If this accident had occurred today, would the band have even been mentioned in the news coverage?

I’d argue the larger failure is that we do not shun today’s Bruce Ismays. We get what we tolerate and we tolerate too much.

I loved the story of the Titanic musicians. They were indeed brave and gallant men. I read that a trumpet was found near the Titanic wreck and cleaned up and restored; however, no one is allowed to play it. The conservators of this artifact realize that the last person to play it was the Titanic musician who owned it and they don’t want that to change.

One giant cluster-f$%^K from the global bankers…same ol same ol, different victims. http://publiccentralbank.com

Have a great day!

You challenge me to produce numbers and when I do you say:

“You sling magnitudes of the sums as though they’re the overriding – or perhaps even the only significant – factor.”

As if magnitude were not a measure of root causes. It’s been said that ice cubes, as an example, would not have sunk the Titanic where a massive chunk of iceberg did. Magnitude is central to the issue of root causes.

In any case I don’t “sling magnitudes of the sums as though …[they] were the ONLY significant .. factor”. Not at all. I specifically say sub-prime was a +moderate+ part of the problem. FM a much smaller part. I also show that the very deep-rooted nature of the US government structures favouring corporations fosters dependency on subsidised corporations even as they take their manufacturing and money elsewhere.

But let me be clear. While I see this as multi-causal, you are arguing that government ’socialism’ and specifically FM are at the heart of the crisis. So you in effect reverse the reality. You are the one supporting a mono-causal narrative.

You assert this:

“Derivatives – regulated or “deregulated” – didn’t artificially inflate housing prices by flooding the market with millions of unqualified new home buyers”

I’m saying to you a very simply thing. The sub-prime problem is a fraction of the overall problem, which existed in a risk model that would have failed in any case – that didn’t require the subprime mess (let alone the smallish FM portion of it) to cause the chaos.

If it hadn’t been subprime it would have been credit card debt, or foreign nations balking on US treasuries or balance of payments problems or social unrest as further manufacturers fled the US. These are issues that would ultimately have triggered the event because there are structural problems along with inefficient income distribution and industrial viability in the States – created by corporate-pocketed government. And because of this, because Americans are tapped out debtors, it was just a matter of time until the swaps issue, based around US consumption, would have arisen.

Now I’m sorry if this order of magnitude thing gets to you, but it is the underlying reality. To get back to Bill’s topic, your argument is effectively:

“Bracewell, you are a mono-causal thinker because you refuse to recognise that it wasn’t the whole iceberg that caused the titanic to sink, but just the tip of it that made that almighty gash.”

Well no, if that tip weren’t there, there is always another to spearhead the monstrous inertia and weight of that object. The tip alone would have been brushed aside. FM wasn’t even the tip.

Let me tell you categorically that the sub-prime mess is handlable by itself. It may have caused a recession, but it is a combination of the US’s deep indebtedness to the world, flight of manufacturing, loss of decent wages and lastly the derivatives industry that are the killers, because the contracts out there are several times US GDP, tens and tens of trillions of dollars.

Governments are bailing these corporations out for 2 major reasons.

- Derivatives, the collapse of which would see the economies of the world go down rapidly.
- And protection of foreign government treasury and bond holders who hold the US in hock because of its consumption profligacy.

Take these 2 things out of the equation and the sub prime mess becomes handlable. You can simply take the financial industry through a bankruptcy procedure. Recession yes. Depression – and we are going to have one – no. The bailouts are peripherally to do with subprime. They are actually about keeping those 2 issues – foreign bond holder confidence and the attempt to limit swaps triggering in a bankrupt environment – from getting out of the bag. The second issue is what made the Lehman bankruptcy such a watershed moment. It told government there was no room to move – not because of sub-prime but because of the triggering of insolvent swaps that saw markets plunge (Dow by 500 points) across the world the day after.

None of this has a remote relationship to what you laughably call ’socialism’.

So:

- You don’t support the argument that subprime is of the scale to have caused this crisis. You won’t be able to because it is not of an order that could cause anything but a recession.

- You don’t support by figures any crippling amount of the subprime mess that was +forced+ on private industry. You won’t be able to.

- You can’t provide figures of a scale that would show GSEs are at the heart of it. On the contrary, you show figures that indicate the moderateness of the issue.

