Books I Haven't Read 1: The Vision of the Annointed

[_Droopy]

If wealth can't be created by the government due to "logical necessity," then there are no unique cases where in some sense, the government creates wealth.

I don't recall Sowell's answer to Analytics going into any detail, but what is quite clear is that taking money out of the economy through taxation and building a bridge, while wealth (the bridge) materializes somewhere, this is only because it was shifted from somewhere else. The process is completely circular. No net net wealth is "created," only redistributed from one use of those resources to another by the state.

Whether or not government spending can create wealth is ultimately an empirical question, there are no constraints of logic that prohibit government intervention from creating wealth.

Elementary logical thought and the most rudimentary economic knowledge are all that is required to come to the obvious conclusion.

In fact, you only screw yourself by logically constraining government intervention to reallocation, because if that's the case, then government intervention can't diminish wealth either! You can't blame government intervention for hurting the economy!

You're problem appears to be that you have a great deal of difficulty thinking logically, in which case, logical argument will be of little avail.

There is one thing, and one thing only, that creates new net wealth, and hence, economic growth, and that is productive economic activity. Government engages in no productive economic activity. All its activities are utterly parasitic and based on the transfer of wealth from the private sector to itself (as it can generate none of its own in any real sense, unless you think the creation of fiat money out of thin air is wealth creation) which is then reallocated -redistributed - to other uses. No new wealth is created, only shifted and transferred from where it would have been utilized in the private sector to another use of those same resources as determined by political considerations. The economy is the same size it was before the the pile of bricks were moved from one side of the yard to the other and then back again at taxpayer expense in a government jobs program.

Its easy for government to destroy wealth. Its called taxation, regulation, the manipulation of money and credit (creating debt bubbles and boom and bust cycles) and inflation.

Oh wait, I can hear you scrambling to change your position to: the law of conservation of wealth holds during government intervention, but after the intervention, the effect can be negative, thus crashing the economy. Well, if that's true, then the converse is a possibility as well. In other words, we've caught you red-handed playing a semantics game to score a rhetorical point rather than make an intellectually serious point about economics.

If you actually can adduce an argument showing why I should believe that the state can "create" new, net wealth in an economy, please do. You never have, as of yet, but you may wish to give it the old college try.

[_Kevin Graham]

Its not at all difficult to see why, Kevin, you have credibility problems in two areas, the first being intellectual substance, and the second being intellectual integrity.

My credibility is just fine among those who matter. Unfortunately, that doesn't include a few self-righteous LDS elitists who can't handle refutation from non-scholars, or an uneducated hick who thinks total submission to the religion of Right Wing fanaticism means he gets o refer to himself as an intellectual.

No, I don't think so. You've never been able to refute anything I have said on these matters without whining about leftist bias in all the sources that refute your stupidity, even referring to sources I never used to make your well-poisoning agenda complete. I provided the link that proved you're wrong on this point. TLie about it if you must, no one is going to listen too you except you. You have no credibility. That you're still trying to salvage Sowell's flawed CRA argument is proof positive you've never been interested in truth. You've only been interested in swallowing the usual government phobia nonsense that resonates in virtually all trailer parks.

[Guest]

My credibility is just fine among those who matter. Unfortunately, that doesn't include a few self-righteous LDS elitists who can't handle refutation from non-scholars, or an uneducated hick who thinks total submission to the religion of Right Wing fanaticism means he gets o refer to himself as an intellectual.

It just goes on and on and on...

No, I don't think so. You've never been able to refute anything I have said on these matters without whining about leftist bias in all the sources that refute your stupidity, even referring to sources I never used to make your well-poisoning agenda complete.

All of your sources were from government financial agencies and government employees dead center of the severest economic downturn since the Great Depression. Each and every source you used were from the foxes in the hen house. Why? Because you had nowhere else to go, besides the Obama administration's minions, other than the usual obviously biases leftist spin mills.

I provided the link that proved you're wrong on this point.

You provided several links to ass covering government insiders smack dab in the middle of the policies that crushed the economy. Hardly impressive.

