Cain vs Ron Paul

The only people who didn't see it coming were the people schooled in Keynesian and Supply Side economics. Unfortunately that represents 95%+ of government officials.:doh:
 
Back in that period...

around 2003, I had a number of friends who would be considered good solid tradittonal liberal Democrats-we all saw it coming, to a man. There was just no way it wasn't going to happen in our view. So whatever the thinking in Washington, there were plenty of folks on the 'left' who both saw and deplored the circumstance. I do not personally know of single liberal of my aquaintance who got into mortgage trouble but I did know at least 4 good conservatives who were foreclosed on or short sold out their property. Take that slim anecdotal evidence for what it is worth but the disconnect between liberal citizens and their politicians may be one of the best kept secrets in Washington.
 
It might have something to so with the fact that people who have "their guy" in power are more optimistic than those that don't. Now that Obama is in power there are all kinds of conservative that see the economic Apocalypse coming while liberals seem to have a greater tendency to think things are going to get better.
 
The last stat I saw...

said that only 17% thought things were going in the right direction. With Obama in a dead heat in potential match ups there must be some disconnect between people's optimism and 'their' guy.
Also, I and my friends back in 2003-04 did not even consider Bush or an overall 'apocalypse', we were just convinced on events on the ground that the absurd level of housing price increases and the ridiculous broadening of the debtor population and the relaxation of lending standards could not possibly be maintained. That was pretty much the extent of it. Bush and the Republicans had zero to do with our thinking on that score. My wife and I bailed out of the property market in 2004 on that analysis.
 
My wifes dad worked as head of collections for a good sized bank in a town of 35k for years. Even while retired he's kept busy doing odd jobs for some of his old business buddies.
A few years ago he was running errands for the bank... basically verifying that work on homes or businesses being built was getting done. While we were back on vacation my wife rode around with her ol dad so they could catch up... while driving through a neighborhood that was full of new McMansions and scads of others being built, he told her "Honey, there's just too much money out here... there is simply too much money in the system and it's not right." refering to the amount of money being loaned.
 
This is just a general reply...

to this thread. The link is to very short blog piece from a Duke University publication that pots a good deal of comment I have seen around the financial and economics journals for the last year or so. The basic ideas here are two: 1) in hindsight the housing meltdown looks like something that should have been obvious 2) but in fact the individual participants, all the way from the borrowers to the overleveraged investments in mortgage backed securities by the banks, were actually acting 'rationally' from their time and perspective bound position.

The two comments below the body of the blog are worth reading and the link to the Economist article on the place of government subsidy and support in housing is very much worth the time. What I like about this whole line of thinking is that it should really challenge our ideas about both 'rational actor' economics and about the wisdom of making too much out of home ownership at any cost.

The blog author does misuse 'beg the question' but don't let that entirely color your opinion:p

http://sjpp.sanford.duke.edu/2011/maturing-view-housing-crisis/

This link is a bit old but it does give the Freddie / Fannie leverage and loan standard history a rapid going over. It shows how all other issues aside just how dangerous were the assumptions about capital investment in non-productive purchases (housing) on a highly leveraged basis. I have since read that the overall leverage rate at these two companies is 100:1 Prior to 2004, SEC law required no more than 12:1 !!!


http://ticker-classics.denninger.net/archives/24-Fannie,-Freddie,-Banks-and-Government-Debt.html
 
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