Not just the Minimum Wage: Red States Rapid Decline a Harbringer for Liberals if we fail to act

[opinterph]

It's not that simple. I suggest you read the Wikipedia discussion …

Okay, compromise. I’ll settle for “in your own words.”

 

[T-Rexx]

They did not such thing. They were required by law to make loans to poor and minority people, so they made variable rate mortgages. The Fed raised interest rates, the rates on the mortgages went up, people could not pay, the FDIC panicked and closed down the banking system.

This is just nonsense.

Banks have no requirement to make loans to poor people. They are prohibited from discriminating against credit-worthy borrowers who happen to live in poor neighborhoods, or who happen not to be of northern European extraction. No bank anywhere is ever required to make a loan it regards as financially unsound. But banks are not permitted to judge the financial soundness of transactions on the basis of the color of a customer's skin, or the street where the customer lives. That has been the law since 1977.

The Federal Reserve last raised interest rates in June 2006 - to 5%. That put the rate precisely where it had been in May 2001. Rates were incrementally reduced between 2001 and 2004, then incrementally increased again between 2004 and 2006. The Great Recession was NOT casued by the Fed fine-tuning interest rates two years earlier. The Fed has a long history of adjusting mortgage rates up and down as a mechanism for fine-tuning the economy. That's what the Fed does.

The statement that "the FDIC panicked and closed down the banking system" is just gibberish. The FDIC is an insurance system for depositors. It occasionally will merge an unstable bank with one which is financially sound as a means of protecting depositors. It has no authority to "shut down the banking system" (what does that even mean?), nor has it ever had any reason to do so, if it could.

The Great Recession was caused by the same thing that caused the Great Depression - a worsening gap between the wealth of the rich and everyone else. If you keep reducing the real income of the middle class, of course you are going to reach a point where many people are no longer able to pay for their homes. Duh!

It fascinates me that, rather than acknowledge the obvious truth that Reaganomics resulted in spectacular economic collapse, you Republicans fantasize a world in which laws which have never existed inexplicably induce panic in unrelated regulatory agencies, causing them to take actions they cannot possibly take, resulting in outcomes which do not follow.

You live in a weirdly schizophrenic world.

 

[Benvolio]

The effect of requiring loans in poor neighborhoods is to require loans to poor people. This was done by making millions of variable rate loans. These loans start with one interest rate, but when rates rise generally, the rate on the mortgage and the monthly payments increase. Millions of such loans were made, all overseen by the regulators, and when the Fed began raising rates, the rates on all these variable rate mortgages increased, as well as the monthly payments. Many borrowers could not make the new payments. The FDIC's panicky and aggressive actions described below, including the takeover of hundreds of banks, forced banks to virtually stop making loans and to call many existing loans. Credit dried up and home purchases dried up. Home values went down in a spiraling effect.
What was different from prior actions by the Fed and the FDIC was the huge number of variable rate mortgages pushed into default by the raising interest rates, and the extremity of the FDIC actions.

 

[hotatlboi]

The Great Recession was caused by the same thing that caused the Great Depression - a worsening gap between the wealth of the rich and everyone else. If you keep reducing the real income of the middle class, of course you are going to reach a point where many people are no longer able to pay for their homes. Duh!

I applaud your fact filled deconstruction on Ben's ridiculous post, however this is not entirely correct.

It wasn't really a problem with the rich. Major drawdowns happen when the total amount of leverage internal to the economy has gotten so large that it cannot sustain itself.

In the case of the recession, it did not occur simply because people could not pay their loans, it occurred because their loans were over leveraged and when they went bad a domino effect took place.

People not being able to afford their loans was the catalyst this time, but when the amount of leverage gets that absurd, the bubble is going to pop at some point regardless of what does it.

That said, I completely agree that the middle class getting squeezed out and not being able to afford a decent living is a major economic problem and it did contribute to what precipitated the crisis. All I'm pointing out is that this is just what exposed the root problem, which was the severely over-leveraged positions, in effect tipping over the first domino.

 

[hotatlboi]

Put another way, it was not really the rich being rich that caused it. If you are rich you don't need to over-leverage.

What really caused it was the people trying to become rich by massively over leveraging their positions (mostly in the financial markets). Though to be sure some very rich people definitely participated in it (hedge fund managers etc).

