The 2007 Subprime Mortgage crisis

I think you may have a misconception about how the Fed works then.

The Fed cannot just "set" rates. That's really more a generalized expression.

They have to undertake market operations to try to affect the rates, attempting to move them to their target.

That of course can be very expensive, so they don't want to do this for too long.
It's easier if the target rate is not too far from what the natural market rate would otherwise be.

If the Fed wants higher rates, they have to pay those rates themselves. For the ENTIRE market. It would be absurd for the Fed to try to set rates for the benefit of their own financial position. If the Fed was run like a private investment bank, they would never try to set the rates, and it would be free-floating.

 

See it coming? Yes, if they were "in the market". That is, the banksters who kept lending money for those who thought they would make a Quick Buck buying/selling property. (Some people call that "human self-indulgence" others think it is "just plain stoopid".)

Like most financial failures it happened unannounced to the larger world. The "bubble" popped overnight. And a lot of people lost fortunes. Losing 5 or $10K is a fortune for a great many people. When that happens to millions upon millions, it's a far greater catastrophe.

The general reaction in such a circumstance is almost automatic. Consumers restrain spending and Demand fails. When that happens, companies fire people they don't need because they are not selling products/services. Demand falters even more and that simply accelerates the process. (When that happens significantly, it becomes a major economic depression. Which had happened only once before, in 1929.

The root cause of the SubPrime Mess (from here):

 

Most of them probably deserved it.

I'm not saying they did not suffer terribly for their financial mistakes.

I have several personal stories about this, will not post them here, but I know people who were on both sides of the fence. One of them, everyone told him he was crazy for selling his house and renting for a year, but he ended up getting out right at the height of the market and now lives in a very expensive $2 million house on prime real estate.

There were definitely rumors going around that the market was going to tank, though no one knew exactly when, whether it would be in 6 months or 4 years, and not everyone believed those rumors. It seemed like everything was just appreciating without end and people were afraid if they didn't get in now they would be left out.

I kept getting a credit card offer in the mail almost every week. Actual credit cards with my name on it, all you would have to do is call a number to activate it. Scary.
Unemployed and no assets, and never requested those credit cards.
They were practically throwing out money in all directions, trying to get people to borrow.

 

So you appreciated the asphalt crews repairing pot holes with enormous signs praising Obama. And you think pot hole repairmen fixes the economy?

 

Thank you.... maybe I should take a stab at politics!

http://www.politicalforum.com/index...asic-minimum-income-for-all-canadians.556527/

 

The US does not "borrow money". It sells Treasury Notes that endebt the country. You may think it's the same. But, it isn't. Because T-notes are not "called-in" by any bank. (Except the Federal Reserve that can redeem them.)

The problem with the US is that it is not using its Discretionary Spending to better the nation. Just to pay for a DoD that is far too big for what it must do. That is, defend the nation. And particularly at a time when there is no real war that threatens the US.

This makes no sense. Printing money does not create inflation. Demand-pull inflation occurs when aggregate demand for goods and services in an economy rises more rapidly than an economy's productive capacity.

The US does have what is known as a Debt Ceiling, for which going beyond requires Congressional approval. Still, such does happen because our economy has become "hooked on debt". And that debt is largely due to the fact that far too much money is spent on the DoD - compared to what is necessary.

Raising and not lowering taxes on the rich and super-rich would lower debt levels - but no Replicant PotUS would ever dare do that ...

 

I'm always embarrassed at your gifts:
Thanks to the Koch Brothers, We Have More Proof that Single Payer ...

https://www.thenation.com/.../thanks-koch-brothers-proof-single-payer-saves-money/
Jul 31, 2018 - The Koch brothers have invested billions of dollars in a decades-long campaign to turn public opinion against necessary reforms, such as the establishment of a single-payer health-care system in the United States.

