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This Time it’s Bernanke’s Housing Bubble

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“That men do not learn very much from the lessons of history is the most important of all the lessons of history.” These are the simple, yet exceedingly relevant for our times, words of the famous English writer, Aldous Huxley. If only Federal Reserve chairman Ben Bernanke would acquaint himself with this quote.

For three years, between 2001 and 2004, in an effort to boost the economy after the 911 terrorist attacks, his predecessor at the Fed, Alan Greenspan, kept the Federal Funds Interest Rate under two percent. As a result, cheap money and low introductory teaser rates fueled the largest housing boom in American history. Then, like all fake boom phases, when interest rates rose, it came to an end. The necessary correction phase started and all the malinvestment of the boom phase was no longer sustainable under higher rates. Foreclosures increased. As housing prices fell back to earth, underwater mortgages and abandoned homes were everywhere. Many still find themselves unemployed and destitute.

Now, instead of letting the market go through a much needed correction after the crisis began, new Federal Reserve chairman Ben Bernanke pursued a policy bent on “stabilizing” the value of assets. Since 2008, Bernanke’s Fed has kept the Federal Funds Interest Rate close to zero percent and it has increased its balance sheet by just under three trillion dollars by purchasing Treasuries and mortgage-backed securities from member banks.

Some economists believe Chairman Bernanke’s policies have created a housing recovery. These economists believe this because they haven’t learned from history, especially recent history.

But, according to David Stockman, the former head of the Office of Management and Budget under Reagan, what Bernanke’s policies have created is simply another housing bubble. He sees a similar combination of artificially low interest rates and speculation producing the current housing boom just like the boom during Greenspan’s tenure.

Nationally, the median price for existing single-family homes was $178,900 in the fourth quarter of 2012, up 10 percent over the same period in 2011. This marked the greatest year-over-year price increase since the fourth quarter of 2005.

And there are local pockets of even greater price increases in real estate going on. There is a farmland bubble taking place in the Midwest and Mountain states with non-irrigated cropland prices increasing on average by about 18 percent. Southern California, Silicon Valley, Washington D.C., and New York City are all experiencing huge real estate booms with prices for pre-construction condos in Manhattan increasing on a bimonthly basis.

It is ridiculous to believe that what we are seeing is anything other than another housing bubble. Unemployment and underemployment are still very high. Many employed middle income buyers are still reeling from the last bust. The huge price increases we are seeing is the work of speculators fueled by Bernanke’s easy money policies.

The bust will come when rates rise, the malinvestments of the boom become unsustainable at the higher rates, and the speculators liquidate their positions leaving small investors holding the bag. It will be 2008 all over again for many, except this time it will be Ben Bernanke’s Housing Bubble.

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About Kenn Jacobine

  • Glenn Contrarian

    Kenn –

    “That men do not learn very much from the lessons of history is the most important of all the lessons of history.”

    Right. Now how many nations based on libertarian principles are there among the first-world nations today? Oh, right – NONE.

    But back to your article:

    Interestingly enough, beyond the manipulation of the Federal Funds Interest Rate you didn’t even mention the effects of regulation or the lack thereof. You didn’t address the effects of easy access to credit, sub-prime loans, the effects of credit default swaps, and the dangers of derivatives, all of which combined with the interest rates (that you correctly pointed out were a problem) to make a kind of perfect storm. It wasn’t just the interest rates – it was the whole deregulated system:

    …almost three years after stepping down as chairman of the Federal Reserve, a humbled Mr. Greenspan admitted that he had put too much faith in the self-correcting power of free markets and had failed to anticipate the self-destructive power of wanton mortgage lending.

    “Those of us who have looked to the self-interest of lending institutions to protect shareholders’ equity, myself included, are in a state of shocked disbelief,” he told the House Committee on Oversight and Government Reform.

    Critics, including many economists, now blame the former Fed chairman for the financial crisis that is tipping the economy into a potentially deep recession. Mr. Greenspan’s critics say that he encouraged the bubble in housing prices by keeping interest rates too low for too long and that he failed to rein in the explosive growth of risky and often fraudulent mortgage lending. (boldface mine)

    It wasn’t just that interest rates were kept too low for too long – it was that the market was pretty much deregulated. At the time, the lenders would lend to anyone as long as they were breathing, but hopefully the Dodd-Frank legislation will mitigate that particular practice.

    I agree that a correction was necessary and it occurred (and my house got foreclosed in the process (and it hurt))…but it was and is unnecessary for everything to drop back to rock bottom. Why? Because property values had to be preserved – not just for the sake of the property tax income that keeps local, municipal, and state governments afloat, but also to protect small businesses. Why? When one’s business property isn’t worth anything close to what it was, it all of a sudden becomes that much harder to use that as collateral for business loans.

    Don’t get me wrong – I don’t agree with everything Bernanke did. I think that he should have pushed to put a whole lot of bankers and hedge fund managers and CEO’s in jail. But your premise that low interest rates were what led to the housing bubble is faulty, for it focused on only one part of the big picture and did not address how the other factors each poured fuel on the fire…and because those other factors have been exposed today to regulators with the teeth and the will to enforce those regulations, there is no reason to assume that low interest rates in and of themselves will drive us back into another housing boom/bust.

  • Kenn Jacobine

    Glenn, without the Fed’s low interest rates the criisis would not have happened. Low interest rates were the gasoline in the engine. It made the motor go. And the point is that nothing has changed and we are doing it again. This time under Obama – oh yes, the Republicans have thwarted he ability to regulate. I guess that is true even between 2009-2011 when he had majorities in both houses of Congress an a lot of political capital himself.

