Q. What is an Economic Stimulus Payment? Huckabee's view, too bad he's out of the race... And finally, the always accurate, Jib-Jab view... Learn more about the 2008 Economic Stimulus Package and how it helps solve Florida's Real Estate Crisis (hint: it does not do a darned thing...)
A. It is money that the federal government will send to taxpayers.
Q. Where will the government get this money?
A. From taxpayers.
Q. So the government is giving me back my own money?
A: Only a smidgen.
Q. What is the purpose of this payment?
A. The plan is that you will use the money, for example, to purchase a high-definition TV, thus stimulating the economy.
Q. But isn't that stimulating the economy of China?
A. Shut up...
Friday, May 9, 2008
Explaining the Economic Stimulus Payments and how it will help the Real Estate Market...
Wednesday, April 30, 2008
Biggest downturn since the Great Depression
Watch Mort Zuckerman explain why he thinks that the US is facing an economic crisis the likes of which we have not seen in decades. He explains how the securitization of mortgage loans led even the smartest people in Wall Street to fall for what turned out to be garbage paper.
Mort certainly knows what he's talking about. He is a billionaire real estate developer and investor turned media mogul as owner and publisher of several newspapers and magazines as well as Editor-in-Chief of U.S. News & World Report…
Monday, April 21, 2008
The Great Greenspan Depression of the Millennium
Alan Greenspan’s spirited defense of late about his legacy has more in common with revisionist history and self-serving grandstanding than the actual truth: He is largely blamed for creating the chaos that we now know as the “dot com bubble”, the following 2001 deep recession that destroyed trillions of dollars in economic value as well as millions of jobs, and the current economic catastrophe whose effects we have not yet been able to quantify but which already has left millions of hard working families literally on the streets, not only from losing their homes but also from losing their jobs as companies close down due to the credit crunch.
Mr. Greenspan caused the 2001 recession by consistently underestimating the ability of technological change and increased productivity to dampen inflationary pressures. Refusing to accept that the American economy was capable of growing at 3.5% to 4% annual rate without generating inflation, his Fed started hiking interest rates in 1999 and went on too fast and too far. The infamous 50 basis-point hike in May 2000 triggered the stock market’s collapse, evaporated millions of jobs, obliterated the life savings of over thirty million Americans and created the ensuing recession.
Mr. Greenspan then gave birth to the housing bubble in the wake of 9/11 by consistently overestimating the threat of deflation. The result was historically low interest rates that provided crucial air for the resultant housing bubble. The low rates that normally would fuel investment and growth were exploited by irresponsible banks and mortgage companies and their brokers greedily looking to increase their returns. The over-leveraging and securitization of these loans coupled with the lack of oversight by the federal government led to the credit mess whose final consequences are yet unknown. (see A Primer on Sub-Prime Mortgages ).
We must not forget, however, the fact that even the ugliest sub-prime loans were getting paid as scheduled. It was not until the rates jumped so violently that they became delinquent in droves. No matter how solid a country’s economy is, the instability created by a bad policy decision is enough to turn a boom into a bust. Stability is the catalyst that fosters investment, growth and long term prosperity.
Today, without official duties and no longer involved with the Fed, Mr. Greenspan continues to create havoc, unnecessary panic and above all, destruction of value. His public musings about the stock market and the economy only add volatility to the current crisis while undermining the already tenuous position of current Fed Chairman, Ben Bernanke, Greenspan’s own boy. For the public good, it would be best if he let his defense rest and simply zipped his lips and go home with his millions in earnings. But Greenspan has shrewdly figured that keeping himself on the limelight does help him sell more books and book more lectures and consulting gigs which have made him a very wealthy man.
The chart at the right graphically illustrates the stock market carnage. This chart presents the Dow divided by the price of one ounce of gold. This results in what is referred to as the Dow / gold ratio or the cost of the Dow in ounces of gold. When priced in that universal world currency (gold), the Dow is in the midst of a massive eight year bear market!
In its own words, the official top objectives of the Federal Reserve are:
1) Conducting the nation’s monetary policy by influencing the monetary and credit conditions in the economy in pursuit of maximum employment, stable prices, and moderate long-term interest rates.
