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So if the economy is so great.......

Discussion in 'American Politics' started by FreeinChrist, Sep 11, 2019 at 11:13 AM.

  1. FreeinChrist

    FreeinChrist CF Advisory team Staff Member Site Advisor Supporter

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    Besides the high corporate bond debt, student debt, individual credit card debt....


    This could 'end very badly': Trump officials warn on mortgage finance

    The U.S. housing finance system is worse off today than it was on the cusp of the 2008 financial crisis, Republican lawmakers and Trump administration officials warned on Tuesday.

    Fannie Mae and Freddie Mac, the two government-controlled enterprises that stand behind half the country's mortgages, are way too undercapitalized, and lending standards have actually deteriorated since the housing crash, the officials said.


    “This whole thing is a car wreck. It’s a dumpster fire,” Sen. John Kennedy (R-La.) said at a Senate Banking Committee hearing on the White House’s proposal to overhaul the way the nation finances mortgages.

    “We spent $190 billion of taxpayer money, and we’re in worse shape,” he said, referring to the bailout of Fannie Mae and Freddie Mac, which were seized by Treasury a decade ago to stave off catastrophic losses in the crisis.

    The hearing kicked off what promises to be a highly contentious debate over the plans released last week by the Departments of Treasury and Housing and Urban Development to scale back the federal government’s massive role in the mortgage market. Republicans are focusing on what they say are growing risks in the system, while Democrats are mostly concerned about providing affordable housing.

    And if the economy is so great, why is Trump belligerently calling for zero interest rates? Is the economy is doing fine, there is not need to lower interest rates. Doesn't he know that lowering the rates when the economy is good exhausts the Fed's ability to deal with a recession when it comes?

    Trashing Fed 'Boneheads,' Trump calls for central bank to cut interest rates to 'ZERO'

    President Donald Trump on Wednesday called on the Federal Reserve to slash U.S. interest rates “down to ZERO,” admonishing chairman Jerome Powell and other leaders of the U.S. central bank as “Boneheads.”

    “The Federal Reserve should get our interest rates down to ZERO, or less, and we should then start to refinance our debt,” Trump tweeted. “INTEREST COST COULD BE BROUGHT WAY DOWN, while at the same time substantially lengthening the term. We have the great currency, power, and balance sheet.”

    side note - does he really not know that the US cannot refinance its debt? Doesn't he know it is in Treasury notes and bonds? I wonder if he realizes the US cannot go bankrupt and refinance its debt like Trump did with his businesses.
     
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  2. ananda

    ananda Early Buddhist

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    Sounds like a good start. Gov't intervention has forced prices artificially higher, unjustly pricing the younger generations out of the market. The same thing is happening in other sectors, like higher education.
     
  3. Ricky M

    Ricky M Member Supporter

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    You seem to assume Trump cares about the country. All he cares about is lining the pockets of his rich buddies. He's proved that time and time again and he's not going to stop now.
     
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  4. KCfromNC

    KCfromNC Regular Member

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    My experience has been that questions like these all share a common answer.
     
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  5. RocksInMyHead

    RocksInMyHead God is innocent; Noah built on a floodplain!

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    As a member of said "younger generations," I can assure you that government intervention in the loan market isn't what has priced me out. It's a combination of stagnant wages, student debt, and wealthy (often foreign, at least in my area) private buyers purchasing all the real estate to use as rental properties because rent is also insanely high.

    And a big part of why higher education has gotten more expensive because government intervention has been reduced. Public universities get a much smaller percentage of their funding from the government these days, which means they need to raise money through other means - like increasing tuition.
     
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  6. whatbogsends

    whatbogsends Senior Veteran

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    Slightly off topic, but since it's being discussed...

    I don't believe it's correct that tuition increases are a reaction to reduced government intervention/financial assistance. Tuition has been increasing by staggering rates since at least the early 90's, and i'm not aware of federal aid being reduced at that time. The increased rate of tuition increases started back in the late 70's and it is at least somewhat caused by the availability of federal aid.

    Tuition increases are largely due to the inelastic demand for higher education, and federal assistance contributes to that higher demand. In the 4 years I went to college, back in the early 90's, I saw tuition go from ~$16K my freshman year to ~$21K my senior year. Tuition for that school is now well over $50K and continuing to increase well ahead of inflation.
     
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  7. ananda

    ananda Early Buddhist

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    I include all that as a result of "government intervention", in various ways.

    It's also a result of increased competition for a small number of spots. An increase in population might be profitable for those at the top, but not for us at the bottom as we must compete ever more against our exponentially multiplying fellow peons towards achieving a minimally reasonable standard of living, amidst a shrinking pie.

    The system is broken, and by that I don't mean capitalism (vs socialism). What's broken involves something far more fundamental than either.
     
  8. hislegacy

    hislegacy This is me.

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    Six months in, it’s safe to say that the sky isn’t falling. But you might think of the real estate market right now as behaving like a C student that isn’t living up to its full potential.

    “The housing market is doing fine,” said Lawrence Yun, Chief Economist for the National Association of Realtors. “But it certainly can do better given what’s happening with job creation and the historically low mortgage rate that is currently in place.”

    and then again​
     
  9. ananda

    ananda Early Buddhist

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    I wonder what he means by "do better". For those who are looking to purchase, "doing better" would mean prices correcting by going down.
     
  10. FreeinChrist

    FreeinChrist CF Advisory team Staff Member Site Advisor Supporter

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    That is a different aspect of housing sales. The OP is more about the mortgage business itself.
    That is more about the market .