    Price fixing never works. But you think like the politicians – if one of our policies messes up the economy, we can’t admit we were wrong, we simply just need more government involvement (regulations). But those regulations are elusive because the industries they are meant to regulate write them. But the people are stupid and dont know that, so we can always push for more. And before you know it, we have a mess like the health care industry. But our scapegoat will always be those greedy insurers.

    BTW – the reason the investment banks were irresponsible was because theyhad an implicit guarantee to be bailed out. Notice I said investment bank because as I have proven in the past, the institutions that got in ttrouble were not covered by the late Glass Steagle anyway.

  • Glenn Contrarian

    Kenn –

    See, that’s just how much you don’t know.

    I guess that is true even between 2009-2011 when he had majorities in both houses of Congress an a lot of political capital himself.

    He did have majorities in both houses, but he only had a filibuster-proof majority in the Senate for a grand total of 72 in-session days. By early summer of ’09, the GOP could and did filibuster almost everything that Obama tried to pass…precisely in accordance with what their leadership agreed to do in a meeting the night before his inauguration. They filibustered far more bills than at any time in American history. The current filibuster of Vietnam Vet and Purple-Heart-awardee Republican Chuck Hagel is the first time in American history that a nominee for Defense Secretary has been filibustered.

    It is not for nothing that I have repeatedly stated that Obama faced the most obstructive Congress since the Civil War. That, sir, is a true statement.

    So don’t tell me that he could have done anything he wanted to for two years – that’s false. He had his way for 72 in-session days, until Scott Brown won Ted Kennedy’s old seat.

    Price fixing never works. But you think like the politicians – if one of our policies messes up the economy, we can’t admit we were wrong, we simply just need more government involvement (regulations).

    Did you not read what Greenspan said? Greenspan had been strongly conservative and had been FOR deregulation…and then he stated quite clearly above that he was wrong.

    You’re an historian, Kenn, so you should be able to objectively look at the world’s nations and tell me which countries are succeeding and which are not. Would you care to show me even ONE example from the beginning of the twentieth century until the present day where a nation was able to prosper at even close to the same level as the regulated economies?

    What you’re doing wrong is you’re starting with your assumptions about government regulations and trying to make the circumstances fit your beliefs. What you should be doing is looking at the most successful nations and asking yourself “Why are they the most successful? What do they have in common?” and use your conclusions to help shape your belief. But you won’t do that because that would force you to question your own beliefs.

    the institutions that got in ttrouble were not covered by the late Glass Steagle anyway.

    Really? Like Bank of America? I suggest you take a look at this list of bailed-out banks and rethink that statement.

  • Kenn Jacobine

    What is Greenspan going to say, it is my fault? Why would you quote the man who was at the center of producing the crisis?

    Obama didn’t have the time to get financial regulation done, but he had time to totally take over the health care system? What was more important, fixing the current problem or a longer term problem. Besides we did get Dodd/Frank. But, I guess since that is not preventing this next housing bubble, you prefer to ignore it. You are partisan and clueless Glenn.

  • Kenn Jacobine

    Your list indicates banks that got money to “prop up capital and support new lending”. It doesn’t mean they needed the money to avoid bankruptcy. Hell a community bank that I am invested in got money and they had no sub-prime loans on their books. This is just an example of crony capitalism pure and simple. Face it Glenn, the Fed is the bankers piggy bank. As a good Keynesian, I am surprised you don’t yell for the Fed to print money and hand it to consumers instead. Why should the banks get all the fun?

  • Kenn Jacobine

    The implied guarantee of a bailout was based on Greenspan’s decisions surrounding Long Term Management – a speculating hedge fund. In some circles he is known as “Mr. Bailout“.

  • Igor

    What’s truly astounding was Greenspans childlike belief in self-correcting economics.

    Bankers committed palpable fraud, repeatedly, yet none went to jail. So, who can you trust?

  • Glenn Contrarian

    What’s truly astounding was Greenspans childlike belief in self-correcting economics.

    Same thing goes for all libertarians and most conservatives.

  • Glenn Contrarian

    Kenn –

    Obama didn’t have the time to get financial regulation done, but he had time to totally take over the health care system?

    You’re developing a real habit of building strawmen, since all Obamacare essentially does is (1) ensure that almost all Americans have access to health insurance – almost all of which will be provided by the private sector, (2) help them to be able to afford said health insurance, and (3) ensures that at least 80% of the revenue taken in by those insurers is actually used for health care. But don’t let that stop you from building strawmen, now!

    What was more important, fixing the current problem or a longer term problem. Besides we did get Dodd/Frank. But, I guess since that is not preventing this next housing bubble, you prefer to ignore it. You are partisan and clueless Glenn.

    If you knew your recent history, you would know that the stimulus came first, that we were officially out of the recession by August of 2009 (though that doesn’t mean that we had recovered from it – sorta like stopping a plane’s death dive and leveling out the flight doesn’t mean that the plane’s back up to the proper altitude yet), and THEN he got to work on Obamacare. Dodd-Frank did come after that…but we had to understand first exactly what had happened and then figure out what was needed to fix it – and then negotiate with the most obstructionist Congress since the Civil War to get it passed.

    Furthermore, if you knew your American economic history, you’d know that this was not the first correction in housing prices we’d had…but none of the corrections before had all the other factors I listed above, factors which became an economic vicious circle.

    But you go on building strawmen, now.

    Your list indicates banks that got money to “prop up capital and support new lending”. It doesn’t mean they needed the money to avoid bankruptcy. Hell a community bank that I am invested in got money and they had no sub-prime loans on their books. This is just an example of crony capitalism pure and simple. Face it Glenn, the Fed is the bankers piggy bank.

    You should have said, “Your list also indicated some banks that were not in danger of bankruptcy” – your statement could be misleading otherwise. Besides, are you really aware of the inner workings of the community bank you were invested in? How was their liquidity status? Do you know? If it wasn’t good, are you so naive to think they’d actually tell you? If you’ll check, a significant part of the Great Recession was that it was also a liquidity crisis.

