Quote :

"Like I said every form of government and economy has its pros and cons but theres no way to argue that under the same conditions communism benefits more people than capitalism. Sure the overall average could possibly be higher in capitalism but thats only because it is brought up by a very small% of the theoretical population."

Communism, especially your love based communism, fails mathematically as there is no mechanism to allocate resources due to the absense of anything to replace the price system. This was a problem never solved by any communists, as demonstrated by the Soviets, Chinese, and Cubans retaining money and prices in order to ration consumption. At various times both the Soviets and the Chinese tried to use prices to ration capital goods, but it was abandoned on the long road of searching for anything to force the people to act under communism as people under capitalism do voluntarily.

What truely matters in a complex economy is rarely end-user prices. The price of bread is important to make sure demand meets supply, but society will survive with an imbalance. The problem arrises when the bread that is produced is inedible because the mill manager left in the stalks. What the soviets were never able to do was get plant managers to pay any attention to the quality of the goods they produced.

By the end, the Soviet planners had given up on trying to get the Soviet people to play the game right and hired western manufacturers to come in, build whole industries, train the workforce, and run them until they made a (theoretical) profit.

I highly recommend the book The Rise and Fall of the The Soviet Economy: An Economic History of the USSR for anyone that thinks communism could work. The smartest Soviet Planners came to work everyday and complained that they had no idea what they were doing. Today's Russian Planners, namely business owners, do not suffer the same daily confusion. There is a logic underneith the chaos that we see on the surface of capitalism. But communism is an effort to supress the math because you don't like what it is telling you. So instead communism appears the reverse, the surface appears planned, because the planners have guns, but underneither there is no foundation, only the chaos of daily life constantly chipping away at the plan.

9/12/2008 2:04:07 AM

Quote :

"ya way to go picking out certain cases where [communism] failed without mentioning how almost any economy or government is bound to fail when it is put in place during an unstable time "

East and West Germany serve as the perfect controlled experiment for the failures of communism. Obviously, both started with the same culture, language, history and value system. After WWII, the West was largely a free capitalistic economy whereas the East was communist. Westerners were never really able to get a glimpse of the East until the fall of the Berlin wall. After the fall of the Berlin wall, the difference in living standards between the East and West were night and day. The cars produced in the East hadn't changed in 30 years. The productivity of the East German workforce was one-third that of its Western neighbors. The goods produced were so shotty and antiquated that it was deemed more valuable to sell the factories as scrap metal than to spend billions to modernize them. There were food shortages in the stores, hyperinflation was destroying the value of money and the government was bankrupt.

Contrast all the above with today, after the East was integrated with the West under a more capitalistic system. Germany is currently the third largest economy in the World.

If you still think communism is ideal, I kindly recommend you re-read the above.


[Edited on September 12, 2008 at 7:11 AM. Reason : .]

9/12/2008 7:08:18 AM

I don't think either is ideal so don't put words in my keyboard. Like I said, every form of economy has its pros and cons and neither capitalism nor communism has ever really "worked". The only reason people are under the belief capitlisms and their free markets have actually worked is because every country that has successful used them STOLE enough resources to compensate for its deficiencies and get the economy jumpstarted. Getting started is the hardest part. You won't find an example of a communism that started in good economic time. Either that or incredible aid was put into a small economy to get it started (although most of the latter still failed). Imagine if the soviet union had a ~free, unlimited human labor resource? Would that have changed anything?

My ideal economy is a socialized capitalism that works as a mix of the two although it would still be much closer to what we have today in America than a pure communism and it wouldn't be a command economy either. Basically, federalization of certain key industries is necessary and profit caps, and several forms of wealth redistribution are necessary to balance the downhill momentum that is created by capitalism.

9/12/2008 7:55:26 AM

Quote :

"The actual risk still exists, namely that the person might not finish off the loan. Again, the higher rate serve two purposes: discouraging bad financial decisions and helping the company lose less money on defaulted mortgages so they can offer more loans to more people."

You can't argue that a higher rate doesn't make a person more likley to default becuase this takes their already stiff economic situation and adds to it. Higher rate =higher payment. Higher payment= harder to pay especially for someone who would have a hard time paying the normal payment. There are people out there who make 2000 paying 1500 because they would be over 40% dti on the mortgage that should be 1000. They can surely afford to pay 1000 but you're going to make them pay 1500 and really push them just because they can't easily afford it. This person is now in a tight spot solely because of their increased rate. All that does is force the risk up exponentially on any loan that isn't easily afforded.

In reality, the risk is lowered of someone who can't easily afford it because there is less risk of prepayment. If someone is at 25% then they might start paying triple payments and be done in 5 years. You woudln't have to worry about prepayment with someone who can't afford to pay more than their payment in the first place. Less risk

9/12/2008 8:38:06 AM

Quote :

"The only reason people are under the belief capitlisms and their free markets have actually worked is because every country that has successful used them STOLE enough resources to compensate for its deficiencies and get the economy jumpstarted."

