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It's the [Economy Thread], Stu... Silly Goose!

124

Posts

  • mrt144mrt144 King of the Numbernames Registered User regular
    edited February 2010
    mrt144 wrote: »
    mrt144 wrote: »
    Deebaser wrote: »
    government which allowed downright crazy mortgages to be written...

    The free market can never fail. The government failed the free market.

    I question whether or not the government should only allow specific types of mortgages. 30 year, 15 year fixed may not be the best mortgage for some people.

    I mean, no mortgage is the best mortgage.

    This better not be going towards "We should live in this kind of society" cause that warrants its own thread.

    Just the concept that being poor is expensive.

    A mortgage is immensely expensive vs. property value (investment) when you actually carry out a full 15/30/40 year term. It comes down to the perplexing concept that each dollar spent by someone without wealth is less valuable than a dollar spent by a wealthy person when you factor in interest.

    I find something fundamentally wrong with the concept, and the working-class has bought into the myth that in order to better themselves they need to take on enormous debt.

    Practically, a working-class family is better off with a new high speed rail to expand job markets rather than a home in a dying, working-class city.

    There are pros and cons to a mortgage but in practical terms it can be really a bad deal in terms of a long term financial investment / safety net / social advancement. It essentially relies on things outside of control of the people taking out a mortgage. It also presents long term problems in public policy because so much relies on property tax base, and homeowners' interests are specifically catered to by municipal interests.

    Take the case of Detroit; if you bought a house in 1970 and worked for an auto manufacturer you'd be fucked right now. You'd likely be without a job but would have a small pension, you'd have paid off your mortgage, but the value wouldn't have created an real profit, and worst of all you would have probably voted in such a way that reinforced uncompetitive policies for Detroit and Michigan cause you had a ball and chain that you can't move away from. It is my belief that the Michigan political aparatus is just as much to blame for the failure of the auto industry, not by giving too little but by giving too much and not forcing the companies to be more competitive. And politicians are owned by donators and voters.

    I totally agree that things are such a way in our country that very myopic solutions are presented as the only way to benefit the most amount people, even if they have bad long term effects.

    mrt144 on
  • GoumindongGoumindong Registered User regular
    edited February 2010
    The ignorance regarding the CRA in here is staggering.

    First off, lets look at specifically what it does.

    The CRA requires that banks within a community use some of their funds to make investments within that community. Previously, many institutions would funnel money out of areas and it was causing many problems. Savings was not going to help the people who were saving it essentially.

    Specifically the legislation requires that the banks hold a certain percentage of their assets in CRA compliant loans. The big part is here "hold". It means "they cannot sell them". That means "it does not matter if they get chopped up and some part of them sold, because the bank always has an interest in the loan paying off." In fact, the bank always has an interest in the loans paying off to the tune of the required percentage of their assets.

    This completely negates the incentive problems that were instrumental in causing this whole mess. Without which this would not have happened. Its further backed up by looking at the numbers, CRA compliant loans have performed exceptionally compared to other loans, even other sub-prime loans.

    The loans that were made that were not CRA complaint are the ones that are having problems. It was an entirely new beast of predatory sub-prime lending that did it. And that came about with no help from the government.

    Also, if you're sticking around in the same place for about 10+ years, buying is much better than renting

    Goumindong on
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  • mrt144mrt144 King of the Numbernames Registered User regular
    edited February 2010
    Goumindong wrote: »
    The ignorance regarding the CRA in here is staggering.

    First off, lets look at specifically what it does.

    The CRA requires that banks within a community use some of their funds to make investments within that community. Previously, many institutions would funnel money out of areas and it was causing many problems. Savings was not going to help the people who were saving it essentially.

    Specifically the legislation requires that the banks hold a certain percentage of their assets in CRA compliant loans. The big part is here "hold". It means "they cannot sell them". That means "it does not matter if they get chopped up and some part of them sold, because the bank always has an interest in the loan paying off." In fact, the bank always has an interest in the loans paying off to the tune of the required percentage of their assets.

    This completely negates the incentive problems that were instrumental in causing this whole mess. Without which this would not have happened. Its further backed up by looking at the numbers, CRA compliant loans have performed exceptionally compared to other loans, even other sub-prime loans.

    The loans that were made that were not CRA complaint are the ones that are having problems. It was an entirely new beast of predatory sub-prime lending that did it. And that came about with no help from the government.

    Also, if you're sticking around in the same place for about 10+ years, buying is much better than renting

    I think most of us were in agreement that the "CRA is evil and caused this" was and is a red herring.

    And the 10+ years is contingent on that place not being a shithole.

    mrt144 on
  • GoumindongGoumindong Registered User regular
    edited February 2010
    mrt144 wrote: »

    And the 10+ years is contingent on that place not being a shithole.

    Yes, there are risks in everything. Congratulations, you have discovered risks exist.

    And no, the risks involved in housing prices come with changes for the worse, not for the place being bad.

    Goumindong on
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  • mrt144mrt144 King of the Numbernames Registered User regular
    edited February 2010
    Goumindong wrote: »
    mrt144 wrote: »

    And the 10+ years is contingent on that place not being a shithole.

    Yes, there are risks in everything. Congratulations, you have discovered risks exist.

    And no, the risks involved in housing prices come with changes for the worse, not for the place being bad.

    Can you rephrase this in a less condescending tone?

    mrt144 on
  • GoumindongGoumindong Registered User regular
    edited February 2010
    Did you not understand it the first time? If you're sticking around for a good while, buying > renting so long as the market does not tank.

    Goumindong on
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  • mrt144mrt144 King of the Numbernames Registered User regular
    edited February 2010
    Goumindong wrote: »
    Did you not understand it the first time? If you're sticking around for a good while, buying > renting so long as the market does not tank.

    I understood the first time, but you're simplifying the risks and considerations grossly, and then went on to give me a condescending non-answer answer about risk.

    mrt144 on
  • mrt144mrt144 King of the Numbernames Registered User regular
    edited February 2010
    http://www.calculatedriskblog.com/2010/02/fed-banks-cease-tightening-standards.html

    Good news, kinda sorta. Lending standards shouldn't be as tight as they are now, but if you're philosophically opposed to credit in general, or think we need to return to fog-a-mirror standards then obviously this isn't good news either way.

    I'm in the camp that good loans need to be made and the inability to refi old debts due to quality issues is bad.

    mrt144 on
  • enc0reenc0re Registered User regular
    edited February 2010
    The vast, vast majority of subprime loans occured outside anything to do with the CRA. That's a bullshit republican talking point that has been widely discredited by every source that doesn't have a personal interest in making the Republicans look good.

    Seriously do some research on the subject, try websites that end in "edu" or something that looks like some actual investigation went into it.

    cra.png

    While I'm not in the "blame the CRA" camp, those pie charts don't show the relevant numbers. We'd have to know what share of those were adjustable vs fixed-rate as well. It's the ARM resets, sub-prime and prime, that are driving foreclosures.
    4322713869_52bd7660f7_o.png4322713909_4951f16c38_o.png

    enc0re on
  • The Crowing OneThe Crowing One Registered User regular
    edited February 2010
    Except that there is no such thing as a "Prime Adjustable Mortgage".

    It's just silly wordplay.

    Also, the Option ARM is the most brilliant mortgage product ever, given to the completely wrong consumer.