    Was the bailout perfect? Of course not. Did it stop us from going into another Depression? According to most economists, ABSOLUTELY. Maybe you would have enjoyed seeing America find out what the Weimar Republic was like, but most of us would rather avoid that.

    As a good Keynesian, I am surprised you don’t yell for the Fed to print money and hand it to consumers instead. Why should the banks get all the fun?

    If you had half the clue about Keynesian economics as you think you do, you’d know that’s not Keynesian economics.

    And I’m still waiting for you to tell me why it is that ALL the non-OPEC first-world nations are socialized democracies – I mean, hey – if (as you seem to believe) market forces would drive socialized democracy into the dustbin of history while those nations with small governments with weak regulations should be booming! But NONE of that is happening! Even given the stupid-assed austerity measures that are hurting Greece and Spain much more than necessary, they’re still first-world nations.

    Neither you nor Clavos nor any other conservative or libertarian has been able to answer that simple question in the two years I’ve been asking it. Sometimes it takes guts to address a question that casts doubt onto one’s long-held beliefs. Do you have guts enough to address the question?

  • Igor

    In ’89 after the S&L debacle over 1000 bankers were sent to jail.

  • Glenn Contrarian

    I know – that’s one thing that Reagan did that I wish Obama would have done.

  • troll

    Glenn’s question has been addressed in both economic and military terms in these threads – a third facet of a comprehensive explanation would have to be epidemiological…the diseases that emerged out of the cesspool that was Europe destroyed numerous civilizations which were modeling alternative social structures before the invading barbarians could fully appreciate and incorporate the better principles of these alternatives

  • Igor

    @5-Kenn: a couple points in passing:

    -bankers DO regard the Fed as their piggy bank, after all, they appoint the Fed Governors. We should change that, but they’re too hooked on it and they have too much power.

    IMO bankers were given too much latitude and they soon succumbed to temptation.

    -Ben Bernanke once jokingly said that the best way to increase the money supply was to fly over cities in a helicopter scattering large bills. It’s the fairest way. He got the moniker “helicopter Ben” from that comment.

  • Glenn Contrarian

    troll –

    Glenn’s question has been addressed in both economic and military terms in these threads – a third facet of a comprehensive explanation would have to be epidemiological…the diseases that emerged out of the cesspool that was Europe destroyed numerous civilizations which were modeling alternative social structures before the invading barbarians could fully appreciate and incorporate the better principles of these alternatives

    That’s not quite true. ‘Socialized democracy’ – as we know it today – is a relatively recent development. While one could try to make the case that its roots lay with the Magna Carta, the practical application of socialized democracy – the implementation of a social safety net – didn’t come until the advent of socialized health care in Germany in the 1880’s and the weakening of royalty in Germany and England.

    In other words, there’s been lots of chances for other types of government to work. It is true that there were other forms of government that were certainly successful and protected the rights of the individual – the Iroquois nation comes to mind – but in order to implement such a system, you have to (1) sell that system to enough people for them to choose to change their sociopolitical framework to the new paradigm – no easy task! – and (2) determine whether that system would actually work given our modern interdependent and information-driven world society.

    In other words, it’s one thing to point out what one thinks is a better way, but it’s another thing altogether to show that has a ghost of a chance of working in the real world. That’s why I’m a strong supporter of socialized democracy, because that’s what’s working the best in the real world, and what has brought its citizens the highest standard of living in human history.

  • Kenn Jacobine

    Yes, that is right , Glenn. Germany since the 1880s has been so much more prosperous than the U.S. because her citizens have socialized health care. And she hasn’t been prone to starting a couple of world wars, a period of hyperinflation, and being ruled by a madman either. It has worked well for her.

  • Doug Hunter

    “‘Socialized democracy’ – as we know it today – is a relatively recent development.”

    Nations have only recently become wealthy enough to support these systems. For some reason the analogy that always comes to my mind is that of the horse and carriage. Capitalism is the horse pulling the carriage (welfare state) which has it harnessed in. You get a strong horse and you can hook quite the carriage up to it. I’d rather gallop bareback into the future risking my neck, but I recognize the comfort and safety of the decked out carriage trotting along as well. Too much horse you get pulled along quick for a bumpy ride, but too much carriage you ease along at the back of the pack and can even stop progressing completely. The old saying you can’t put the cart before the horse applies as well, which is why I support allowing unbridled capitalism into undeveloped countries. It may eat all their grass and shit on them today, but eventually they’ll slip a halter around it’s neck and ride into the sunset.

  • Glenn Contrarian

    Kenn –

    Yes, that is right , Glenn. Germany since the 1880s has been so much more prosperous than the U.S. because her citizens have socialized health care. And she hasn’t been prone to starting a couple of world wars, a period of hyperinflation, and being ruled by a madman either. It has worked well for her.

    Yes, and it’s worked out SO terribly for England, Australia, Canada, and the rest of non-OPEC first world nations since then, huh? I pointed out Germany in order to show just how recent socialized democracy is in human history.

    And remember, the Great Recession hardly touched Canada and Australia. According to your economic beliefs, it should have devastated them.

  • Glenn Contrarian

    Doug –

    which is why I support allowing unbridled capitalism into undeveloped countries. It may eat all their grass and shit on them today, but eventually they’ll slip a halter around it’s neck and ride into the sunset.

    You forget – I’ve got a home in one such third-world nation with largely unbridled capitalism (the Philippines). And it’s far more capitalistic than America – taxes on the people almost nonexistent, regulation is a joke, and anything – anything at all – can be had, for a price…and you can’t get anything at all unless you have money.

