"Because a contract that is inherently unfair and signed only because one of the parties does not understand the implications of doing so is null and void under common (and statutory) law."

Speaking to the subject at hand - are you maintaining that people can understand a 20% down, less than 36% DTI loan but not one that has more relaxed terms? While there certainly has been fraud perpetrated on the unwitting, I don't believe it had anything to do with the downpayment or DTI ratios.

"There's a solution to that and it is found in the Constitutional power to regulate the money supply. Set reserve requirements at 10% by statute with no exceptions or loopholes."

A set reserve requirement would be better, but I would again ask why we would want to leave any wiggle rom for the wealth of the citizenry to be stolen through process by bankers!


Thanks for the response. I truly enjoy your perspective, but I do bristle most of the time when we get to the suggested solutions.... they almost always employ force, and have as an underlying premise that a gamed system is acceptable, so long as we have an appropriate level of oversight. I just can't bring myself to view government as a universal force for good, crusading to protect the little guy. It isn't. It's just the mob with tanks, protecting it's constituent interest groups and enriching it's partisans.

I am decidedly sceptical of the all-powerful state, and simply cannot embrace a solution that presupposes it's infalibility. Allowing anyone - even the pious purveyors of statecraft - to arbitrarily change the value of money is a recipe for great plunder of the people's wealth.

That's a nice theoretical world you live in.

Back in a world called reality we live with where we are and what we have available to us.

Government's primary purpose is to stop people from perpetrating fraud and force on one another.

There is no greater perpetrator of fraud and force than the government. Is expecting them to protect us from every possible sort of negative outcome not clearly contradictory?

Our nation was not founded so that a strong overlord in Washington could protect us. It was founded so that we might never again need protection from a government who thought it knew better how to order our lives than we do. They decidedly hobbled the government, attempting to secure the liberty of the people by narrowly construing the prerogatives of government, limiting it to ennumerated powers.

If you truly see the government as our great benefactor, properly protecting us from ourselves, then you're the one who needs to get in touch with reality. People should be free to enter into a contract, no matter it's terms, so long as it is not obtained under undue duress, in contravention of proper law and all parties understand the nature of the agreement.

It is not immoral for a person to loan to another with less than 20% or more than a 36% DTI. It might be a bad idea, but businesses make bad decisions all the time, and they should reap the consequences of making those decisions. I still don't understand why your first stop is always to limit the freedoms available to free people. Wouldn't it make more sense to just get rid of the idea that if you're big enough and stupid enough - we'll let you have taxpayer money to protect you from the results of your stupidity?

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if you're big enough and stupid enough

Good idea there. If you are an Accredited Investor sign whatever loan agreement you want. Everyone else 20% Down, 36% DTI unless you fall into some special programs (FHA/VA).

You obviously haven't read a hundredth of what I've written on the topic of government generally.

Start there before I am forced to conclude that you are interested in disruption rather than discourse.

Karl - I certainly have read your writing, and again, enjoy your analytics. If you suspect that I'm trolling, you're wrong. Look back - I haven't posted in a while, but disruption isn't my MO......

If you look back at my previous offerings, you'll see that I have an agenda I suppose (don't we all), but I'm not trying to get your dander up. I respect your mental work in this vein, and would simply seek to challenge your presuppositions about what government can and should be doing in this arena. I am an unrepentant capitalist, a prophet of the free market. If that makes me disruptive, then I'd argue that the status quo needs to be disrupted.

As I said on the first post of mine in this thread - everything I say is intended with all due respect, of which I think a good deal is due. You are providing a service, and clearly have a keen mind. I am not trying to tear you down in the slightest - but I do think you could improve in some areas by adopting my own outlook. :)

Seriously though..... the government is never the best solution to a problem, whether it be social or financial in nature. Government doesn't do a single thing without employing force to codify the interests of some at the expense some other, and there is always a better way.

Max -

You're comfortable with the concept that government should be the one deciding the internals of loan contracts? What if they decided on a maximum cost per square foot that could be financed? That might help keep someone from overpaying for a home. Maybe we should just let them decide the market price for homes too! Heck, they might have a better insight into where I should live - I mean, they are omniscient - perhaps my lot in life would be better if I lived in Arkansas, given my individual characteristics.....