Lie about it if you must, no one is going to listen too you except you. You have no credibility. That you're still trying to salvage Sowell's flawed CRA argument is proof positive you've never been interested in truth. You've only been interested in swallowing the usual government phobia nonsense that resonates in virtually all trailer parks.

You're problem, as with all leftists, is that the state is your god, and as a good fundamentalist, you don't take blasphemy lightly.

[_Droopy]

Kevin, unwittingly it seems, let the cat out of the bag on the thread he links to above with this statement:

Similarly, a 2008 study by a law firm specializing in CRA compliance estimated that in the 15 most populous metropolitan areas, 84.3 percent of subprime loans in 2006 were made by financial institutions not governed by the CRA

Precisely. All of the subprime loans made were not covered directly by the CRA. The CRA was only the core of the affordable housing movement that came out of Congress in the late seventies, spurred by crusading leftists who's pretext was the (now known to be a myth) claim that minorities were being disproportionately turned down for mortgage loans. Those initiatives spread well beyond the CRA per se and came to dominate much of the housing mortgage market by the middle of the last decade. The entire pressure placed upon American banks to lend to uncreditworthy buyers by the millions was centered in the CRA, HUD, Fannie and Freddie (GSEs) and the Reno Justice Department in the 90s which toughened existing loan requirements relative to minorities and low income citizens with the threat of legal action against traditional banks and other lending institutions were certain quotas not met as to loan acceptance as a percentage of all loans granted.

There was only one possible and inevitable outcome, at some future point, to this kind of irrational, politically motivated economic behavior, and it finally came.

[_Analytics]

It pains me to say this Kevin, but you are right regarding Sowell. The Community Reinvestment Act had absolutely nothing to do with the housing crises--that fact is absolutely indisputable.

Actually, its easily demonstratable both empirically and historically as a matter of conceptually obvious cause and effect relationships and a basic knowledge of how the laws of economics work.

The assertion that the CRA played a role in the housing crisis is just as indisputably false as the assertion that the facsimiles published in the Book of Abraham are a correct interpretation of Egyptian.

How seamless and easy it seems to be for a leftist to slide effortlessly from one intellectual enormity to another. Combine leftism with anti-Mormonism (not at all a problem, as the existence of this board indicates) and the the entire personality begins to list to port.

I stand by what I said. A few dishonest or incompetent people came up with a narrative involving the CRA that certain anti-governemennt types find compelling because it plays into their anti-government prejudices, but it has no bearing on reality.

How would you like to break into the details?

[_Analytics]

If wealth can't be created by the government due to "logical necessity," then there are no unique cases where in some sense, the government creates wealth.

I don't recall Sowell's answer to Analytics going into any detail, but what is quite clear is that taking money out of the economy through taxation and building a bridge, while wealth (the bridge) materializes somewhere, this is only because it was shifted from somewhere else. The process is completely circular. No net net wealth is "created," only redistributed from one use of those resources to another by the state.

That was the position that Kevin's buddy held, and the bridge analogy debunked it. That's why his friend went to Sowell for aid.

Sowell essentially said that in principle, of course government can create wealth, and the bridge story is an example of how it is possible. He totally conceded the point. He said that in practice the government rarely does create wealth, and went on a tangent about how in my example, the government would likely continue charging tolls after the project was paid for (which is a terribly bad point on his part in its own right). But he conceded the main point.

[_Chap]

I don't recall Sowell's answer to Analytics going into any detail, but what is quite clear is that taking money out of the economy through taxation and building a bridge, while wealth (the bridge) materializes somewhere, this is only because it was shifted from somewhere else. The process is completely circular. No net net wealth is "created," only redistributed from one use of those resources to another by the state.

That was the position that Kevin's buddy held, and the bridge analogy debunked it. That's why his friend went to Sowell for aid.

Sowell essentially said that in principle, of course government can create wealth, and the bridge story is an example of how it is possible. He totally conceded the point. He said that in practice the government rarely does create wealth, and went on a tangent about how in my example, the government would likely continue charging tolls after the project was paid for (which is a terribly bad point on his part in its own right). But he conceded the main point.