    Here’s a quick story when it comes to lack of regulation. There’s no smog control there, no emissions standards. So what happens? When you look down the road, you see a black-tinged cloud about a half-klick down the road: that’s the accumulated exhaust from the cars clouding the air between you and that spot down the road. And when you get home, you blow your nose and a bunch of black snot comes out of your nose – that’s the soot that didn’t go into your lungs.

    There’s little regulation of business, almost none at all of food. Caveat emptor is how one lives there. It doesn’t mean that one can’t live well and happily there, but it does mean that you’re completely on your own. And don’t even think of being able to take Big Business to court! In the land of unbridled capitalism, Juan Doe has precisely zero protection against the vagaries of Big Business. If Big Business screws you over, all you can do is to go elsewhere – you can’t even argue with them…’cause if you do, you might find out the hard way what being salvaged means.

    So you know what happens with unbridled capitalism? There’s a truly nice area – it’s called “Fort Bonifacio Global City” if you want to look it up. It’s really nicer than any comparably-sized area between Vancouver B.C. and San Francisco, right down to the Lamborghini and Maserati showrooms. But go a kilometer in any direction, and you’re back among the squatters and the children running up to your car begging for a few pisos so they can eat. Supply-side trickle-down economics? That’s so much bullshit. To paraphrase Charlie Rangel, the people there never got the trickle, but they sure as hell got the down.

    I’ve seen it first-hand, Doug, I’ve lived it – and I can tell you that it doesn’t work like you think it would.

  • Doug Hunter

    Glenn, according to the World Bank GDP has grown 16.8% in the Philippines since 2008 compared to 0.8% in the US where we carry a larger welfare load. You have to have money before you can redistribute it and what the Philippines is doing is what is required for growth rates 1700% larger than ours over four years. Unrestrained capitalism is working to build the wealth and one day once they are wealthy they will choose to spend that wealth on welfare luxuries (your social democracy) like most other countries do. I bet their growth rates get lower then as well. Again, a horse without a big load can run ahead quite a bit faster and they’re playing catchup. The end result is worth the growing pains.

  • trollop

    “‘Socialized democracy’ – as we know it today – is a relatively recent development.”

    however older forms of socialized democracies wealthy enough to support safety nets based on small government and more direct approaches to democracy than those we know today might well have existed – see the recent work of Charles Mann (1491and 1493) and the older work of Jack Weatherford (Indian Givers) for evidence supporting this alternative narrative

    perhaps the anarchy in Chiapas represents the tip of an iceberg of some cultural memory of such things and we will find that America’s true exceptionality resides with what’s left of her indigenous populations…this idea allows the more optimistic amount us to imagine a future based on something other than our whitebread fantasy of eternal domination

    in any case I see no reason in any of these responses to consider Glenn’s initial question – why are all non-OPEC first world countries (defined as those with today’s highest standards of living) socialized democracies (defined as those post-1880 countries with large elected governments enforcing strong regulations and safety nets) – unanswered

  • Kenn Jacobine

    Glenn,

    England, Australia, and Canada have never been as prosperous as the U.S either. Do you live on planet earth?

  • Glen Contrarian

    Kenn –

    England, Australia, and Canada have never been as prosperous as the U.S either. Do you live on planet earth?

    REALLY? Are you talking in terms of gross domestic product, perhaps? Or maybe you’re thinking of GDP per capita…which doesn’t always take into account the fact that Americans – unlike their counterparts in the rest of the non-OPEC first world – have to pay through the nose for health care, and outside our big cities it’s expected that one must have a car…which is not the case in most other places in the world.

    But when was the last time you visited Canada or Australia? They’re both beautiful and every bit as modern as America. Australia’s suffering from the effects of climate change, but try finding any sizable American city that is as nice, as clean, and as fully modernized as Sydney or Vancouver!

    I spent three days in Vancouver a little over a year ago, and I specifically looked for homeless, for trash, for graffitti – it’s a habit I gained after Singapore – and let me tell you that there’s no sizable city in America that compares…

    …which is why Vancouver’s perenially chosen as one of the top most livable cities in the world. So is Sydney.

    Kenn, you’ve spent a lot of time as an expat, but you’ve apparently been missing a lot of lessons that the rest of the world has to teach us.

  • Glen Contrarian

    Doug –

    in the Philippines since 2008 compared to 0.8% in the US where we carry a larger welfare load. You have to have money before you can redistribute it and what the Philippines is doing is what is required for growth rates 1700% larger than ours over four years.

    Doug, you’re showing your ignorance. That big growth rate isn’t showing great success – it’s showing how low a bar they’re having to clear. I do so wish I could take you for a tour there – I’d take you to the nice places – not only Fort Bonifacio but to the malls (three of the world’s ten largest malls are within a ten mile radius in Manila – with the possible exception of the Mall of America our malls are almost laughably small in comparison) where you can walk by the top of the line stores. In December my wife and I walked down Rodeo drive, and you know what? With the possible exception of Tiffany’s, I saw the same stores (and more of them) in Manila. Yes, Manila and the Philippines in general is booming…

    …until you see the millions and millions of poor, of squatters. There’s nowhere in America that compares. No American who has not walked through a third-world slum really knows what poverty is…

    …and it puts the lie to that 1700% growth rate. That growth rate means that there’s a few million people who can afford high-end items…but there’s millions and millions more who can’t even dream of it.

  • Glenn Contrarian

    troll –

    in any case I see no reason in any of these responses to consider Glenn’s initial question – …- unanswered

    Now I’ve been accused many times of having poor reading comprehension, so instead of giving a blanket denial that there has been no such answer, I’ll just ask you exactly where those answers were because I really don’t see anything that addresses my question concerning the current state of the world.