If you start to view the government as your protector and benefactor, with no tactic they might employ being off-limits fudamentally, then there is no logical hurdle that must be overcome to sanction full on collectivism - it is only a matter of degree. Are you a collectivist?

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Seriously though..... the government is never the best solution to a problem, whether it be social or financial in nature.

What about the federal government stepping in to help force desegregation in the South?

Circpros,

It's not that... I work in a Bank that makes a killing on NSF fees. A great number of our customers make dumb financial decisions day after day.

When a young kid who barely makes 30 grand a year gets a brand new truck or mustang that costs 30 grand it makes me upset that someone along the chain doesn't tell them they are making a mistake because if they did, they wouldn't get paid.

We don't do negative amort loans (we have some ethics), but I mean come on. If you need an 0% down, interest only arm to buy that house, you can't afford it no matter what we say.

I don't know... maybe the govt. could force lenders to pay for "anti-lending" ads (sort of like anti-smoking/anti-drunk driving ads)... "Friends don't let Friends take out negative amortization loans".

>8-]

Crazybook -

Why should it have? It is not the proper role of the government to see to the morality of it's citizens! We are guaranteed the right of free association in our constitution, and that includes to be borish and ignorant in those choices.

Jim Crow laws codifying a separation of the races in interfacing with the state was a clear violation of equal protection, and should not have been allowed to stand. On matters of private intercourse - such as an individual running a restaurant - that proprieter should be allowed to have whatever conditions he chose to place on conducting association with his establishment. The state should not be forcing indivduals to do business with someone against their will, or forcing an owner who wanted to serve blacks not to do so under penalty of the law.

Jim crow was wrong, as in the aggregate those laws tended to substitute the will of the majority in place of the will of the owner of the asset. The reaction that sought to counteract Jim Crow was just as immoral, again seeking to force individuals to dispose of their property in ways that they didn't choose.

Jim Crow laws were abhorrent, and in most cases, unconstitutional. The fact of the matter is, they should have been struck down, Unfortunately, what we got in respose was a typically tyrannical reaction - to impose the view of the collective as superior to the will of the one with a moral right to decide how to utilize his own property.

In practice, most of what government has undertaken in the quest for equality is abhorently harmful, and in a plurality of the examples, counter-productive to the stated aims in so doing. In practice, it divides us along racial lines, stipulating that the success of one group must come at the expense of another. Even if it were functionally effecacious, that wouldn't change the fundamental immorality of appropriating hegemony over an individual's property simply because you don't like how he'll use it.

I just read the "Mises on Money" breakdown by Gary North.
http://www.lewrockwell.com/north/mom2.ht....
Something to think about. Really speaks to what the government's role should be.

Max -

You simply would be replacing one form of coercion with another. Doesn't that kid earning 30 grand bear <i>some</i> responsibility for his own financial decision making?

To be sure, there are people out there who seek to gain advantage over the average consumer. As it stands, if they simply spend enough money to lobby congress, they can get their immorality codified and protected, and in many cases universalized!

Government is a protection racket at it's core, and the founders understood this. They called it a necessary evil, and sought to cripple it as much as possible. I agree with their sentiments, but am equivocating on the 'necessary' part at the moment.....

If the ticker goes to Dems as well, we might start a Mexican Standoff... Now THAT would be juicy politics.

Fatso -

Garcia and Von Mises.... you might be my kinda fellow!

I greatly enjoy reading Gary North. He is a bright individual, indeed.

Gen, I believe in most of the stuff you have put forth so far, but the fact is that with unemployment as low as it is, and the SPX near an all time high, nobody is going to do a damn thing because when the market crashes they will get blamed for it.
So far the government response/fed has been 100% reactive. Do you think they will tinker with things before the SHTF?
It's sad and I don't want to make an excuse for inaction, this is just the way things look to me.

Fatso

Thanks for the link.

I have very little use for the feckless Democrats, but the party of Gingrich, Lott, Delay and The Shrub is a malignant, vile, sinkhole of wretchedness and will do nothing to address the situation as needed. Why in the name of Mary, Joseph, and you know who, would they? Wherever and whenever possible Republicans, to a man and woman, laid the ground work, and smoothed the way for our present dreadful condition. President Bush, (did you really vote for that all world disaster of a President) both times?) is easily the most incompetent CIC the nation has ever seen.

