[Note - I posted this on Christmas, but am re-posting it again, since you're all back]
How to stop the crash tomorrow?
Here's ten for starters. I'm not saying I'm for this or against this - I'm just letting you know how the US government could stop the crash overnight
Have at it...
1) $10 trillion, 10 year green energy, transportation and infrastructure money bomb
2) 3% 40-year Fannie/Freddie mortgages and refi's, government gets 20% of any post-funding sales profit, plus $20,000 cash Federal downpayment assistance on any home purchase (funds repaid with any home sale profit)
3) 40% devaluation of the US dollar via Bernanke's printing press (note - this is already underway)
4) 2009/2010 $100,000 Roth IRA maximum, $100,000 401k maximum, no forced withdrawals for retirees
5) 0% tax on savings account interest income
6) Cut corporate tax rate to 10%. Keep cap gains at 15%.
7) Eliminate mark-to-market accounting and restore uptick rule
8) Pre-packaged bankruptcy and forced merger of GM/Ford/Chrysler, combined with law requiring all cars sold in America in 2015 and after to be hybrid or electric, while raising MPG standard 50% by 2015 and adding $1 per gallon gas tax effective immediately, going up 10% a year through 2030
9) Arrest Angelo Mozilo, Michael Perry, Dick Fuld, Chris Cox, Stanley O'Neal, Casey Serin and Chris Dodd. And just for fun Dick Cheney too.
10) 2009 Tax Holiday - no income tax, no social security tax, no medicaid/medicare tax, no federal taxes of any kind whatsoever
Posts
40 comments:
Here's Friedman in the NYT today:
My fellow Americans, we can’t continue in this mode of “Dumb as we wanna be.” We’ve indulged ourselves for too long with tax cuts that we can’t afford, bailouts of auto companies that have become giant wealth-destruction machines, energy prices that do not encourage investment in 21st-century renewable power systems or efficient cars, public schools with no national standards to prevent illiterates from graduating and immigration policies that have our colleges educating the world’s best scientists and engineers and then, when these foreigners graduate, instead of stapling green cards to their diplomas, we order them to go home and start companies to compete against ours.
To top it off, we’ve fallen into a trend of diverting and rewarding the best of our collective I.Q. to people doing financial engineering rather than real engineering. These rocket scientists and engineers were designing complex financial instruments to make money out of money — rather than designing cars, phones, computers, teaching tools, Internet programs and medical equipment that could improve the lives and productivity of millions.
For all these reasons, our present crisis is not just a financial meltdown crying out for a cash injection. We are in much deeper trouble. In fact, we as a country have become General Motors — as a result of our national drift. Look in the mirror: G.M. is us.
That’s why we don’t just need a bailout. We need a reboot. We need a build out. We need a buildup. We need a national makeover. That is why the next few months are among the most important in U.S. history. Because of the financial crisis, Barack Obama has the bipartisan support to spend $1 trillion in stimulus. But we must make certain that every bailout dollar, which we’re borrowing from our kids’ future, is spent wisely.
http://www.nytimes.com/2008/12/24/opinion/24friedman.html?em
Another great post Keith.
One, two and nine get my vote for what will eventually happen (although the figures are surely off).
All Home Depot to be turned into Gas Chambers for Borrowing Baby Boomers. Problem solved.
You've been watching too much CNBS Keith. You're starting to sound like one of those moronic bubbleheads with their braindead "solutions" to the economy.
Go read "Economics in One Lesson". You sound like an idiot.
You're beginning to hit your stride with S&A, Keith. This is a great post. The Buddhist nun Pema Chodron once wrote that Americans don't like to be awake, but prefer to be asleep.
No matter what the government does, we will have a hyper-deflation. Asset prices are way too high. Stocks, bonds, and real estate was at a huge bubble. The real estate bubble was the largest in the history of world finance!