    Concerining those older apparent forms of small-government socialism to which you refer – even if they existed and worked well – this would probably be IMO a case of comparing apples to oranges since we cannot – cannot – have the level of technological advancement that we have today without the government-enforced regulation and government-funded infrastructure that enables said technological advancement. If what you’re looking for is a peaceful, pastoral life, then that small-government socialism might well work better than any modern form of government. It all depends on what you’re willing to give up to have that kind of government.

    I had a long debate with Cindy in which I took the position that government on anarchist principles could not exist…and it was the example of Chiapas that proved me wrong. That said, such can only exist when there is no need to compete militarily with other, more aggressive nations. Furthermore, I would also the ability of such a government to stand up to multinational corporations.

  • troll

    Glenn – as ‘you vere der’ (thanks for the memories Igor) all along the way it might prove more instructive were you to restate the arguments from the various threads – economic military and epidemiological – as you understand them and your refutation of each

    at this point I’ll simply propose that in some senses histories do shape the current state of affairs

    and concerning the separate question of possible alternative forms of organization when you say …we cannot – cannot – have the level of technological advancement that we have today without the government-enforced regulation and government-funded infrastructure that enables said technological advancement. I say you don’t know what people are and aren’t capable of and that your claim is just that and not an argument…and as usual all your claim boils down to is that what is is and is therefore necessary

  • Doug Hunter

    #23

    You can be incredibly dense and impervious to fact when you want to. Go with your gut if you choose, but in general if you look at a list of countries by GDP top to bottom, the ones at the top are pretty nice places to live while the ones at the bottom are terrible. Growing GDP would seem a reliable way to improve perceived standard of living. I didn’t say they had a 1700% growth rate, I said their growth rate was 1700% of the US growth rate (16.8% versus 0.8%) in the last four years… which is simply a fact. That is a good thing for them, and a bad thing for us. I know you’re happy because Obama has doubled down on Bush with even more government intrusion, regulation, spending and debt coupled with an 0.8% growth total since he was elected but we simply will not retain our position in the world with such a pitiful performance long term.

    BTW, troll has you nailed on this. Big welfare state and onerous government regulation are not something required for a modern state, they are luxuries (or burdens depending on your view) that most democracies choose to pay for at the hands of a fearful and control minded population. Your claim would be akin to me saying “In order to be rich, one must own a 200′ Yacht a private jet, and have live in domestic help”. Actually that’s not true, even if many very rich people choose that path it’s not required to be wealthy and actually works against it in a small way…. much like your beloved regulations and big government welfare state.

  • roger nowosielski

    @25

    QFT

  • roger nowosielski

    @26

    I don’t think that’s troll’s argument, Doug. Of course, I may be wrong.

  • Doug Hunter

    #28

    It is not the exact argument, but it contains key consistencies IMO. I read it as troll leaving open the door to other arrangements that could achieve many of the same trappings of modernity without the burden of large government. My opinion is that government is not required for many of the things we have, it is one reactive option that the majority has, at least nominally, voted for once we had the wealth to support it’s inefficiencies. I could be confused and rambling though, wouldn’t be the first time.

  • roger nowosielski

    What I meant was that your operative term, “a modern state,” is absent in #25. As to your main thrust in #29, I think I agree.

  • Glenn Contrarian

    troll –

    in some senses histories do shape the current state of affairs

    Yes, that’s true – but the operative part of that statement is “in some senses”. It would be easy to dismiss my claims about the current sociopolitical makeup of the world if it weren’t for the post-WWII recovery of Japan and (Western) Germany, and the recovery of South Korea after the cease-fire that ended hostilities in the Korean War. Yes, we did help a lot with the Marshall Plan, but it was only help – we did not rebuild those nations. The people of those nations did the rebuilding of the national infrastructures and economies…

    …and each of them were immediately saddled with what today’s conservatives would call “big government” with onerous regulations. If anti-big-government dogma were true, then Japan and Germany would still be economic wastelands and not the world’s number three and four economies, respectively. The same thing goes for South Korea.

    Conversely, there were many nations with what we could call “small” governments – low taxes and little regulation – who came through WWII fairly unscathed since they were not belligerents in that war. And how many of them are non-OPEC first-world nations today? None. Yes, most of these were third-world Cental and South American and Asian nations and were often unstable, and said instability hurt their ability to progress…but I would submit in reply that another significant benefit of socialized democracy is the overall stability of the government relative to that of “small” governments. Think on that one for a while.

    and concerning the separate question of possible alternative forms of organization when you say …we cannot – cannot – have the level of technological advancement that we have today without the government-enforced regulation and government-funded infrastructure that enables said technological advancement. I say you don’t know what people are and aren’t capable of and that your claim is just that and not an argument…and as usual all your claim boils down to is that what is is and is therefore necessary

    Really? Would you care to name some major technological advances that were brought to the masses and changed the world without significant government help? The internet? Nope. Cell phones? Nope. Television? Nope. Telephones? Nope. Our electrical grid? Nope. Our cars? Nope. Our best-in-the-world hospitals? Nope. Air travel? Nope. Satellite communications? Nope. Our water and sewage systems? Nope.

    Sit back and think on your refutation of my claim that “we cannot – cannot – have the level of technological advancement that we have today without the government-enforced regulation and government-funded infrastructure that enables said technological advancement.” And then give me some examples of how government-enforced regulation and government-funded infratructure was not needed to bring a major technological advancement to the masses.

    You might be able to do so…but any such examples would be very much the exception to the rule. Troll, it’s very much in style to criticize the government and lay the blame for all the world’s woes at the feet of the government (and this is often not without cause), but in America, it seems almost politically-incorrect to point out what the government does that is right. Think about it, troll – almost everyone here eagerly points out what the government does that is wrong (and rightly so), but how many of us are pointing out what our kind of government does that is right? Not many at all. I am, after all, a contrarian.

    In other words, troll, while government is not and can never be the whole solution to the world’s problems, government certainly is and will always be a crucial part of any such solution to the world’s problems.