Let's see.

A. The government:
(1) Obtains money by adding 0.5% to a tax on a particular kind of liquor. (We assume that the number of people put off buying the product by the consequent price increase is not large enough to negate the consequent gain.)
(2) Invests that money in building a toll-earning bridge.
(3) Does not create wealth thereby.

B. A large company that owns a number of brands of liquor:
(1) Obtains money by increasing their price by an amount equivalent to a 0.5% rise in the tax levied. (We assume that the number of people put off buying the product by the consequent price increase is not large enough to negate the consequent gain.)
(2) Invests that money in building a toll-earning bridge.
(3) Creates wealth thereby.

Have I missed out something there?

[_Analytics]

Kevin, unwittingly it seems, let the cat out of the bag on the thread he links to above with this statement:

Similarly, a 2008 study by a law firm specializing in CRA compliance estimated that in the 15 most populous metropolitan areas, 84.3 percent of subprime loans in 2006 were made by financial institutions not governed by the CRA

Precisely. All of the subprime loans made were not covered directly by the CRA. The CRA was only the core of the affordable housing movement that came out of Congress in the late seventies, spurred by crusading leftists who's pretext was the (now known to be a myth) claim that minorities were being disproportionately turned down for mortgage loans. Those initiatives spread well beyond the CRA per se and came to dominate much of the housing mortgage market by the middle of the last decade. The entire pressure placed upon American banks to lend to uncreditworthy buyers by the millions was centered in the CRA, HUD, Fannie and Freddie (GSEs) and the Reno Justice Department in the 90s which toughened existing loan requirements relative to minorities and low income citizens with the threat of legal action against traditional banks and other lending institutions were certain quotas not met as to loan acceptance as a percentage of all loans granted.

Great story, but it has no bearing on reality. Here is a story that illustrates what really happened: a black guy went to his local bank and asked for a mortgage, and the banker said, "We are fully compliant with the CRA and go out of our way to service people in your neighborhood. We even have some special programs. Let's fill out an application."

The guy had bad credit, no down payment, no verifiable income, too much debt, and otherwise didn't meet conventional loan standards. The banker told him, "I'm sorry, you don't qualify for a loan. Despite the incentives that the CRA gives us, and despite the help we get from HUD and the GSEs, you don't meat our credit standards. There is nothing I can do. Sorry."

The guy is bummed and goes back to his cheap apartment. He checks his mailbox, and finds fifteen letters from various mortgage companies telling him that he probably qualifies. He goes down to the mortgage company. They tell him, "Even if you don't qualify for a traditional mortgage, we can still help. Lehman Brothers has a program to help people like you buy houses with no down payment. If you are willing to pay a slightly higher interest rate, they don't even need proof of income! In fact, a white guy was just in here who makes $75,000 a year, and thanks to Lehman Brothers, I helped him purchase a $370,000 home in a nice neighborhood with no down-payment and an adjustable rate. In fact, I was able to finance 120% of his home price, so he was able to consolidate $60,000 of credit cared debt. The program is great!"

The black guy says, "I don't get it. The local bank won't help me, but you will? What's the catch?" The officer says, "There is no catch. This is the free market working for you. Lehman Brothers has invented some collateralized mortgage obligations where they combine several loans, make what they call 'credit enhancements', and sell claims on the loans to private investors such as insurance companies. The top tranches of these pools are so secure that private publishing firms called "rating agencies" give these loans their top ratings. Private investors can make more money on these privately issued AAA loans than they can make on government bonds or Fannie Mae or Freddie Mac bonds, so they are begging the private investment banks to issue more. The private investment banks are trying to meet the private demand of these private investors, so that is why they are giving me special incentives to write more loans. That is why we sent you the advertisement. It's capitalism working for you!

The black guy says, "Let me get this straight. You are doing this not because the government is twisting your arm, but rather because you think you'll make money buy issuing me a loan?"

The officer says, "Yes. Frankly, my company doesn't care if you pay back your loan or not. We make money by closing the loan, and send the loan to the private investment bankers. Whether or not you pay back the loan is their problem."