    The Crowing One on
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  • YarYar Registered User regular
    edited February 2010
    We could probably talk about the CRA forever and not get very far, but again, it is indicative of a larger political movement. I think it's pretty clear that it wasn't the sole or even significant source of bad loans. At the same time, it is also clear that CRA loans as a whole perform much like subprimes elsewhere.

    It was a catalyst, something that moved banks towards bad loans at a time when the market was poised to fool them into thinking that bad loans weren't so bad, which then in turn led to even worse loans to all sorts of people everywhere. And saying "CRA-regulated banks weren't the worst hit" doesn't really prove anything except that fly-by-night mortgage brokers got it worse than diversified retail banks who got TARP.

    Also, Fannie most certainly securitized the fuck out of CRA loans.

    Yar on
  • mrt144mrt144 King of the Numbernames Registered User regular
    edited February 2010
    Yar wrote: »
    We could probably talk about the CRA forever and not get very far, but again, it is indicative of a larger political movement. I think it's pretty clear that it wasn't the sole or even significant source of bad loans. At the same time, it is also clear that CRA loans as a whole perform much like subprimes elsewhere.

    It was a catalyst, something that moved banks towards bad loans at a time when the market was poised to fool them into thinking that bad loans weren't so bad, which then in turn led to even worse loans to all sorts of people everywhere. And saying "CRA-regulated banks weren't the worst hit" doesn't really prove anything except that fly-by-night mortgage brokers got it worse than diversified retail banks who got TARP.

    Also, Fannie most certainly securitized the fuck out of CRA loans.

    Except it wasn't a catalyst. It was a cocurrent thing with other things.

    mrt144 on
  • nexuscrawlernexuscrawler Registered User regular
    edited February 2010
    Did the CRA require banks to bundle these mortgages into securities that were artificially graded higher than their worth?

    Or to take out gigantic credit default swaps to insure those securities?

    Methinks that was the banks doing

    nexuscrawler on
  • enc0reenc0re Registered User regular
    edited February 2010
    Except that there is no such thing as a "Prime Adjustable Mortgage".

    It's just silly wordplay.

    Also, the Option ARM is the most brilliant mortgage product ever, given to the completely wrong consumer.

    o_O

    Of course there are. Here are some from PenFed.

    enc0re on
  • SavantSavant Registered User regular
    edited February 2010
    Did the CRA require banks to bundle these mortgages into securities that were artificially graded higher than their worth?

    Or to take out gigantic credit default swaps to insure those securities?

    Methinks that was the banks doing

    According to goum, the CRA loans were less likely to be bundled into securities and passed off than mortgages outside of the CRA.

    There are quite a few things about the CRA that make blaming it for the crisis smell bad. First of all, the CRA was primarily focused on blocking redlining, where low-income neighborhoods were discriminated against by lenders. Note here the part about low income neighborhoods. Even if you accept the premise that the CRA force banks into making a ton of unsound loans (which you shouldn't accept without evidence), the CRA for the most part focused on the smallest portion of the lending in terms of incomes and it would have been mostly in neighborhoods with residential real estate towards the bottom of the price scale. To blame the CRA for the bubble, there needs to be a solid explanation as to how either the low end of real estate pricewise was key factor in the housing bubble and following crash or that it would have had an major effect in the higher priced residential real estate.

    Add onto that, roughly 50% of the subprime loans were made by institutions that were not at all under CRA regulation, and a large portion of the remaining ones were made by institutions only partially regulated by it. So the CRA was definitely not responsible for about half of the subprime loans, and it is unclear how much it contributed at all to the remaining half, though clearly it was not responsible for all subprimes loans made by regulated banks.

    Beyond that, the real estate crisis has not been contained solely to subprime mortgages. Commercial real estate has been taking an awful beating lately too, and you'd have to come up with a very contrived explanation as to how the CRA would be to blame for that.

    Savant on
  • CommunistCowCommunistCow Registered User regular
    edited February 2010
    How bout them 3.8 trillion dollar budget with estimated $1.6 trillion deficit.

    Apparently losing cap and trade costs us $646 billion in revenue. Also the WH is predicting unemployment rate to go down to 7.9% by Q4 2012. I kind of suck with economics so what do you guys think of this proposed budget?

    CommunistCow on
    No, I am not really communist. Yes, it is weird that I use this name.
  • mrt144mrt144 King of the Numbernames Registered User regular
    edited February 2010
    How bout them 3.8 trillion dollar budget with estimated $1.6 trillion deficit.

    Apparently losing cap and trade costs us $646 billion in revenue. Also the WH is predicting unemployment rate to go down to 7.9% by Q4 2012. I kind of suck with economics so what do you guys think of this proposed budget?

    Relative to other budgets or on its own merits?

    mrt144 on
  • GoumindongGoumindong Registered User regular
    edited February 2010
    enc0re wrote: »
    Except that there is no such thing as a "Prime Adjustable Mortgage".

    It's just silly wordplay.

    Also, the Option ARM is the most brilliant mortgage product ever, given to the completely wrong consumer.

    o_O

    Of course there are. Here are some from PenFed.

    Its just silly wordplay. Almost by definition, an adjustable loan cannot be prime. This is because "prime" loans refer to the person who is getting it and not the loan itself. If you are a "prime" customer, you in no way should be getting an adjustable mortgage because you qualify for the best fixed rate mortgages that lending institutions will give.
    According to goum, the CRA loans were less likely to be bundled into securities and passed off than mortgages outside of the CRA.

    Yes and no. It actually didn't make much of a difference since the requirement for CRA is that a bank be holding the asset. Such if an MBS was sold that was CRA compliant, the bank had to retain ownership of some part of it.

    The easiest thing to do is just ask "how well did CRA compliant loans do compared to other loans?" and if the answer is "a lot better" then they were not the problem. And the answer is of course that CRA compliant loans did a lot better than other loans. Loans with good repayment rates and low foreclosure rates are not causing valuation drops in any MBS they are a part of unless the drop in MBS value has nothing to do with the loans and everything to do with a change in expected inflation(which didn't happen).

    Goumindong on
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  • ScalfinScalfin __BANNED USERS regular
    edited February 2010
    Savant wrote: »
    Did the CRA require banks to bundle these mortgages into securities that were artificially graded higher than their worth?

    Or to take out gigantic credit default swaps to insure those securities?

    Methinks that was the banks doing

    According to goum, the CRA loans were less likely to be bundled into securities and passed off than mortgages outside of the CRA.

    There are quite a few things about the CRA that make blaming it for the crisis smell bad. First of all, the CRA was primarily focused on blocking redlining, where low-income neighborhoods were discriminated against by lenders. Note here the part about low income neighborhoods. Even if you accept the premise that the CRA force banks into making a ton of unsound loans (which you shouldn't accept without evidence), the CRA for the most part focused on the smallest portion of the lending in terms of incomes and it would have been mostly in neighborhoods with residential real estate towards the bottom of the price scale. To blame the CRA for the bubble, there needs to be a solid explanation as to how either the low end of real estate pricewise was key factor in the housing bubble and following crash or that it would have had an major effect in the higher priced residential real estate.

    Add onto that, roughly 50% of the subprime loans were made by institutions that were not at all under CRA regulation, and a large portion of the remaining ones were made by institutions only partially regulated by it. So the CRA was definitely not responsible for about half of the subprime loans, and it is unclear how much it contributed at all to the remaining half, though clearly it was not responsible for all subprimes loans made by regulated banks.