So do you really think the Fed can inflate their way out like they always do? In order for the sky high real estate prices to support themselves, people need income and income is backed up by real productivity in the economy and we don't have that! Rather, we have fake productivity via consumption. Name me one society that has increased their wealth via consumption?
We need to face our problems head on; we as Americans need to work and then save our money. Something that a lot of our fellow citizens will abhor.
This crash was engineered. The powers that can stop it, don't want to.
-one human's opinion
The elite kleptocracy in this country have engineered this crisis. The top 1% who stole more than 20% of America's wealth last year want us to be poor, stuck in long, long mortgages and they want our retirements to be transfered to thier accounts. They want retirees back in the work force, they want NAFTA, anything to increase the slave work force and keep competition for jobs high and wages down. They want us to build the stuff we need cheaply and so they can get a higher profit when we buy the stuff we made.
Only when these people are worried that they have gone too far, gotten just too greedy and fear for their own safety will things start to change.
Our politicals are trying to save our economy, however its the wrong one.
Today I saw advertized a SUV (the Caddy type) on TV for $57,500.00 on a deep year end sale----So what was the original price? 75K? Who the hell needs to spend-borrow that kind of money for a ride? That is the WRONG economy to save. We MUST start building homes and cars that the people still having jobs and lives can afford in the years to come. I know a local builder who is rethinking and starting some 1000 square foot nice homes in the 99,000 price range. These are to be real nice for that amount of money, and if we could do 4 percent finance on them to a QUALIFIED buyer, building and the economy would come back and that would be an economy worth saving. If we could build a car or truck that would cost no more than 12,500, and had a low interest 36 month payoff on it, with a good down payment, and that car would get good milage and last 5 to 6 years--that would be an economy worth saving. If our kids could ALL get in college one way or another, (I suggest working their way through like we used to do) then student loans would be history, and the kids would have a fighting chance when they graduated. America you WILL have to adjust your lifestyle---we have NO choice if we actually do have desires to "stop the crash". My sidebar here is that our blog topic is assuming we had the power to make this happen. When we "assume" we make ASS out of U and ME, as everyone knows. It would be really nice if The people of the United States of America really did have the power as patriots and citizens to effect this. We have more talent on just one of our States than most of the world combined. The talent we lack is in whom we trust to lead us. We are too gullible---that is why we are torn down and broke. We need a leader, a real one, not one groomed by the elite handlers to mesmerize us.
Keith:
Do you disagree with Ron Paul that inflation is the "cruelest tax" on the poor?
"1) $10 trillion, 10 year green energy, transportation and infrastructure money bomb"
Obviously this won't happen, since:
1. It benefits the wrong sort of people, i.e. the general public.
2. Our current way of paying the "construction mafia" in each state works well for them, since they perform a minimum of work for a maximum of pay. Any project like that would only mean similar amounts of money, but a much greater amount of work. So they'll never agree to it.
3. Green energy is not in corporate interests since it disconnects the idea of charging for everything. The only green energy that will be adopted to any degree is the sort that the utility companies can build up as "green, but costly". Decreasing your utility costs is NEVER on their agenda; in fact, the opposite is true.
There will always be minor, local exceptions to these points, but largely there cannot be an "Apollo Project" in the USA for such work. The American practice of large, beneficial projects is long over.
"2) 3% 40-year Fannie/Freddie mortgages and refi's, government gets 20% of any post-funding sales profit, plus $20,000 cash Federal downpayment assistance on any home purchase (funds repaid with any home sale profit)"
Even with those terms, too many mortgages would still be unaffordable. All those unaffordable 30-yr loans have a marginal payment change when converted to 40-yr terms.
And that promise of getting "post-funding sales profit"? Why should we ever believe that? The government and lenders summarily ignored many standards and rules in the first place. That promise will just get lost and the taxpayer will just get ripped off again.
"3) 40% devaluation of the US dollar via Bernanke's printing press (note - this is already underway)"
WRONG. That printing press can't even begin to fill the hole created by the evaporation of tens of trillions from the securitization and hedge follow-on effects. Inflation or devaluation are fantasies in this financial environment. What we must have now is DEFLATION.
