Home Values Fight Back

This from the Wall Street Journal:

“Officials at a Citigroup Inc. office in St. Louis placed a call to this desert town recently. The bank had caught word that Indio was coming after the lending giant with fines and threats of criminal charges. The offense: an algae-infested swimming pool at 79760 Eagle Bend Court.

Citigroup wound up in charge of the foreclosed home, one of thousands of such properties it was managing across the country. But last year, Indio passed a law that allowed it to charge banks with a criminal misdemeanor if they allowed a home to fall into disrepair.

“If I need to do it, I’ll say, ‘Mr. Bank President, if you don’t come and take care of your property, we’re going to come arrest you and take you to court in California,'” says Brad Ramos, Indio’s long-serving police chief.

The hard-line approach is part of this town’s attempt to gain leverage over some of the nation’s largest lenders. A couple of years ago, Indio was a real-estate bonanza. Old date farms were closing down, sprouting subdivisions in their places. Today it’s a different scene with one in 10 houses either in default or foreclosure.”

At first glance, this seems like a good way for homeowners who have done everything right and made their payments on time to prevent their home values from going down. As the neighbors upkeep can have negative externalities. The next question is the property rights one. Should other homeowners be allowed to sue other homeowners for upkeep.

The solution may be that if they all entered a social contract like the ones James Buchanan lays out, then it is an unianimous decision that the homeowners would be held against. Obviously, if your neighbor who you never entered a contract with decides that you do not keep your home nice enough for him, then he cannot do anything to you. This is why there are homeowner’s associations.

The rest is here.


Published in: on May 28, 2009 at 1:17 pm  Leave a Comment  
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What we need is a government recession!

Often times when our economy goes into a recession, the media and policymakers get obsessed with spending. Here is their argument: spending causes more money to flow into businesses, which flows into employees, and employees are consumers. All along the way the money multiplies. We seem to discourage savings. Many Conservatives and others come to me and they say their reason for not supporting the government fiscal “stimulus” is because most people will save the money anyways.

What is wrong with saving? If we save our money most of the times that means we put it in the bank. The bank then takes that money and loans it out to a business owner. That business owner may then hire someone new, thus doing the same thing as consumer spending, except without the massive amounts of debt. During a recession savings increase and spending decreases and many people see this as a bad thing, but at the same time they complain about the debt each person has. This simply does not make sense.

What we truly need is a government recession! One where the government saves more and spends less. This way they too can also not run up large amounts of debt. If the government slows spending, that means they require less taxes. If they take less in taxes, then more people will have more of their own money to spend. This is not even mentioning the loss due to the collection and transfer itself.

Debt is nothing but a future tax. Since the future taxpayers cannot vote, we have decided that they are now the target for us to spread the cost to. You think we have a bad recession, wait until you see the one years from now when our children and their children have very high percentage income tax.

The government is acting like a bad teenager who cannot control his money. He goes up spends it on things he shouldn’t and charges up credit cards like there is no tomorrow. What America needs to do is to take that money away from little Barry and show him how the money should be spent (because after all it is YOUR money).  We call that the Free Market!

The Threat of Hyper-Depression By Robert Murphy

Today’s article of the day comes from Campaign for Liberty:

In the Keynesian heydays of the 1950s and 1960s, most economists and policy makers believed in the “Phillips Curve,” which was the (alleged) tradeoff between unemployment and price inflation. The idea was that the Federal Reserve could cure a recession by printing money, or that the Fed could cure runaway inflation by jacking up interest rates. Each of these moves had its downside, of course, but the point was that the Fed could choose one poison or the other.

This Keynesian orthodoxy was shattered in the 1970s when the United States suffered through “stagflation,” which was high unemployment and high inflation. This outcome was not supposed to be possible, according to the popular macroeconomics models, and it left policy makers with no clear choice. If the Fed raised rates to stem the inflation, it would hurt the economy even more, but if the Fed cut rates (through printing more money) the inflation problem would worsen. The vacuum created by this crisis in both theory and policy was filled by the Reagan Revolution and supply-side economics.

At this stage nothing is certain, but the country is currently headed straight into a period of very rapid price hikes and a very bad recession. It would not surprise me at all if the national unemployment rate and the annualized rate of consumer price inflation both broke through into double digits by the end of 2009. Moreover, regardless of when it actually starts, I predict that things will get much worse before they get better, and that the United States will be mired in a malfunctioning economy for at least a decade, with price inflation in the double-digits (possibly higher) the entire time. We can call this condition “hyper-depression.”

As with stagflation during the 1970s, hyper-depression will blow up the prevailing “cutting edge” models of the macroeconomy. Back when he was an academic, Fed Chair Ben Bernanke was actually an expert on the Great Depression. Bernanke adheres to the (alleged) lesson taught by Milton Friedman and Anna Schwartz in their classic A Monetary History of the United States. F&S argued that Fed officials bore a large share of the blame for the Great Depression, because they did not pump in enough liquidity. The quantity of money actually declined by about a third from 1929-1933, as panicked customers withdrew cash from the banks. (In a fractional reserve banking system, when people withdraw deposits, the banks have to shrink their outstanding checking balances because of reserve requirements.) (more…)

Deferring Risk and Taking Names by Justin Williams

The article of the Day is from a website I contribute to called Liberty Movement HQ:

Deferring risk is attempting to take a risky action that may bring a big benefit and putting the costs upon others. Those who may read this site are probably thinking about our current government bailouts, but I would like to look deeper into this problem. In particular, regulations that defers costs. One example of this is the Federal Deposit Insurance Corporation (FDIC), which insures a certain amount of a bank holder’s account. This is what I call the consumer bailout of 1933 as their website says that they were created because of thousands of bank failures during this time. Regardless of why you think the banks failed, this was a bailout for consumers in order to defer the costs upon the taxpayers.

