KILLING A FALSE RECOVERY: IT’S HOUSING, STUPID!

EDITOR’S COMMENT: I agree with Krugman from an economists point of view that this is like 1937 all over again when the Republican scare tactic of the deficit drove us back into a depression. But I think he misses the point. He says they are killing the recovery. I say we have no recovery. A patient isn’t recovering if the prognosis has changed from death in 2 weeks to death in 2 months.
You can talk all you want about sounding like a broken record — at least they were real and when they broke, you could see it and knew that something had to be done to correct the situation.
We are dealing with a false economy — in which half of our gross national product is measured by the paper we trade, which supposedly is based upon real services and products. But the paper we trade is based upon other paper we trade and that paper is based on other paper — which is why “financial  services” has climbed from 14% of GDP to effectively 50% of GDP. It’s a false figure — all smoke and mirrors and the rest of the world knows it.
By appeasing Wall Street we are replaying the famous Chamberlain appeasement of Hitler. Unfortunately, our politicians are as short-sighted now as always, and in particular the 1930’s. Wall Street is playing the world governments the same way Hitler did and when they are ready they are going to present demands that are impossible to meet. It is no solace that these politicians will be regarded as idiots by historians. Blame won’t ameliorate the pain we are have felt and the pain that will be inflicted by Wall Street as long as we keep appeasing them in order to maintain the false image of continuity in the marketplace.
THERE WILL BE NO RECOVERY UNLESS THE PAPER CHASE ENDS. When financial services starts going down sharply as a percentage of GDP then we will know we have control of our society back and that the banks are controlling nothing. The paper chase can’t end unless we accept that it is just paper and not just worthless, but a liability that will cost real money to clean up — like after a ticker tape parade. It’s all based on the false premise of a transaction with homeowners that was falsified, fabricated and fraudulent compounded by a transaction with investors buying bogus mortgage bonds that were falsified, fabricated and fraudulent.
Wall Street wants us to regard what they did as spilled milk that can’t be recovered. To a small degree that is true. But mostly this is and has been a theft of money and property that all still exists and can be recovers, put back where it belongs and form the foundation of a smaller but REAL economy that makes and does things. So first we must fix the housing problem, and while we do that, we need to fix the investor problem because if you do one without the other, one of them is going to get screwed — AGAIN. And that will spell doom for our prospects.

March 3, 2011

How to Kill a Recovery

By PAUL KRUGMAN

The economic news has been better lately. New claims for unemployment insurance are down; business and consumer surveys suggest solid growth. We’re still near the bottom of a very deep hole, but at least we’re climbing.

It’s too bad that so many people, mainly on the political right, want to send us sliding right back down again.

Before we get to that, let’s talk about why economic recovery has been so long in coming.

Some economists expected a rapid bounce-back once we were past the acute phase of the financial crisis — what I think of as the oh-God-we’re-all-gonna-die period — which lasted roughly from September 2008 to March 2009. But that was never in the cards. The bubble economy of the Bush years left many Americans with too much debt; once the bubble burst, consumers were forced to cut back, and it was inevitably going to take them time to repair their finances. And business investment was bound to be depressed, too. Why add to capacity when consumer demand is weak and you aren’t using the factories and office buildings you have?

The only way we could have avoided a prolonged slump would have been for government spending to take up the slack. But that didn’t happen: growth in total government spending actually slowed after the recession hit, as an underpowered federal stimulus was swamped by cuts at the state and local level.

So we’ve gone through years of high unemployment and inadequate growth. Despite the pain, however, American families have gradually improved their financial position. And in the past few months there have been signs of an emerging virtuous circle. As families have repaired their finances, they have increased their spending; as consumer demand has started to revive, businesses have become more willing to invest; and all this has led to an expanding economy, which further improves families’ financial situation.

But it’s still a fragile process, especially given the effects of rising oil and food prices. These price rises have little to do with U.S. policy; they’re mainly because of growing demand from China and other emerging markets, on one side, and disruption of supply from political turmoil and terrible weather on the other. But they’re a hit to purchasing power at an especially awkward time. And things will be much worse if the Federal Reserve and other central banks mistakenly respond to higher headline inflation by raising interest rates.

The clear and present danger to recovery, however, comes from politics — specifically, the demand from House Republicans that the government immediately slash spending on infant nutrition, disease control, clean water and more. Quite aside from their negative long-run consequences, these cuts would lead, directly and indirectly, to the elimination of hundreds of thousands of jobs — and this could short-circuit the virtuous circle of rising incomes and improving finances.

Of course, Republicans believe, or at least pretend to believe, that the direct job-destroying effects of their proposals would be more than offset by a rise in business confidence. As I like to put it, they believe that the Confidence Fairy will make everything all right.

But there’s no reason for the rest of us to share that belief. For one thing, it’s hard to see how such an obviously irresponsible plan — since when does starving the I.R.S. for funds help reduce the deficit? — can improve confidence.

Beyond that, we have a lot of evidence from other countries about the prospects for “expansionary austerity” — and that evidence is all negative. Last October, a comprehensive study by the International Monetary Fund concluded that “the idea that fiscal austerity stimulates economic activity in the short term finds little support in the data.”