"5) 0% tax on savings account interest income"
Dream on. The government HATES savers. All efforts are devoted now to REFLATION, which must fail. There will be no effort whatsoever for rewarding savers except for what savers ordinarily get on their own, which is SELF-CAPITALIZATION.
"6) Cut corporate tax rate to 10%. Keep cap gains at 15%."
That's largely going to happen anyway, as the wealthy and the corporate continue to run our government into the ground and constantly make sure that LABOR is taxed, not their WEALTH. Of course, that's no solution at all since the laborers cannot sustain this huge government.
We only need to do one thing to get the crash over with and start the recovery: allow people who have been foreclosed on to get a fixed-rate mortgage immediately, as long as they can make a down payment and can handle the monthly payments (change to Fannie/Freddie rules). This would cause most homeowners to walk away from their mortgages. RE prices would crash instantly to fair market value. All MBS would become worthless. A lot of banks would fail. Folks who made risky investments would be lose it all. We'd get the complete crash over with in a few months instead of years.
But everyone would buy a new house at a reasonable price as soon as they could. Families would again have workable budgets with the ability to purchase things with earnings instead of borrowed money. No more job losses. The economy would be on the mend immediately.
Don't kid yourselves - the only purpose behind the bailouts is to protect wealthy investors and financial companies at the expense of everyone else.
Anonymous FFMExpat said...
We only need to do one thing to get the crash over with and start the recovery: allow people who have been foreclosed on to get a fixed-rate mortgage immediately, as long as they can make a down payment and can handle the monthly payments (change to Fannie/Freddie rules). This would cause most homeowners to walk away from their mortgages. RE prices would crash instantly to fair market value. All MBS would become worthless. A lot of banks would fail. Folks who made risky investments would be lose it all. We'd get the complete crash over with in a few months instead of years."
Wrong, the same "investors" (dummies) who caused this run up would be back in the market looking to flip. Those people need to be kept out of the market for at least 7 years in order for prices to return to sanity.
11) Increase the minimum wage to $10 and set it to increase at 3.5% annually thereafter.
This will increase inflation expectations and even out the boom bust cycle.
ZIRP does not increase consumer inflation expectations and neither does New Deal 2.0
1) $10 trillion, 10 year green energy, transportation and infrastructure money bomb
Ha! Who in the hell would lend $10 trillion to the US? Certainly no the Chinese. And if the US prints that much, we'll become Zimbabwe overnight, the dollar will crash, then the Chinese and the Japanese will stop buying treasuries. Are you insane?
Wasn't Friedman kissing Raju's arse on his book not too long ago? Friedman should get his globalism bull$hit and stick up his a$$. Typical ultraliberal a$$hole...clueless.
Let me give you a class of Economics 101. Obama's plan is flawed because he won't be investing on needs. Nobody needs green energy, nobody needs bridges to nowhere pushed by lobbyists, nobody needs roads when people don't want to drive. THERE'S NO EFFICIENCY.
The only things that Obama should do is to give large ta breaks to companies that produce in the US, so all those outsourced jobs can come back to this country overnight. Also, crack down on all the illegal workers and their employers, so Americans can get their jobs.
Did you miss this?
"I'm not saying I'm for this or against this - I'm just letting you know how the US government could stop the crash overnight"
This post is what the government COULD DO to stop the crash today.
And yes, on the $10 trillion, since we're the reserve currency, we could just print it.
And print it we shall.
It hath been foretold.
Still drinking the "Global Warming" Kool-Aid?
Bloomberg -- US Temperature in 2008 Was Near 20th Century Average
The temperature for the U.S. in 2008 was near the annual average experienced since 1895 and below normal for December, the National Oceanic and Atmospheric Administration said.