    Beyond that, the real estate crisis has not been contained solely to subprime mortgages. Commercial real estate has been taking an awful beating lately too, and you'd have to come up with a very contrived explanation as to how the CRA would be to blame for that.

    In fact, it probably lowered the number of subprimes by forcing banks to give people from poor areas loans equivalent to people from rich areas with equivalent economic statistics. Given that one of the big problems in this crisis is the large number of people who should have gotten primes being given subprimes, the CRA was a boon.

    Scalfin on
    [SIGPIC][/SIGPIC]
    The rest of you, I fucking hate you for the fact that I now have a blue dot on this god awful thread.
  • mrt144mrt144 King of the Numbernames Registered User regular
    edited February 2010
    Scalfin wrote: »
    Savant wrote: »
    Did the CRA require banks to bundle these mortgages into securities that were artificially graded higher than their worth?

    Or to take out gigantic credit default swaps to insure those securities?

    Methinks that was the banks doing

    According to goum, the CRA loans were less likely to be bundled into securities and passed off than mortgages outside of the CRA.

    There are quite a few things about the CRA that make blaming it for the crisis smell bad. First of all, the CRA was primarily focused on blocking redlining, where low-income neighborhoods were discriminated against by lenders. Note here the part about low income neighborhoods. Even if you accept the premise that the CRA force banks into making a ton of unsound loans (which you shouldn't accept without evidence), the CRA for the most part focused on the smallest portion of the lending in terms of incomes and it would have been mostly in neighborhoods with residential real estate towards the bottom of the price scale. To blame the CRA for the bubble, there needs to be a solid explanation as to how either the low end of real estate pricewise was key factor in the housing bubble and following crash or that it would have had an major effect in the higher priced residential real estate.

    Add onto that, roughly 50% of the subprime loans were made by institutions that were not at all under CRA regulation, and a large portion of the remaining ones were made by institutions only partially regulated by it. So the CRA was definitely not responsible for about half of the subprime loans, and it is unclear how much it contributed at all to the remaining half, though clearly it was not responsible for all subprimes loans made by regulated banks.

    Beyond that, the real estate crisis has not been contained solely to subprime mortgages. Commercial real estate has been taking an awful beating lately too, and you'd have to come up with a very contrived explanation as to how the CRA would be to blame for that.

    In fact, it probably lowered the number of subprimes by forcing banks to give people from poor areas loans equivalent to people from rich areas with equivalent economic statistics. Given that one of the big problems in this crisis is the large number of people who should have gotten primes being given subprimes, the CRA was a boon.

    Isn't that one of the worst parts about this whole debacle? People who qualify for good, less risky loans taking risky ones instead.

    mrt144 on
  • GoumindongGoumindong Registered User regular
    edited February 2010
    mrt144 wrote: »

    Isn't that one of the worst parts about this whole debacle? People who qualify for good, less risky loans taking risky ones instead.

    I wouldn't say "taking them instead" Because for the most part they didn't know that these loans were predatory.

    Goumindong on
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  • mrt144mrt144 King of the Numbernames Registered User regular
    edited February 2010
    Goumindong wrote: »
    mrt144 wrote: »

    Isn't that one of the worst parts about this whole debacle? People who qualify for good, less risky loans taking risky ones instead.

    I wouldn't say "taking them instead" Because for the most part they didn't know that these loans were predatory.

    That's true, and I feel bad for a lot of those people but at the same time, I can't even relate to those people because I would do my best never to do something like that. It's one of those things I can't grasp, signing onto an obligation I don't understand fully.

    mrt144 on
  • SavantSavant Registered User regular
    edited February 2010
    mrt144 wrote: »
    Goumindong wrote: »
    mrt144 wrote: »

    Isn't that one of the worst parts about this whole debacle? People who qualify for good, less risky loans taking risky ones instead.

    I wouldn't say "taking them instead" Because for the most part they didn't know that these loans were predatory.

    That's true, and I feel bad for a lot of those people but at the same time, I can't even relate to those people because I would do my best never to do something like that. It's one of those things I can't grasp, signing onto an obligation I don't understand fully.

    Well, I'm taking a wild guess that a pretty large portion of the American public is fairly unsophisticated in financial matters. I don't really blame them for it, either.

    I remember that Alan Greenspan recommended getting adjustable rate mortgages roughly the time the bubble was just popping and interest rates were already extremely low. I remember some at the time noted how incredibly stupid that advice was, but people could have believed Greenspan because he and other likeminded pundits pushing out the same sort of crap through the media were supposed to be the experts. There was a lot of disinformation and really bad advice floating around back then.

    Savant on
  • ScalfinScalfin __BANNED USERS regular
    edited February 2010
    mrt144 wrote: »
    Scalfin wrote: »
    Savant wrote: »
    Did the CRA require banks to bundle these mortgages into securities that were artificially graded higher than their worth?

    Or to take out gigantic credit default swaps to insure those securities?

    Methinks that was the banks doing

    According to goum, the CRA loans were less likely to be bundled into securities and passed off than mortgages outside of the CRA.

    There are quite a few things about the CRA that make blaming it for the crisis smell bad. First of all, the CRA was primarily focused on blocking redlining, where low-income neighborhoods were discriminated against by lenders. Note here the part about low income neighborhoods. Even if you accept the premise that the CRA force banks into making a ton of unsound loans (which you shouldn't accept without evidence), the CRA for the most part focused on the smallest portion of the lending in terms of incomes and it would have been mostly in neighborhoods with residential real estate towards the bottom of the price scale. To blame the CRA for the bubble, there needs to be a solid explanation as to how either the low end of real estate pricewise was key factor in the housing bubble and following crash or that it would have had an major effect in the higher priced residential real estate.

    Add onto that, roughly 50% of the subprime loans were made by institutions that were not at all under CRA regulation, and a large portion of the remaining ones were made by institutions only partially regulated by it. So the CRA was definitely not responsible for about half of the subprime loans, and it is unclear how much it contributed at all to the remaining half, though clearly it was not responsible for all subprimes loans made by regulated banks.

    Beyond that, the real estate crisis has not been contained solely to subprime mortgages. Commercial real estate has been taking an awful beating lately too, and you'd have to come up with a very contrived explanation as to how the CRA would be to blame for that.

    In fact, it probably lowered the number of subprimes by forcing banks to give people from poor areas loans equivalent to people from rich areas with equivalent economic statistics. Given that one of the big problems in this crisis is the large number of people who should have gotten primes being given subprimes, the CRA was a boon.

    Isn't that one of the worst parts about this whole debacle? People who qualify for good, less risky loans taking risky ones instead.

    That's what I was saying. Without the CRA, a lot of people from bad areas would have gotten much worse mortgages than their incomes and financial statii justified. That didn't stop a lot of brokers from convincing people that they could only qualify for subprimes (on top of the conventional wisdom that the rate would only jump if the financial market collapsed, which would, of course, never happen).

    Honestly, we can blame a lot on trade theory, as nobody bothered to shop around due to the assumption that the market evens everything out. It's a real life case of the economist who says that it couldn't possibly be a Franklin on the ground because somebody would have picked it up by now.

    On another subject, how does one deal with a stagflation?