Then how do you explain the differences between East and West Germany? Both started from the same foundations, but obviously the communistic economy proved to be a failure whilst the capitalistic prove to be a remarkable success.

Quote :

"Basically, federalization of certain key industries is necessary and profit caps, and several forms of wealth redistribution are necessary to balance the downhill momentum that is created by capitalism."

The same downward momentum that has allowed those at the poverty level to afford such luxuries that could only be afforded by the top 10% in the ‘20s? What you fail to understand is that it is the existence of profits that incentivizes innovation and productivity, the lifeblood of progress. Such progress has allowed even the poorest amongst us to afford things they never would have under a system of capped profits. If we were to cap profits, why would anyone invest in the massive infrastructure that was necessary to bring high-speed internet to almost every home? Would GE have spent billions on R&D for life-saving medical devices if the expected return was capped? Absolutely not. Given companies face the uncertainty that their product will fail, they require a higher rate of return to justify investing in projects and ideas. The absence of profits stifles innovation and productivity.

9/12/2008 8:51:22 AM

^exactly

that "greed" and lust for profits, that you so adamantly bemoan, are probably the only reason we're able to have this discussion on the internet.


back to the original topic. I think you will find that a large portion of the people that can afford lower payments, are being able to work with their lender and renegotiate the terms of their loan. the major issue at hand though is that lots of people bought house with exotic mortgages and are now so far behind that renegotiation is impossible. both the lenders and lendees are at fault for this, but both entered into the terms of the agreement willingly; therefore, both are at fault for this mess.

9/12/2008 9:17:26 AM

Worst. Idea. Ever.

Senators Ask Fannie, Freddie to Freeze Foreclosures

Quote :

"Sept. 11 (Bloomberg) -- U.S. Senate Banking Committee members urged Fannie Mae and Freddie Mac, the mortgage companies placed under federal control this week, to freeze foreclosures on loans in their portfolios for at least 90 days. ``This action would provide immediate relief to many homeowners'' and let the companies ``turn these non-performing loans into performing assets to minimize losses,'' Senators Charles Schumer, Robert Menendez and other panel Democrats said today in a letter to the companies and the Federal Housing Finance Agency, which is overseeing them under the government conservatorship."

http://www.bloomberg.com/apps/news?pid=20601087&sid=aovAPlvMndWc&refer=home

"Performing Loans" - "Minimize Loses" !?!? WHEN YOU STOP COLLECTING PAYMENTS ?!?

Mish Shedlock's blog had the money quote:

Quote :

" If one could turn non-performing loans into performing assets by halting payments, why not just stop collecting mortgage payments [from] everyone in the county? Every loan would be current and think of all the money consumers would have to buy things. Of course taxpayers would be immediately on the hook for a mere $5 trillion, but who cares about small details like that? "

9/12/2008 9:27:31 AM

oh dear god. please don't do that

the "do nothing" alternative is looking better by the hour

[Edited on September 12, 2008 at 9:37 AM. Reason : .]

9/12/2008 9:36:10 AM

Quote :

"You can't argue that a higher rate doesn't make a person more likley to default becuase this takes their already stiff economic situation and adds to it. Higher rate =higher payment."

Ok, here we have proof that you have no idea how mortgages work. When you show up at the bank they ask you how much you are trying to borrow and then tell you a rate. The more you are trying to borrow, IE the higher your payment would be regardless of rate, the higher the rate they quote you. And, if that higher rate then puts your payment above what they think you can afford, or at a rate the borrower would refuse the pay, then no loan takes place. The borrow will be encouraged to run off and find a cheaper house, thus lowering their payment, making it easier to pay, and thus lowering the interest rate they pay, making it even easier to pay. Thus there is a virtuous cycle for low income borrowers to buy smaller houses and thus avoid the penalty of a high interest rate. But we live in a land of choice, and if a borrower really wants that big house then I see no reason why they should not be made to compensate society (the lenders) for the risk their choice is imposing upon others.

Quote :

"The only reason people are under the belief capitlisms and their free markets have actually worked is because every country that has successful used them STOLE enough resources to compensate for its deficiencies and get the economy jumpstarted."

Utter and complete bullshit. When capitalism started there was nothing to steal. The entire world was dirt poor and there was no demand for resources, because there was no economy to do anything with them. Under capitalism there is no need to steal anything, just pay for it. How the west treated its colonies was a bad deal for both the enslaved and the west: just pay the locals a dirt poor wage just like you were doing back in the home country. There was no need to enslave, tax, steal, or manage. These activities were the life of the state, and while it has been argued that giving politicians a foreign playground to impliment their perverse schemes kept them from trying them at home (thus curtailing socialism and allowing capitalism) that does not excuse the practice. If need be shoot the politicians; there is no telling how many decades colonial socialism has held back technological development, nevermind the immediate and lasting human cost as the former colonies have continued to treat themselves as foreigners once treated them.

