<p>“The effect on the financial markets of the sale of Merrill Lynch and the bankruptcy of Lehman Brothers are relatively minor compared to what’s at stake with AIG, which has global reinsurance commitments in the neighborhood of more than 400 billion dollars. Simply put, AIG cannot be allowed to fail and the federal government – and I expect a global consortium of banks and other countries – will have to step in.”</p>
<p>They better hurry up. AIG closed Friday a bit over $12. They dropped to $4 today before bouncing. Only 50% down at the moment. AIG also has commitments in Houston I believe. I noticed that Berkshire is up quite nicely today. I wonder if AIG customers will be looking to Warren for insurance and reinsurance going forward. Berkshire might also be up because property damage from Ike isn’t as bad as was forecasted.</p>
<p>Regarding the politics: everyone wants a healthy real-estate market whether at the local level, the state level or the national level. It generates loads of jobs on borrowed money and it generates loads of tax revenue. The mantra has been about providing the pride of ownership. And it’s been a bipartisan mantra.</p>
<p>Part of the problem was the politicisation of the central bank. I was hoping that President Bush would fix that in 2001 but he just continued it. I think that the current players (Bernanke and Paulson) are much better than their predecessors. But they have a very tough job to take care of. Tossing Lehman and Bear to the wolves was a good start. Yes, Bear received a “bailout” but I’m pretty sure that long-term shareholders weren’t particularly pleased about it.</p>
<p>There are always new avenues of investment but bubbles provide the fastest way there. Look at the salaries that are bandied about in the Business Majors forums. Who doesn’t want a piece of that at 18 years?</p>
<p>Actually a lot of people. And that’s a good thing.</p>
So you, under your logic, you believe that taxes are good <em>because</em> they prevent investors from being flush with cash? You think that investors being flush with cash is a bad thing.</p>
<p>No. I think that it is proven than enriching wealthy people by borrowing billions of dollars abroad is a bad thing, and the assumption that doing so will result in trickle down is an absurdity. It is also a direct cause of “irrational exuberance”. </p>
<p>None of this happens without the Bush/McCain tax cuts and the borrowing to pay for it.</p>
<p>Tax cuts or ordinary rebates to working people so they can buy things, or providing health care so that millions of people don’t go bankrupt is another story.</p>
Yes, you think that if investors are flush with cash we get into situations like this. Let me put it another way. Assume we hadn’t gone to Iraq. Our budget would be reasonably balanced and investors would still be flush with cash. This thing still would have happened. That’s assuming your unproven claim that “investors being flush with cash due to tax cuts” caused this whole thing. I, on the other hand, think the issue is significantly more complex with the gigantic push to get more low income home ownership, rising global wealth (foreign & domestic), and the rise of financial products.</p>
<p>
100% speculation. I think it happens regardless.</p>
<p>A lot of people have become believers in K-Waves in this century and these are long waves where it doesn’t depend on who is in office but rather inter-generational attitudes towards debt.</p>
<p>People and countries were flush with cash due to an improving economy in some countries (China) and the flow of oil money and other money from successful exporter countries. It had little to do with money in the US one way or another.</p>
<p>While the exact leverage ratio probably wasn’t discussed, Barney Frank and Congress held Freddie’s and Fannie’s hands and essentially precluded this administration (and several others) from reigning in the two entities. So, by virtue of Congressional inaction, it did encourage higher leverage.</p>
<p>“Assume we hadn’t gone to Iraq. Our budget would be reasonably balanced and investors would still be flush with cash.”
Hello? you are mixing up 2 completley seperate factors.
1] the GOVERNMENT’s budget was still balanced in 2001. That budget was a carry over from the Clinton administrations tax policies and the financial boom in the late 90’s.
2] the rich weren’t AS flush with cash UNTIL AFTER THE BUSH TAX CUT, which put a whole bunch more $$ in their pockets. If we hadn’t gone to war with Iraq, then the governments’ budget would “theoretically” be in much better shape than it is now, but the political decision to cut the taxes of the wealthiest 1% of taxpayers had a huge effect on the drive to find new investments to enable the rich make more money with their new tax windfall.</p>
I might be phrasing my argument poorly, but I’m not mixing up anything. I only mentioning balancing the budget because Democrats somehow think the deficit causes the end of the world and I wanted to eliminate that from the argument.
Yes. Never disagreed.
Agreed.
Agreed, however, “put a whole bunch more money in their pockets” isn’t a particularly good argument for anything.</p>
<p>
You clearly don’t understand my argument. Hypothetically, the government could have cut spending (ie: not go to Iraq) and therefore lowered taxes on the top 1%. This would have been perfectly fine fiscally. Yet, mini somehow thinks that this would have been a bad situation because investors would be flush with cash. Pure lunacy, an argument against citizens having money in their pocket.</p>