Debt Ceiling Chicken

Minarchist wrote:

DOW down 634 today, all other indexes more than 6%. That's almost 20% down from the recent highs in late May. Color me not-at-all surprised. Unfortunately.

God help us. Because the first one worked so very, very well.

If they have to re-rescue banks, I will be pissed. But it will also confirm what I said in a debate here a ways back that Obama and the financial community hadn't really changed or learned anything from the last crisis. So we'll all lose lots of money, but I will have been right in an internet chatroom. And that makes it all better, right?

*weeps quietly in a dark room*

What's killing the equity markets are hedge funds trying to maintain their liquidity positon. What we're seeing now is going to be like 1987, it's not a debt issue but a liquidity issue. We'll most likely see the markets roar back to even higher than before the decline. Try to buy while the discounts are happening.

I don't think there's ever been a time I've wished more that you and I were wrong.

Also, I have not yet drunk enough bourbon to properly process this information.

Ulairi wrote:

What's killing the equity markets are hedge funds trying to maintain their liquidity positon. What we're seeing now is going to be like 1987, it's not a debt issue but a liquidity issue. We'll most likely see the markets roar back to even higher than before the decline. Try to buy while the discounts are happening.

You may well be right. The economic news last week, while not great, was hardly the stuff of doom. This looks like pros piling out fast.

Minarchist wrote:

DOW down 634 today, all other indexes more than 6%. That's almost 20% down from the recent highs in late May. Color me not-at-all surprised. Unfortunately.

God help us. Because the first one worked so very, very well.

Just let me know when I can stop paying my crappy BofA mortgage.

Oh, the assets won't disappear, they'll just get purchased by someone else. You'll still have a mortgage.

So let me see if I understand all this financial mumbo jumbo. We bailed out the banks because they were "too big to fail" and if we didn't we were told the economy would collapse. So we bailed them out and the economy collapsed?

Now they want to do this again? I must be missing something...........

Minarchist wrote:

Oh, the assets won't disappear, they'll just get purchased by someone else. You'll still have a mortgage.

What if the mortgage were originally by some unknown company, rolled into a mortgage-backed security by Countrywide, which then was taken over by BoA? There's probably very little chance they could actually prove they own this house by now, I hope.

Bear wrote:

So let me see if I understand all this financial mumbo jumbo. We bailed out the banks because they were "too big to fail" and if we didn't we were told the economy would collapse. So we bailed them out and the economy collapsed?

Now they want to do this again? I must be missing something...........

We bailed them out the worse way possible. There were many experts like Noriel Roubini saying that we needed to nationalize the banks, make them solvent, and then sell them off again, ie the Swedish Model. But NOOO that is deemed socialism and was never tried.

The economy is not collapsing, it is going back to where it should be without the QE2 bull.

The really, really douchey part of me still wishes FDIC was capped at 100M....

Bear wrote:

So let me see if I understand all this financial mumbo jumbo. We bailed out the banks because they were "too big to fail" and if we didn't we were told the economy would collapse. So we bailed them out and the economy collapsed?

Now they want to do this again? I must be missing something...........

[snark]Of course. Obviously we didn't steal spend enough the first time.[/snark]

Aetius wrote:
Bear wrote:

So let me see if I understand all this financial mumbo jumbo. We bailed out the banks because they were "too big to fail" and if we didn't we were told the economy would collapse. So we bailed them out and the economy collapsed?

Now they want to do this again? I must be missing something...........

[snark]Of course. Obviously we didn't steal spend enough the first time.[/snark]

You don't understand the difference between TARP and Stimulus. Bear was talking TARP.

Actually with our economy the only stimulus that can work is lowering taxes on the poor and middle class. And letting automatic stabilizers like unemployment insurance do what they need to do.

Bonus_Eruptus wrote:
Minarchist wrote:

Oh, the assets won't disappear, they'll just get purchased by someone else. You'll still have a mortgage.

What if the mortgage were originally by some unknown company, rolled into a mortgage-backed security by Countrywide, which then was taken over by BoA? There's probably very little chance they could actually prove they own this house by now, I hope.