Across the U.S., December bought an average temperature of 32.5 degrees, 0.9 degrees below the long-term norm. As a region, Iowa, Michigan, Minnesota and Wisconsin had its 10th-coldest December on record.
December snowstorms produced more than 2,000 daily snowfall records in the U.S. Satellite data show that 6.8 million square miles (17.6 million square kilometers) of North America were covered by snow in December, 0.4 million square miles above the 1966 to 2008 average.
Oh yeah, the planet is melting, bunch of sheep.
Another way to jump start the economy is by cutting taxes directly at payroll level. This way you shoot right in the vein.
I would have to support a tax decrese for companies that produce in the United States. There should be more of an incentive to set up production in areas that are the most hard hit by the economic downturns, and one prime example would be Detroit, Michigan.
What got us in this fix, is that we are not producing goods. Instead, we are borrowing from foreign countries and consuming imports.
Obama wants to help the bedpan cleaners and diaper changers, but not everybody wants to be a nurse. Refer to the first part of the last sentence, I'm sure most of you understand why. Sorry, but there aren't enough hamburger flipper jobs to go around.
What's wrong with sewing seams in a garment factory, or installing armatures on electric motors? It may not be a whole lot of money. But I can garantee that it would be enough to keep a place to live and a car to drive. And of course, an incentive to get companies to set those places up would do a heck of a lot more to stop the crash than buying those huge cases of Depends.
Peahippo nails it ....
The money destruction going on is remarkable. This could be an extinction event for the dollar.
As to the new world we will live in ...
Your car should cost 25% of your yearly income. You house should cost 250% your yearly income. College should be affordable at a half time minimum wage job.
The should be a national sales tax of 10% that covers the general budget. There should be a social security tax of 20% that covers retirement and health care. There should be a tax on energy that covers defense.
DMP
You are going to be disappointed in alternative energy. Energy return on energy invested of these technologies are so low, a lot of which are negative. They make oil shale look good in comparison.
Cinch
Why in the world would we stop the crash? Let it get even worse! I've been waiting for this for years. It's the only way justice will be served.
The banking mafia, annoying ramen eaters, and brilliant government deserve it. I'll take a crash knowing I will suffer with everyone else. We're on this sinking ship together, but it has been worth it so far, and will continue to be so.
There is an easier, more direct path. The U.S. government could default on all of its foreign debts and simultaneously announce a new currency to replace the dollar. The new currency would be backed by our known reserves of a basket of domestic commodities, metals, oil, NG, coal, etc. This would prevent the new currency from losing all value. Considering the sorry state of other economies and currencies around the world, our new "buck" might even become the world's reserve currency!
Our trading "partners" in Asia and the EU will be pissed off big time, but so f-ing what? We still have all those Trident submarines with 240 warheads on each boat. You want a piece of that MF?
America First.
Cut everyone a check for 250K and then cut ALL taxes AND GOVERNMETN SPENDING ('investments' per Obama) 50% for the next 2 years.
BTW Keith, I still cannot believe that you (at one time) supported Dr Paul and now are an Obama zombie.
Very, very, strange man you be...
All of you made in U.S.A. types are delusional. it takes at least 12 months to set up a factory and train workers for sewing garments, winding motor armatures, or just about any other worthwhile product. Where does the money come from to start these businesses? Obama and his posse are going to give the trillions in save-America loot to bankers, state government workers, and a few hundred lucky construction companies who managed to bribe the right politicians. There isn't going to be diddly left for creating those real jobs you love to talk about. The guys on the construction payrolls will spend their money on food, a cheap rental, booze, drugs, and Chinese crap, probably in that order.
"7) Eliminate mark-to-market accounting and restore uptick rule"
Et Tu Brute'?