 

And that’s a good thing, because socializing healthcare is the only demonstrably effective way to control costs and cover everyone. It results in a healthier country and it saves a ton of money.[/quote]

Ever heard of East/West Germany or Cuba /Florida? Capitalism is how you control prices so everyone can afford everything. China just switched to Republican capitalism and now instead of starving to death under libsocialism (120 million slowly starved to death)they are all getting rich and can afford lots of health care. A child could follow this but not a liberal!

 

This liberal has never heard of Iran China Russia North Korea and their ICBM's. NO missiles aimed at France because it is too insignificant and stands for nothing except using America for its defense.

 

wrong of course demand can be sky high but without more money printed aggregate prices cant go up one penny. 1+1=2

 

It was necessary to save civilization in WW1&2 , win cold war and prevent communism, defeat terrorism and now to police the world without which the world would instantly descend into to chaos.

 

I understand. When one drinks the establishment koolaid and ends up with a perspective that consists mostly of irrational platitudes - one is easily embarrassed.

 

Correct

 

if so why is the gifted liberal so afraid to identify the most obvious irrational platitude for the whole world to see? What did the liberal learn from his fear??

 

why is socialism correct when it just starved 120 million to death and capitalism just saved 200 million from starvation??
Ever hear of Cuba/Florida? East /West Germany?

 

1) I am not a Liberal and
2) I have no clue what you are talking about - You need to become more gifted at creating a coherent thought

 

I did not say Socialism was "correct" so why are you nattering on as I did ... Silly Rabbit -- Tricks are for Kids !

 

And YOU SHOULD LEARN that in an online debate-forum, you quote the person to whom you are addressing a response such that they are informed!

On the other hand, you could very simply Go Away ... !

 

Subprime mortgage crisis was the fault of the Federal government. The pushed lenders to reduce their requirements and lower the down payments from 20% to 0- 19%. Why?

Because they wanted to make buying a home more affordable to the lower middle class.

As a former realtor, I know this was a bad idea. Because most buyers don't take into account the cost of upkeep, increases in insurance and taxes, and increases in electric, water, and has expenses. Plus they don't realize that they should have at least 3 months of monthly expenses in savings in case they lose their jobs.
When I was selling real estate I always informed my buyers of this.

Obama's stimulus package was the wrong move. The Federal Governments regulations, Fannie Mae and VA Loans ; were the biggest cause of the mortgage disaster. If a homeowner loses their job and income, without 20% equity, even if they find a buyer for their home, they will likely have to put money in at closing. I believe 20% down should be required, period.

 

You are correct - in this case the platitude was identified previously. Normally I would restate again but in this case the one I was responding to is a Troll.

 

What? A job fixing potholes is better than no job. The economy was well on its way to recovery.

 

My hope is one of these days you guys read up on what presidents can do and what they can't for example name me a president who has killed the economy

 

Hope-wishing in this forum with "one-liner sarcasm" as rebuttal will never work. The fundamentals of any economy are in the aggregate numbers - and not one-liner sarcasm!

THAT is why American politics do not change. Simpletons vote automatically for one side or the other without understanding the underlying consequences to either the economy or fundamental rights.

Good luck, Uncle Sam. Do call back when you get better ... !

(Meanwhile the world has learned to let you simmer in your own little corner of the world, all wrapped up in a bitter fight over a WALL with Mexico ....)

 

Doesn't matter. Report what the troll said and your response. It gives direction to an online debate.

One can spend a lifetime responding to "trolls" on this forum (who haven't the slightest understanding of the science of economics) in an Economics Debate Forum !

They spread their shat with one liner rebuttals anywhere they can ...

 

Clinton and Bush. Clinton by loosening regulations and not reigning in the tech boom, and Bush by loosening bank regulations resulting in the sup-mortgage crisis. Trump is on the way by lifting virtually all environmental regulations and by goosing an economy that was already on the upswing.
A gradual rise in the economy is preferable because he has used up all his arrows to shore up the economy when it takes a nose dive.