- You don’t recognize that sub-prime preceded any GSE involvment in it, that it was a corporate and not a government instrument, and that the holders of these securities are mainly corporate holdings, not GSE holdings. Also that these private contracts were undertaken +voluntarily+, not by order of government.

This sort of comment is bewildering :

“You don’t appear to understand (or are willfully ignoring) the dependency in the relationships of those sums to one another – relationships that are independent of their magnitudes”

Not because it is beyond me, but because you keep making a claim on this enormously subtle narrative that you fail then to cogently produce. Your narrative is predetermined. It’s socialism, quasi government companies are to blame, regulation not deregulation is at the heart of the mess. Nothing will change this for you because it is an article of faith for you. I know its an article of faith because you shy away from the scale of the other issues, the reality of the figures that sit largely in the corporate realm and from blindingly obvious responsibility of deregulation that even Alan Greenspan now agrees was an issue.

Until you can show how the GSEs, through “the dependency in the relationships of those sums to one another “, have a greater impact on this crisis than the private sector which carries enormously larger sums of debt instruments, subprime among them; or show that GSEs have a greater impact than the avalanche of swaps and private sub-prime entered into voluntarily by corporations, you don’t have a narrative that comfortably fits your view of its reliability.

For instance this may be true:

“GSEs didn’t increase their purchase of high-risk mortgages because the derivative markets were demanding more securities on which to base new instruments. GSEs increased those purchases because of an overweening, increasingly socialist government’s religious obsession with “affordable” housing (read: vote buying)….”.

But its not relevant as a root cause of the problem, only as a trigger – which is not even my argument – to the current crisis exactly because of its scale, which is piddling.

And this:

“Derivatives – regulated or “deregulated” – didn’t artificially inflate housing prices by flooding the market with millions of unqualified new home buyers, who would otherwise have been barred from the market if it hadn’t been corrupted by the GSEs’ promotion of high-risk home loans backed by the Treasury ”

Is a feckless conflation of the GSE dabbling in subprime with the major players’ full blown jumping into it. Those who invented and foisted sub-prime on Americans in the first place were corporations who were doing this on a large scale YEARS before FM went into the market. And not for socialist reasons but for ideological ones and with the feckless belief that housing prices would never come down.

We can agree on this: “This damage came from the combination of a popped housing bubble and disastrous federal economic policies.”

The policies that produced thses things were fundamentally redistributive (upwards), destructive of real industry, profligate in terms of letting this leech sector grow and so on.

As far as the industry being a leech industry, I’ve always called it that and for anyone with eyes to see, this crisis was a long time coming. It’s no surprise to me and my feelings toward the dependency structures of the US haven’t changes in years. Corporatism is government run by industry for industry and shares many common features with a Soviet economy. That is what Republicans with the Democrats meekly trotting behind ultimately bequeathed the US, A deeply dependent people completely tapped out and unable to fight the economies of scale, the increasingly corporate-favourable legislation and the suction of all business life upwards .

Of course it did, David. But none of it is relevant to the root cause of the problem.

You say it “doesn’t matter” what triggered the crisis. You sling magnitudes of the sums as though they’re the overriding – or perhaps even the only significant – factor. You don’t appear to understand (or are willfully ignoring) the dependency in the relationships of those sums to one another – relationships that are independent of their magnitudes. You hold the popular, erroneous opinion that derivative markets have nothing to do with building anything. This process was a reaction chain, David, and it had initial conditions and a root cause. I have no intention of attempting to convince you, but since you can’t be taken at your word, let me continue by way of spelling all that out for you, in case you really were interested.

GSEs didn’t increase their purchase of high-risk mortgages because the derivative markets were demanding more securities on which to base new instruments. GSEs increased those purchases because of an overweening, increasingly socialist government’s religious obsession with “affordable” housing (read: vote buying), built on the backs of the U.S. Taxpayer – that productive portion of our society that shoulders the bulk of the tax burden for all 300+ Million (plus illegals). Derivatives were not the motivation for the GSEs’ decision to purchase ever-increasing bundles of ever-higher-risk loans.