The black guy says, "But why are they willing to do this? Surely the government is making them!"

"No," the officer says. "They are doing it to make money. It's their free choice. Investors with trillions to invest are coming to those investment banks, looking to invest money in these collateralized mortgage obligations. The private investment banks are trying to meet the free-market demand, but the only way they can write loans fast enough is to keep lowering their loan requirements."

"But if they lower the quality of the loans, won't the investors lose money?"

"No. The investment banks will just make further credit enhancements to the contracts to ensure the AAA-quality of the top tranches."

The crisis was driven by the free-market supply and demand for collateralized mortgage obligations. The CRA had nothing to do with it.

[_Analytics]

All of your sources were from government financial agencies and government employees dead center of the severest economic downturn since the Great Depression. Each and every source you used were from the foxes in the hen house. Why? Because you had nowhere else to go, besides the Obama administration's minions, other than the usual obviously biases leftist spin mills....

You provided several links to ass covering government insiders smack dab in the middle of the policies that crushed the economy. Hardly impressive.

Here is a link to a paper written by a risk-management professional to an audience of risk-management professionals. These are the guys who were responsible for managing risks at private insurance companies, which lost hundreds of billions in this debacle. Surely their incentive is to cover their own behind, and not the government's.

http://www.soa.org/library/newsletters/ ... jardin.pdf

To create the perfect storm, a massive and continuous supply of funds was needed to meet this demand for all mortgage forms. Insurers and other institutional investors readily supplied these funds, because, historically, mortgages had been considered almost as safe and predictable as U.S. Treasuries but with higher returns. When returns on U.S. Treasuries fell to historic lows, these higher returns caused the demand for mortgage se- curities to skyrocket—further fueling the supply. For a while this looked like a good bet, because investors, as a whole, did not have the data needed to understand the true risks they were assuming.

[_Kevin Graham]

Excellent Analytics. That pretty much describes a typical loan in the American Housing Market.

The funniest thing about this whole CRA myth is that none of these folks can point to any specific stipulation in the Act that "requires" banks to do any of the things they claim. They just assert this nonsense, and then throw authority figures like Sowell behind the mantra. The fact is the FBI warned of the mortgage crisis back in 2004, and their own investigations have concluded that this was the largest wave of white collar crime in American history. Predatory lenders looking to make quick commissions by closing loans quickly while lying about what it was the borrowers were actually getting themselves into. In many cases they'd rewrite signed contracts so that a first time home buyer would be stuck with an adjustable rate mortgage as opposed to a fix-rate mortgage. They did this because they would get higher commissions with ARM loans. And they did this before repackaging the loan as a mortgage-backed security and selling it off to someone else who would have to deal with the lenders ability or inability to make the payments.

We just bought another home a few months ago and I found out last week that our loan is now owned by Wells Fargo and not the original lender, which was a private lender that offered a better rate. These lenders quickly sell off these loans as mortgage-backed securities. CRA doesn't govern these lenders, not that CRA would have "forced" them to make bad loans anyway. In reality the CRA requires banks to make responsible loans. The racists and bigots like droopy just automatically assume it is about welfare for the poor, because that fits their worldview.

I wish there were a study to determine what percentage of foreclosures come from minorities, because in my experience the minorities are the ones most likely to keep their homes. I can think of at least a dozen white, middle-upper class friends and family members who have lost their homes because they bit off more than they could chew. Greenspan convinced so many Americans that if they have a $300k home and have $100k in equity, that this means they have $100k in liquidity. All they had to do was use this as collateral for further loans, digging themselves into deeper debt. My best friend is a Right Winger who wants to blame the government because he is losing his second home. But the fact is he bought a second home because he thought he was going to rent it out and get rich doing so. He was also caught buying this during the sub-prime hoopla a decade ago, which means his $500 a month mortgage payment became $580 after the first year, $790 the second year, and finally he got stuck with a $1100/month payment, which was more than he would get renters to pay. So he foreclosed last month. And of course, it is CRA's fault because that is what FOX News tells him. So the result is he is even more racist than he was before, constantly making racist comments every time he sees a minority living the American dream.