2) Supervising and regulating banking institutions to ensure the safety and soundness of the nation’s banking and financial system and to protect the credit rights of consumers.
3) Maintaining the stability of the financial system and containing systemic risk that may arise in financial markets.
In simpler terms, what this means is that the Federal Reserve's main goals are to foster economic stability and prosperity. In this regard, Greenspan’s record is dismal. Since 1999, the destruction of value that Greenspan has caused is estimated at over 7 Trillion Dollars. That is a very large number. To put this figure in perspective: the entire U.S. economy generated only about $13.8 trillion in 2007, and total household wealth is currently only about $45 trillion.
In the history of the United States no enemy has ever been able to inflict upon us more harm. In this regard, Greenspan’s legacy of financial destruction will be remembered as “The Great Greenspan Depression of the Millennium”.
Wednesday, April 9, 2008
HOW Money is Created
In our economic system, the presence of money is felt everywhere; indeed, a world without money would be quite difficult to even imagine. Practically all of our daily transactions, from the most menial trip to the supermarket to the purchase of office buildings and the financing or whole armies are exchanges between money and goods or services. In ancient times, the total supply of money was essentially equal to the total supply of goods to be traded. Over time, new structures were devised to improve on the barter-based economy. Long time ago, most economies in the world were under the “Gold Standard”, basically tying the supply of money to the amount of gold the country owned. Under the gold standard, currency issuers guarantee to redeem notes, upon demand, in that amount of gold. Banking and Finance are fascinating yet complex subjects. This documentary presents in layman’s terms how money is actually created out of literally nothing, and how our whole financial system is so dependent on the public’s confidence in our currency and nothing more.
Today’s standard is called in economics, “fiat currency”. Fiat money is money that has value primarily because a government demands it in payment of taxes, and that government has credible enforcement of its demand. It basically has value because the public has a collective belief in the credibility of the entity printing the currency.
Former US Federal Reserve Chairman Alan Greenspan once argued, before the advent of monetarism, that:"Under the gold standard, a free banking system stands as the protector of an economy's stability and balanced growth... The abandonment of the gold standard made it possible for the welfare statists to use the banking system as a means to an unlimited expansion of credit... In the absence of the gold standard, there is no way to protect savings from confiscation through inflation”
PART 1 - THE ORIGINS OF MONEY
PART 2 - HOW MONEY IS CREATED
PART 3 - MONEY IS DEBT
OUR BANKING SYSTEM AND MONETARY REFORM
WARNING ABOUT THE N.W.O.
Monday, April 7, 2008
A Primer on Sub-Prime Mortgages
The sub-prime mortgage infection has already spread to affect most areas of the U.S. economy and the world. What started as one of the after-effects of the "Great Greenspan Depression of the Millennium", it has recently threatened to destabilize the very financial system of the most powerful economy in the world. Many AAA mortgage bonds are actually extremely high risk because of little-considered nuances in the hundreds of pages of trust indentures and servicing agreements. In addition to the widely understood mortgage default risks and other concerns, these contracts actually permit the loan servicers to advance payments on behalf of defaulted homeowners for years and years at interest rates of 12% and more. These advances put funds back into the trust to be paid to junior security holders and are subsequently repaid first from foreclosed home sales. The net effect is that foreclosed home sales may result in little or no proceeds, or even a liability to the AAA bonds which are supposed to be the senior securities. This is not widely understood even now.
This presentation called "A primer on Sub-Prime Mortgages" is entertaining while at the same time very educational. It describes in simple terms some of the reasons that got us into this mess.
The large amount of "First Mortgage Syndicated Bank Loans" issued since 2004 are, for the most part, garbage. Most of these loans permit the borrowers to sell the collateral, keep the money, and reinvest in almost anything they want to, including stocks junk bonds, defaulted loans, or even Al Gore's ventures.
The Fed is now stepping up to guarantee these loans which is effectively shifting them into the Federal Reserve's Balance Sheet. And, you may ask, who "balances" the Balance Sheet?... The taxpayers - our kids.
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