"Senators Ask Fannie, Freddie to Freeze Foreclosures"
And this, ladies and gentlemen, is why government run businesses never balance their books.

[Edited on September 12, 2008 at 10:34 AM. Reason : .,.]

9/12/2008 10:19:53 AM

^ I don't think it's that simple here. You have various accounts of shady behavior from lenders. Increasing rates hidden in the fine print, intentionally inaccurate information about borrower financial ability, and so on.

9/12/2008 10:28:23 AM

^ Then in those instances there is no problem. The lenders will be convicted of fraud and made to pay reparations for the damage their behavior caused.

9/12/2008 10:35:28 AM

Quote :

"You can't argue that a higher rate doesn't make a person more likley to default becuase this takes their already stiff economic situation and adds to it. Higher rate =higher payment. Higher payment= harder to pay especially for someone who would have a hard time paying the normal payment. There are people out there who make 2000 paying 1500 because they would be over 40% dti on the mortgage that should be 1000. They can surely afford to pay 1000 but you're going to make them pay 1500 and really push them just because they can't easily afford it. This person is now in a tight spot solely because of their increased rate. All that does is force the risk up exponentially on any loan that isn't easily afforded."

I don't argue that at all. I agree that a higher rate would increase the likelihood of defaulting, but, for those with the higher rate, the risk is already high anyway. Otherwise, they wouldn't have a high rate to begin with. However, the real deal here is that if you can't easily afford the loan at whatever rate is offered, then you shouldn't be getting the loan in the first place; you should sock away some money however you can and use that money to increase your downpayment, thus lowering the amount you have to borrow, thus lowering your monthly payment. Plus, a larger downpayment will also tend to get you a lower interest rate. The alleged "problem" with giving someone a higher rate is, ultimately, alleviated with financial common sense at the end of the day.

9/12/2008 5:17:18 PM

^^ Because there's no possibility of dubious or predatory lenders not getting convicted, right? What I'm talking about isn't necessarily fraud by the legal definition (though some that happened as well).

9/12/2008 9:19:15 PM

why do u hate freedom

9/12/2008 9:34:51 PM

Quote :

"Then how do you explain the differences between East and West Germany? Both started from the same foundations, but obviously the communistic economy proved to be a failure whilst the capitalistic prove to be a remarkable success."

One side had the aid of the Soviett Union while the other had the aid of the rest of the "allies"

Quote :

" The same downward momentum that has allowed those at the poverty level to afford such luxuries that could only be afforded by the top 10% in the ‘20s?"

Of course everything gets cheaper with time but I don't think saying the poor are living with the luxuries from 90 years ago is helping your argument...

Quote :

"If we were to cap profits, why would anyone invest in the massive infrastructure that was necessary to bring high-speed internet to almost every home? Would GE have spent billions on R&D for life-saving medical devices if the expected return was capped? Absolutely not. Given companies face the uncertainty that their product will fail, they require a higher rate of return to justify investing in projects and ideas. The absence of profits stifles innovation and productivity."

Sorry I mean capping profit margins not capping profits. It would be very simple and has been considered by many as needed today for cases like Exxon.

Quote :

""Performing Loans" - "Minimize Loses" !?!? WHEN YOU STOP COLLECTING PAYMENTS ?!?"

I think you have it misunderstood. The government is simply going to make up the ground to make the payments payable again. Everybody wins.

Quote :

"Ok, here we have proof that you have no idea how mortgages work. "

Considering I originated loans for 5 years... I think I know a little about how they work

Quote :

"When you show up at the bank they ask you how much you are trying to borrow and then tell you a rate. The more you are trying to borrow, IE the higher your payment would be regardless of rate, the higher the rate they quote you. "

No No and No. The rate on a conforming conventional loan is set everyday in stone and is the same regardless of the loan amount (until you go into jumbo) so you obviously don't know what your're talking about.

Quote :

"And, if that higher rate then puts your payment above what they think you can afford, or at a rate the borrower would refuse the pay, then no loan takes place."

True today but this wasnt true when most of the foreclosure crisis people bought there home. If you went over the debt to income ratio there was always a subprime loan waiting to charge you a double digit interest rate and often a 3-5 year arm that you wouldn't be able to afford once it matured. Companies often told people their value would be up so much that they could just refi by then and not have to worry about it.

