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Thread: It Is Looking More And More Like 1929, Folks

  1. #31
    Radical Centrist BigLeRoy's Avatar
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    Quote Originally Posted by Puzzling Evidence View Post
    HOUSE republicans pushed the bill, Clinton signed it. Apparently, lots of democrats forgot about that.
    Are you referring to the repeal of Glass-Steagall? That would be the Gramm/Leach/Bliley Act. Gramm, Leach, and Bliley are all Republicans, by the way. And that bill passed Congress by a veto-proof margin. Even if Clinton had vetoed it-----and he SHOULD HAVE----his veto almost certainly would have been over-ridden. A strong majority of the House Democrats voted against repeal, IIRC. But Clinton himself did favor repeal. So he did sign the bill. I agree that was a mistake on his part. America was in a deregulatory MOOD in the late 1990's, you know. The economy seemed to be going gangbusters. We wanted to make it GO even better. We were in the mood for experimentation. We should have listened to the warnings of Democratic Senator Byron Dorgan.

    To my mind, the WORSE thing Clinton did was to raise the amount of tax exempt profits from the sale of a home to half a million dollars. That just poured FUEL on the escalating prices of homes. It fueled the speculative fever that really took off in the early 2000's. So, like I said, I am NOT absolving Clinton of blame in the housing bubble. But, really, George W. Bush WAS the number one cheerleader all the time he was in office. I guess you just were not paying attention to what HE was doing.
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  2. #32
    Veteran Member Madeline's Avatar
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    Quote Originally Posted by BigLeRoy View Post
    This just might be the scariest graph you will see this year, folks:

    https://www.gurufocus.com/shiller-PE.php

    The Shiller P/E ratio of the S&P 500 stock market index-----these are mostly America's biggest industrial firms----is at roughly the same level it was at in the year 1929. Just before the Great Crash that ushered in the Great Depression.

    The only time this ratio was higher than it was in 1929 and 2018 was in 1999, when we had another huge stock market bubble, the dotcom bubble. The NASDAQ saw the worst excesses in the late 1990's, but we certainly saw a lot of irrational exuberance in the rest of the market as well. We're seeing a lot of that today, too. There is no justification for these lofty stock market valuations, America, especially as we are about to plunge into a full-blown trade war.

    Ten years ago, we were about to plunge into the worst phase of the Financial Crisis that accompanied the Great Recession. I will probably post some retrospectives on the Financial Crisis and the Great Recession over the next few weeks, before I take a long hiatus from PH. We are headed for another Big Crisis, friends. Prepare yourself. We learned very little, and perhaps NOTHING, from the last crisis, because we are doing many of the same things again. We are, once again, on a massive debt binge. Consumers are racking up debt again. Have you heard that no money down mortgages are making a comeback? Corporations have never been so deeply in debt. And, of course, the Trump tax cuts are causing the budget deficit and hence the national debt to soar. The trade deficit, which was a signature issue of Mr. Trump, is also soaring. [There is a macroeconomic linkage between the two deficits, the budget and trade deficits, which is why we often refer to them as 'the twin deficits'.] Our National Saving rate is plummeting.


    In that last crisis, ten years ago, it was our big banks that really got in trouble. They had leveraged themselves to the hilt. That is not the case this time around. The Fed has been subjecting our banks, our financial institutions deemed 'Too Big To Fail' to stringent 'stress tests', and most of them are in rude health. No, this time, it could be many of our top-line industrial firms that are in trouble, too heavily indebted to withstand a deep economic downturn triggered by a major trade war. The consequences of that for Middle America could be frightening to contemplate.....
    Okay, but in 8th grade I was taught the reforms Roosevelt passed made it impossible for another stock market bubble to cause another Great Depression. Such things as government insurance for bank accounts.

    IYO, is this still true?

  3. #33
    Veteran Member Puzzling Evidence's Avatar
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    Quote Originally Posted by Mister B View Post
    No. I see what's happening. You, however, bought into the alt right propaganda. Hook, line and sinker.
    *You don't 'buy into' something "hook line and sinker" -- you swallow it that way.
    Last edited by Puzzling Evidence; 4th July 2018 at 05:31 PM.
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  4. #34
    Veteran Member Puzzling Evidence's Avatar
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    Quote Originally Posted by BigLeRoy View Post
    Are you referring to the repeal of Glass-Steagall? That would be the Gramm/Leach/Bliley Act. Gramm, Leach, and Bliley are all Republicans, by the way. And that bill passed Congress by a veto-proof margin. Even if Clinton had vetoed it-----and he SHOULD HAVE----his veto almost certainly would have been over-ridden. A strong majority of the House Democrats voted against repeal, IIRC. But Clinton himself did favor repeal. So he did sign the bill. I agree that was a mistake on his part. America was in a deregulatory MOOD in the late 1990's, you know. The economy seemed to be going gangbusters. We wanted to make it GO even better. We were in the mood for experimentation. We should have listened to the warnings of Democratic Senator Byron Dorgan.