    Scalfin on
    [SIGPIC][/SIGPIC]
    The rest of you, I fucking hate you for the fact that I now have a blue dot on this god awful thread.
  • mrt144mrt144 King of the Numbernames Registered User regular
    edited February 2010
    Scalfin wrote: »
    mrt144 wrote: »
    Scalfin wrote: »
    Savant wrote: »
    Did the CRA require banks to bundle these mortgages into securities that were artificially graded higher than their worth?

    Or to take out gigantic credit default swaps to insure those securities?

    Methinks that was the banks doing

    According to goum, the CRA loans were less likely to be bundled into securities and passed off than mortgages outside of the CRA.

    There are quite a few things about the CRA that make blaming it for the crisis smell bad. First of all, the CRA was primarily focused on blocking redlining, where low-income neighborhoods were discriminated against by lenders. Note here the part about low income neighborhoods. Even if you accept the premise that the CRA force banks into making a ton of unsound loans (which you shouldn't accept without evidence), the CRA for the most part focused on the smallest portion of the lending in terms of incomes and it would have been mostly in neighborhoods with residential real estate towards the bottom of the price scale. To blame the CRA for the bubble, there needs to be a solid explanation as to how either the low end of real estate pricewise was key factor in the housing bubble and following crash or that it would have had an major effect in the higher priced residential real estate.

    Add onto that, roughly 50% of the subprime loans were made by institutions that were not at all under CRA regulation, and a large portion of the remaining ones were made by institutions only partially regulated by it. So the CRA was definitely not responsible for about half of the subprime loans, and it is unclear how much it contributed at all to the remaining half, though clearly it was not responsible for all subprimes loans made by regulated banks.

    Beyond that, the real estate crisis has not been contained solely to subprime mortgages. Commercial real estate has been taking an awful beating lately too, and you'd have to come up with a very contrived explanation as to how the CRA would be to blame for that.

    In fact, it probably lowered the number of subprimes by forcing banks to give people from poor areas loans equivalent to people from rich areas with equivalent economic statistics. Given that one of the big problems in this crisis is the large number of people who should have gotten primes being given subprimes, the CRA was a boon.

    Isn't that one of the worst parts about this whole debacle? People who qualify for good, less risky loans taking risky ones instead.

    That's what I was saying. Without the CRA, a lot of people from bad areas would have gotten much worse mortgages than their incomes and financial statii justified. That didn't stop a lot of brokers from convincing people that they could only qualify for subprimes (on top of the conventional wisdom that the rate would only jump if the financial market collapsed, which would, of course, never happen).

    Honestly, we can blame a lot on trade theory, as nobody bothered to shop around due to the assumption that the market evens everything out. It's a real life case of the economist who says that it couldn't possibly be a Franklin on the ground because somebody would have picked it up by now.

    On another subject, how does one deal with a stagflation?

    Kick inflation in the nuts and let unemployment work itself out.

    mrt144 on
  • SavantSavant Registered User regular
    edited February 2010
    You're pretty much fucked when you get hit with stagflation, there's no simple "press this button" fix that is an obvious choice.

    One likely way to cause stagflation is a supply side shock, like an oil embargo. You can't simply just increase spending blindly to increase demand, because the gains from that are probably going to mostly be gobbled up by inflation. And if you decrease demand without increasing efficiency or productivity, you'll lower the standard of living to deal with the inflation.

    In the case of an oil shock, the way I could think of dealing with it would be to proactively retool the economy to be less dependent upon oil. But that's something where you can't just snap your fingers and have it be done, it would take quite a bit of time and effort, and necessitate improvements in the infrastructure and technology.

    Savant on
  • enc0reenc0re Registered User regular
    edited February 2010
    Goumindong wrote: »
    enc0re wrote: »
    Except that there is no such thing as a "Prime Adjustable Mortgage".

    It's just silly wordplay.

    Also, the Option ARM is the most brilliant mortgage product ever, given to the completely wrong consumer.

    o_O

    Of course there are. Here are some from PenFed.

    Its just silly wordplay. Almost by definition, an adjustable loan cannot be prime. This is because "prime" loans refer to the person who is getting it and not the loan itself. If you are a "prime" customer, you in no way should be getting an adjustable mortgage because you qualify for the best fixed rate mortgages that lending institutions will give.

    Absolute nonsense. ARMs are common among "prime" borrowers. They still give you lower rates. It's the old trade off over who is assuming the interest rate risk, lender or borrower. The rates I linked as an example are all prime rates. I assure you, a subprime borrower would not qualify for a 3.35% APR 5/1 ARM right now.

    enc0re on
  • MKRMKR Registered User regular
    edited February 2010
    I just found all my notes from my introduction to economics class. This was in 2008, shortly before the markets tanked.

    They came in the form of questions and answers. The teacher would post a list of questions each week, and we answered them.

    I'm going to do an economics 101 thing using my notes so people can have a central place to refer the confused masses to when they need a primer on economics. Anyone up for double-checking my answers and providing input on things to add/change?
    ECO191 Notes

    Chapter One

    1.What is your opportunity cost of going to college?
    The time spent learning this skill could be spent at a job, or learning a hobby.

    2.Is this a positive or normative economic statement? "Congress should balance the federal budget."
    Normative.

    3.Define the term “land” as used by economists.
    Natural resources used in the creation of consumer goods, such as the trees used for furniture, the graphite in pencils, or the silicon in microchips.

    4.What are the assumptions of the production possibilities model?
    -1: That all of the economy's resources are being put to work.
    -2: That the quality and quantity of production factors are fixed.
    -3: That the methods used in production stay the same.
    -4: That the economy only produces two goods.

    5.What does a point within (underneath) the PPF illustrate?
    A production level that doesn't employ all available resources.

    6.What does a point outside the PPF illustrate?
    Production levels that aren't currently possible.

    7.What does a point on the PPF curve illustrate?
    A production level that fully employs all available resources.

    8.What does the PPF illustrate in regards to cost of production?
    The balancing act between producing consumer goods and production goods within the limits of available resources.

    9.Define the term “capital “ mean as used by economists?
    All resources used in the production of consumer goods.

    10.What are the factors of production?
    Land (natural resources), Labor (the skills of the people involved in production), Capital (resources used in the production of consumer goods), and Entrepreneurial ability (the skills needed to produce something using the other factors).

    Chapter Two

    1.Describe the components of economic competition.
    The ability to own private property gives incentive to improve production, because the improvements are owned solely by those responsible for the improvements. The freedom to choose what to buy, and to choose what to produce ensures that the market always reflects the needs of consumers and producers. Competition ensures that consumers will always have options, and that producers will always have incentive to improve.

    2.How does the division of labor contribute to a society’s output?
    By specializing, a worker is able to improve the quality and speed at which they perform a task. Alone they would be useless, but combined with the specializations of millions of workers, the overall production and efficiency of the market is greater than if everyone had to do multiple tasks.

    3.How does the free market system decide on what goods and services will be produced?
    By the profitability of products, and the demands of consumers.

    4.How does the free market system decide on how those goods and services will be produced?
    By finding the combination of resources and production technologies that is the most efficient.

    5.How does the free market system decide on who will get the goods and services will be produced?
    By the ability and willingness of consumers to purchase a product.

    6.How does the free market system accommodate change?
    By quickly adapting to the changing demands of consumers, and changes in technology.