 

[opinterph]

An overwhelming majority of states with the highest wages are all blue states ran by Democrats and those wages are growing faster than in the weakest states, run by Republicans.

Does the cost of living vary between red and blue states?

Is Life Better in America’s Red States? (NYT; Opinion, Richard Florida; January 3, 2015)​

 

[evanrick]

Is Life Better in America’s Red States? (NYT; Opinion, Richard Florida; January 3, 2015)​

no, its bad everywhere.

 

[hotatlboi]

no, its bad everywhere.

This is the kind of nonsense that makes it hard to take you seriously on anything you say.

 

[T-Rexx]

The effect of requiring loans in poor neighborhoods is to require loans to poor people.

No, it isn't.

You make nonsensical statements like that, then you draw bizarre conclusions about the world from your fantasies.

There is no law requiring banks to make inappropriate loans, except in your imagination.

Barack Obama is an American citizen - born in Hawaii, not Kenya. Global warming is caused by human release of CO2 from fossil fuels. Creationism is religion, not science. Guns really do kill people. Waterboarding is torture. Health care really is a massive problem in America. We gays do not choose our sexuality in an unpatriotic attempt to bring down American social order.

So long as you Republicans make policy on the basis of fantasy over fact, the rest of us cannot negotiate with you. We cannot pass laws to placate your paranoid delusions. We cannot communicate with the phantoms that you insist are swirling around us.

 

[T-Rexx]

Major drawdowns happen when the total amount of leverage internal to the economy has gotten so large that it cannot sustain itself.

In the case of the recession, it did not occur simply because people could not pay their loans, it occurred because their loans were over leveraged and when they went bad a domino effect took place.

People not being able to afford their loans was the catalyst this time, but when the amount of leverage gets that absurd, the bubble is going to pop at some point regardless of what does it.

The reason that the loans became leveraged in the first place was/is the declining wealth of the middle class. When people are faced with a declining standard of living, they will do what they can to maintain that standard, even sometimes if that means taking on risk.

The root cause of the Great Recession and the Great Depression was the same. Too much money moved out of the middle class, and became concentrated in the hands of too few people.

Put another way, it was not really the rich being rich that caused it. If you are rich you don't need to over-leverage.

Yes, exactly. The people who need to leverage are the middle class. And that's what the middle class did, in both of the great economic downturns of the last 100 years.

It was not the rich who caused the Great Recession or the Great Depression. It was the fact that the middle class had become too poor. In both cases, onset of the economic debacle was preceded by about 30 years during which the rich became richer, at the expense of the middle class.

The greatest expansion of economic wealth in the history of the world happened in the USA, following WWII. That expansion happened because money began moving into the middle class. Strong unions encouraged a living wage for average workers. Federal programs encouraged average people to pursue higher education (an incomprehensible luxury for average people, before the war). Tax policy helped average Americans buy homes.

The driving force behind the American economy is the middle class. Force-feeding the fat does nothing but make them fatter. But when we starve the middle class, the nation dies.

 

[Benvolio]

No, it isn't.

You make nonsensical statements like that, then you draw bizarre conclusions about the world from your fantasies.

There is no law requiring banks to make inappropriate loans, except in your imagination.

Barack Obama is an American citizen - born in Hawaii, not Kenya. Global warming is caused by human release of CO2 from fossil fuels. Creationism is religion, not science. Guns really do kill people. Waterboarding is torture. Health care really is a massive problem in America. We gays do not choose our sexuality in an unpatriotic attempt to bring down American social order.

So long as you Republicans make policy on the basis of fantasy over fact, the rest of us cannot negotiate with you. We cannot pass laws to placate your paranoid delusions. We cannot communicate with the phantoms that you insist are swirling around us.

The world is not as simple as your blindly-accepted dogmas would suggest. There are and entire series of laws designed to require banks to make loans in poor and minority neighborhood. The entire purpose of the laws is to require banks to make loans they mat prefer not to make. Banks undergo a separate audit to ensure that they are make such loans, and the loans are audited. But, of course, if loans goes wrong then the bureaucrats, like
you, will dishonestly posture that doubtful loans should not have been made.

 

[opinterph]

There are [an] entire series of laws designed to require banks to make loans in poor and minority neighborhood.

How many separate laws do you estimate to be part of the series?