    From the article I linked:

    “I will tell you as a safety-and-soundness regulator, when I look at a $3 trillion institution that is leveraged 1,000 to 1, it keeps me up at night,” Federal Housing Finance Agency Director Mark Calabria, the companies’ regulator, told the committee.

    “If we do nothing, this is going to end very badly,” he added.
    Some companies look real good right now, but they owe a great deal of money that is coming due. Too many are zombie companies. Likewise, Freddie Mac and Fannie Mae are too leveraged.
     
  11. RocksInMyHead

    RocksInMyHead God is innocent; Noah built on a floodplain!

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    That's a fair point.
     
  12. RocksInMyHead

    RocksInMyHead God is innocent; Noah built on a floodplain!

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    There's a legitimate argument for student debt being due to government intervention, but how do you figure wage stagnation and private speculation to be related?
     
  13. DaisyDay

    DaisyDay blind squirrel

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    Again, if the economy is so great, why is Donald cussing out Jeremy Powell on Twitter for not doing his bidding and lowering the rates to zero or lower?
    The Federal Reserve should get our interest rates down to ZERO, or less, and we should then start to refinance our debt. INTEREST COST COULD BE BROUGHT WAY DOWN, while at the same time substantially lengthening the term. We have the great currency, power, and balance sheet.....
    ....The USA should always be paying the the lowest rate. No Inflation! It is only the naïveté of Jay Powell and the Federal Reserve that doesn’t allow us to do what other countries are already doing. A once in a lifetime opportunity that we are missing because of “Boneheads.”
    No inflation means no growth. The Wharton graduate should be aware of that.
     
  14. ananda

    ananda Early Buddhist

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    The core power of government (its ability to physically compel via law) is wielded by its spouses - powerful corporations - to compel general economic activity, for the benefit & growth of both, to the detriment of their frienemy, the People in general.

    This compulsion is effected through currency manipulation and taxation loopholes (which serves to encourage speculative "investment" by the wealthy), and other laws which protects corporatism along with the promotion of legally protected technological advancements & population growth (leads to wage stagnation due to increased competition among the ever-multiplying serfs).
     
    Last edited: Sep 13, 2019 at 9:13 AM
  15. hislegacy

    hislegacy This is me.

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    It’s a shame that during the eight years of the previous administration it didn't get better, but worse and now with two years into the current administration the President is being castigated for not fixing in two years what Obama could not do in eight.
     
  16. Ricky M

    Ricky M Member Supporter

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    I was going to say something, but never mind.
     
  17. hislegacy

    hislegacy This is me.

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    What are the other indicators of the economy that show “it’s not so great”

    Job growth up
    Wages up a consistent 3%
    Unemployment at its lowest in decades
    Lower taxes for the middle class
    Consumer confidence up

    Several million off food stamps
    Record numbers reentering the workforce.
     
  18. grasping the after wind

    grasping the after wind That's grasping after the wind

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    And health care.
     
  19. FreeinChrist

    FreeinChrist CF Advisory team Staff Member Site Advisor Supporter

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    How incredibly false. Not the topic of the thread but the falsehood just can't be left unresponded to.

    us-real-gdp-2007-2016-600x558.png


    TRUMP-OBAMA-BUSH-EMPLOYMENT-CHART-2005-TO-2018-JOEL-SHORE-.png


    msnbc-chart.png


    And before someone wants to post about 2009 as if it was Obama's fault - that would be a lie.

    The last six years of of Obama's term, the Republicans had the house. They obstructed. It would have been even better.


    A big part of the recovery was due to the stimulus, which Republicans, resisted, and to the Dodd-Frank bill. Republicans keep trying to repeal that.
    Dodd–Frank Wall Street Reform and Consumer Protection Act - Wikipedia
    On March 14, 2018, the Senate passed the Economic Growth, Regulatory Relief and Consumer Protection Act exempting dozens of U.S. banks from the Dodd–Frank Act's banking regulations.[35] On May 22, 2018, the law passed in the House of Representatives.[36] On May 24, 2018, President Trump signed the partial repeal into law.[37]


    So now there is talk of minus interest mortgages like in some countries like Japan. There is the incredibly leveraged Fannie Mae and Freddie Mac.
    The tax cut for the rich resulted in companies buying back their own stock, propping up their own companies as if they were doing better than they are, and leading to HUGE corporate debt, and a record $3 trillion of that debt is rated just above junk status. There is $3.5 trillion in corporate debt coming due in the next 3 years.

    And the manufacturing?

    US manufacturing activity dives to more than 9-year low on trade war worries, survey shows

    U.S. manufacturer growth hit a multiyear low in May, the latest sign that the trade war may be slowing the economy.

    The U.S. manufacturing PMI (purchasing managers index) was 50.6 in May, the lowest level since September 2009, according to results from financial data firm IHS Markit released Thursday.
    And in August:
    US factory activity unexpectedly slowed last month for the first time in 3 years — and Trump's trade war was the main culprit | Markets Insider

    US manufacturing activity dipped in August for the first time in three years as domestic manufacturers continued to grapple with the fallout from the US-China trade war.

    The Institute for Supply Management said on Tuesday that its closely watched purchasing managers index slid to 49.1 in August, a level lower than any analysts expected, according to Bloomberg. A reading below 50 typically indicates that growth in the manufacturing sector is weakening.
    That is on Trump's watch, not Obama. So let's stick to the topic in the OP which is about now, not the last administration who left a growing economy for Trump.
     
  20. hislegacy

    hislegacy This is me.

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    dup
     
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