    7.How does the free market system promote progress?
    Businesses make more money when they improve their products to give them more appeal over their competitors' products.

    8.Describe the three key virtues of the market system.
    Efficiency is promoted by forcing the use of efficient use of resources to gain an edge over competitors. Freedom allows the market to adapt to changes with minimum interruption. The incentives of greater production and higher incomes come from harder work and improvement of skills.

    9.How did the coordination problem contribute to the demise of the command economic systems?
    The fact that a single entity was responsible for millions of small decisions kept it from adapting to changes quickly, resulting in overproduction of some goods, and underproduction of others.

    10.How did the incentive problem contribute to the demise of the command economic systems?
    The command system focused on quotas that didn't always reflect needs. A lack of oversight ensured that while the specifications were met, the point was missed. To borrow from chapter 1, 100,000 pounds of industrial robots were ordered, and tens of thousands of tiny, useless robots were produced.

    Chapter 3

    1. List at least three characteristics of the equilibrium price that are not true of any other price.
    As far as I can tell, the only unique attribute is that the supply matches demand.

    2. Define a shortage and explain how it can be cured.
    A shortage is where supply does not meet the demand. It can be cured by finding methods to increase production, or by increasing price to reduce demand.

    3. Define a surplus and explain how it can be cured.
    A surplus is where supply exceeds demand. It can be cured by reducing output, or by reducing price.

    4. What impact on employment of low skill workers is likely to result from an increase in the minimum wage?
    A reduction in output of lower margin products due to the increased operating cost.

    5. Why would rent controls result in a higher incidence of racial or age discrimination?
    I don't see anything in the chapter on that, and I haven't been able to come up with a correlation between them.

    6. Will an increase in the market price for grits cause a change in the supply of grits?
    An increased price would reduce demand, resulting in reduced production.

    7. What group (buyers or sellers) is a price ceiling supposed to protect and what is the actual irony of that?
    They're meant to protect sellers. The ceiling ends up causing a shortage by artificially increasing demand.

    8. Will a change in the price of peanuts cause a change in the demand for peanuts?
    Yes.

    9. How is a change in quantity supplied different from a change in supply?
    Supply is the amount of a product that is available. A change in the quantity supplied reflects a change in demand.

    10. What group (buyers or sellers) is supposedly protected by a price floor and what is the actual irony of that?
    Sellers. The floor is intended to keep vital products (like wheat) from becoming unprofitable. The side-effect is that increasing the supply of one product will reduce the resources available to produce other products.

    Chapter 4

    1.What is a key advantage of a corporation?
    Reduced liability for owners.

    2.What is a public good?
    A good created to serve everyone, such as an interstate or a streetlight.

    3.What are two key distinctions between public goods and private goods?
    Private goods are characterized by "Rivalry", meaning a good is only available to the purchaser, and "excludability", meaning that only those willing or able to buy the product benefit. Public goods are the opposite. Public goods are usually offered for free (public roads, street lights, etc.), and the benefits are available to everyone.

    4.What effect does a negative externality have on market price and output?
    The money saved by not properly disposing of waste can result in savings to the consumer, or allow for more production.

    5.What effect does a positive externality have on market price and output?
    I'll use the example of scholarships. Although a scholarship directly benefits a student, the community benefits by having more skilled workers.

    6.What is a progressive tax?
    A tax which taxes a different percentage of income based on total income.

    7.Define marginal tax rate.
    The rate at which tax is paid on each additional unit of income. This means that as income rises, so does the tax percentage.

    8.Describe 3 ways that government can correct for positive externalities.
    The 3 methods described in the book sound like subsidies. The first two are called subsidies, but the third is essentially bypassing market forces to affect production, much like a farm subsidy lowers the bar for entry in to the farming industry. Government production is effectively subsidizing the suppliers and employees, who might not have been employed otherwise.

    9.Describe two ways that government can correct for negative externalities.
    Legislation (emission standards).
    Research (finding better ways to dispose of waste).

    The book says taxes and legislation. While legislation is straightforward, just saying taxes would miss the point. Tax, but spend the tax on research to solve the problem.

    10.What is the principal-agent problem?
    When executives put their own interests ahead of the interests of stockholders.

    Chapter 5

    1.Using Table 5.4 on page 90, if Mexico decides to produce only avocados, how many tons of soybeans does it have to give up?
    15

    2.Using Table 5.4, if Mexico decides to produce only soybeans, how many tons of avocados must it forego?
    60

    3.Using Table 5.5, if the United States chooses to produce only avocados, how many tons of soybeans must it sacrifice?
    30

    4.Using Table 5.5, if the United States chooses to produce only soybeans, how many tons of avocados must it give up?
    90

    5.What is Mexico’s opportunity cost of making one ton of avocados?
    1/4 ton of soybeans

    6.What is the United States opportunity cost of making one ton of avocados?
    1/3 ton of soybeans

    7.Which country has the comparative advantage in producing avocados?
    Mexico

    8.Looking at the “Consider This..” section on page 90, why should Madison pay Mason to paint her house when she can paint faster than he can?
    Because although it would cost less for Madison to paint the house, the opportunity cost (lost accounting time) makes it a better arrangement to hire Mason.

    9.Why should Mason pay Madison to do his taxes?
    For the opposite reason. Mason would lose paid painting time if he did his own taxes.

    10.What happens to the total output of avocados and soybeans by Mexico and the United States when they specialize and trade?
    The output of each product increases in their respective countries.

    11.If the Chinese yen becomes more valuable, what happens to the prices of Chinese exports?
    The price in yen stays the same, but the cost in foreign currencies increases.


    12.When the yen appreciates in value against the dollar, does the dollar appreciate or depreciate against the yen?
    Depreciates


    13.How do tariffs help protect certain United States industries?
    Tarrifs reduce the amount of product coming in from other countries, reducing competition.


    14.What happens to the United States prices of all of the thousands of imports subject to tariffs?
    Prices rise due to the reduced supply and the added overhead cost.

    15.What happens to the purchasing power of U.S. consumers as a result of tariffs and quotas?
    It's reduced - whether it's US tarrifs on imports, or tarrifs on US exports, output goes down, driving prices up.

    16.What would happen to employment in the United States if all of the tariffs and quotas were removed?
    Employment would shift to industries that best utilize the increased resources from unrestricted imports.

    17.How does specialization and trade benefit countries that freely participate in it?
    Increased production.

    18.Why do economic historians agree that the Smoot-Hawley Tariff of 1930 contribute to worsening the Great Depression?
    It resulted in an epic trade war, leading to a reduction in income and output.

    19.Compare tariff rates from 1860 to 1920 with those that ran from 1950 to 2000.
    The former had rates that varied between 35% and just under 60%. The latter saw a dramatic drop in tarrifs from the sanity introduced by GATT.

    20.Which helps United States companies achieve lower costs and prices and therefore greater sales—higher tariffs and lower tariffs?
    Lower tarrifs. Lower tarrifs reduce the cost of international trade.

    Chapter 6


    1.What is Gross Domestic Product (GDP)
    The total output of an economy in a year.

    2.What is a final good?
    A good ready to be sold to a consumer.

    3.What is an intermediate good?
    A good used in the production of a final good.

    4.Why don’t economists count intermediate goods when calculating GDP?
    For simplicity - until it reaches the consumer, it could be bought and sold any number of times.