    To my mind, the WORSE thing Clinton did was to raise the amount of tax exempt profits from the sale of a home to half a million dollars. That just poured FUEL on the escalating prices of homes. It fueled the speculative fever that really took off in the early 2000's. So, like I said, I am NOT absolving Clinton of blame in the housing bubble. But, really, George W. Bush WAS the number one cheerleader all the time he was in office. I guess you just were not paying attention to what HE was doing.
    Among [Clinton's] biggest strokes of free-wheeling capitalism was the Gramm-Leach-Bliley Act, which repealed the Glass-Steagall Act, a cornerstone of Depression-era regulation. He also signed the Commodity Futures Modernization Act, which exempted credit-default swaps from regulation. In 1995 Clinton loosened housing rules by rewriting the Community Reinvestment Act, which put added pressure on banks to lend in low-income neighborhoods. It is the subject of heated political and scholarly debate whether any of these moves are to blame for our troubles, but they certainly played a role in creating a permissive lending environment.

    Bill Clinton - 25 People to Blame for the Financial Crisis - TIME
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  5. #35
    Radical Centrist BigLeRoy's Avatar
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    Quote Originally Posted by Madeline View Post
    Okay, but in 8th grade I was taught the reforms Roosevelt passed made it impossible for another stock market bubble to cause another Great Depression. Such things as government insurance for bank accounts.

    IYO, is this still true?
    Short answer: No. Long answer: It's complicated. We do have the Federal Deposit Insurance Corporation, or FDIC, which was one of the best reforms introduced during the Great Depression. And, as you say, it provides government insurance for the bank accounts of ordinary people in their banking institutions, which was vital to restoring trust in the banking industry, because many, MANY Americans lost their life savings when more than nine thousand banks collapsed in 1929-1933. But the FDIC only guarantees depository institutions. It did not apply to the Big Five investment banks on Wall Street in the years leading up to the Great Recession: Goldman Sachs, Bear Stearns, Morgan Stanley, Merrill Lynch, and Lehman Brothers. Goldman Sachs was the only one of those five that survived the carnage of 2008-2009, the rest either went bankrupt or were swallowed up by larger institutions, sometimes almost at gunpoint by the Federal Reserve! So we DID have a big run on banks in the financial/banking/credit crisis of 2008/2009, despite the FDIC. We have developed a very large shadow banking system, almost completely unregulated, that operates alongside our more carefully regulated banking system. During the housing bubble, for example, Countrywide Mortgage, run by CEO Angelo Mozilo, was a major player in the mortgage market, and it was completely unregulated. All kinds of funny business, with Congressmen getting special deals from Countrywide, if they were "Friends of Angelo"......
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  6. #36
    Veteran Member Puzzling Evidence's Avatar
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    Quote Originally Posted by BigLeRoy View Post
    Short answer: No. Long answer: It's complicated. We do have the Federal Deposit Insurance Corporation, or FDIC, which was one of the best reforms introduced during the Great Depression. And, as you say, it provides government insurance for the bank accounts of ordinary people in their banking institutions, which was vital to restoring trust in the banking industry, because many, MANY Americans lost their life savings when more than nine thousand banks collapsed in 1929-1933. But the FDIC only guarantees depository institutions. It did not apply to the Big Five investment banks on Wall Street in the years leading up to the Great Recession: Goldman Sachs, Bear Stearns, Morgan Stanley, Merrill Lynch, and Lehman Brothers. Goldman Sachs was the only one of those five that survived the carnage of 2008-2009, the rest either went bankrupt or were swallowed up by larger institutions, sometimes almost at gunpoint by the Federal Reserve! So we DID have a big run on banks in the financial/banking/credit crisis of 2008/2009, despite the FDIC. We have developed a very large shadow banking system, almost completely unregulated, that operates alongside our more carefully regulated banking system. During the housing bubble, for example, Countrywide Mortgage, run by CEO Angelo Mozilo, was a major player in the mortgage market, and it was completely unregulated. All kinds of funny business, with Congressmen getting special deals from Countrywide, if they were "Friends of Angelo"......
    Be sure and check out the rest of the list.