And speaking of jr., I see he was just over in "The Kingdom" supplicating for lower prices or increased pumping. The answer was a polite but resounding no. To say this is bad news would be a colossal understatement. But let me cut to the chase:


Karl, you would do well to apply the insight of another, much more illustrious Karl of German heritage. Yes, that Karl, Karl Marx. You see, unfortunately here in the rentier class paradise, Karl Marx gets a bad name but the fact is, he was only half wrong about that on which he wrote. His prescriptive remedy (Communism) for the ills of Capitalism was never viable. However, as a surveyor of the ills themselves, Karl Marx has always been unsurpassed. And on the following point, he was right as rain, namely that Capitalism as a form of economic organization is inherently prone to boom and bust. And I don't want to hear any rubbish about how our unfolding capitalist debacle here in Freedom's Land could have been avoided, because I am sure that by the same token you would not listen for a fraction of a nanosecond to any similar attempts to explain how the great socialist experiment in Soviet Russia might have likewise avoided failure.

Ewok,

The business cycle is not endymic to capitalism; it is a manifestation of inflationary policies of central banks. Central banks expand credit through manipulation of interest rates and montary policy, leading to a deformation of the normal flow of capital in markets. This inevitably leads to malinvestment, and the period where the malinvestment reaches excess, followed by the realization of the bubble and an eventual return to the median.

See Karl's rants about housing prices reverting to the mean. They must, unless the FED decides to opt for more incentives for malinvestment, and more warping of the system.

The problem is not capitalism. It is that we've allowed capitalism to be gamed. Our problem is that we've bought the socialist central planning world view, and made a deal with the devil. Governments cannot efficiently govern free markets, and should not be attempting to do so.

There is nothing wrong with boom and bust.

And Circ, you're wrong. Before we had a central bank called "The Fed" we were subject to much bigger booms and busts than afterward.

Those of you who have simply not read a ****ing word of history need to be consigned to the library for a few years. No, not the internet version, the REAL library where there are REAL books printed on REAL paper.

Unfortunately The Internet has spawned all sorts of horse**** parading as history. It is not.

As for government's proper role, it has always been to stand as a means of enforcing the truth when people stand to lie and take advantage.

I am a capitalist through and through, but I recognize that absolutely unfettered capitalism without enforcement of the law is just about the worst system that can exist, because it allows the few to rob the many with impunity. We have laws to prevent this, and we have a Constitution to prevent it as well.

Would be that just a few of those laws would be enforced.

"Before we had a central bank called "The Fed" we were subject to much bigger booms and busts than afterward."

The Central Bank adds the prospect of transfering the inherrent sytemic risk to the population of the nation.

Inflationary policies and the feeding of the business cycle do not require a central bank, but it sure doesn't hurt.

The 'much bigger' booms and bust to which you refer are (at least in part) still a manifestation of the same things. There were periodic and generally isolated bank runs and things like that, but nothing on the scale of the great depression, or what I believe is in the nascent stages here and now.
--------------------
"As for government's proper role, it has always been to stand as a means of enforcing the truth when people stand to lie and take advantage."

I would disagree. The only proper and just ends of government is to jealously protect the liberties of the people. It was not a mutual aid society, or a co-insurance plan.

Our founders never envisioned a system where the assets of the treasury would be used to leverage funds for speculators. In fact, they knew of the insidious nature of a centralized economic authority, warning of the tendency of the money powers to gain hold over the apparatus of state.

Yes, Hamilton was ennamoured with having a central bank (he got one, briefly), but he was decidedly out of step with the majority. He was the early advocate of an activist role for government intervention in business, and his view won out in the 20th century, to the detriment of good sense and at great peril to our liberty.

As for reading history - I have a minor in history, and am a voracious reader. I am not intimidated by veiled appeals to authority - Ideas stand up to logical rigor or they do not. Implying that I'm mentally inferior to you isn't a refutation of my points.

People want their leadership to believe in something. "Change" only becomes a compelling platform if the current regime is perceived as cynically corrupt.

If the current administration would actually live up to its claim as the defender of law and order, and demonstrate that they are not simply enablers of Wall Street to the detriment of everyone else, they could turn the tide in the coming election in a big way.

Karl, your proposal provides the blueprint for the Republicans to finally demonstrate to the American people that they believe in something besides self-enrichment and the accumulation of power. It would also almost entirely rehabilitate Junior's shredded legacy.