    5.What does the term “value added” refer to?
    The value added to an intermediate good at each stage of production.

    6.Why are second hand sales not counted in GDP?
    Because they don't contribute to production.

    7.What are the two key ways of looking at GDP?
    Expenditures approach and income approach.

    8.What does GDP=C+I+G+X mean?
    It's a formula used to calculate GDP.

    9.Are Net Exports in the United States a positive or negative number?
    Negative.

    10.What is disposable income?
    Money available to a consumer after personal taxes.

    11.How is Real GDP distinct from nominal GDP?
    Real GDP is (nominal) GDP that has been adjusted for inflation

    12.To get Real GDP, do we inflate nominal GDP when there is inflation?
    No - Real GDP is the adjusted result of nominal GDP.

    13.If inflation is 5% and nominal GDP increases 5%, how much did Real GDP increase?
    0%

    14.What economic activities are not counted in GDP?
    Financial transactions and second-hand sales.

    15.How do economists calculate Real GDP using a price index?
    By using data from previous years to establish the real GDP for the current year.

    Chapter 7
    1.What factors contribute to rising productivity and economic growth?
    Increased inputs, and the productivity of those inputs.
    2.What factor makes the largest contribution to the growth of the U.S. economy and therefore to living standards?
    Increases in productivity
    3.What is the definition of an official recession?
    A decline in output that lasts 6 months or more.
    4.What firms and industries are affected most by a recession?
    Producers of durable goods.
    5.Into what 3 major groups does the BLS divide the U.S. population?
    Employed; not in labor force; Under 16 and/or institutionalized
    6.How does the BLS treat those who are working part time? Are they counted as unemployed or employed?
    Fully employed; employed
    7.What percent of part time workers are working part time because they want to?
    Around 84%.
    8.What small subgroup of those over 16 and noninstitutionalized are not considered in the labor force?
    Adults who are potential workers but are not employed and are not seeking employment.
    9.Is everyone who is over 16 and not in an institution who is out of work considered as “unemployed” by the BLS?
    No
    10.How is the unemployment rate calculated?
    Unemployment rate = unemployed/labor force * 100.
    11.Why do some economists insist that the unemployment rate is understated?
    Because it counts many people who are unemployed or partially employed by circumstance -- rather than by choice -- as fully employed.
    12.Describe the three key categories of unemployment.
    Frictional unemployment: People who are between jobs or seeking their first job.
    Structural unemployment: People who are unemployed due to changes in the market. For example, telephone switching maintenance workers were replaced by digital switches. Great for network capacity, bad for workers who only knew that line of work.
    Cyclical unemployment: People who are unemployed due to a reduction in demand (rather than a change in products demanded).
    13.What do economists mean by “full employment” and the “natural” rate of unemployment”?
    The natural rate of employment is the state of a fully employed economy; one where frictional and structural unemployment are the only concerns.
    14.What is the CPI and how is it calculated?
    CPI is used to report inflation, and adjust government benefit programs to compensate for inflation.
    CPI is found with: rate of inflation = price of the most recent market basket/estimate of the same basket in 1982-1984 * 100. The "market basket" is the price of 300 common urban consumer goods in the present market basket year range.
    15.What is the difference between demand pull and cost push inflation?
    Demand-pull is typically caused by an overproduction of money, leading to excessive demand, and higher prices. Cost-push is caused by a reduction of output, and an increase in production costs.
    16.How does inflation affect output?
    In demand-pull, production attempts to rise to increase supply. In cost-push, the price of production goes up, reducing production.

    Chapter 8
    1.What is the marginal propensity to consume?
    The proportion of any change in consumption relative to a change in income.
    2.What is the basic determinant of the amounts that households will consume and save?
    Disposable income.
    3.What are the four nonincome determinants of consumption and saving?
    Wealth, expectations, interest rates, household debt, and indebtedness.
    4.What is the basis for the decision of businesses to increase investment?
    Determining whether or not returns will exceed inflation.
    5.Describe 3 major non-interest rate determinants of investment demand.
    Acquisition, maintenance, and operating costs; Business taxes; Technological change.
    6.Which shows more stability over time—consumption or investment? Why?
    Consumption is reasonably stable, because people always need things. Investment varies depending on the uncertain lifespan of capital goods, the unpredictability of technological advancement, and other uncertain factors.
    7.How is it possible that an investment increase of $30 billion can cause an increase in GDP of $90 billion?
    The multiplier effect; the investment leads to an increase in production.The multiplier determines how far the amount of investment will be from the GDP.
    8.How is the multiplier related to MPC?
    The change in investment, and subsequent change in output affects profits, which affects wages and salaries, which affects consumption.

    Chapter 9
    1.Looking at Table 9.2 on page 168, what is the tendency of employment and output when inventories are lower than expected?
    Increase

    2.At levels of GDP that are below the equilibrium level, what is happening to inventories and output?
    They decrease

    3.Describe equilibrium GDP in the private closed economy.
    Production and investment are balanced.

    4.If a $5 billion change in investment spending leads to a $20 billion change in output, what is the multiplier?
    4 (change in output/change in spending)

    5.What impact on U.S. exports results from a depreciation of the value of the dollar?
    Exports rise.

    6.Why does a $50 billion increase in government spending increase GDP by much more than $50 billion?
    A rise in spending will tend to increase output by a larger amount.

    7.Does the economy always produce full employment when it achieves equilibrium GDP?
    No

    8.What results if aggregate expenditures at full employment GDP are less than those required to achieve full employment GDP?
    A recessionary expenditure gap.

    9.What results if aggregate expenditures at full employment GDP exceed the economy’s expenditures at the full employment GDP?
    An inflationary expenditure gap.

    Chapter 10

    1.What is Aggregate Demand?
    A schedule that shows how much real output consumers will buy at each price level.

    2.Is the explanation for the downward slope of the Aggregate Demand curve the same as the explanation for the downward slope of an individual demand curve?
    No

    3.Does a change in the price level change Aggregate Demand (shift the AD curve)?
    No

    4.What does increase Aggregate Demand (shifts the AD curve)?
    Changes in government, consumer, or investment spending.

    5.What four factors can increase consumer spending and therefore increase Aggregate Demand?
    Increases in wealth; changing expectations; increased debt; reductions in income taxes.

    6.What factors will increase investment spending and therefore increase Aggregate Demand?
    A reduction in real interest rates and higher expected returns.

    7.What four factors will boost expected returns on investment projects?
    New and improved technologies; a more optimistic outlook; a decrease in business taxes; a reduction in unused capital

    8.Why is the short run Aggregate Supply curve relatively flat at output levels below the full employment output level?
    Because unemployed resources can be put to work quickly to increase output.

    9.Why does the short run Aggregate Supply curve become much steeper at output levels below the full employment output level?
    Because up to the full employment level, unemployed resources are available. Once they are fully employed, those resources must work harder and less efficiently to produce more. []

    10.What 3 factors shift the Aggregate Supply curve?
    Changes in input prices; changes in productivity; new or modified business laws.

