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Politics : Formerly About Advanced Micro Devices -- Ignore unavailable to you. Want to Upgrade?

To: Road Walker who wrote (428509)	10/20/2008 4:27:20 PM
From: TimF	Respond to of 1570515

You specifically said "no foolish action" by 3 institutions. If you meant no foolish action by the private sector you should have mentioned them. I didn't mention them because I wasn't talking about them. Plenty of private sector actors have acted foolishly (along with plenty of government actors), but that's in the past, I'm talking about the future, and specifically additional situations that would almost definitely be needed to get a real great depression type situation. Absent additional and massively foolish government action (such as contracting the money supply, a huge tax hike, or a trade war, all of which happened in the late twenties to early 30s, or perhaps something different but equally foolish) there is not a very significant chance of "great depression II" Those distortions were minor, and frankly good as long as basic principle were followed. The distortions where very large, building up over decades under both parties. They lead to over investment in housing. Home ownership in isolation does have a stabilizing effect on society, but distortions and incentives that increase it beyond its "natural" extent (not just in terms of more people having houses, but also in terms of people getting larger homes, or just paying, and thus borrowing, more for the same homes because of the increased demand brought out by these distortions) is healthy or stable. And even absent considerations of inflated costs and debt, home ownership isn't an unalloyed good, for example rising home ownership tends to decrease labor mobility to an extent. The list of incentives and distortions are long. From overly easy money (not directly tied to home ownership, but that's where a lot of the money went, particularly after the tech stock collapse), to deduction of mortgage interest, to capital gains on housing becoming essentially tax free for most people under Clinton, to the CRE and related regulations and political pressure and lawsuits, to Fannie Mae and Freddie Max, to the treatment of reserve funds in such a way as to give lower reserve requirements when the asset held is a basket of rated mortgage backed securities, even ones based on relatively risky mortgages, then if the asset held is an actual mortgage even from a good credit risk. And that's not an exhaustive list just the highlights.