Comments on naked capitalism: Bigger Role for Fannie and Freddie Could End US AA...

If I know my fellow Murricans a-tall, if forced to...

2008-04-15T11:30:00.000-04:00

If I know my fellow Murricans a-tall, if forced to choose guns or butter they will emphatically belly up to Butter. Which is Reason No. 1 I am all for this hemi-demi-semi-depression thing: we may well put those dogs of war down fastest by starving the beasts.

Regarding our 'divisive' politics, there is an effect which follows from a massive collapse in credibility; call it the 'Katrina factor' or coin your own catch-all. Dubya was exactly who and what he was from before his first day in Texas (at least policy- and noncompetence-wise), but his stock went hard south for good when he dropped the Baby Grand on that one. The plutocracy was hardly wiped out in '29-'32: they came through better than most of the rest, but their credibility went negative, and the institutional political stranglehold they had maintained for sixty odd years fell down the privy hole for a generation. For most of the 'middle class' in the US now, having their home equity knocked down by six figures or out, and having the buying power of their wages massively slashed by cost inflation will be a perception change inducer. Whether 'We were robbed,' "We were lied too," or "We were ill-led," I couldn't say but our politics will have a massive input toward realignments from past positions. Our politics may remain divisive, but 'our divisive politics' are a description of the past not the future.

I don't expect unity, not least because the MSM remains wholly controlled by super-wealthy, super-conservative interests (and I'm not talking conspiracy here, just to be clear), and they have no interest in muck-racking and the like. We're more likely to get a 'Progressive Era' than a 'New Deal,' and I say that on many grounds as the better historical parallel. But Good Government will be at the top of the agenda, and that alone will be a massive redefinition from the politics of the last twenty years, where Bad Government, or better Badgovernment, was the only kind which was supposed to exist.

I assumed financing govt. costs 1% now because the...

2008-04-15T11:17:00.000-04:00

I assumed financing govt. costs 1% now because there is a rush to quality. If the US loses its AAA rating the author throws out an optimistic 10% financing cost.

It seems to me that once confidence is lost, the currency goes to hell and pretty quickly financiers realize the interest rate would be inconsequential. That is, 10% just wouldn't do it.

I'm a bit confused about the use of the word "cost...

2008-04-15T06:39:00.000-04:00

I'm a bit confused about the use of the word "cost" in the third-from-last paragraph

In the specific example of Bear Stearns and the brokers ("so far costs less than 1% of GDP") haven't the credit facilities merely been extended, and it's not cost anything, unless we actually get default, which hasn't actually happened yet?

Semantics maybe, but I rather feel it's an important point.

"If we have a depression or something not that far...

2008-04-15T03:07:00.000-04:00

"If we have a depression or something not that far off, then I agree, there will be greater unity because the pain will be widely shared."

What about the Okies in California or the GM strike? Not much unity there.

We addressed that when the story ran: Oof, if this...

2008-04-15T02:04:00.000-04:00

We addressed that when the story ran:

Oof, if this isn't politically influenced, I don't know what is. Moody's says the US risks a downgrade on its debt rating unless it does something about its "social security and healthcare" spending.

First, everyone who has looked at the data says Social Security is not the problem. And even if it gets worse, some very minor fixes (raising the ceiling on payroll tax liability) will take care of it. The big problem is Medicare, and that in turn results not from demographic change, but from out of control health care costs. In other words, the answer is health care reform, not cutting entitlements. But you'd believe the reverse if you read Moody's.

And why does the report not mention the fiscal sinkhole called Iraq?

Well, Moody's did say that, but it was a sop to th...

2008-04-15T01:43:00.000-04:00

Well, Moody's did say that, but it was a sop to the ideologues who want to cut SocialSecurityAndMedicare.

If we have a depression or something not that far ...

2008-04-15T01:37:00.000-04:00

If we have a depression or something not that far off, then I agree, there will be greater unity because the pain will be widely shared. But if we have a mere bad recession (1973-74ish, or 1980-81ish, but longer lived with a slower recovery), you'll see more variance in the degree of suffering. You'll also see more disagreement about who is deserving of help and why, and there will be lots of arguments that boil down to equity versus efficiency.

"Given the divisiveness of our politics, this will...

2008-04-15T01:26:00.000-04:00

"Given the divisiveness of our politics, this will be an ugly process."

I would venture to compare our politics to the politics in academia. Confy, with a full belly and secure future, our estimated professors can't find anything better than to bitterly argue and fight with venom about their respective pet theories.

I'm not so sure it'd be that way if they had to focus on keeping their job and making sure they'll effectively have a future.

IOW, our politics would have to get real in times of great pain. The reality-based crowd would once again, rule the land.

Now, I'd rather not speculate about the state of the land when they'd get there.