This one regulation changed the way that people looked at banking forever. Like the way Medicaid recipients think of health care, people now think of their checking and savings accounts as a right. They believe that the bank should always be a safe place for them to put their money because they are insured. When you go to a barber, you exchange money for a haircut. You are exchanging your property (money) for a service (haircut). This should be no different than a bank. There may be chance that when you get your haircut, that they could do it wrong or cut you. This will not happen 99% of the time, but there is still a chance just like there is a chance the bank will fail. One way you avoid this is by developing a relationship with your bank and your barber. The other way is people like lawyers offer their services to prosecute in case of problem and there are insurance companies that offer insurance to the barber at a fee. All voluntary but important functions. This goes to show you that even without the FDIC there will probably be an insurance system, but banks will not be forced to join and the risk will not be deferred to the taxpayer.

Taking names is the after effect. It is when you feel harmed and you try to find who was responsible. When the barber cuts your ear, you know who is responsible. When your bank fails, it seems to the public that it is more than just the bank responsibility. They blame Capitalism, not the bank but they should. Banks are businesses! They are not some sacred invincible being that you park your money at. Now with the FDIC’s “protection” nobody cares about the business practices of their bank. If you knew that your barber cut off every other persons ear, you would not go. If you knew that your bank was making bad loans and losing money, you would not go.

So now who is to blame? The people who gave the first government bailout, also known as the New Deal. They distorted the market and reduced the incentive for consumers to check what their bank is doing. They basically gave out $100,000 dollar blank checks for every account to every bank and expected prudence. This is like handing a teenager a new car and expecting him/her to not drive it.

People will never see this because they would rather blame the “unknown,” Capitalism.

Published in: on April 7, 2009 at 6:23 pm  Comments (1)  
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Terence Corcoran: Is this the end of America?

The article of the day comes from The Financial Post:

U.S. law-making is riddled with slapdash, incompetence and gamesmanship

By Terence Corcoran

Helicopter Ben Bernanke’s Federal Reserve is dropping trillions of fresh paper dollars on the world economy, the President of the United States is cracking jokes on late night comedy shows, his energy minister is threatening a trade war over carbon emissions, his treasury secretary is dithering over a banking reform program amid rising concerns over his competence and a monumentally dysfunctional U.S. Congress is launching another public jihad against corporations and bankers.

As an aghast world — from China to Chicago and Chihuahua — watches, the circus-like U.S. political system seems to be declining into near chaos. Through it all, stock and financial markets are paralyzed. The more the policy regime does, the worse the outlook gets. The multi-ringed spectacle raises a disturbing question in many minds: Is this the end of America?

Probably not, if only because there are good reasons for optimism. (more…)

The devalued Prime Minister of a devalued Government

This Video of the Day is from Daniel Hanna MEP:


If only we could solve the credit crisis with good looks…

This from Reuters:

“A credit score can tell a lender a lot about a prospective borrower, but so can the borrower’s looks, a new study says.

People who are perceived to be trustworthy are more likely to have a higher credit score and pay lower interest rates on loans, and are less likely to default, according to the study by Rice University in Houston, Texas.

Even when hard facts such as credit scores are available, people rely on an assessment of trustworthiness to decide whether to make a loan.

“It turns out that if you look trustworthy, you’re more likely to get a loan,” said Jefferson Duarte, a professor of real estate finance at Rice University, one of the study’s authors.”

I am feeling correlation doesn’t mean causation here. That means that good looks do not cause good credit scores just as much as good credit scores do not cause good looks. If this was true then you could solve the whole credit problem and there would be no need for credit scores. You would just hire a sample of people to rate the looks of the person wanting the loan and problem solved.


U.S. Banking System: Now Accepting Loans



Published in: on March 13, 2009 at 11:34 am  Leave a Comment  
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Rick Santelli starts a Revolt!


Govt says bank bailout will require private money?

This from International Herald Tribune:

“Administration officials said the plan to be announced Tuesday was likely to depend in part on the willingness of private investors other than banks — like hedge funds, private equity funds and perhaps even insurance companies — to purchase the toxic assets that wiped out the capital of many banks.

The officials say they are counting on the profit motive to now create a market for those assets. The government would guarantee a floor value, officials say, as a way to overcome investors’ reluctance to buy them.”

Say what? So the Obama Administration and the goons on the left are all crying that it was greed and the profit motive that go us into the mess and now they are saying it will get us out? If they really thought this then why not leave it alone? This is like a liberal saying that the hunter shot and killed the bear but that we will depend upon him to repopulate the bear population.

This is so ridiculous and I really wish that the lefty’s would give Obama a hell of a time for this. I mean I personally think the profit motive didn’t get us into this and would get us out of this but seriously this is what they are saying now?


Published in: on February 11, 2009 at 1:13 pm  Comments (1)  
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