It was originally owned by a relatively-known company, bought by Countrywide and then taken over by BofA. I can afford to pay it, and the interest rate is good. But I don't live there anymore, am underwater and having a hell of a time trying to do a short sale through BofA's system. Wheee!

Bonus_Eruptus wrote:
Minarchist wrote:

Oh, the assets won't disappear, they'll just get purchased by someone else. You'll still have a mortgage.

What if the mortgage were originally by some unknown company, rolled into a mortgage-backed security by Countrywide, which then was taken over by BoA? There's probably very little chance they could actually prove they own this house by now, I hope.

If you are without a job, or paying onerous interest rates or losing equity fast then do it. Woops edit.

goman wrote:
Aetius wrote:

[snark]Of course. Obviously we didn't steal spend enough the first time.[/snark]

You don't understand the difference between TARP and Stimulus. Bear was talking TARP.

I fully understand the difference. One was hundreds of billions of dollars the government borrowed and will force taxpayers to pay back, all in order to bail out too-big-to-fail politically connected banks who had gotten in over their heads and were going bankrupt. The other is hundreds of billions of dollars the government borrowed and will force taxpayers to pack back, all to bail out other politically connected companies and state governments who had gotten in over their head and were going bankrupt.

I fully consider the TARP bailout to be stolen money - money taken from some people by force and given to other people who deserved to go bankrupt, without even the usual pretense of taxes coming first. And now it's obvious that even that wasn't enough. Hence the snark.

Aetius wrote:
goman wrote:
Aetius wrote:

[snark]Of course. Obviously we didn't steal spend enough the first time.[/snark]

You don't understand the difference between TARP and Stimulus. Bear was talking TARP.

I fully understand the difference. One was hundreds of billions of dollars the government borrowed and will force taxpayers to pay back, all in order to bail out too-big-to-fail politically connected banks who had gotten in over their heads and were going bankrupt. The other is hundreds of billions of dollars the government borrowed and will force taxpayers to pack back, all to bail out other politically connected companies and state governments who had gotten in over their head and were going bankrupt.

I fully consider the TARP bailout to be stolen money - money taken from some people by force and given to other people who deserved to go bankrupt, without even the usual pretense of taxes coming first. And now it's obvious that even that wasn't enough. Hence the snark.

Yeah. How it's politically impossible to tax the rich after this is head-assplodingly crazy to me. At the very least there could have been a huge burden placed on the banksters if/when they got back on their feet. Nevermind the actual crimes committed.

Bear wrote:

So let me see if I understand all this financial mumbo jumbo. We bailed out the banks because they were "too big to fail" and if we didn't we were told the economy would collapse. So we bailed them out and the economy collapsed?

Now they want to do this again? I must be missing something...........

Well, at least the first time we did this, the money was all used in a productive manner, and the banks didn't pay out a bunch of undeserved and wasteful bonuses, so we know that won't happen this time either.

...oh, wait... sh*t.

Farscry wrote:
Bear wrote:

So let me see if I understand all this financial mumbo jumbo. We bailed out the banks because they were "too big to fail" and if we didn't we were told the economy would collapse. So we bailed them out and the economy collapsed?

Now they want to do this again? I must be missing something...........

Well, at least the first time we did this, the money was all used in a productive manner, and the banks didn't pay out a bunch of undeserved and wasteful bonuses, so we know that won't happen this time either.

...oh, wait... sh*t.

Yeah. Exactly. Obama and the Dems have already lost my vote. I probably won't vote again this election. But if this happens again and the banks aren't taken over then that's truly kicking the can down the road. Eventually the wealthy have to pay for the risks they took with public money. It's fair.

DSGamer wrote:

Eventually the wealthy have to pay for the risks they took with public money. It's fair.

Apparently not.

LA Times wrote:

Of an already small pool of millionaires and billionaires, 1,470 didn’t pay any federal income taxes in 2009, according to the Internal Revenue Service.

The LA times seriously needs better editors.

Rising layoffs are partly to blame. Nearly 11.3 million taxpayers collected unemployment benefits in 2009. The amount of benefits paid out nearly doubled to $83 million.