    Chapter 11
    1.Describe expansionary fiscal policy.
    Government spending is increased, or taxes are cut. This is intended to push the economy out of a recession.
    2.Describe contractionary fiscal policy.
    The opposite of expansionary. It uses taxes or reduced government spending to reduce inflation.
    3.Describe how tax revenues and transfer payments serve as automatic stabilizers.
    Since taxes are based on percentages, tax revenue varies with the GDP. Fewer people need transfer payments as GDP rises because they have more money.
    4.What problems hinder the effective application of fiscal policy?
    Timing, political consideration (political self-interest at odds with the common good), expectations, changes in interests rates and investment countering changes in policy, and the differences between the way state, local, and federal financial policy work.
    5.Who are the two largest owners of the U.S. public debt?
    US government agencies and foreign owners.
    6.How does the U.S. compare to Germany, France and Japan in terms of the ratio of public debt to annual GDP?
    The US ratio is less than that of France, Germany, Japan, Belgium, and Italy.
    7.What state constitutional considerations result in state fiscal policies that worsen recessions?
    The federal government has the flexibility to go in to debt or increase revenue to meet needs. State government spending, however, is always linked to the state's level of prosperity.

    Feb 25-29 DQs
    Chapters 12 & 13


    What is M1?

    Currency and all checkable deposits

    What is M2?
    M1, savings deposits, time deposits < $100,000, and MMMF (Money Market Mutual Funds) held by individuals.

    What is the function of the Federal Reserve banks?
    "Banker's banks"; they do for lower level banks what those banks do for the public.

    What is the key function of the Federal Reserve?
    Regulating the economy's supply of money.

    What is the primary function of the FOMC?
    The FOMC helps the Board of Governers manage the federal reserve.

    Chapter 13

    How do banks “create” money?
    By issuing loans and purchasing government bonds from the public.

    What makes money creation possible by banks?
    Banks hold less in reserve than they issue in loans.

    How much can a single bank lend for each dollar of its excess reserves?
    An amount equal to what it holds in reserve. The explanation in the book doesn't seem to help much here. If a person tries to get a loan from a bank, how does the fact that other banks can lend only their reserves help the bank give a loan? Does the bank borrow from these other banks to lend the money?

    If the required reserve ratio is 10%, how much can the banking system lend for each dollar of its excess reserves?
    All of its excess reserves.

    If the required reserve ratio is 5%, by how much will the money supply expand from an initial amount of new reserves of $10 million?

    47.5 million - ((10,000,000 / 100) * 95) * 5


    March 10-17 DQs
    Chapter 14

    Why does the public want to hold some of its wealth in the form of money?
    Because money is immediately available for investment and purchases.

    How is the equilibrium interest rate determined?
    By combining the demand and supply of money.

    Why is the supply of money shown as a vertical line?
    Because monetary authorities and financial institutions have provided the economy with a particular amount of money.

    What can change the equilibrium interest rate?
    Changes in the demand for or the supply of money.

    What impact will an increase in the supply of money have on the equilibrium interest rate?
    Lower it

    What is the relationship between interest rates and bond prices?
    Inverse

    What are the Fed’s three tools of money control?
    Open market operations, the reserve ratio, and the discount rate.

    Describe the primary tool the Fed uses to control the money supply.
    The fed uses open-market operations, which consist of buying and selling bonds and securities.

    What is the Fed likely to do if it wishes to decrease the money supply?
    Sell securities

    What impact on the money supply results from the Fed increasing the reserve ratio?
    The supply declines.

    If the Fed wishes to increase the money supply by changes in the reserve ratio, what would it do?
    Reduce the required reserve ratio.

    If the Fed wishes to increase the money supply through changes in the discount rate, what would it do?
    Reduce the discount rate.

    What is the Federal funds rate?
    The rate banks charge to lend to other banks.

    Describe expansionary monetary policy.
    It is meant to counter recession, and is accomplished by reducing rates.

    Describe contractionary monetary policy.
    This is the opposite of expansionary, and counters inflation by increasing rates.

    If the Fed wants to encourage additional consumer and business spending, what will it do?
    Use an expansionary monetary policy.

    What is the relationship between the prime interest rate (the rate for borrowers with great credit) and the Federal funds rate?
    The prime interest rate is used on longer term, riskier loans.

    What are the two key advantages of monetary policy over fiscal policy?
    Speed, flexibility, and isolation from political pressure.

    Compare the maximum term of an elected President and the terms of the Fed’s Board of Governors.
    The president can serve a maximum of two 4-year terms. The 12 board members are appointed by the President, and serve 14 year terms.

    Go to www.federalreserve.gov and select Monetary Policy. What is the targeted federal funds rate as identified in the latest FOMC Statement?

    3%


    I don't think I ever put corrections from replies into the notes, so there are probably some inaccuracies.

    MKR on
  • AegisAegis Not Quite TorontoRegistered User regular
    edited February 2010
    How bout them 3.8 trillion dollar budget with estimated $1.6 trillion deficit.

    Apparently losing cap and trade costs us $646 billion in revenue. Also the WH is predicting unemployment rate to go down to 7.9% by Q4 2012. I kind of suck with economics so what do you guys think of this proposed budget?

    Apparently, according to Sullivan, the budget apparently proposes cutting farm subsidies. I am going to love to see this fight. The reader he quoted pointed out the Republican hypocrisy apparent in thinking that not all Americans should have healthcare they need, but do think that farmers should have subsidies to produce things people don't need.

    Edit: Linky
    The White House is trying again to cut subsidies to the largest grain and cotton farmers while also proposing to slash payments to the crop insurance industry.

    ...

    Instead, he said, the cuts in farm subsidies were necessary to help shrink the federal budget deficit and would help farmers by holding down interest rates.

    “We have to be cognizant of the deficit issue because of the long-term impact that’s going to have on farmers and ranchers,” Vilsack told reporters.

    Under the budget, grain and cotton farmers could receive no more than $30,000 in fixed annual payments, a cut from the current limit of $40,000 a year.

    The payments also would be restricted to farmers with no more than $500,000 in farm income and $250,000 in non-farm income. The current caps are $750,000 for farm income and $500,000 for non-farm earnings.

    Aegis on
    We'll see how long this blog lasts
    Currently DMing: None :(
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  • HenroidHenroid Mexican kicked from Immigration Thread Centrism is Racism :3Registered User regular
    edited February 2010
    I'm eying over that (for now, thorough read comes later), but I recognize some of the questions or phrases from my highschool econ class. Yay public education. <_<

    Henroid on
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  • enlightenedbumenlightenedbum Registered User regular
    edited February 2010
    Oh farm subsidies. You are the white whale of competent governance.

    enlightenedbum on
    Herbert Hoover got 40% of the vote in 1932. Friendly reminder.
    Warren 2020
  • YougottawannaYougottawanna Registered User regular
    edited February 2010
    Aegis wrote: »
    How bout them 3.8 trillion dollar budget with estimated $1.6 trillion deficit.

    Apparently losing cap and trade costs us $646 billion in revenue. Also the WH is predicting unemployment rate to go down to 7.9% by Q4 2012. I kind of suck with economics so what do you guys think of this proposed budget?

    Apparently, according to Sullivan, the budget apparently proposes cutting farm subsidies. I am going to love to see this fight. The reader he quoted pointed out the Republican hypocrisy apparent in thinking that not all Americans should have healthcare they need, but do think that farmers should have subsidies to produce things people don't need.

    Edit: Linky
    The White House is trying again to cut subsidies to the largest grain and cotton farmers while also proposing to slash payments to the crop insurance industry.

