[alt lit]

	Originally Posted by Tristan To view links or images in this forum your post count must be 2 or greater. You currently have 0 posts.
	If there is an unfettered niche in this system, let me know.

Until 2010 the unfettered niche in the system was OTC derivatives, the $395 trillion (in late 2008) market that was the primary enabler of the 2008 crash, not to mention the near-meltdown of LTCM a decade before.

[Arkeph]

Originally Posted by Tristan To view links or images in this forum your post count must be 2 or greater. You currently have 0 posts.

I just don't buy the "tax cuts for the rich" line, nor the "they boosted revenues" or "they raped revenues" lines, because there isn't a lick of data to back any of these assertions up. None of them are evident simply from the trends observed during the decade, which are aggregates of many different forces. Perhaps you even implied this in your appeal for "vital context." So follow your own advice, and don't write an insubstantial storyline on how this panned out.

That's right--federal revenues change due to an aggregate of many different forces. My point was that we understand perfectly well what kind of a force the tax cut was on the budget. It pushed federal revenues down.

If you're going to be sad, go be sad about the poor slobs who buy the story lines. 'Deed there is no "vital context" because guesses on the income distribution are hardly worth posting... let alone wild guesses on how tax cuts affect these wild guesses (which are outright BS). Government statistics are not consistent in how they account for capital trades and untaxed savings towards the top, benefits and business income in the middle, and public aid at the bottom. Furthermore, we have no control group. We cannot compare results with America #2 which didn't approve tax cuts. Wild guesses on how much the tax cuts "recover" wild-guesstimated revenues over time have no merit. Guessing 30% is totally arbitrary. Like that other poster, you sound pretty committed to this "tax cuts for the rich" thing. This doesn't make me sad, just a bit vexed. Whatever, I guess Barack Obama can applaud you even if empirical data can't.

You said we can't trust the (empirical) data available, and even went so far as to suggest that the lack of a control group leaves us unequipped to discern the dynamics of the federal budget (you'd be surprised how much
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without a real control group).

All you can say, if you acknowledge only your own ignorance, is that you don't have any clue about what is or isn't so. This is not a good position from which to argue that nobody else does.

[annaelizabeth]

I for one am glad Obama is finally stepping up to the liberal ideas which I elected him for. It's been way too long. I am pleased with his speech, and think he is intelligent, respectful and finally STANDING UP FOR WHAT WE DEMOCRATS BELIEVE IN. Long overdue.

[Vulture]

	Originally Posted by annaelizabeth To view links or images in this forum your post count must be 2 or greater. You currently have 0 posts.
	I for one am glad Obama is finally stepping up to the liberal ideas which I elected him for. It's been way too long. I am pleased with his speech, and think he is intelligent, respectful and finally STANDING UP FOR WHAT WE DEMOCRATS BELIEVE IN. Long overdue.

this speech sounded a lot like one of his election speeches. hmm... 2012 is only a month away... expect to see him "standing up for what democrats believe in" more the coming 11 months...

not really poking fun at your thoughts here, just trying to introduce an alternate viewpoint and reasoning for his sudden rekindled love for talking about democratic ideals...

[Tristan]

	Originally Posted by alt lit To view links or images in this forum your post count must be 2 or greater. You currently have 0 posts.
	Until 2010 the unfettered niche in the system was OTC derivatives, the $395 trillion (in late 2008) market that was the primary enabler of the 2008 crash, not to mention the near-meltdown of LTCM a decade before.

Perhaps so. Still, I'm not sure whether a really ineptly-regulated market counts as unregulated. Derivatives made a natural choice for packaging loans— bad ones— that only came about because Congress encouraged the loans and assured banks that taxpayers would assume the risk. Which they did.

Convenient to let progressive "loans for all comers" work together with heavily-subsidized house construction to wreck the economy, and then let derivatives take the blame.

[Zsych]

The point of what he's saying is that the American way, as it were, doesn't help in bad times... and in its current form, is in fact is part of what creates the bad times. It always has been. Much like people adopting various religions, people end up with all manner of beliefs that are immature - and that do not lead to sustainable growth.

Yes some people succeed with hard work... but few, very few. These days more than a few people need multiple jobs just to survive.

As for rebuilding the middle class - I don't like money carelessly dumped into things to revitalize the economy... it does, but it may only be temporary in its benefit. However, businesses aren't automatically going to revitalize the middle class, so something needs to be done. The market did not correct itself and make the US recover from the great depression - it took government intervention (I almost think of government as being like an insurance company - there to save the country when its about to be screwed over)

... The problem here is that no one clearly knows what to do. There's no easy way to define what investments are better for the country (well I have my opinions but the point is that everyone has their own opinions). They are basically trying out ideas, and where they don't seem all that brilliant... its better than zero action. We do need money flowing in the economy. We just need to make sure it goes to places where it helps create profit in the long term and not just jobs in the short term.

... The correct solution for a given problem, isn't necessarily one that follows a specific pre-existing philosophy.

--

If I were choosing investments, I probably would invest in food, communication, education, health care, cheap housing and areas with low cost of living.... but not directly as means to revitalize the economy. Those things are infrastructure. What is needed is ways to create new things and make more money - not just spend money we currently have (I'll count debt we can still leverage as money/liquidity we currently have). The game needs to be changed, or this country will not survive.

Annoyingly, I think its the hippies in places like Sweden that have better chances at long term survival... because they actually run the country with that sort of focus.