  • roger nowosielski

    Microsoft, AT&T, General Motors, IBM . . .

  • Glenn Contrarian

    Doug –

    Go with your gut if you choose, but in general if you look at a list of countries by GDP top to bottom, the ones at the top are pretty nice places to live while the ones at the bottom are terrible. Growing GDP would seem a reliable way to improve perceived standard of living.

    Really? Been to China lately? They’ve got the second-largest (and soon to be the largest) economy on the planet. But the standard of living there for much of the population sucks – or haven’t you heard about the sweatshops there? The key is not the GDP – the key is to have a nice GDP and a low level of income inequality.

    I didn’t say they had a 1700% growth rate, I said their growth rate was 1700% of the US growth rate (16.8% versus 0.8%) in the last four years… which is simply a fact.

    Okay, fine – whatever. It’s still not helping the squatters and the poor who far outnumber the middle class and the rich.

    That is a good thing for them, and a bad thing for us. I know you’re happy because Obama has doubled down on Bush with even more government intrusion, regulation, spending and debt coupled with an 0.8% growth total since he was elected but we simply will not retain our position in the world with such a pitiful performance long term.

    BTW, you did know that your personal federal tax burden is lower now than at any time since the Truman administration, didn’t you? And you knew that our corporate tax rates are lower now than at any time since Nixon, didn’t you? And you knew our government is growing slower now than at any time since Eisenhower, didn’t you? And you did know that our federal deficit has dropped thirty-seven percent since 2009 (the last Bush budget), didn’t you? Yes, the deficit was much lower before 2009…but that’s less of an indicator of how bad Obama is than of how bad the Great Recession was, of how difficult our recovery still is. Oh, but I forget – in Conservative World, Obama’s no different from Bush…and that’s quite true, as long as one ignores all the hard data.

    BTW, troll has you nailed on this. Big welfare state and onerous government regulation are not something required for a modern state, they are luxuries (or burdens depending on your view) that most democracies choose to pay for at the hands of a fearful and control minded population. Your claim would be akin to me saying “In order to be rich, one must own a 200′ Yacht a private jet, and have live in domestic help”. Actually that’s not true, even if many very rich people choose that path it’s not required to be wealthy and actually works against it in a small way…. much like your beloved regulations and big government welfare state.

    Oh, yes, the “welfare state” argument. We’re just giving money away, flushing the money down the drain, right? That’s all that is, right?

    Wrong paradigm, Doug. Thirty years ago I would have heartily agreed with you, but now I understand what our social safety net really is – it’s an investment on our most important infrastructure – our PEOPLE. Let’s say we just cut off all welfare – what would happen? Instead of people (and especially single mothers) hanging on to an apartment by a thread, they (and their children) be out on the street. And how do children who grow up homeless tend to turn out? Frankly, I’d much rather pay a few extra dollars in taxes for welfare than I would a few extra dollars in taxes for correctional institutions.

    Instead of paying for Medicaid for the poor, let’s cut it off. And what happens? Just like in the Philippines, when the breadwinner of the family gets sick, instead of getting the health care that he (or she) needs so he can get back to work and continue providing for the family (and continue paying taxes), he stays sick for much longer…or dies. And what happens to the family that no longer has a breadwinner? And especially if there’s no welfare?

    These aren’t just made-up scenarios, Doug – these are REAL LIFE. That social safety net that you decry is an essential part of maintaining the high standard of living for a nation. It’s a hell of a lot harder to get a good paying job (or a job at all) if one is homeless. It’s a hell of a lot harder to keep a job or provide for one’s kids of one is too sick to work. And do you really think that there’s no cost to YOU when people are stuck in these situations?

    It’s like I pointed out to Clavos years ago, like the old Midas commercial: “You can pay me now, or you can pay me later”…with the obvious caveat being that “pay me later” would be a LOT more expensive. Like every other taxpayer, Doug, you WILL pay for the poor. You can either pay for them now with your taxes to keep them off the streets, to try to keep more of them and their children from a life of crime…OR you can pay later with the higher crime rate, with the diminished number of people who are able to patronize your business, with the diminished number of people who are able to contribute to our national tax base.

    And if all this were not true, if that “welfare state” you hate so much were such a drag on a national economy, then why are Japan and Germany the number three and four world economies, respectively, despite the epic devastation they both suffered in WWII? And don’t even try to use the Marshall Plan to worm your way out of it. The money helped…but that was over sixty years ago. After all, if the Marshall Plan is to be credited for today’s Japan and Germany, then what is that but the best possible argument for Keynesian stimulus policies?

    It’s like any good coach, any good military leader will tell you: take care of your people, and they will take care of you. Don’t take care of them, and they can’t take care of you. And when it comes to nations, if you leave your people to rot on the streets, then you’re going to find that they’ll do what they have to, to survive…and most of it won’t be legal. Is that really what you want?

  • Glenn Contrarian

    Roger –

    Microsoft, AT&T, General Motors, IBM . . .

    Really? Are you actually going to try to make the argument that what their success didn’t have anything to do with government-enforced regulation and government-funded infrastructure?

    I suppose you never heard about DARPA, our educational system (for all its woes), our interstate highway system, the Code of Federal Regulations that ensures that phone services can communicate with each other, our satellite systems (btw, is government-funded GPS important to Big Business?)…come on, Roger, I can do this all day long! Tell you what – why don’t you point out even ONE major corporation that (1) got to where it is without government regulation and infrastructure, and (2) continues to depend on said government regulation and infrastructure in order to operate at a profit? I’m really looking forward to you trying to think of one!