And do you remember the lavish praise heaped on Britain’s conservative government, which announced harsh austerity measures after it took office last May? How’s that going? Well, business confidence did not, in fact, rise when the plan was announced; it plunged, and has yet to recover. And recent surveys suggest that confidence has fallen even further among both businesses and consumers, indicating, as one report put it, that the private sector is “unprepared to fill the hole left by public sector cuts.”

Which brings us back to the U.S. budget debate.

Over the next few weeks, House Republicans will try to blackmail the Obama administration into accepting their proposed spending cuts, using the threat of a government shutdown. They’ll claim that those cuts would be good for America in both the short term and the long term.

But the truth is exactly the reverse: Republicans have managed to come up with spending cuts that would do double duty, both undermining America’s future and threatening to abort a nascent economic recovery.

14 Responses

  1. I think the people that are more two payment behind should set up a trust fund in there kids name.put all the mortgage payments in it. Then when they are evicted buy something eles at half the prise. Two years till eviction ,24 months at $ 850.00=$20,400.00 a good dowm payment!

    Pat the rat

  2. […] 6 Mar COMBO TITLE AND SECURITIZATION SEARCH, REPORT, ANALYSIS ON LUMINAQ EDITOR'S COMMENT: I agree with Krugman from an economists point of view that this is like 1937 all over again when the Republican scare tactic of the deficit drove us back into a depression. But I think he misses the point. He says they are killing the recovery. I say we have no recovery. A patient isn't recovering if the prognosis has changed from death in 2 weeks to death in 2 m … Read More […]

  3. john gault,

    Since many refinances were simply a “modification” of prior mortgage (borrowers did not know), thus, prior “recorded” mortgage loan never paid off as it should have been, rescission is much more complicated than described in the case you provide – or by other cases.

  4. Part of this economy is being held up by the income of those not paying their mortgages. Those that have given up trying to get mods are using that mortgage money to buy everything else.

  5. Most rescission cases die because the bankster comes in and yada yadas about the borrower needing to ‘tender’ the amt due. Here is a link to a case, and I might add, the only one like it I have seen which says no, the first consequence of rescission is NOT that the borrower has to tender the alleged amount due on the note because the bankster had to do xyz first and the bankster does not do xyz first:

    http://www.scribd.com/doc/49828508/Right-of-Rescission-under-TILA-You-don-t-have-to-pay-first

  6. …don’t have time to gab…busy on my pleading against HSBC…

    A-MAN. Michael Moore is nuts. He’s not giving away his money, is he?

    Krugman?…pure B.S.: “These price rises have little to do with U.S. policy; they’re mainly because of growing demand from China and other emerging markets, on one side, and disruption of supply from political turmoil and terrible weather on the other.”

    Food prices are higher because the “breadbasket of the world”, the United States, makes gasohol out of fully ONE THIRD of U.S corn crop output; demand is increasing, yes, but capacity is there. Oil, as the fuel of democracy and freedom (think travel) is only an issue because of U.S. EPA policy and continued support of the dictator oligarchies of the Middle East (another reason to hate us). The United States has plenty of oil.

    Drill, BABY, DRILL!
    and drill your BANK while you’re at it.

    REAL unemployment is nearing 20%. I think that the tipping point will be 22-25%. When one member of the taxpaying public is supporting 3 of their neighbors (2 government employees and one unemployed guy, or vice-versa), we’re done.

    The recently foreclosed and vacated houses I’m seeing around town are being stripped. Heating, copper, doors, everything. These people are leaving very, very angry. Hard working guy, this guy, two little kids, wife, POOF! GONE!

    When the county has to assume ownership because the bank abandoned the proceeding after evicting the owners. they’ll raze them all. Eminent domain. Very sad.

    STAND UP AND FIGHT!

  7. Do the Judges recognize Luminaq yet? Or are they dismissing it as hear say?

  8. Fred ,

    Can you please shoot me a copy of your rescission (TILA & UCC) along with the QT ,, I have representation but I need to lead them …

    Thanks

    brian_tracy @ cfl.rr.com

  9. Paul Krugman, you explain but what is your solution? And of course you never mention that fact that money is a debt based system so the solution will be and can only be more debt. Of course you never mention that that new debt never reaches main street and if it does it is so watered down it is useless. You jack wagon.

  10. Here is the bill HR6500

    http://thomas.loc.gov/cgi-bin/query/z?c111:H.R.6550:

  11. Both parties are nuts.

    Fred, can you fill me in on your QT action. I may do the same.

    thelariat@att.net

    thanks.

  12. Good day to all. Neil I must say after two years of following and using some of the many great strategies and legal theories you are now narrowing in on the core issue. The most powerful thing money, its creation and manipulation is in the hands of bankers and wall street. Money is created by Law and manmade. That is it is not natural and subject to laws of nature. The Federal Reserve is the main player and by its position of privilege and the privilige it has given t o bank to create check money they have taken control of society.l would like to suggest a look at House Resolution 6550 introduced by Kesinech to deprivatize the Fed and stop borrowing money rather when stimulus is needed spend the money into production creating value instead of nothing but concentration of money int the hands of a few. The American Monetary Institute ( monetary.org ) helped author the bill and is a good resource in this regard. One other point thanks for TILA research on your site We have just put in a recession under TILA and UCC codes with no reply, so Friday filed Quiet title action ins District Court. Good day

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