    ...

    Instead, he said, the cuts in farm subsidies were necessary to help shrink the federal budget deficit and would help farmers by holding down interest rates.

    “We have to be cognizant of the deficit issue because of the long-term impact that’s going to have on farmers and ranchers,” Vilsack told reporters.

    Under the budget, grain and cotton farmers could receive no more than $30,000 in fixed annual payments, a cut from the current limit of $40,000 a year.

    The payments also would be restricted to farmers with no more than $500,000 in farm income and $250,000 in non-farm income. The current caps are $750,000 for farm income and $500,000 for non-farm earnings.

    If I'm reading the bolded correctly, this means that as it stands right now, a farmer can make $749,000 of "farm income" and still have the government give them even MORE money to grow things the country doesn't particularly need?

    Yougottawanna on
  • mrt144mrt144 King of the Numbernames Registered User regular
    edited February 2010
    Farmers are a bunch of welfare queens.

    mrt144 on
  • big lbig l Registered User regular
    edited February 2010
    Aegis wrote: »
    How bout them 3.8 trillion dollar budget with estimated $1.6 trillion deficit.

    Apparently losing cap and trade costs us $646 billion in revenue. Also the WH is predicting unemployment rate to go down to 7.9% by Q4 2012. I kind of suck with economics so what do you guys think of this proposed budget?

    Apparently, according to Sullivan, the budget apparently proposes cutting farm subsidies. I am going to love to see this fight. The reader he quoted pointed out the Republican hypocrisy apparent in thinking that not all Americans should have healthcare they need, but do think that farmers should have subsidies to produce things people don't need.

    Edit: Linky
    The White House is trying again to cut subsidies to the largest grain and cotton farmers while also proposing to slash payments to the crop insurance industry.

    ...

    Instead, he said, the cuts in farm subsidies were necessary to help shrink the federal budget deficit and would help farmers by holding down interest rates.

    “We have to be cognizant of the deficit issue because of the long-term impact that’s going to have on farmers and ranchers,” Vilsack told reporters.

    Under the budget, grain and cotton farmers could receive no more than $30,000 in fixed annual payments, a cut from the current limit of $40,000 a year.

    The payments also would be restricted to farmers with no more than $500,000 in farm income and $250,000 in non-farm income. The current caps are $750,000 for farm income and $500,000 for non-farm earnings.

    If I'm reading the bolded correctly, this means that as it stands right now, a farmer can make $749,000 of "farm income" and still have the government give them even MORE money to grow things the country doesn't particularly need?

    Farm subsidies are one of the worst policies this country has and can basically never be defended on policy merits, but in all fairness, I'm almost certain that is $750,000 of revenue, not profits, so if you have big costs and big revenues it isn't all that hard to get to $750,000 of revenue as a small, struggling farmer.

    big l on
  • shrykeshryke Member of the Beast Registered User regular
    edited February 2010
    Funny thing is, pre-Nixon the US had one of the best farm subsidy-type programs around.

    Them there was a slight blip one year in agriculture crops, the public panicked and Nixon fucked the whole thing up.

    shryke on
  • ronyaronya Arrrrrf. the ivory tower's basementRegistered User regular
    edited February 2010
    Oh, boy. Farm subsidies. You know, there's a reason they're so hard to shift.

    It's nice to imagine harmlessly cutting into Monsanto profits, but it doesn't work that way. Cutting farm subsidies means higher food prices unless farm efficiency is increased or import tariffs slashed (which itself increases efficiency by proxy).

    Both of which invariably mean Monsanto stomping on more small farms or Them Furr'ners stomping on more small farms (factory farms have great returns to scale, and gain efficiency through size, so invariably the losers are the small organic farms of legend). If neither is done, then food prices just rise instead. The left doesn't see any of these three as politically acceptable. The right doesn't see cutting subsidies to Monsanto as politically acceptable. Cue deadlock.

    ronya on
    aRkpc.gif
  • enlightenedbumenlightenedbum Registered User regular
    edited February 2010
    ronya wrote: »
    Oh, boy. Farm subsidies. You know, there's a reason they're so hard to shift

    I'll simplify this, because it has nothing to do with policy:

    Farm subsidies are hard to shift because there are lots of Senators from farming states! And one of them always chairs the Agriculture Committee in the Senate.

    enlightenedbum on
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  • ScalfinScalfin __BANNED USERS regular
    edited February 2010
    ronya wrote: »
    Oh, boy. Farm subsidies. You know, there's a reason they're so hard to shift.

    It's nice to imagine harmlessly cutting into Monsanto profits, but it doesn't work that way. Cutting farm subsidies means higher food prices unless farm efficiency is increased or import tariffs slashed (which itself increases efficiency by proxy).

    Both of which invariably mean Monsanto stomping on more small farms or Them Furr'ners stomping on more small farms (factory farms have great returns to scale, and gain efficiency through size, so invariably the losers are the small organic farms of legend). If neither is done, then food prices just rise instead. The left doesn't see any of these three as politically acceptable. The right doesn't see cutting subsidies to Monsanto as politically acceptable. Cue deadlock.

    Actually, a lot of those subsidies are holdovers designed to keep priced up.

    Scalfin on
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  • ronyaronya Arrrrrf. the ivory tower's basementRegistered User regular
    edited February 2010
    Scalfin wrote: »
    ronya wrote: »
    Oh, boy. Farm subsidies. You know, there's a reason they're so hard to shift.

    It's nice to imagine harmlessly cutting into Monsanto profits, but it doesn't work that way. Cutting farm subsidies means higher food prices unless farm efficiency is increased or import tariffs slashed (which itself increases efficiency by proxy).

    Both of which invariably mean Monsanto stomping on more small farms or Them Furr'ners stomping on more small farms (factory farms have great returns to scale, and gain efficiency through size, so invariably the losers are the small organic farms of legend). If neither is done, then food prices just rise instead. The left doesn't see any of these three as politically acceptable. The right doesn't see cutting subsidies to Monsanto as politically acceptable. Cue deadlock.

    Actually, a lot of those subsidies are holdovers designed to keep priced up.

    Yes. The consumer sees the lower prices. The farmer gets the higher revenue. The government provides the difference via a subsidy.

    Cut the subsidy, and consumer-side and farmer-side prices converge.

    ronya on
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  • YarYar Registered User regular
    edited February 2010
    enc0re wrote: »
    Absolute nonsense. ARMs are common among "prime" borrowers. They still give you lower rates. It's the old trade off over who is assuming the interest rate risk, lender or borrower. The rates I linked as an example are all prime rates. I assure you, a subprime borrower would not qualify for a 3.35% APR 5/1 ARM right now.
    This one has the right of it.

    An ARM means you get a lower rate in exchange for not locking it for 30 years. The end. It has nothing to do with your credit. Subprime borrowers end up in ARMs because the fixed they are offered is so damn high that they'll take anything to reduce it. The crappy part is that they often balloon them, too, just because they can.

    Same goes for interest-only.

    If you think you'll be selling (and be able to sell) before the ARM adjustment, an ARM might make sense. If you think you can do better investing your capital elsewhere and letting the loan ride, then maybe interest-only makes sense. Your credit isn't a factor there. Though generally speaking it is a safer bet all around to just take the 30-yr fixed P&I.

    Yar on
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