    And you’re intelligent enough to know I’m right – NONE of those corporations could have gotten to where they are without the comprehensive regulation and infrastructure that our government provides. But you’ll never admit it, will you? Nah – agreeing with me on anything is beneath you…and it’s simply politically-incorrect in today’s world to say that government is anything but bad and evil and incompetent.

  • troll

    Glenn – most of #31 is a restatement of your original question just clothed differently –

    and as for your professed contrarian innocence – you go beyond simply pointing out what our dominant form of liberal governance does right…you insist that others ought to agree with you that it should be supported – claiming that the ‘good’ outweighs the ‘bad’

    and you do realize that your punchline In other words, troll, while government is not and can never be the whole solution to the world’s problems, government certainly is and will always be a crucial part of any such solution to the world’s problems. creates a straw man right?

  • Clav

    …I would submit in reply that another significant benefit of socialized democracy is the overall stability of the government relative to that of “small” governments.

    Wrong. That is a cultural, not political, difference. Corruption, bribery, and their attendant results are much more a part of those cultures than in Europe or here, and as such, are tolerated — even welcomed, by much of the population.

    Much of the population laughs at, and even complains about La mordida, but those same people don’t hesitate to use it when the opportunity arises.

  • Glenn Contrarian

    troll –

    you do realize that your punchline In other words, troll, while government is not and can never be the whole solution to the world’s problems, government certainly is and will always be a crucial part of any such solution to the world’s problems. creates a straw man right?

    How so? I honestly don’t see it.

  • Glenn Contrarian

    Clavos –

    Wrong. That is a cultural, not political, difference. Corruption, bribery, and their attendant results are much more a part of those cultures than in Europe or here, and as such, are tolerated — even welcomed, by much of the population.

    I would strongly disagree based on the fact that the stability of a socialized democracy does not seem to depend overmuch upon the level of corruption tolerated by the society in question. While corruption does adversely affect the functioning of the economy and the government, the stability of a socialized democracy is much less threatened, as can be seen by the general stability of the world’s socialized democracies (even in the third world) from 1900 on as commpared to the stability of other forms of government during that same time period.

    Again, I’ll use the Philippines as an example. For all the endemic corruption – which I daresay is greater than anything you’ll find in Europe – and for all the grinding poverty and sociopolitical instability over the years (including a Soviet-supported rebellion, and now a Muslim-extremist-supported rebellion of sorts), they’ve been a democracy (if not a socialized democracy) since 1946. I can’t think of another form of government since 1900 that had anything approaching their problems that lasted nearly as long. You might say that their a democracy but not a socialized democracy, but the only real difference between the two is the level of social support for the people (and the taxes to support it).

  • NKFJR

    the fact that the stability of a socialized democracy does not seem to depend overmuch upon the level of corruption tolerated by the society in question.

    Oh but it does, Glenn. In a corrupt society, the corrupt govern; that percolates through every aspect of the governance of the country, and results in enormous instability in both the economic and political sectors.

    as can be seen by the general stability of the world’s socialized democracies (even in the third world)

    Woah!! For weeks you’ve been arguing that the “socialized democracies” are first world, and that the third world countries are not socialized democracies! You can’t have it both ways just to win an argument, Glenn. That one’s a strike.

    If what you say about the Filipinas is true, then they are the exception that proves the rule. Virtually all the third world countries in Latin America have been unstable for most of the last century. Some have been unstable for all of it. The same would hold true for corrupt nations in other parts of the world, such as Africa.

  • troll

    Glenn – as I understand it the argument here is over approaches to governance (large vrs small bureaucracies…strong regulation vrs weak…anarchist and ad hoc vrs codified – that kinda thing) not the absence or presence of government

  • Glenn Contrarian

    Clav –

    Oh but it does, Glenn. In a corrupt society, the corrupt govern; that percolates through every aspect of the governance of the country, and results in enormous instability in both the economic and political sectors.

    Look again, Clav. Look again at the overall stability of democracies, whether in first-world nations or third-world nations – how many of those nations have devolved into civil war or tyranny? Some, but not many – and none at all among first-world nations. Perhaps it would be more accurate to say, then, that socialized democracies aren’t stable because they’re socialized, but because they’re democracies. Would you agree with that?

    Woah!! For weeks you’ve been arguing that the “socialized democracies” are first world, and that the third world countries are not socialized democracies! You can’t have it both ways just to win an argument, Glenn. That one’s a strike.

    WRONG. Can you find anyplace that I said that ALL socialized democracies are first-world? No sir, you can’t, because I never said that. I’ve been very careful to state that ALL non-OPEC first-world nations are socialized democracies – but that doesn’t say that all socialized democracies are first-world nations, does it? There are a few other socialized democracies, and there are many small-government democracies in the third world (but none in the first world).

    If what you say about the Filipinas is true, then they are the exception that proves the rule. Virtually all the third world countries in Latin America have been unstable for most of the last century. Some have been unstable for all of it. The same would hold true for corrupt nations in other parts of the world, such as Africa.

    But how many of those were actual democracies? Look at the ones that devolved into anarchy or civil war or tyranny (or some combination of such), and then look at how many of those had been democracies (as opposed to how many had been something other than a democracy). That should give you a better idea of the stability of democracy in the largely corrupt third-world commmunity of nations.

  • Glenn Contrarian

    troll –

    Glenn – as I understand it the argument here is over approaches to governance (large vrs small bureaucracies…strong regulation vrs weak…anarchist and ad hoc vrs codified – that kinda thing) not the absence or presence of government

    Yes. And I have a habit of rambling, as some here might just possibly have noticed.

    But about that strawman in #35 – could you please elaborate on that? I seriously don’t see it and since you phrased that politely and in terms of constructive criticism, it’s driving me a bit nuts wondering where my logical error lay.

    Thanks –

  • troll

    Glenn – if no one was arguing against the government per se who were you talking to?

    when in argument you create a position to argue with that no one is advocating that creation is a straw man

    or perhaps I misunderstood?

