Obama XXII: Occupy the White House

[LynahFan]

Re: Obama XXII: Occupy the White House

So in the 1980s, with a Republican president and a Democratic Congress, it was the Republican's fault, and in the 2010s with a Democratic President and a Republican Congress, it's the Republicans' fault? That seems pretty convenient for you...

Or did I misinterpret your unstated snide remark?

[ScoobyDoo]

Re: Obama XXII: Occupy the White House

So in the 1980s, with a Republican president and a Democratic Congress, it was the Republican's fault, and in the 2010s with a Democratic President and a Republican Congress, it's the Republicans' fault? That seems pretty convenient for you...

Or did I misinterpret your unstated snide remark?

http://en.wikipedia.org/wiki/Great_D...8inequality%29

[LynahFan]

Re: Obama XXII: Occupy the White House

http://en.wikipedia.org/wiki/Great_D...8inequality%29

You do realize that during the cited period (since the "late 70s"), the Democrats controlled the Presidency 43% of the time, the House 66%, and the Senate 54%, right? Of course, neither side had a 60-seat majority in the Senate, so that's a wash on both sides.

I think the rise of inequality is due to forces much larger than either the Dems or Repubs - it's due to better communication and transportation infrastructure. In 2012, we only need one Facebook worldwide, so only a very small handful of people get very rich. In the 1950s, people connected with their friends at their local soda shops instead, so thousands of soda shop proprietors made a decent living but nobody got rich. The same thought process applies to almost any industry - shipping, manufacturing, even services (Merry Maids, etc) have become more consolidated into just a few huge global players rather than having hundreds of separate businesses focused on particular geographic markets.

[ScoobyDoo]

Re: Obama XXII: Occupy the White House

You do realize that during the cited period (since the "late 70s"), the Democrats controlled the Presidency 43% of the time, the House 66%, and the Senate 54%, right? Of course, neither side had a 60-seat majority in the Senate, so that's a wash on both sides.

I think the rise of inequality is due to forces much larger than either the Dems or Repubs - it's due to better communication and transportation infrastructure. In 2012, we only need one Facebook worldwide, so only a very small handful of people get very rich. In the 1950s, people connected with their friends at their local soda shops instead, so thousands of soda shop proprietors made a decent living but nobody got rich. The same thought process applies to almost any industry - shipping, manufacturing, even services (Merry Maids, etc) have become more consolidated into just a few huge global players rather than having hundreds of separate businesses focused on particular geographic markets.

I'd point directly to what's documented in the book below.

http://www.amazon.com/Two-Income-Tra...9253249&sr=8-1

[LynahFan]

Re: Obama XXII: Occupy the White House

I'd point directly to what's documented in the book below.

http://www.amazon.com/Two-Income-Tra...9253249&sr=8-1

I have to say, I was a bit skeptical, so I perused some of the negative reviews. The first one pretty much nailed it. Keep in mind that this was written in 2004:

Everything looks like nails to a man with a hammer. To this mother/daughter duo, everything's about getting your kids into good schools. They hilariously interpret the entire US housing bubble through the lens of suburban flight in search of better schooling.
Their basic thesis runs like this:

1. The middle class is in financial trouble.
2. The biggest rise in middle class spending is housing.
3. Middle class people care about good education for their kids.
4. Therefore, they have started a "bidding war" for good-school neighborhoods, and have inadvertently priced housing into the stratosphere.

Their solution to this problem is to implement a voucher system which would surely cause a housing crash, and ironically bankrupt even more of the poor middle class homeowners they pretend to be championing.

But education is not very convincing as the dominant factor leading to our housing bubble. This bubble is more easily understood in terms of a combination of historically low interest rates, combined with a relaxation of lending standards that has increased homeownership to an all-time high. Despite this, homeowners' equity as a percentage of market value stands at an all time low. If you back out the 39% of homeowners who own their houses outright, the remaining 61% have average equity of just 25%. Thus a decline in housing just to the price levels of 2000 would put the majority of homeowners at an average of zero to negative equity.

How did this happen? Thanks to loose standards which permit zero downpayments, interest-only loans, ability to withold proof of income, an all-time high percentage of ARM borrowers, and so on.

Things like 20% downpayments and a proof-of-income requirement narrow the competition for housing and keep prices lower. The opposite, historically unprecendented trend seen in recent years naturally increases the pool of potential buyers and pushes up prices. Now there are people buying their first 500K "starter home" with zero-down interest-only ARMs. This is called "affordability", but the debt grows.

The inevitable results are HIGH "homeownership", LOW equity, and HIGH prices. Moreoever, as prices have risen year after year in many areas, the cycle becomes self-feeding as desperate buyers increasingly "stretch" (just as they did in the stock market in 1999 and 2000) just to get a house. They think prices can only go up or they will never be able to buy a house.