 

[Kulindahr]

Still applies. I didn't say external factors wouldn't affect you. Of course they will. Sometimes they will have a major impact. But those effects still pale in comparison to the effects of the personal choices we make. Every day you make decisions that can either improve your situation or cause you to regress.

Everyone will face good economic times and bad ones in their lives. It's how you respond to them that will determine your outcome. If you embrace the philosophy that external factors are always in control of your life and you can do nothing to make progress then you will never get anywhere.

So you think everyone should be a financial expert.

Our society requires a LOT of expertise in a lot of areas. We have no choice but to operate on faith -- faith that the experts are not lying and deceiving and manipulating. When those experts violate that trust, they should be required to make good all the damage they did.

Rather than bail out the banks that caused people to lose their homes, the government should have just decreed the mortgages to be paid, and put the ruined banks on the auction block. You can't put all the risk on the individual and none on the institution.

 

[Kulindahr]

How has that law changed since the Great Recession?

Wasn't that shown to be a lie, and wasn't he asked to stop repeating it?

I lose track of all his lies.

 

[Kulindahr]

I applaud your fact filled deconstruction on Ben's ridiculous post, however this is not entirely correct.

It wasn't really a problem with the rich. Major drawdowns happen when the total amount of leverage internal to the economy has gotten so large that it cannot sustain itself.

In the case of the recession, it did not occur simply because people could not pay their loans, it occurred because their loans were over leveraged and when they went bad a domino effect took place.

People not being able to afford their loans was the catalyst this time, but when the amount of leverage gets that absurd, the bubble is going to pop at some point regardless of what does it.

That said, I completely agree that the middle class getting squeezed out and not being able to afford a decent living is a major economic problem and it did contribute to what precipitated the crisis. All I'm pointing out is that this is just what exposed the root problem, which was the severely over-leveraged positions, in effect tipping over the first domino.

It's definitely a problem with the rich. The rich are the ones who got it made law that a company has to maximize investor returns. That means they are legally obligated to shaft their workers as much as possible. That means workers live on the edge, and buying anything they can' pay cash for becomes a gamble. Of course, they have no choice but to buy lots of things they can't pay cash for, given crappy pay, and that's part of the game: coerce people into living off credit, which increases the profits for the rich.

Walmart and a lot of other employers could pay a living wage and not even blink -- the only issue is that billionaires wouldn't keep increasing their wealth as fast, which they can't abide.

If there were any Christians among the billionaires in this country, there wouldn't be a problem, because real Christians running a company like Walmart would donate billions to a trust fund to make sure their employees were fed and housed and had decent medical care available. But the Waltons and their ilk worship greed, so we have the mess we have.

 

[Kulindahr]

Put another way, it was not really the rich being rich that caused it. If you are rich you don't need to over-leverage.

What really caused it was the people trying to become rich by massively over leveraging their positions (mostly in the financial markets). Though to be sure some very rich people definitely participated in it (hedge fund managers etc).

Rich people in their greed manipulated people into "over leveraging".

The way to prevent this from happening again is law that requires the institutions and their shareholders to pay the price, when those institutions manipulate people, by deception or other falsehoods, into taking on risk, and then things go bad. It's called personal responsibility, and since the wealthy of the country plainly don't believe in it any longer, the law should impose it on them.

 

[hotatlboi]

It's definitely a problem with the rich. The rich are the ones who got it made law that a company has to maximize investor returns.

Which law would that be?

 

[Kulindahr]

Is Life Better in America’s Red States? (NYT; Opinion, Richard Florida; January 3, 2015)​

no, its bad everywhere.

This is the kind of nonsense that makes it hard to take you seriously on anything you say.

Well, it is bad everywhere -- just in different ways. As the article showed, the worst inequality is more and more in blue states ( a result, to a great extent, of law-imposed urban growth boundaries). Indeed, if it wasn't bad everywhere, if it was obviously worse in red states, no one would re-elect shysters like Scott Walker.

 

[Kulindahr]

Which law would that be?

Whichever one is referenced repeatedly here by our liberals.

 

[hotatlboi]

Whichever one is referenced repeatedly here by our liberals.

Thought so.

There is no such law.

If there was, the gross inefficiencies that take place in many boardrooms of many companies that profoundly decrease shareholder value would not be permitted.