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  1. Handan November 14, 2015 @ 10:51 am

    In the Republican debate, Herman Cain said he would seek to find a Fed Chairman like Alan Greenspan. He must be kdiidng. Anyone who reads this website knows that Greenspan’s artificially low interest rates are one of the important factors that led to the current, unfolding economic collapse that started in 2007. Herman Cain is clueless.More on last nights debate. The Republicans continually cite the notion that the housing collapse was caused by Democrats forcing banks to lend money to folks that could not afford to pay the money back. They blame this on the bogus belief that the Community Reinvestment Act (CRA) laid the groundwork for this. They maintain that the CRA requires banks to lend to sub-prime borrowers when, in fact, the CRA contains no requirement at all. None. What the CRA does is encourage banks to try to lend in communities where these banks operate branches. That is not a requirement. Yet Republicans constantly repeat this fallacy. And by the way most all sub-prime loans were issued by non-bank lenders, not banks. And non-bank lenders were not (and are not) covered by the Community Reinvestment Act. So, the whole CRA theory is bogus, through and through.I hereby challenge anyone to read the CRA and cite where exactly this requirement is. It does not exist.

The Terrible Plot of The American Economy

Economics, Economy, Finance, Thoughts Comments (1)

I am so bored with the latest installment of the movie The Big Scam. Not only we have seen it all too many times, but the casting is all wrong. I must admit that the casting of Paulson as the evil terrorist who threatens with the destruction of the American and world economies if he doesn’t receive 700 billion dollars is good (albeit a copy of Dr. Evil), but the casting of Bernanke as Mini Me is terrible, just terrible.

As for the plot, what can I say. We know that our hero will save the day sooner or later, most probably when the Civilization is at the brink of destruction and we will all live happy forever after. So I wonder why going trough all the trouble.

So I was thinking how to make a better movie, and I came out with the following ideas. We could rebuild New Orleans, the Texas seacoast and any other city destroyed by natural or man made disasters with gilded houses. We could also rebuild them to look like a Dr. Seuss houses, so at least the new generations burdened with debt will enjoy them, or we could buy another country and move there until things get better.

Another thing we could do is to pay all the bad debt that these companies have accumulated, we would solve their problems and the problems of all the people about to lose their homes, or unable to access to the equity on their homes, or unable to sell and move up. If we did that, the treasure would recover around 25% of the money in taxes. Since the pardoned debt would be considered as income, the recipients of our largesse would have to pay taxes on the amount paid by us. We could even afford being generous and let them pay those taxes over a period of 5 years or so.

This measure would also be equivalent to a tax refund of between 1,000 and 3,000 dollars a month, depending on how much the people facing foreclosure pay for their mortgages. That money would flood the streets immediately and reactivate the economy overnight. We are talking about billions of dollars freed of debt servicing and moving into the economy. Since the the government receives an average of 32% of the GDP in taxes, we would be paying us back immediately.

So, although I appreciate the casting of Dr. Paulson as Dr. Evil, and I recognize his threat of utter destruction of the civilization as an interesting, but too common plot, I would like to see our representatives asking Dr. Paulson and Mini Me if their plan can guarantee a 50% repayment rate and, more important, guarantee the overnight reactivation of the economy. If they hesitate, and we are going to be socialists, let’s be socialists with the largest and most in need group of the population.

Franklin @ September 24, 2008

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