[Daoist]

Originally Posted by Tristan To view links or images in this forum your post count must be 2 or greater. You currently have 0 posts.

I've never been committal about the effects of tax cuts on the budget. Why does everyone get on my ass about this? I just don't buy the "tax cuts for the rich" line, nor the "they boosted revenues" or "they raped revenues" lines, because there isn't a lick of data to back any of these assertions up. None of them are evident simply from the trends observed during the decade, which are aggregates of many different forces. Perhaps you even implied this in your appeal for "vital context." So follow your own advice, and don't write an insubstantial storyline on how this panned out.

The reason I'm more sympathetic to the "raped revenues" story is that the consensus among both supporters and detractors of the tax cuts was that they would decrease revenues. People at that time were worried about the macro effects of a budget surplus. (Seriously.)

Originally Posted by Tristan To view links or images in this forum your post count must be 2 or greater. You currently have 0 posts.

Perhaps so. Still, I'm not sure whether a really ineptly-regulated market counts as unregulated. Derivatives made a natural choice for packaging loans— bad ones— that only came about because Congress encouraged the loans and assured banks that taxpayers would assume the risk. Which they did. Convenient to let progressive "loans for all comers" work together with heavily-subsidized house construction to wreck the economy, and then let derivatives take the blame.

Losses on mortgages are something on the order of a few percent of the total economic losses of the recession. The issue is why the losses got propagated through the entire financial system. Keep in mind that for every real CDO, there were several 'synthetic' equivalents - these were CDOs people created because there weren't enough real CDOs on the market. HHS never forced or encouraged anyone to do that.

Also, if this market was so heavily distorted, why couldn't these bankers see that? It's was just as much public knowledge back then as it is now. Why does market distortion result in instability? The same distortions exist today - are they now to blame for sinking property prices?

[alt lit]

Originally Posted by Tristan To view links or images in this forum your post count must be 2 or greater. You currently have 0 posts.

Perhaps so. Still, I'm not sure whether a really ineptly-regulated market counts as unregulated. Derivatives made a natural choice for packaging loans— bad ones— that only came about because Congress encouraged the loans and assured banks that taxpayers would assume the risk. Which they did. Convenient to let progressive "loans for all comers" work together with heavily-subsidized house construction to wreck the economy, and then let derivatives take the blame.

No, we’re not talking about “ineptly regulated.” OTC derivatives on Wall Street are known as a “black boxes.” Often no one except those who package and sell them (sometimes not even them) completely know or understand what the underlying securities are, the formulas determining performance, who counterparties are, risks, etc. (You will perhaps recall that anonymous counterparties was an issue in the SEC’s suit against Goldman in spring 2010. For educational purposes, you might also research how LTCM marketed and sold its OTC derivatives.)

In 1998 Bob Rubin, Greenspan, Larry Summers, and Arthur Levitt successfully lobbied to prevent the CFTC from gaining legal authority to regulate the OTC derivatives market. CFTC had never had this regulatory authority but was pushing to get it (partly because of what had come to light in P&G’s lawsuit against Bankers Trust in 93), and this effort was shut down by that crowd in cahoots with Phil Graham and a handful of other congressmen. The point being: The market was not “ineptly regulated” from its origin to now – it wasn’t regulated at all. None. Nada. Zero. Zip. It was a libertarian’s wet dream – no regulation, no transparency, no ability to investigate fraud. Just every person for him/herself, trying to screw someone else while not getting screwed, and the market left to miraculously “work it out for itself.”

Finally, the point about Congress encouraging subprime loans isn’t a relevant counterargument to the clear, concrete, indisputable effects of zero derivatives regulation. However, it is notable that whether the underlying asset is subprime mortgages or something else, history (as TMM likes to invoke) has shown that derivatives pose a dangerous and barely understood risk to financial markets. LTCM nearly collapsed a full decade before the 2008 meltdown, and it was not using subprime mortgages as underlying assets in those derivates.

The fact is the OTC derivatives market from its origin to 2008 was a libertarian’s ideal – in your words, “an unfettered niche in the system.” The near meltdown of LTCM in 1998 and the 2008 crash are what we got for it. There is no informed, legitimate counterargument otherwise.

[Arcanist]

Why NOT gamble with derivatives if yer losses are going to be socialized?

[Tristan]

Regardless of how much pussy there is to be had in the world, I won't get any while mired in an argument over whether the SEC or the CFTC should have taken charge of OTC derivatives in 1998. So consider this charity work. You give the CFTC's version of events, which made its way to PBS. But the SEC already exerted control through banks and broker dealers; to this end OTC derivatives had capital reserve and hedging requirements in place as a deterrent against fraud and price manipulation. A shame the truth will not always out.

[annaelizabeth]

	Originally Posted by Vulture To view links or images in this forum your post count must be 2 or greater. You currently have 0 posts.
	this speech sounded a lot like one of his election speeches. hmm... 2012 is only a month away... expect to see him "standing up for what democrats believe in" more the coming 11 months... not really poking fun at your thoughts here, just trying to introduce an alternate viewpoint and reasoning for his sudden rekindled love for talking about democratic ideals...

I totally agree with you. I wish he had been pushing all along those ideals. It's like he gave up and compromised way too many times. He didn't go far enough. I have been disappointed in him for this. I know that the timing of this is not coincidental.