I think the solution to the problem is to eliminate the concept of continual growth which drives the concept of usery and interest. For instance, the housing crash will be resolved if the government were to lend money directly to consumers at 0%interest + administrative costs. This will drive housing values even lower since long term appreciation would also be low as well, and in return allow most Americans to become real home owners as opposed to borrowers. Reducing consumer depth from housing and allowing most of us to really own homes instead of paying mortgages or rent would also leave us with more residual income to spend on commodoties. Not to mention that overall inflation would be low and so would wage inflation, health care spending and so on. Banks should also start entering in partnerships with businesses as opposed to pure lending and borrowing. This means that every sector of the economy should become productive as apposed to rely on services only...
COMMUNIST. This government will be wiped out before you see any of this bullshit become reality. The American people will not tolerate the living standards of a dog so some wack job communists can have their utopia.
All the money bomb will do is complete the country's conversion to Socialism and prolong the pain of the depression by a factor of 20. The dead-giveaway is when you said, "overnight". There is no stopping this crash. There is only the prolonging of it.
You like to say you support Peter Schiff and Ron Paul, but posts like this prove otherwise. Inflation is the cruelest tax on the poor, and the money bomb is the definition of inflation.
Take investing in "green energy" for example. What does that mean? Throwing hundreds of millions at some guy growing algae that glows in the dark? Because that is EXACTLY what is going to happen. Hundreds of millions, even billions, of dollars wasted on unproven technologies. By all means, remove the barriers that prevent promising new technologies from rising to prominence, but don't fund wasteful R&D so you can say you are being "green". If your goal is to reduce your dependence on foreign oil, building nuclear power plants and oil refineries would be a smart first step. (but then you'd be agreeing with John McCain).
Also, if you dropped such a huge money bomb all at once, the Chinese would instantly begin selling their US Treasury Bonds. Obama already has a problem convincing them that we "still have a strong dollar policy". They obviously are not convinced. They know he is speaking out of both sides of his mouth. Bush told them (rightly so), that deficit spending in the Middle East wouldn't have the same impact on the dollar's value as domestic deficit spending would. Obama's definition of stimulus is intended specifically to destroy the US dollar. Anything he says to the Chinese is going to be a lie, because if they begin to sell their US Treasuries, milk will cost 28 dollars a gallon in no time.
You seem not to fear inflation, but you should be very afraid of it, because the only tools we possess to stop it from becoming hyper-inflation actually pull money OUT of the system. Anti-stimulus just when we need the opposite. Interest rates jumping way up just when people think they are making enough on inflation-adjusted salaries to buy homes, again.
Schiff was right. Ron Paul was right. No money bomb.
"Shut your piehole, Tom Friedman"
http://www.youtube.com/watch?v=sv6nvMUq10U
All of you made in U.S.A. types are delusional. it takes at least 12 months to set up a factory and train workers for sewing garments, winding motor armatures, or just about any other worthwhile product. Where does the money come from to start these businesses? Obama and his posse are going to give the trillions in save-America loot to bankers, state government workers, and a few hundred lucky construction companies who managed to bribe the right politicians. There isn't going to be diddly left for creating those real jobs you love to talk about. The guys on the construction payrolls will spend their money on food, a cheap rental, booze, drugs, and Chinese crap, probably in that order.
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You are so right, Anon 5:06. But actually, construction workers and grounds keepers often spend more on booze, drugs, and hookers than they do food. Rent comes first, of course. Then they buy the Chinese trash. Of course, they wouldn't have any time for that garbage if they had real jobs and a meaningful hobby.
forget stopping the crash...let it happen. the sooner it does, the sooner we can start to rebuild. all of this nuttiness with bailouts, interest rate manipulation, nationalization of industry etc. is a cure that's much worse than the ailment itself.
enough!
Then they buy the Chinese trash.
Buh buh Tom Zionist Friedman said that's the way to go, that we should bend over to globalism and take it like Bitterrenter and Andrew Sullivan. I thought all of you Pelozinoids from bankrupt California loved being f*cked in the a$$ by Eurotrash, Raju, and the Chinese. What happened? Now I let you all trendsters go back to do Ioga in front of your Ioga iPhone Widget.
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