It's quite sad, really, and like all bubbles I expect it will end in a crash which will bankrupt many. So this is the easiest explanation for the precarious financial state of the middle class. The authors' incessant focus on the "heroic" efforts of mom and (that lesser animal) pop to provide a good educational environment for their kids is just another apology for the housing bubble when you get down to it.

I think a better book for most middle class people wanting to avoid bankruptcy is "The Coming Crash in the Housing Market: 10 Things You Can Do Now to Protect Your Most Valuable Investment".

[ScoobyDoo]

Re: Obama XXII: Occupy the White House

Meh. That's a very small subset of the book, which I've read in its entirety. The premise isn't just the fight for good schools in good districts, but that's certainly part of it. I could save a buttload of money on housing if I didn't want the comfort of living in a city that valued education, there's no question about that. Does the reviewers points have merit? Absolutely. But, that all could have been avoided if we had just left a nice simple law like Glass Steagall in effect. We didn't. And if I remember correctly that one was thrown out in the last 30 years as well. The point is our public policy has been as short sighted as 9/10 of Wall Street and it's cost everyone dearly.

[Kepler]

Re: Obama XXII: Occupy the White House

I think the rise of inequality is due to forces much larger than either the Dems or Repubs - it's due to better communication and transportation infrastructure.

Improvements in communication and transportation have continued unabated since before the industrial revolution. There have been intervals within that period when inequality has grown and they have been characterized by the sort of "devil take the hindmost" political rhetoric and governmental policy that has dominated the national discourse since Reagan.

Policy matters. Inequality probably is ultimately driven by the internal dynamics of technology and economics, but that's why, crudely speaking, "leveling" is necessary to keep the population from dividing into a tiny elite and an enormous underclass. Every time we forget that -- the Gilded Age, the 20's, the 00's -- the system quickly subverts itself and everybody -- even the very wealthy -- loses.

If you want the benefits of capitalism to endure you have to regulate it. It's no different than fire.

[LynahFan]

Re: Obama XXII: Occupy the White House

Meh. That's a very small subset of the book, which I've read in its entirety. The premise isn't just the fight for good schools in good districts, but that's certainly part of it. I could save a buttload of money on housing if I didn't want the comfort of living in a city that valued education, there's no question about that. Does the reviewers points have merit? Absolutely. But, that all could have been avoided if we had just left a nice simple law like Glass Steagall in effect. We didn't. And if I remember correctly that one was thrown out in the last 30 years as well. The point is our public policy has been as short sighted as 9/10 of Wall Street and it's cost everyone dearly.

You'll certainly get no argument from me on the last sentence.

Fundamentally, the root cause is still people wanting what they can't afford and trying to beat the system (i.e. the laws of economics) to get it. It doesn't matter whether you chose to take an unaffordable mortgage because you wanted a bigger garage or because you wanted a better education for your kids. Unaffordable is unaffordable. There is always a pent-up desire for unattainable things (forbidden fruit), and the public policy makers pandered to that demand by adopting policies that promised those goodies for free. The public bought it hook, line, and sinker and trashed the economy in the process. Fan-freaking-tastic.

One part that certainly rings true is that relying on 2 incomes to pay your bills is *much* riskier than relying on one. If there's a 10% chance of losing each job, then relying on 2 jobs gives your family a 20% chance of a bankruptcy rather than the 10% you would have if you only had (and relied on) 1. The only way for 2 incomes to be less risky than 1 is if you truly can afford to lose either of the jobs and continue to pay your liabilities on the other one - in that situation, your "system" has a redundant backup rather than 2 single failures that can each cause a catastrophic failure.

[ScoobyDoo]

Re: Obama XXII: Occupy the White House

Yeah, well, having kids can be a strong motivation to live beyond your means. Especially when their education and well being is at stake.

[Kepler]

Re: Obama XXII: Occupy the White House

Fundamentally, the root cause is still people wanting what they can't afford and trying to beat the system (i.e. the laws of economics) to get it. It doesn't matter whether you chose to take an unaffordable mortgage because you wanted a bigger garage or because you wanted a better education for your kids. Unaffordable is unaffordable.

The problem was the people who wrote the loans had no personal stake in making sure they could be repaid. Whether it is evil public sector villains or blessed private sector saints, the way to stop it from happening again is for the guy approving lending to know that if the checks bounce he, personally, is going to either the poorhouse or the big house.

There's plenty of room on the gallows for Goldman Sachs and the Senate.

[ScoobyDoo]

Re: Obama XXII: Occupy the White House

The problem was the people who wrote the loans had no personal stake in making sure they could be repaid. Whether it is evil public sector villains or blessed private sector saints, the way to stop it from happening again is for the guy approving lending to know that if the checks bounce he, personally, is going to either the poorhouse or the big house.

There's plenty of room on the gallows for Goldman Sachs and the Senate.

Bingo. And any system that supports as ****ed up a scenario as that has no business being part of our society.