  • troll

    (the ‘idea of government per se’ that is)

  • Clavitos

    there are many small-government democracies in the third world (but none in the first world).

    Glenn, I have traveled all over Latin America and through much of Africa. With very few exceptions, none of the nations in those areas are BOTH third world AND democracies; their governments are seldom democratic: people’s votes are regularly suborned, courts are usually corrupt, ad infinitum.

    There may be a country or two in the third world that is democratic, but I’ve never seen (or read about) one. Quite a few claim they are democratic, but close inspection usually turns up plenty of evidence to the contrary.

  • Glenn Contrarian

    troll –

    Ah. I think I see now. You didn’t misunderstand. I meant to keep it on the big-government vs. small government argument, but I think I either got sidetracked or said it in a way it wasn’t meant. The worst thing is, my memory is terrible – it’s a running joke around the house – so I’m not sure which one it is. Thanks for pointing it out, though.

  • Glenn Contrarian

    Clavos –

    people’s votes are regularly suborned, courts are usually corrupt, ad infinitum.

    Then I think you need to check your personal definition of ‘democracy’, because if those are your benchmarks, then America wasn’t a democracy for most of its history. The presence of a high level of corruption does not mean that it’s not a democracy – you should undertand that already! I mean, look at Italy, for Pete’s sake! They’re a first-world nation, but they also have a high level of corruption if the story of a guy named Burlusconi is any indication.

    Frankly, I think your comment might be another symptom of what I call the conservative insistence on perfection in government (unless it’s run by them): if the government doesn’t work perfectly in the way we think it oughta work, get rid of it. If the government agency doesn’t do their job perfectly the way we think it should, get rid of it. If a law isn’t perfectly enforced the way we think it should be or if some people are able to get around the law, then the law’s no good, get rid of it.

    Like the Post Office, for instance. It doesn’t work perfectly the way you think it should, so get rid of it!

  • Clav

    Well, Glenn, you can define democracy any way you choose to, but there’s no democracy in anyone’s book that tolerates the government’s rigging election outcomes in total disregard of how the people voted.

    I am in fact flabbergasted that you think otherwise; “One man, one vote” is perhaps the most basic of democratic principles.

  • Glenn Contrarian

    Clavos –

    No, I don’t think otherwise. But I am also realistic enough to know that even America is not free from election fraud. Given that not only was there attempts at election fraud – not the very rare voter fraud, but election fraud, and it’s not just what happened in Florida.

    It’s what the GOP’s trying to pull in six states where the electoral votes would not be apportioned by who won the popular vote by the state, but by who won the popular vote in the district – meaning that if this had been in place this last election, Obama – who easily won the popular vote in Pennsylvania – would have gotten only about one-third of the electoral votes from Pennsylvania.

    If this same system had been in place in six swing states, Romney would have won the electoral college vote, despite having been soundly defeated in the popular vote. THAT, Clavos, is not democracy. It means that in the GOP-gerrymandered states, the votes of people in urban areas simply don’t count as much as the votes of people in rural areas. This is flatly wrong – but this is what the GOP’s trying to pull.

    So are we, then, to call America no longer a democracy, given that one of the two major parties is plainly trying to suborn the democratic process itself?

    The presense of corruption in a nation, Clavos, does not mean that nation cannot be a democracy. Like I said, look at Italy.

  • Clav

    Glenn, I’m not talking about election fraud, I’m talking about countries (Mexico, for one) where nobody’s vote counts. Countries where only the dominant party decides who gets to be president, as has been the case in Mexico since the early twentieth century. And Mexico is not unique: with few exceptions, elections in Latin America have been decided by almost anything except the voters; oftentimes in the past, the decider (particularly in central America) was the US government! Often, in Guatemala, it was United Fruit Company (Chiquita Banana). US interests assassinated more than one LatAm leader in order to put someone more friendly to United Fruit in power. Guatemala is chaotic to this day, and the roots of its chaos can be traced back to, and laid squarely at the doorstep of the land of the free and home of the brave. You tell me: are those the actions of a democracy? I say no, they’re the actions of a tyranny.

    And Glenn: what has happened in Florida and elsewhere has been undertaken within the parameters of existing law. As such, it’s not election fraud, nor is gerrymandering. Unethical, yes, but not fraud. So far, the Justice Department has only manged to get a dozen convictions for voter fraud in Florida. Those are fraud alright, but fraud on a minuscule scale.

    Fraud is what has happened in every election in Mexico since just after the turn of the twentieth century, wherein the vote totals are ignored altogether and the dominant party simply announces as the winner whomever they want to.

  • Glenn Contrarian

    Clav –

    Points taken. No, what the GOP is doing isn’t illegal by the letter of the law, but its end effect isn’t much different from election fraud. Like you said, unethical.

    But when it comes to the definition of a democracy, I think you and I will have to agree to disagree. All democracies – like all governments – are at least to some extent corrupt – I really don’t think you’d disagree with that! The difference between first-world and third-world democracies, then, is only a matter of degree (though sometimes the degree of difference is huge).

    But at what degree of corruption do we draw the line between a democracy and not-a-democracy? Again, I point to the Philippines (though it’s almost as if I’m using it as a crutch). It’s the most dangerous country in the world for journalists (even including Syria), yet when it comes to election time, the masses fill the streets. I mean, if the people themselves believe it’s a democracy, then that should count for something even in your book, I would think.

  • Glenn Contrarian

    And one more thing – if the system the GOP’s trying to put in place had been there and allowed Romney to win, how do you think the nation would have reacted with Obama having lost despite a 5M-vote majority in the election?

    And it’s not hard to imagine how the nation’s conservatives would have reacted if Obama had won the electoral college but Romney had gotten 5M more votes….