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Mannfm11 wrote..

Appreciation in stocks or real estate only work if income follows or you have a buyer at a higher price. The other ripoffs are the management run games with corporate cash flows.

You beat me to it, Mann. The debt was used to finance household expenses after salaries had gone flat back in the 70's. Yeah, some bought McMansions they didn't need but a whole lot of folks were buying that modest house they thought every American family should have, both parents were working, and were struggling to pay for the mortgage, two cars, bills, for kids, and then save for college expenses and retirement (which was their home for most part, or so they thought since it worked well for their parents and grandparents).

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What is left is debt and little credit for mom and pop. We can't socialize credit expansion forever, because the consumption and investment associated with it is misdirected and unearned. We need a formula for a haircut.

We can't afford to even socialize all the credit expansion right now, much less forever. Restructuring some of the debt with principal writedowns, if needed, in addition to interest rate refinances would be a good place to start, both mortgages and student loans. Yes, it introduces some moral hazard, but how much are you willing to pay in order to keep a few people honest? And why should grad students have 6.8% for money they borrow from the govt, who can borrow for under 2.5% (assuming Congress reauthorizes 3.4% for undergrads, but even that difference is expected to be paid for elsewhere)? Do we have to make money off bankrupting our kids now? Sure, tuitions should come down but until then, the decent pay jobs that exist require a degree. We could upgrade our embarrassingly bad infrastructure and get some people back to work. As one example, we made a trade deal with Panama to get the larger ships coming into our east coast and we don't have the deepwater ports or transportation infrastructure in place to handle them anywhere on the Gulf coast.

It would help if corporations would bring companies back on shore and start paying labor comparable to what they used to. While worker productivity has increased, worker pay, as percentage of corporate profits, has declined, with the excess profits being poured into capital. Of course, that might require the CEO's get paid less astronomical compensation packages. Per the NY Times, executive compensation went up another 47% in 2010-11. No wonder the rich can so easily buy any government they want, esp. favorable tax legislation that has seen their taxes (incl. corporate taxes, as share of gross revenues) progressively decline in the last few decades while the middle class has picked up a larger share, the rise in payroll taxes used to pick up much of the slack (thanks, Reagan, and every president since).

So, yeah, I agree folks have been screwed by the banks, esp. in states like FL, NV, and CA. If only the banks were the only ones doing the screwing. We don't need debt based money. Why don't we spend some money into existence and get the economy going again?

Last modified: 2012-06-12 10:32:47 by bigbluffer
Reason: fixed html tag

2012-06-12 10:32:14


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