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Politics : President Barack Obama -- Ignore unavailable to you. Want to Upgrade?

To: michael97123 who wrote (16712)	4/8/2008 5:09:48 PM
From: Road Walker	Read Replies (2) \| Respond to of 149317

We disagree We do disagree. The root problem is financial imbalance... huge debt imbalances. Part of that is consumer debt, part is federal debt, part is trade debt. It has to come into balance or our quality of life is in danger (many would say the downward trend is well under way). You can't put out a fire with more fuel (more debt)... you have to get fiscally responsible. But here is probably not the place to discuss.

To: michael97123 who wrote (16712)	4/8/2008 7:20:28 PM
From: RetiredNow	Respond to of 149317

Michael, why do you think we are where we are now? The U.S. has just experienced a huge margin call. People want their money back, which is why liquidity dried up and the Fed had to step in. But stop trying to address the symptoms for a second and try to understand the root cause. In my business we ask the 5 whys. So let's begin: 1) Why did the Fed have to pump liquidity into the markets? Answer = Because bank loans were being defaulted on at an unprecedented level and the folks securing the financial derivatives created out of those loans were trying to cash out of those derivatives. 2) Why cash out and why the defaults? Answer = Owners of derivatives and mortgage debt knew that defaults were happening at an unprecedented level and they wanted to get their cash quickly before they became worthless 5) why did that cause liquidity problems? Answer = because everyone is selling and no one is loaning money, so money supply tightens 6) why was everyone defaulting on the loans then? * permissive Fed policy (rates held at low levels for too long) after 9/11 and an unregulated housing market boosted housing prices and then housing buildouts to unsustainable levels; when people realized this, they started to sell and the housing bubble popped, leaving too many people with houses worth less than their mortgage loans; then ARMs caught many in an inability to pay when the rates spiked up 7) So given all that, why shouldn't the Fed keep lowering rates and why shouldn't the gov't keep giving us more tax decreases and tax rebates to offset all this mess? Answer = because the dollar is at an all time low; the Fed will very soon find that when they try to print new money by offering Fed bonds on the market, they won't be fully subscribed. Other countries are trying to divest themselves of the worthless US currency now, because they are sustaining massive losses. All of this has made us less wealthy relatively. If we keep this up, we will become the United States of China. The bottom line, Michael, is that America's chickens have come home to roost to quote an infamous man. We now have to pay the piper. I know that is tough medicine to swallow in this climate where the only proposal put forth by the neo-cons is feel-good economics, but it's time to use our heads and figure out how to make American financially sound again. That means balancing the budget, running a surplus, paying down the debt, and not spending money on wars and giving away the treasury in oil and in shipping jobs overseas. So yes, it's time for a little protectionist policies to bring balance back to this country. We've gone too far to the right and now we need to correct to bring us back to the middle. Tough medicine indeed, but it's the responsible, ADULT, thing to do.