    Angelo Mozilo - 25 People to Blame for the Financial Crisis - TIME

  7. #37
    Radical Centrist BigLeRoy's Avatar
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    Quote Originally Posted by Puzzling Evidence View Post
    Among [Clinton's] biggest strokes of free-wheeling capitalism was the Gramm-Leach-Bliley Act, which repealed the Glass-Steagall Act, a cornerstone of Depression-era regulation. He also signed the Commodity Futures Modernization Act, which exempted credit-default swaps from regulation. In 1995 Clinton loosened housing rules by rewriting the Community Reinvestment Act, which put added pressure on banks to lend in low-income neighborhoods. It is the subject of heated political and scholarly debate whether any of these moves are to blame for our troubles, but they certainly played a role in creating a permissive lending environment.

    Bill Clinton - 25 People to Blame for the Financial Crisis - TIME

    Yeah. I just discussed the Gramm/Leach/Bliley Act. I agree that the Commodity Futures Modernization Act was another bad idea. Like I said, there was a deregulatory MOOD in this country, in the late 1990's. The economy seemed to be HUMMING right along. Those were free-wheeling days.


    But, look: The Community Reinvestment Act had precious LITTLE to do with the housing bubble or subsequent collapse. That idea was completely exploded by research conducted by the Minneapolis branch of the Federal Reserve. Mortgage loans issued under the CRA were going into foreclosure at a much LOWER rate than non-CRA loans. And besides that, the CRA CANNOT explain why we had more-or-less simultaneous housing bubbles in such far-flung places as Australia and New Zealand, Hong Kong and Singapore, Spain and Portugal, Ireland and the United Kingdom. Much larger forces were at work.
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  8. #38
    Member Robert Urbanek's Avatar
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    So tonight I'm gonna party like it's 1929
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  9. #39
    Radical Centrist BigLeRoy's Avatar
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    Quote Originally Posted by Puzzling Evidence View Post
    Be sure and check out the rest of the list.

    Angelo Mozilo - 25 People to Blame for the Financial Crisis - TIME
    Yes, I've seen the list before, and it's a pretty good list. Chris Cox certainly belongs on the list, and so do American consumers, as a GROUP. You know, we had a lot of upwardly striving Yuppies in this country in the 2000's, who were buying just way more house than they could really afford, because they had real estate whores telling them that was the way to get rich. And so we had couples with a nice combined income of, say, $150,000, or even $200,000, but they were trying to buy million-dollar homes. Using gimmick mortgages. And so we had the proliferation of Liars's Loans, where people were ENCOURAGED to lie about their incomes, and NINJA loans, where NINJA = No Income, No Job, no Assets. I mean, any Tom, Dick, or Harry who could fog a mirror could get a mortgage, make maybe ONE mortgage payment, and then sit in that house rent free for two or three years while foreclosure proceedings worked their slow way through the courts. And because mortgages were being sliced-and-diced, in many cases it became almost impossible to figure out who really held the title to the property. Foreclosed homes in the Southern California area had pools that became festering swamps, breeding grounds for mosquitoes. No one was responsible for cleaning them up. What a massive clusterfuck.
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  10. #40
    Veteran Member Puzzling Evidence's Avatar
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    Quote Originally Posted by BigLeRoy View Post
    Yes, I've seen the list before, and it's a pretty good list. Chris Cox certainly belongs on the list, and so do American consumers, as a GROUP. You know, we had a lot of upwardly striving Yuppies in this country in the 2000's, who were buying just way more house than they could really afford, because they had real estate whores telling them that was the way to get rich. And so we had couples with a nice combined income of, say, $150,000, or even $200,000, but they were trying to buy million-dollar homes. Using gimmick mortgages. And so we had the proliferation of Liars's Loans, where people were ENCOURAGED to lie about their incomes, and NINJA loans, where NINJA = No Income, No Job, no Assets. I mean, any Tom, Dick, or Harry who could fog a mirror could get a mortgage, make maybe ONE mortgage payment, and then sit in that house rent free for two or three years while foreclosure proceedings worked their slow way through the courts. And because mortgages were being sliced-and-diced, in many cases it became almost impossible to figure out who really held the title to the property. Foreclosed homes in the Southern California area had pools that became festering swamps, breeding grounds for mosquitoes. No one was responsible for cleaning them up. What a massive clusterfuck.
    Mortgage insurance emboldened lenders to foreclose on properties at an unsustainable rate. This was the coup d'état that became our undoing.
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