There's a pretty big difference between $83 million and $83 billion...

OG_slinger wrote:
DSGamer wrote:

Eventually the wealthy have to pay for the risks they took with public money. It's fair.

Apparently not.

LA Times wrote:

Of an already small pool of millionaires and billionaires, 1,470 didn’t pay any federal income taxes in 2009, according to the Internal Revenue Service.

The ultra wealthy do not pay federal income taxes. Raising the marginal rates doesn't affect them.

EDIT: If we're ever going to close tax loop holes we're going to need to fast track the changes for an up/down vote. There are too many hands interested in too many loop holes and we'll always end up creating more. I'm surprised President Obama hasn't pushed for changing how hedge funds are taxed and other things that only help the ultra rich, not hte family made up for a CPA and Lawyer making $300,000 living in any major city.

Ulairi wrote:
OG_slinger wrote:
DSGamer wrote:

Eventually the wealthy have to pay for the risks they took with public money. It's fair.

Apparently not.

LA Times wrote:

Of an already small pool of millionaires and billionaires, 1,470 didn’t pay any federal income taxes in 2009, according to the Internal Revenue Service.

The ultra wealthy do not pay federal income taxes. Raising the marginal rates doesn't affect them.

EDIT: If we're ever going to close tax loop holes we're going to need to fast track the changes for an up/down vote. There are too many hands interested in too many loop holes and we'll always end up creating more. I'm surprised President Obama hasn't pushed for changing how hedge funds are taxed and other things that only help the ultra rich, not hte family made up for a CPA and Lawyer making $300,000 living in any major city.

Yup.

I keep going back to this, but I really think it needs to start with abolishing the corporate income tax and instituting a no loophole progressive tax scheme. If we want to encourage private sector investment from high net worth individuals, we can do it with targeted, temporary tax incentives.

DSGamer wrote:

Yeah. How it's politically impossible to tax the rich after this is head-assplodingly crazy to me. At the very least there could have been a huge burden placed on the banksters if/when they got back on their feet. Nevermind the actual crimes committed.

Well, as you know, I've no interest in additional taxes for the rich, as two wrongs don't make a right. All I want to see is those who took insane risks getting what they deserve.

Paleocon wrote:

I keep going back to this, but I really think it needs to start with abolishing the corporate income tax and instituting a no loophole progressive tax scheme. If we want to encourage private sector investment from high net worth individuals, we can do it with targeted, temporary tax incentives.

The problem with this is what Ulairi pointed out, and something I've repeatedly pointed out in the past - truly rich people don't have incomes, they have assets. They are largely immune to progressive income tax rates, and benefit from inflation. The "rich" people you end up taxing with this sort of scheme are small business owners of S corporations and the like, who look like they have large incomes but really don't because their business is run through their personal accounts.

Getting rid of corporate taxes is a good idea, because those taxes are passed right through to the consumer - their only use is to tilt the playing field in favor of large companies with political pull.

I don't like taxes as a rule, and consider them simply organized theft. But the only fair way to tax is a small, straight percentage - at least then you're stealing equally from everyone. Such a system is predictable and easy to deal with, as well as being resistant to political favoritism - which, of course, is why we're not going to get it any time soon. And of course, such a system does nothing to resolve our spending and debt problems.

While I fundamentally disagree with Aetius on the nature of taxation(my taxes buy the civilization I live in) and the specific solution he outlined above(a low flat tax is never going to let us pay down the debt and provide the services the majority seem to want), he does have the right idea on the sources of the problem(investment-class is nearly untaxed and small businesses get shafted). The capital gains tax is a joke right now, and treating gains from stocks and investments as magically different from gains earned at a job is foolish. Abolishing the gains tax and treating all income as income could fix it, or making the capital gains tax rate as high as current income taxes while lowering the actual income tax rate (benefits us wage slaves, small business owners, etc.), or something similar would get us closer to an equitable solution.