I've never voted Republican in my life, but if the current administration would carry out your proposal, I'd have to reconsider. I know I'm not alone. I just hope the White House is listening.

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There were periodic and generally isolated bank runs and things like that, but nothing on the scale of the great depression, or what I believe is in the nascent stages here and now.

You are absolutely wrong. As I said, you've never read history. I suggest you do because you are simply 100% full of ****.

The United States has suffered three Depressions, not one. The two prior to the 1930s were in fact worse than the 30s and skull****ed people three times as hard.

Lincoln's "Greenbacks" are often called out as a "great success", but what the Internet-educated (as opposed to those who read actual history books) don't learn (because the people who are promoting that horse**** didn't bother to tell them) is that the currency lost 35% of its value in less than one year's time. Now that's inflation! Yes, we've seen problems with the dollar, but you ain't seen NOTHING like having 1/3rd of your wealth disappear in 12 months - but it happened, and that was in the days before The FEd.

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As for reading history - I have a minor in history, and am a voracious reader.

Well you obviously either haven't read any of it or you are practicing intentional deceit.

To claim that the 1930s was the first time we saw anything of a serious economic dislocation in the United States is just plain horse**** and belies either ignorance or intentional misconduct.

I am not going to allow intentional misconduct.

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"As for government's proper role, it has always been to stand as a means of enforcing the truth when people stand to lie and take advantage."

I would disagree. The only proper and just ends of government is to jealously protect the liberties of the people. It was not a mutual aid society, or a co-insurance plan.

Again, you are intentionally misrepresenting my position and what I have written.

I expect you to retract that.

In point of fact providing sanction against force or fraud is the function of government. Without it we have feudalism at best and anarchy at worst, and neither is conducive to anything approaching a society.

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Our founders never envisioned a system where the assets of the treasury would be used to leverage funds for speculators.

And where did you see me state that such a position is appropriate? Gee, you claim to be such a "voracious reader" that you apparently missed my call for impeachment of the current administration for doing exactly that with Bear Stearns, eh?

If this is due to your "voracious reading" claim being more than a bit full of ****, along with your claim of "historian", then you owe the forum an apology for your ignorance.

If this is nothing more than intentional misdirection I'm going to strip this portion of the conversation related to the Ticker and bilge it.

I will not tolerate intentional obfuscation and misdirection.

Genesis wrote..

Lincoln's "Greenbacks" are often called out as a "great success", but what the Internet-educated (as opposed to those who read actual history books) don't learn (because the people who are promoting that horse**** didn't bother to tell them) is that the currency lost 35% of its value in less than one year's time.

If I understand correctly, the "debt merchants" were succesful in placing a limitation on the face of the "greenbacks" that read as follows:

"This note is a legal tender at its face value for all debts, public and private, except duties on imports and interest on the public debt"

The concept was doomed to fail from the very beginning.

I really don't know if a better system exists, but I'll listen to reason.

I am 100% full of ****. Nice....

Your rendering of three depressions on the scale of the so-called Great Depression is simply incorrect. All of them were more regional in nature (generally speaking, northeastern industrial busts), and most of these dislocations were caused by speculative excesses which quickly rebounded once the limited excess was wrung from the system. The greenback experiment was actually a phenomenon I would have used to support my thesis about the cause of boom bust being rooted in monetary policy, exacerbated by central banks.

But you really don't care about the merits, do you. You gotta be the smartest guy in the room. If you can't best me intellectually, you'll feign injury and send the evidence into the memory hole. You'll name call and deride, but not sully yourself to have a reasonable debate. You'll call me a liar, as if by saying it, it becomes true.

Since you'll 'bilge it anyway..... what kind of insecure person bans anyone who expresses a different perspective? I've been deferential, and you just act rude. You take personal shots instead of dealing with things through a reasoned discussion. Kick me outta your sandbox - take your toys and go home. Whatever. It's your dime, chief.

You demand that I retract that the only just ends of government is the protection of liberties?!? I will not. Ban me if you wanna.

I didn't come looking for a fight. Why are you intent on having one? Is this a discussion forum or a diary with space for subsequent adulation?

We're friggin' doomed. Hope for the best. Prepare for the worst. Do what you can.