Quote :

"Thus there is a virtuous cycle for low income borrowers to buy smaller houses and thus avoid the penalty of a high interest rate. But we live in a land of choice, and if a borrower really wants that big house then I see no reason why they should not be made to compensate society (the lenders) for the risk their choice is imposing upon others."

They should pay interest but the interest should not go up the more you think they might not be able to afford it. This is the golf equivalent to giving the handicap to tiger woods because you don't think i can play with him.

Quote :

"but, for those with the higher rate, the risk is already high anyway."

Everyone has a tipping point. If you see somebody is close to the edge why would you push them? Pushing them is very likely to send them over.

Quote :

"Utter and complete bullshit. When capitalism started there was nothing to steal. The entire world was dirt poor and there was no demand for resources, because there was no economy to do anything with them. Under capitalism there is no need to steal anything, just pay for it. How the west treated its colonies was a bad deal for both the enslaved and the west: just pay the locals a dirt poor wage just like you were doing back in the home country. There was no need to enslave, tax, steal, or manage. These activities were the life of the state, and while it has been argued that giving politicians a foreign playground to impliment their perverse schemes kept them from trying them at home (thus curtailing socialism and allowing capitalism) that does not excuse the practice. If need be shoot the politicians; there is no telling how many decades colonial socialism has held back technological development, nevermind the immediate and lasting human cost as the former colonies have continued to treat themselves as foreigners once treated them."

I think you lost focus on the fact that I've already stated neither is good and neither works in a pure form but a mix of the two would be prime

[Edited on September 15, 2008 at 11:28 PM. Reason : socipatilism]

9/15/2008 11:25:46 PM

Quote :

"Sorry I mean capping profit margins not capping profits. It would be very simple and has been considered by many as needed today for cases like Exxon."

Haha. If you capped profit margins then you realize that you would doom small-businesses, right? As well, you would doom anyone who actually came up with a novel new way of manufacturing something or with a new product. Are you going to cap margins overall or on the individual purchase level? Such a bad plan that I can't help but laugh at the sheer stupidity of it.

9/15/2008 11:33:07 PM

^ yeah I LOLed at that comment. not to mention that profit margins tend to be proprietary information. I know for a fact that GE doesn't want its competitors knowing how much a jet engine or ultrasound machine is marked up.

9/15/2008 11:51:40 PM

Ooops, we did it again. Fed bails out AIG
http://money.cnn.com/2008/09/16/news/companies/AIG/index.htm

9/17/2008 5:25:19 PM

Quote :

"Sorry I mean capping profit margins not capping profits. It would be very simple and has been considered by many as needed today for cases like Exxon."

Are you legally retarded ?
Actually, according to that statement, many, including you, are.

Exxon Mobiles net profit margin for the last quarter was under 8.5%.

9/17/2008 5:40:49 PM

$900 billion bailouts to failed financial institutions

$1 trillion Iraq excursion

-$53 trillion net worth

Letting the government solve our banking crisis is like letting a crackhead manage your investments...

9/17/2008 5:53:56 PM

Keep in mind, though, that the $900b is mostly in senior loans, which in the best-case scenario would be a net gain to the U.S. coffers. Predicting the probability of a best-case scenario, however, is pure speculation (as is a worst-case scenario).

I agree with the conclusion, however. The government's role is very troubling.



[Edited on September 18, 2008 at 7:56 AM. Reason : .]

9/18/2008 7:52:50 AM

you guys obviously know more... Do you not realize the implications of letting these institutions domino?

9/19/2008 5:10:26 PM

Socialism for the wealthy, a bare knuckled fight to survive for the unwashed masses

9/19/2008 5:13:59 PM

This is scary. As if the government taking over the country isn't scary enough we have a country full of idiots like wethebest drinking it up. Someone get these kids a copy of Animal Farm or 1984. We're at least halfway there for god's sake.


Banks are a dying breed.

Anyone using a local bank checking account rather than an online checking account just doesn't like money.

Anyone using a local bank savings account rather than an online savings account is crazy.

Anyone using a local bank retirement account rather than a brokerage is a stupid redneck.

And now anyone using a bank money market rather than a brokerage money market fund is stupid.

How the fuck are banks supposed to make money anymore? Oh yeah by feeing your fucking sac off. If you thought the fees were exorbitant already just wait...

Well, I guess if the gov't owns them all profit won't be important anymore... so now even people who don't use banks are going to have to pay for their outdated business model.

9/19/2008 8:36:51 PM

so your argument is that local branch banks are a dying breed (fair enough)
.... but what does that have to do with some of the largest investment houses, mortgage companies, and insurance firms in the entire world failing in the matter of a couple weeks?

9/19/2008 8:41:57 PM

hopefully the feds will manage to buy up all of these mortgages at such a discount that it won't cost the taxpayers anything in the long run.

9/20/2008 8:05:09 AM