Closing tax loopholes to eliminate the power of brib-, er, campaign contributions, lobbyists, off-shoring income, and creative accounting is just common sense. The presence of the gaping loopholes in our tax system is just codified evidence of corruption.

Leon Panetta, Obama's secretary of defense, declares that the defense budget should be protected against $500 billion in automatic defense cuts if the Congressional super-serious debt-cutting committee in Congress can't agree on a plan to eliminate the defense budget. He points to social programs instead. Liberals are not thrilled with the idea.

Funkenpants wrote:

Leon Panetta, Obama's secretary of defense, declares that the defense budget should be protected against $500 billion in automatic defense cuts if the Congressional super-serious debt-cutting committee in Congress can't agree on a plan to eliminate the defense budget. He points to social programs instead. Liberals are not thrilled with the idea.

Because the Defense Department couldn't possibly waste money.

Paleocon wrote:
Funkenpants wrote:

Leon Panetta, Obama's secretary of defense, declares that the defense budget should be protected against $500 billion in automatic defense cuts if the Congressional super-serious debt-cutting committee in Congress can't agree on a plan to eliminate the defense budget. He points to social programs instead. Liberals are not thrilled with the idea.

Because the Defense Department couldn't possibly waste money.

No, never. :rolleyes:

I find it shocking that the secretary of defense doesn't want the defense budget cut. Shocking, I say! But seriously, that's one of the main reasons government continues to grow: everyone wants to protect their own jobs, so they demand larger and larger budgets each year to appear useful, even if they don't necessarily need that budget to be useful. When was the last time you ever heard of any government agency saying, "you know what, we only need 60% of what you gave us last year, and you should probably cut 20% of our staff for being redundant."

Now, people care about job security in the private sector too, but the difference is that the people above them have to make cuts when the budget is tight to keep their jobs. No such downward pressure seems to exist in Washington. Between Bush Jr. and Obama, how much has spending increased? Like eleventy quadrillion dollars or something?

Funkenpants wrote:

Leon Panetta, Obama's secretary of defense, declares that the defense budget should be protected against $500 billion in automatic defense cuts if the Congressional super-serious debt-cutting committee in Congress can't agree on a plan to eliminate the defense budget. He points to social programs instead. Liberals are not thrilled with the idea.

I'm pretty sure everyone with a stake in government funding things that the cuts should come from somewhere else. I'm unimpressed with Panetta's cheek at making a public appeal to the chickenhawks like this, but not terribly surprised.

Paleocon wrote:
Funkenpants wrote:

Leon Panetta, Obama's secretary of defense, declares that the defense budget should be protected against $500 billion in automatic defense cuts if the Congressional super-serious debt-cutting committee in Congress can't agree on a plan to eliminate the defense budget. He points to social programs instead. Liberals are not thrilled with the idea.

Because the Defense Department couldn't possibly waste money.

The $77 billion we spent on Raptor's is paying off. The entire fleet has been grounded for three months now. Opps. Looks like the JSF are grounded as well.

Don't forget the $40 billion we're spending on new Littoral Combat Ships that the navy doesn't know what to do with, that don't have the weapons or electronic systems developed, and that are literally rusting away. Or the $4.4 billion the military dropped on anti-IED devices that are now being sold for scrap on eBay.

Minarchist wrote:

I find it shocking that the secretary of defense doesn't want the defense budget cut. Shocking, I say! But seriously, that's one of the main reasons government continues to grow: everyone wants to protect their own jobs, so they demand larger and larger budgets each year to appear useful...

I don't see this as an issue with someone like Panetta. He's bounced around different jobs in democratic administrations and think tanks over the years. When he's done at the Pentagon, he'll move onto something else. The guy works for the president, so I imagine he's saying what Obama wants him to say.

One thing I'm wondering about is whether Obama and Panetta feel like they can make cuts to defense. Panetta is the first democrat allowed near the job since the mid-1990s. Cohen, who served under Clinton during Clinton's second term, was a republican selected to make the job more "bipartisan." One thing Obama has enjoyed doing is punching a hippie now and then to show he's not a liberal. So maybe pissing off liberals by keeping the defense budget intact is part of that strategy.