consider our brothers and sisters in poor countries.

This is also not the time to make the government rip apart our whole capitalist system. These "stimulus" packages are pretty disgusting IMO. I thought the USSR was structually inferior to the USA. Yet suddenly we want to copy the economy of the USSR. The more you spend -- the more jobs you create -- the better. Well, that is the USSR's way of doing things.

Quoting DETA737 (Reply 41): 1931: 15.9%

Quoting DETA737 (Reply 41): 1939: 17.2%

Higher unemployment 10 years after the crash.

Quoting LTBEWR (Reply 45): The 1937-38 downturn is often used by the conservatives (and their friends at FOX News and the like) to say the 'New Deal' failed by then.

You expect the deficit spending to continue on forever? It failed to fix the economy in a sustainable way. And never mind his highly corrupt tactic to threat to "pack the court". And never mind his order to destroy crops and setting limits on production a la OPEC to drive prices up at a time people were starving.

Quote: Business-oriented observers explained the recession and recovery in very different terms from the Keynesians. They argued that the New Deal had been very hostile to business expansion in 1935-37, had encouraged massive strikes which had a negative impact on major industries such as automobiles, and had threatened massive anti-trust legal attacks on big corporations. All those threats diminished sharply after 1938. For example, the antitrust efforts fizzled out without major cases. The CIO and AFL unions started battling each other more than corporations, and tax policy became more favorable to long-term growth.[47] When the Gallup poll in 1939 asked, 'Do you think the attitude of the Roosevelt administration toward business is delaying business recovery?' the American people responded 'yes' by a margin of more than two-to-one. The business community felt even more strongly so"[30] Treasury Secretary, Henry Morgenthau, angry at the Keynesian spenders, confided to his diary May 1939: "We have tried spending money. We are spending more than we have ever spent before and it does not work. And I have just one interest, and now if I am wrong somebody else can have my job. I want to see this country prosper. I want to see people get a job. I want to see people get enough to eat. We have never made good on our promises. I say after eight years of this administration, we have just as much unemployment as when we started.[48] And enormous debt to boot."

http://en.wikipedia.org/wiki/New_Deal#Recession_of_1937_and_recovery


FDR's policies prolonged Depression by 7 years, UCLA economists calculate:
http://newsroom.ucla.edu/portal/ucla...d-Depression-5409.aspx?RelNum=5409

There were many financial crisis prior to the Great Depression, but none that lasted a decade. The New Deal did not ease, it prolonged the depression. A 10 year calamity cannot be called a success.

And it's not like the Japanese didn't try massive government spending during their "lost decade", either. The idea that one can spend themselves into oblivion and simultaneously increase wealth is ludicrous. And borrowing that money only means pain returns later.

[Edited 2009-01-11 16:20:32]