Derivatives – regulated or “deregulated” – didn’t artificially inflate housing prices by flooding the market with millions of unqualified new home buyers, who would otherwise have been barred from the market if it hadn’t been corrupted by the GSEs’ promotion of high-risk home loans backed by the Treasury (i.e., the Taxpayer). Derivatives didn’t contribute to the housing bubble which took down not only the “bad” loans when it popped, but far too many of the “good” ones as well, along with any derivative instruments that depended upon them.

Derivative markets didn’t cause the pandemic negative equity that resulted once artificially inflated housing prices were corrected. This negative equity was the source of the “toxic assets” at the heart of our lending institutions’ inability to provide credit. Derivatives weren’t responsible for this. On the contrary, this pervasive negative equity contributed to the losses incurred throughout the derivative markets that depended, sometimes by multiple layers, upon the mortgage securities involved.

Derivative markets didn’t cause the record millions of mortgage foreclosures experienced by new home buyers (or those who refinanced themselves into an overleveraged state) as interest rates were raised 17 times and the artificially inflated housing market corrected itself. Those foreclosures were in large part the result of bad lending practices implemented by banks trying to comply with CRA, who justifiably feared litigious thuggery from people like ACORN and Barack Obama after Citibank was made an example of, and who – most importantly – knew they could sell those mortgages to FM and FM after Clinton legislated lower standards for GSE mortgage purchases. Derivatives didn’t cause bad loan policy, they were its victims.

The federal government was forced to double its GSE bailout total for FM & FM in February – from $200B to $400B. $200B used to be the amount that was considered much more than the GSEs would ever need to cover their defaulting securities. As of this last month, $400B is NOW the amount they claim will really, honestly, absolutely, beyond a shadow of a doubt be more than the GSEs will ever need. Next month, who knows?

The government wasn’t forced to double this burden on the taxpayer because of derivatives. It was forced to do so, at least in part, because of damage done to the derivative market. This damage came from the combination of a popped housing bubble and disastrous federal economic policies. Confidence in the economy has been shattered, and that’s had its own effects on an economy that was already in a mild recession as a result of business’ response to the newly elected Democrat majority in Congress. Going by root cause, the government was forced to double this amount because of its own (i.e., the GSEs’) suicidal economic policies – policies blessed by the federal government and all but legislatively guaranteed by same as impervious to the Law of Unintended Consequences, through backing from the Treasury.

Magnitudes of sums are not the issue here. Cause and effect is the issue. Without the cause, and the effect, the magnitudes of the sums are irrelevant. QED.

This is all discussed above, and a vital element necessary to understanding it is the chronicle (linked up there) of Cuomo’s exploits as the utterly-inexperienced-but-all-powerful (sound familiar?) czar in charge of federally-guaranteed “affordable” housing. It even pays homage to some of the shibboleths you think are most significant, David, and places them in context of the larger problem.

There seems to be a pervading opinion in some circles that CRA and the government policies that drove and supported it have “plausible deniability” in terms of their part as the root cause of all this. Absent a root cause, the inclination is to look for what made the result of this “causeless” fiasco so severe. The easiest target for a class-baiting administration and Fifth Column media – as always – is “corporate greed”, “Wall Street” and financial markets that “don’t build anything” and which are “deregulated” such that they grow to a size for which there is “no possible justification” (well, other than the market they serve).

Of course no one complains as long as everyone’s profiting with little apparent risk. I find it interesting that the financial industry – including the derivatives market – wasn’t deemed a “leech” as long as it was endlessly increasing the value of the middle class’ 401-Ks and providing billions in cash for investment in the stock market (i.e., in other businesses, etc.), as well as billions in corporate tax revenue for a Congress whose nominal comprehension of business is as a revenue source. See Mrs. du Toit’s #83 for the basics in this regard.

The notion that the size of a particular sector has “no possible justification” is pretty revealing of any adherent. This thinking goes hand-in-hand with the notion that some arbitrary salary – when it reaches a high enough level – has “no possible justification”. The fact is that the market determines the justification.

Finally, comparison of today with a predecessor scenario where life was “more egalitarian”, and the concomitant assumption of causation without evidence expressed by “small wealth differentials were at the heart of US success”, equates to measuring horse-driven carts against space shuttles, using informal fallacy as a guide.